EXHIBIT 10.8
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (this "Agreement") is entered into as
of February 13, 2002 (the "Effective Date"), by and between CRC MANAGEMENT
SERVICES, INC. (the "Manager"), a New York corporation and an affiliate of CRC,
Inc. ("CRC"), a New York corporation, and E-SYNC NETWORKS, LLC, a Delaware
limited liability company (the "Company").
WHEREAS, E-Sync Networks Inc., a Delaware corporation ("ESNI"), holds a
fifty-one (51%) percent membership interest in the Company and CRC holds a
forty-nine (49%) percent membership interest in the Company;
WHEREAS, the Company has the need for and wishes the Manager to provide
the Management Services (as defined below) relating to the operations of its
business, offices and facilities by acting as the General Manager of the
Company, with all of the power, authority, duties and responsibilities
associated with such position as described under Article III of the Operating
Agreement of E-Sync Networks, LLC dated February 13, 2002 (the "Operating
Agreement") among CRC, ESNI and the Company;
WHEREAS, the Manager wishes to provide the Management Services for the
Company; and
WHEREAS, the Company has agreed to compensate the Manager and reimburse
the Manager for the cost of the Management Services as provided in this
Agreement; and
NOW, THEREFORE, for and in consideration of the foregoing and the terms
and conditions contained hereinafter, the parties hereto agree as follows:
1. Term. This agreement shall remain in full force, as amended in
accordance with Section 9(a) herein from time to time, indefinitely unless
earlier terminated in accordance with the following:
(a) subject to clause (c) below, this agreement may be
terminated at any time by written agreement between the Manager and the Company;
(b) subject to clause (c) below, from and after February 13,
2005, this agreement may be terminated by either party upon 120 days advance
written notice to the other; provided that if the Company terminates this
Agreement pursuant to this clause (b) for any reason other than (i) for Cause
(as defined below) or (ii) upon the sale by CRC of a majority of its Interests
in the Company pursuant to Article 8 of the Operating Agreement (other than
Section 8.2 therein) (in which event notwithstanding anything to the contrary
contained herein the Company may terminate this Agreement upon sixty (60) days
notice), the Company must pay a termination fee in an amount equal to twice the
Company's reported revenues for the immediately preceding twelve (12) months;
provided, however, that if the Company terminates this Agreement pursuant to
this clause (b) for any reason including pursuant to clause (i) or (ii)
above, all amounts payable from the Company or ESNI to the Manager or its
affiliates and contractors must be paid in full prior to termination; and
(c) notwithstanding any other provisions of this Agreement, at
no time and under no circumstances may this Agreement be terminated by the
Company or CRC Management Services, Inc. be removed from the position of
Manager, if at such time the Company has a credit facility that is guaranteed by
CRC or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("JW"), unless CRC and JW are fully and unconditionally
released from such guaranty or all obligations of CRC and/or JW pursuant to such
guaranty are guaranteed by a third party, such release or third party to be
approved by CRC and/or JW, such approval not to be unreasonably withheld. The
Manager shall not enter into a credit facility guaranteed by CRC or JW if an
alternative credit facility, with terms substantially the same as those of the
credit facility to be guaranteed by CRC or JW, is available to the Company.
For the purposes of this Section 1, "Cause" shall be limited to
(A) material breaches of this Agreement that either (i) cannot be cured, or (ii)
that the Manager fails to cure within a reasonable period following receipt of
written notice thereof from the Company, or (B) any material act of fraud or
gross negligence ("Actionable Conduct") in connection with the performance of
the Manager's duties hereunder. Any dispute as to materiality of a breach, the
alleged Actionable Conduct or whether the Company has Cause to terminate this
Agreement pursuant to Section 1(b) shall be submitted to arbitration pursuant
to, and in accordance with, Section 9(c) below.
2. Services. The Manager agrees to provide, and the Company agrees
to accept, the administrative, financial and other management services necessary
for the operations of the Company (collectively, the "Management Services").
3. Compensation. The Company shall pay the Manager as follows:
(a) Base Rate. The Company shall pay the Manager 1% of the
Company's reported revenues, calculated on a monthly basis (the "Base Rate").
