MANAGEMENT SERVICES AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 1st day of January, 1991.
B E T W E E N:
▇▇▇▇▇▇ COMMUNICATIONS INC.,
a corporation continued under the laws
of the Province of British Columbia,
(hereinafter referred to as "RCI"),
OF THE FIRST PART,
- and -
▇▇▇▇▇▇ CANTEL MOBILE COMMUNICATIONS INC.,
a corporation incorporated under the
laws of Canada,
(hereinafter referred to as "RCMCI"),
OF THE SECOND PART,
- and -
▇▇▇▇▇▇ CANTEL MOBILE INC.,
a corporation incorporated under the
laws of Canada,
(hereinafter referred to as "RCMI"),
OF THE THIRD PART.
WHEREAS RCI is experienced in the communications industry and has for a
number of years provided a wide range of managerial and advisory services to
numerous companies throughout the world involved in various sectors of the
communications industry;
AND WHEREAS RCMCI operates several businesses related to a mobile
communications business and is the indirect parent of ▇▇▇▇▇▇ Cantel Inc.
("Cantel"), an operator of a cellular telephone network in Canada. As such,
RCMCI wishes on behalf
- 2 -
of itself and its subsidiaries, including Cantel, to avail itself of, and RCI is
willing to provide to RCMCI, managerial and other advisory services relating to
RCMCI and such subsidiaries and their respective businesses;
NOW THEREFORE in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
covenant and agree as follows:
1. Scope of Services
RCI hereby agrees to provide to RCMCI on a continuing basis in Canada,
through personnel of RCI or, at RCI's discretion, the personnel of subsidiaries
of RCI, executive, administrative, strategic, purchasing, regulatory, legal and
financial corporate supervision and support services relating to RCMCI and its
subsidiaries of such a nature as RCMCI may reasonably request from time to time
having regard to RCI's experience and expertise and personnel or the personnel
of its subsidiaries, as the case may be, and the remuneration payable to RCI
under this Agreement. Such services shall include, among others, the following:
(a) advice and assistance as to the general and corporate policies and
strategic planning and direction of RCMCI and its subsidiaries,
including the services of the Chief Executive Officer of RCI in
connection with same;
(b) advice regarding Canadian federal and provincial income and sales
taxes and the federal goods and services tax;
(c) advice and assistance in dealing with Canadian regulators, including
with respect to public hearings involving RCMCI or any of its
subsidiaries before various municipal, provincial and federal
governmental and regulatory bodies;
(d) advice and assistance involving investor relations for RCMCI,
including in connection with the communication by RCMCI with
investors, analysts
- 3 -
and securities regulators and the preparation and filing by RCMCI of
disclosure documents and reports required to be filed by it in
accordance with applicable securities legislation and policies;
(e) advice and assistance in respect of the financial affairs of RCMCI
and its subsidiaries, including in respect of the preparation of
budgets, business plans and financial projections for RCMCI and its
subsidiaries and the evaluation of capital expenditure proposals and
monitoring RCMCI's operational results (including those of its
subsidiaries), and consulting with management with respect to those
results;
(f) advice and assistance in connection with the raising by RCMCI or any
of its subsidiaries of external debt or equity capital and in
connection with dealings by RCMCI and its subsidiaries with their
respective bankers and other sources of financial assistance,
including interest rate risk management, foreign exchange management
and the investing of excess cash;
(g) advice and assistance in connection with the acquisition and
divestiture of related operations;
(h) making available personnel of RCI to serve as directors on the
boards of directors of RCMCI and its subsidiaries and on committees
of such boards of directors;
(i) advice and assistance in coordinating purchases of goods and
services with affiliated companies in order to obtain lower costs
and improve economic efficiencies and assistance in the negotiation
of contracts with suppliers and others;
(j) advice and assistance in community relations and public relations
programs, including with respect to the establishment and operation
of a
- 4 -
charitable donations program (but specifically excluding any
charitable donations);
(k) co-ordination in data processing and software matters (but
specifically excluding software creation or production);
(l) advice, assistance and co-ordination in pension planning matters;
(m) advice, assistance and co-ordination involving insurance matters,
including with respect to risk management, planning, disaster advice
and co-ordination of insurance programs with affiliated companies;
(n) providing corporate secretarial services for meetings of the boards
of directors of RCMCI and its subsidiaries and meetings of
committees of those boards of directors;
(o) advice in relation to legal matters and assistance in drafting
standard form agreements and documents and the selection,
management, direction and co-ordination of legal assignments of
outside counsel;
(p) advice and assistance in connection with the relationship with
external auditors and in connection with internal audits conducted
to review the regional operating units and corporate offices of
RCMCI and its subsidiaries, including assistance in identifying
areas in which operational improvements can be made;
(q) advice and assistance in developing policies and procedures for
RCMCI and its subsidiaries relating to financial and accounting
matters, human resource and benefit matters and legal matters; and
(r) monitoring international developments and new business opportunities
and consulting with management of RCMCI regarding same.