Payment to the Manager of the Base Rate shall be made no later than thirty days
after the end of each month. If such payment is not made within such thirty-day
period, until such amount is paid to the Manager, interest thereon shall accrue
and be payable at the rate of prime plus 2%.
(b) Incentive Payment. The Base Rate shall increase to 1.5% of
the Company's reported revenues with respect to each semi-annual period during
which the Company's reported revenues have increased at least 15% from the
corresponding period in the previous year. The six-month periods are to be
calculated commencing January 1 and July 1, beginning with July 1, 2002;
provided that the Base Rate shall increase to 1.5% of the Company's reported
revenues if the Company's reported revenues during the second quarter of the
year ending December 31, 2002 have increased at least 15% from the first quarter
of such year. In the event of any such increase in the Base Rate, the
differential between the payments made with respect to such semi-annual period
in accordance with Section 3(a) above and the payments to which the Manager is
entitled pursuant to this Section 3(b) shall be paid by the Company to the
Manager within 5 business days of the Company's receipt from the Manager of
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a written notice, setting forth the calculation evidencing such 15% increase in
the Company's reported revenues for the relevant period.
(c) Additional Fees. The Company agrees to compensate the
Manager for all services other than the Management Services and general
management relating to specific projects. Such compensation will be paid at the
mean rate paid by the Manager's other customers for similar services during the
prior three months. Examples of services that would qualify for this payment of
additional fees include, without limitation, software development or programming
and help-desk.
4. Expenses.
(a) The Manager shall have full and complete authority, power
and discretion, in the name and on behalf of the Company, to do all things
necessary or convenient to manage and control the business, affairs and
properties of the Company, including, without limitation, the power to:
(i) hire and fire personnel and retain and engage
professionals directly involved in the Management Activities;
(ii) invoice and collect payments from customers;
(iii) make disbursements to vendors and suppliers; and
(iv) pay personnel through its own paymaster;
provided, however, in no event shall the Manager be
obligated to advance or loan money to the Company; and provided further,
however, that nothing in this Section 4(a) shall in any way permit the Manager
to take any action that it is prohibited from taking (or prohibited from taking
without the consent of ESNI) under the Operating Agreement.
(b) The Company will pay expenses incurred by the Manager in
connection with its performance of the Management Services. Allocable general
costs, administrative costs, sales costs, marketing costs, recruiting costs and
overhead will be allocated between the Manager and the Company according to the
effort expended for providing the Management Services. Generally this shall be
allocated in proportion to the relative revenues of the Manager and the Company.
However, the Manager may allocate expenses according to different criteria (for
example, actual expenses, planned revenue, planned expenses, research and
development, special projects) when the relative revenues do not represent an
accurate measure of effort expended.
(c) The Company shall also reimburse the Manager for the
allocable expenses pursuant to Section 4(b) above and for its reasonable
out-of-pocket expenses incurred in connection with the Management Services. The
Manager shall provide the Company with an invoice with respect to such expenses
on a monthly basis, and payment to the Manager by the Company shall be made
within thirty days of the date of such invoice. If such payment is not made
within such thirty-day period, until such amount is paid to the Manager,
interest thereon shall accrue and be payable at the rate of prime plus 2%.
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(d) Neither the Manager nor any affiliate of the Manager shall
enter into any material business transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with the Company, except in
the ordinary course of business and on terms not less favorable to the Company
than the Company would reasonably expect to obtain in a similar business
transaction between unrelated parties. The foregoing shall not be deemed to
limit in any manner the right of the Manager or any of its affiliates from (i)
performing or exercising any rights under the Operating Agreement or pursuant to
the transactions contemplated thereby, or (ii) obtaining and perfecting any
purchase money security interest in equipment or other supplies provided to the
Company by the Manager or any of its affiliates or for which purchase money
financing with respect to such equipment or supplies was provided to the Company
by the Manager or its affiliates.
5. Obligations.
(a) The Company agrees to fully cooperate with the Manager and
to supply the Manager with any and all information reasonably necessary to
enable the Manager to perform the Management Services hereunder, in such form as
may be reasonably requested. The Company will give the Manager representatives
free access to any and all sources of information necessary to enable the
Manager to perform its obligations hereunder.
(b) The Manager agrees to cooperate with the Company and to
supply the Company with information reasonably necessary to enable the Company
to meet its legal and tax reporting requirements, including, without limitation,
its Members' periodic reporting obligations under the Securities Exchange Act of
1934, as amended. The Company shall reimburse the Manager for the expenses
incurred in providing such information to the Company.
(c) The Manager agrees to act in a commercially reasonable
manner in exercising its powers, taking actions in the Company's behalf and
performing its activities and responsibilities pursuant to this Management
Services Agreement and the Operating Agreement.
6. Liability. The Manager shall have no liability to the Company for
damages except to the extent of the actual damages (excluding lost profits or
special or punitive damages) suffered by the Company as a direct result of the
willful misconduct of the Manager.
7. Indemnification by the Company. (a) The Company shall indemnify
an indemnified representative (defined herein) against any liability (defined
herein) incurred in connection with any proceeding (defined herein) in which the
indemnified representative may be involved as a party or otherwise, as and when
incurred, by reason of the fact that such indemnified representative is or was
serving in an indemnified capacity (defined herein), including, without
limitation, liabilities resulting from any actual or alleged breach or neglect
of duty, error, misstatement or misleading statement, negligence, gross
negligence or act giving rise to liability, except:
(i) where such indemnification is expressly prohibited
by applicable law;
(ii) where the conduct of the indemnified representative
has been finally determined (A) to constitute gross negligence, reckless
conduct, intentional
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misconduct or a knowing violation of law, sufficient in the circumstances to bar
indemnification against liabilities arising from the conduct; (B) to constitute
a breach of Section 5.1 of the Operating Agreement; or (C) to be based upon or
attributable to the receipt by the indemnified representative from the Company
of a personal benefit to which the indemnified representative is not legally
entitled; or
(iii) to the extent such indemnification has been finally
determined in a final adjudication to be otherwise unlawful.
(b) If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such indemnified representative may be subject, the Company shall
indemnify such indemnified representative to the maximum extent for such portion
of the liabilities.
(c) The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification.
(d) Definitions. For purposes of this Section 7:
(i) "indemnified capacity" means any and all past,
present and future service by an indemnified representative in one or more
capacities as General Manager, officer, or authorized agent of the Company or
the General Manager;
(ii) "indemnified representative" means the Manager, all
employees, agents, representatives and authorized agents of the Manager and any
other natural person or entity designated as an indemnified representative by
the mutual consent of the Manager and the Company;
(iii) "liability" means any damage, judgment, amount paid
in settlement, fine, penalty, punitive damages, tax, or cost or expense of any
nature (including, without limitation, attorneys' fees and disbursements); and
(iv) "proceeding" means any threatened, pending or
completed action, suit, appeal or other proceeding of any nature, whether civil,
criminal, administrative or investigative, whether formal or informal, and
whether brought by or in the right of the Company, a class of its Members or
security holders or otherwise.
(e) Proceedings Initiated by Indemnified Representatives. The
provisions of this Section 7 shall apply to an indemnified representative with
respect to any liability incurred in a proceeding initiated (which shall not be
deemed to include counterclaims or affirmative defenses) or participated in as
an intervenor or amicus curiae by the indemnified representative seeking
indemnification.
(f) Advancing Expenses. The Company shall pay the expenses
(including attorneys' fees and disbursements) incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 7(a) or the initiation of or participation in which is
authorized pursuant to Section 7(e) upon receipt of an
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undertaking by or on behalf of the indemnified representative to repay the
amount if it is ultimately determined that such indemnified representative is
not entitled to be indemnified by the Company pursuant to this Section 7. The
financial ability of an indemnified representative to repay an advance shall not
be a prerequisite to the making of such advance.
(g) Payment of Indemnification. An indemnified representative
shall be entitled to payment with respect to indemnification within twenty (20)
days after a written request for such payment has been delivered to the Company.