- 5 -
For greater certainty, under no circumstances shall RCI be obligated to
provide to RCMCI or its subsidiaries the services of outside professionals or
consultants in fulfilling the obligations of RCI set forth herein nor shall
those services include any common operational services including, without
limitation, services relating to any data centre operated and maintained by RCI.
2. Fees
In consideration of the services to be rendered by RCI hereunder, RCI
shall be paid a monthly fee during each year that this Agreement remains in
effect, determined as set forth below:
(a) in respect of the 1991 and 1992 calendar years, RCI shall be paid a
monthly fee of $666,667, for a total annual fee of $8,000,004 per
year; and
(b) in respect of each calendar year subsequent to 1992, RCI shall be
paid a monthly fee determined as follows:
(i) not less than 30 days prior to the commencement of each such
calendar year RCI and the independent directors of RCMCI
serving on its audit committee (the "Independent Directors")
shall use their reasonable best efforts to determine the
monthly fee that will be payable to RCI hereunder during that
calendar year;
(ii) in determining the fee that will be payable to RCI in each
calendar year as described in clause (i) above, RCI and the
Independent Directors will take into account such factors as
they consider appropriate, including:
(A) the result obtained by multiplying (x) the budgeted
consolidated operating income (before taxes, interest
and depreciation) of RCMCI for that year divided by the
budgeted consolidated operating income (before taxes,
- 6 -
interest and depreciation) of all of RCI's operating
subsidiaries for that year, by (y) 115% of RCI's
budgeted consolidated operating expenses (other than
taxes, interest and depreciation) for that year, in each
case as reflected in the then most recent budgets of
RCMCI and RCI, respectively;
(B) the time and resources of RCI and its personnel
committed to the requirements of RCMCI and its
subsidiaries hereunder during the then current year as
compared with the time and resources of RCI and its
personnel committed to the requirements of the other
operating subsidiaries of RCI during that year; and
(C) any special activities and efforts made by RCI and its
personnel during the then current year principally for
the benefit of RCMCI and its subsidiaries; and
(iii) notwithstanding clause (ii) above, in no event will the annual
fee payable to RCI hereunder in any such calendar year be less
than:
(A) for 1993, the result obtained by (x) multiplying
$8,000,004 by the percentage increase in the Canadian
Consumer Price Index (all items) as reported by
Statistics Canada (the "CPI Index") between January 1,
1991 and December 31, 1991, and (y) multiplying the
result obtained in (x) by the percentage increase in the
CPI Index between January 1, 1992 and December 31, 1992;
and
(B) for each year subsequent to 1993, the result obtained by
multiplying the fee paid to RCI hereunder during the
- 7 -
preceding year by the percentage increase in the CPI
Index between January 1 and December 31 of that year.
For greater certainty, in no event will any monthly fee payable to RCI hereunder
determined by agreement between RCI and the Independent Directors be adjusted to
reflect variations between the budgeted operating income of RCMCI and the
operating subsidiaries of RCI and the actual operating income of RCMCI and the
operating subsidiaries of RCI for any period or to reflect variations between
the budgeted consolidated operating expenses of RCI and the actual consolidated
operating expenses of RCI for any period.
3. Special Provisions for fees
(a) In the event that RCI and the Independent Directors are unable to
agree on the fee that will be payable to RCI hereunder in respect of
any calendar year as contemplated in subparagraph 2(b) above, RCI
shall be paid a monthly fee determined as set forth in clause
2(b)(iii) above during that year unless and until RCI and the
Independent Directors otherwise agree.