(h) Contribution. If the indemnification provided for in this
Section 7 or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the Company shall contribute to the liabilities to which the
indemnified representative may be subject in such proportion as is appropriate
to reflect the intent of this Section 7.
(i) Mandatory Indemnification of Manager. To the extent that
an indemnified representative has been successful on the merits or otherwise in
defense of any proceeding or in defense of any claim, issue or matter therein,
such indemnified representative shall be indemnified against expenses (including
attorneys' fees and disbursements) actually incurred by such representative in
connection therewith. This Section 7(i) shall not be interpreted in any way that
limits the applicability or scope of Section 7(f).
(j) Contract Rights; Amendment or Repeal. All rights under
this Section 7 shall be deemed a contract between the Company and the
indemnified representative pursuant to which the Company and each indemnified
representative intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall not affect any rights or obligations
then existing.
(k) Scope of Section. The rights granted by this Section 7
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement or vote of disinterested members of the Company, both as
to action in an indemnified capacity and as to action in any other capacity. The
indemnification, contribution and advancement of expenses provided by or granted
pursuant to this Section 7 shall continue as to any person or entity who has
ceased to be an indemnified representative in respect of matters arising prior
to such time, and shall inure to the benefit of the heirs, executors,
administrators, personal representatives, successors and permitted assigns of
such a person or entity.
(l) Reliance on Provisions. Each person or entity who shall
act as an indemnified representative of the Company shall be deemed to be doing
so in reliance upon the rights of indemnification, contribution and advancement
of expenses provided by this Section.
(m) Indemnification Insurance. The Company shall obtain and
maintain indemnification insurance of a character and nature that provides
coverage satisfactory to the Manager.
8. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be (i) sent by
registered or certified mail, return receipt requested, (ii) hand delivered,
(iii) sent by electronic mail, or (iv) sent by prepaid
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overnight carrier, with a record of receipt, to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
(a) if to the Manager:
CRC Management Services, Inc.
1290 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
E-Sync Networks, LLC
1290 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Manager
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Each notice or communication shall be deemed to have been given on the date
received.
9. Miscellaneous Provisions.
(a) This Agreement contains the complete understanding of the
parties hereto and there are no understandings, representations, or warranties
of any kind, express or implied not specifically set forth herein. This
Agreement may be amended only by written documents signed by duly authorized
representatives of each of the parties hereto.
(b) This Agreement shall be governed by, interpreted under and
construed in accordance with the internal laws of the State of New York
applicable to contracts
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executed and to be performed wholly in that state without giving effect to the
choice or conflict of laws principles or provisions thereof
(c) The parties hereto agree that any and all disputes, claims
or controversies arising out of or relating to this Agreement that are not
resolved by their mutual agreement shall be submitted to final and binding
arbitration before JAMS, or its successor, pursuant to the United States
Arbitration Act, 9 U.S.C. Sec. 1, et seq. Either party may commence the
arbitration process called for in this Agreement by filing a written demand for
arbitration with JAMS, with a copy to the other party. The arbitration will be
conducted in accordance with the provisions of JAMS' Comprehensive Arbitration
Rules and Procedures in effect at the time of filing of the demand for
arbitration. The parties will cooperate with JAMS and with one another in
selecting an arbitrator from JAMS' panel of neutrals, and in scheduling the
arbitration proceedings. The parties covenant that they will participate in the
arbitration in good faith, and that they will share equally in its costs. The
provisions of this paragraph may be enforced by any court of competent
jurisdiction, and the party seeking enforcement shall be entitled to an award of
all costs, fees and expenses, including attorneys fees, to be paid by the party
against whom enforcement is ordered.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement.
(e) This Agreement shall be for the benefit of the Manager and
the Company and shall be binding upon the parties and their respective
successors and permitted assigns.
(f) Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such term or provision shall be enforced to the maximum extent
permitted by law and, in any event, such illegality or invalidity shall not
affect the validity of the remainder of the Agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and year first above written.
E-SYNC NETWORKS, LLC
By: CRC Management Services, Inc.
Its: General Manager
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
CRC MANAGEMENT SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
CONSENTED TO AND ACKNOWLEDGED:
E-SYNC NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Operating Officer