(b) If, in the circumstances described in subparagraph 3(a) above, the
parties are unable to determine the fee that will be payable to RCI
hereunder in respect of any month during any calendar year because
information respecting the percentage increase in the CPI Index
between January 1 and December 31 of the preceding year (the "CPI
Information") is not yet available from Statistics Canada, RCI shall
be paid a monthly fee equal to the monthly fee paid to RCI during
the preceding year until the CPI Information becomes available,
following which (i) all further monthly payments made to RCI
hereunder during the relevant year will be varied in the manner
contemplated in clause 2(b)(iii) above, and (ii) within 15 days of
the CPI Information becoming available, RCI shall be paid an
additional amount sufficient to compensate RCI for the deficiency,
if any, in the fees theretofore paid to RCI hereunder during that
year plus interest
- 8 -
on the amount of each monthly deficiency calculated from the last
business day of each relevant month until the date such payment is
made at a rate per annum equal to the prime rate of The
Toronto-Dominion Bank during such period, adjusted on a daily basis
for changes in that rate, plus 2%.
4. Transitional Provisions
The parties hereby agree that, effective as of and from January 1991, this
Agreement replaces and supersedes in its entirety the amended and restated
management services agreement (the "Prior Management Agreement") made as of
April 30, 1990 between RCI and RCMI and that, accordingly, all fees payable to
RCI hereunder in respect of the 1991 calendar year shall be calculated and paid
in accordance with the provisions hereof, notwithstanding the actual date of
execution of this Agreement and notwithstanding the provisions of the Prior
Management Agreement.
5. Identifiable Expenses
In the event that during the term of this Agreement RCI incurs any
identifiable expenses exclusively to benefit RCMCI or any of its subsidiaries in
respect of the services rendered by RCI hereunder, RCI shall be entitled to
obtain reimbursement from RCMCI of such expenses, together with an
administration charge equal to 15% of the amount of such expenses, upon
providing RCMCI with an invoice setting forth particulars of the expenses for
which RCI is claiming reimbursement hereunder. Such invoices shall be submitted
to RCMCI by RCI on a monthly basis. For greater certainty, the expenses
contemplated in this paragraph 5 shall include, without limitation, travel and
living costs charged in accordance with then applicable policies of RCI.
6. Additional Services
From time to time hereafter, RCMCI may submit to RCI a request that RCI
provide to RCMCI or any of its subsidiaries services in addition to those
contemplated in paragraph 1 above. RCI may agree or not agree to provide such
services
- 9 -
in its sole discretion. In the event that RCI agrees to provide such services in
any circumstance other than as described in paragraph 7 below, RCI shall be
entitled to obtain reimbursement of the cost to RCI of providing these services
(including, without limitation, RCI's internal costs such as the cost to RCI of
its personnel performing the relevant services) together with an administration
charge equal to 15% of the amount of those costs, upon providing RCMCI with an
invoice setting forth particulars of the costs for which RCI is claiming
reimbursement hereunder. Such invoices shall be submitted to RCMCI by RCI on a
monthly basis.
7. Competitive Bids for Additional Services
Notwithstanding paragraph 6 above, if at any time during the term of this
Agreement RCMCI or any of its subsidiaries wishes to obtain managerial or other
advisory services in addition to those contemplated in paragraph 1 above and
wishes to obtain competitive bids for the provision of those services, then:
(a) RCI shall have the right (but not the obligation) to participate in
such bidding process on substantially the same terms as all other
third parties invited to submit bids to RCMCI or its relevant
subsidiary; and
(b) if RCI elects to submit a bid to RCMCI or its relevant subsidiary
and RCI's bid is technically acceptable to RCMCI or such subsidiary,
as the case may be, acting reasonably, RCMCI or such subsidiary, as
the case may be, will be bound to accept RCI's bid unless it is on
terms and conditions that are materially less advantageous to RCMCI
or such subsidiary from a financial point of view than other
technically acceptable bids submitted to RCMCI or such subsidiary in
accordance with the bidding process established by it.
8. Payment
The fees payable to RCI pursuant to paragraphs 2, 3, 7 and 9 and the
invoices submitted to RCMCI by RCI pursuant to paragraphs 5 and 6 above shall be
paid
- 10 -
on the last business day of each month. Notwithstanding the preceding sentence,
if and to the extent that payment of any of the fees described in paragraph 2,
3, 7 and 9 would result in RCMCI or any of its subsidiaries being in default
under any agreement with a bank or similar lending institution, RCMCI may defer
payment thereof until such time, but only until such time, as the payment would
not result in RCMCI being in default under such agreement. Any payment to be
made to RCI as set forth above that is not paid when due (including, without
limitation, pursuant to the deferment contemplated in the preceding sentence)
shall bear interest from the date such payment is due until the date such
payment is made at a rate per annum equal to the prime rate of The
Toronto-Dominion Bank during such period, adjusted on a daily basis for changes
in that rate, plus 2%.
9. RCI Guarantees
From time to time hereafter, RCMCI may submit to RCI a request that RCI
guarantee the obligations of RCMCI or any of its subsidiaries under one or more
credit facilities or in respect of one or more of their other financial
obligations. RCI may agree or not agree to guarantee such obligations in its
sole discretion. In the event that RCI agrees to guarantee any of such
obligations, RCMCI shall pay a monthly guarantee fee to RCI in an amount equal
to 1/12 of 2% of the total amount guaranteed by RCI.
10. RCI Loans
From time to time hereafter, RCMCI may submit to RCI a request that RCI or
one of its subsidiaries loan funds to RCMCI or any of its subsidiaries. RCI may
agree or not agree to comply with such a request in its sole discretion. In the
event that RCI agrees to so loan funds to RCMCI or any of its subsidiaries,
either directly or through a subsidiary of RCI, the terms of repayment of the
principal sum advanced shall be as agreed to by RCI and RCMCI or the relevant
subsidiary, as the case may be, at the time of such advance. In the event that
funds so loaned to RCMCI or the relevant subsidiary constitute senior secured
debt (as determined by RCI and RCMCI, acting reasonably, at the time of advance
of funds), the unpaid amount of the principal sum so
- 11 -
advanced shall bear interest at an annual rate equal to the Cost of Funds of RCI
during the relevant period plus 2%. For the purposes hereof, "Cost of Funds"
means the cost of funds to RCI as quoted to RCI by its bankers as such cost of
funds may fluctuate from time to time, as notified to RCMCI by RCI. All other
loans made to RCMCI or any of its subsidiaries in accordance with this paragraph
10 shall bear interest at a rate determined by RCI and RCMCI at the time of
advance of funds. Interest on amounts so loaned to RCMCI or its subsidiary shall
be paid by RCMCI or that subsidiary, as the case may be, monthly in arrears on
the last business day of each month in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇. Notwithstanding the
foregoing, this paragraph 10 shall not apply to funds loaned to RCMCI by RCI
pursuant to the provisions of a credit agreement to be entered into between RCI
and RCMCI providing for, among other things, the establishment by RCI of a $100
million revolving credit facility in favour of RCMCL.
11. Responsibility
RCI assumes no responsibility to RCMCI hereunder other than as expressly
set forth herein. RCI shall not be liable to RCMCI hereunder except where RCI
has acted in bad faith or has been grossly negligent in the performance of its
obligations hereunder.
12. Term
This Agreement shall continue in full force and effect until December 31,
1992 and thereafter shall be automatically renewed for successive terms of one
year each unless either party notifies the other in writing at least six months
before the end of the initial term, or any renewal term then in effect, of its
intention not to have the term extended beyond the initial term or renewal term
then in effect, as the case may be. Rights and obligations of either party
accrued hereunder at the time of termination of this Agreement shall not be
affected by such termination. Notwithstanding the foregoing, this Agreement
shall have no force or effect unless and until it is approved by the Independent
Directors at a meeting duly called for that purpose and a certified copy of
- 12 -
the resolution of the Independent Directors so approving this Agreement, in a
form acceptable to RCI, acting reasonably, has been provided to RCI.
13. Notice
Any notice required or permitted to be given under this Agreement shall be
in writing and shall be given by delivering the same, in the case of RCI to
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇, to the attention of Senior Vice President, Finance and in the case of
RCMCI or RCMI to ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, to the attention
of Vice President, Finance. Any notice so given shall be deemed to have been
given or made on the business day on which it is delivered. Either party may
change its address for service from time to time by notice given in accordance
with the foregoing.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto
relating to the subject matter hereof. This Agreement may not be amended or
modified in any way except by the written consent of the parties hereto.
15. Enurement
The provisions of this Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by either party without the prior
written consent of the other party.
16. Additional Assurance
Each party shall from time to time and at all times hereafter do such
further acts and things and execute such further documents and instruments as
shall reasonably be required in order to fully perform and carry out the terms
of this Agreement.
- 13 -
17. Time of Essence
Time shall be of the essence of this Agreement.
18. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein and the parties hereto hereby irrevocably attorn to the jurisdiction of
the courts of such Province.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto
as of the date first above written.
▇▇▇▇▇▇ COMMUNICATIONS INC.
by
-----------------------------------
C.S.
-----------------------------------
▇▇▇▇▇▇ CANTEL MOBILE COMMUNICATIONS INC.
by
-----------------------------------
C.S.
-----------------------------------
▇▇▇▇▇▇ CANTEL MOBILE INC.
by
-----------------------------------
C.S.
-----------------------------------