This management services agreement is between
The Company is in the business of
The Manager is experienced and skilled in general management, business advisory, administrative, fiscal, and accounting services in the Company's industry.
The Company wishes to engage the Manager as an external management consultant for the Company for the purpose of providing professional managerial services.
The parties therefore agree as follows:
1. ENGAGEMENT; SERVICES.
- (a) Engagement. The Company retains the Manager to provide, and the Manager shall provide, the services described in subsection (b) (the "Services").
- (b) Services. The Manager shall:
(i) develop policies to further the commercial, financial, administrative, or other activities of the Company create and implement a future market strategy assess the financial state of the Company prepare monthly and fiscal year-end balance sheets and income/expense statements for delivery to the Company within 30 days after the close of the relevant period ; (ii) develop policies to further the commercial, financial, administrative, or other activities of the Company create and implement a future market strategy assess the financial state of the Company prepare monthly and fiscal year-end balance sheets and income/expense statements for delivery to the Company within 30 days after the close of the relevant period ; (iii) develop policies to further the commercial, financial, administrative, or other activities of the Company create and implement a future market strategy assess the financial state of the Company prepare monthly and fiscal year-end balance sheets and income/expense statements for delivery to the Company within 30 days after the close of the relevant period ; (iv) develop policies to further the commercial, financial, administrative, or other activities of the Company create and implement a future market strategy assess the financial state of the Company prepare monthly and fiscal year-end balance sheets and income/expense statements for delivery to the Company within 30 days after the close of the relevant period ; (v) develop policies to further the commercial, financial, administrative, or other activities of the Company create and implement a future market strategy assess the financial state of the Company prepare monthly and fiscal year-end balance sheets and income/expense statements for delivery to the Company within 30 days after the close of the relevant period ; (vi) (v) (iv) (iii) (ii) devote as much productive time, energy, and ability to the performance of its duties under this agreement as may be necessary to provide the required Services in a timely and productive manner;(vii) (vi) (v) (iv) (iii) perform the Services in a safe, good, and workmanlike manner by fully trained, skilled, competent, and experienced personnel using at all times adequate equipment in good working order;(viii) (vii) (vi) (v) (iv) in the performance of the Services, serve the Company in good faith, ensuring that it is:- A. protecting the Company's interests;
- B. observing all applicable laws related to the Company's activities; and
- C. acting in accordance with good and professional management practices;
(ix) (viii) (vii) (vi) (v) communicate with the Company about progress the Manager has made in performing the Services;(x) (ix) (viii) (vii) (vi) supply all tools, equipment, and supplies required to perform the Services, except if the Manager's work must be performed on or with the Company's equipment;(xi) (x) (ix) (viii) (vii) ensure that all materials and equipment furnished to its personnel are of good and merchantable quality, unless otherwise agreed by the Company;(xii) (xi) (x) (ix) (viii) provide services (including the Services) and end products that are satisfactory and acceptable to the Company and free of defects; and(xiii) (xii) (xi) (x) (ix) remove, replace, or correct all or any portion of the work or end products found defective or unsuitable, without additional cost or risk to the Company.
- (c) Legal Compliance. The Manager shall perform the Services in accordance with standards prevailing in the Company's industry, and in accordance with applicable laws, rules, or regulations. The Manager shall obtain all permits or permissions required to comply with those standards, laws, rules, or regulations.
- (d) Company's Obligations. The Company shall make timely payments of amounts earned by the Manager under this agreement and notify the Manager of any changes to its procedures affecting the Manager's obligations under this agreement at least 30 days before implementing those changes.
2. TERM AND TERMINATION.
- (a) Term. This agreement will become effective as described in section 21 and continue for an initial term of
year(s) (the "Term"). Unless either party gives written notice to the other at least days before the end of the Term, this agreement will renew automatically for an additional -year term. This automatic extension will continue to apply at the end of each extended period until the agreement is terminated. - (b) Termination. This agreement may be terminated:
- (i) by either party on provision of Number days' written notice before the end of a Term;
- (ii) by either party for a material breach of any provision of this agreement by the other party, if the other party's material breach is not cured within
days of receipt of written notice of the breach; and - (iii) by the Company at any time and without prior notice, if the Manager is convicted of any crime or offense, fails or refuses to comply with the written policies or reasonable directives of the Company, or is guilty of serious misconduct in connection with performance under this agreement
. ; or (iv) automatically, on the death of the Manager.
- (c) Effect of Termination. After the termination of this agreement for any reason, the Company shall promptly pay the Manager for Services rendered before the effective date of the termination. No other compensation, of any nature or type, will be payable after the termination of this agreement.
3. COMPENSATION.
- (a) Costs and Expenses. Each
month quarter -day period, the Company shall reimburse the Manager for all costs and expenses reasonable incurred by the Manager (the "Costs and Expenses") in connection with the provision of the Services to the Company for that month quarter -day period . - (b) Management Fee. Each
month quarter -day period , the Company shall pay to the Manager a management fee equal to% of the Costs and Expenses for that month quarter -day period (the "Fee"). - (c) Payment of Fees. Within
days following the end of each month quarter -day period period, the Manager shall prepare a statement of Costs and Expenses incurred in providing the Services, setting for the basis for the calculation in reasonable detail. The Manager shall then invoice the Company for those Costs and Expenses together with the Fee. The Company shall pay those amounts withindays of receipt of that invoice. - (d) No Payments in Certain Circumstances. No payment will be payable to the Manager under any of the following circumstances:
- (i) if prohibited under applicable government law, regulation, or policy;
- (ii) if the Manager did not directly perform or complete the Services;
- (iii) if the Manager did not perform the Services to the reasonable satisfaction of the Company; or
- (iv) if the Services performed occurred after the expiration or termination of the Term, unless otherwise agreed in writing.
- (e) No Other Compensation. The compensation set out above will be the Manager's sole compensation under this agreement.
- (f) Expenses. Any ordinary and necessary expenses incurred by the Manager or its staff in the performance of this agreement will be the Manager's sole responsibility.
- (g) Taxes. The Manager is solely responsible for the payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of the Services by the Manager under this agreement, and for all obligations, reports, and timely notifications relating to those taxes. The Company has no obligation to pay or withhold any sums for those taxes.
- (h) Other Benefits. The Manager has no claim against the Company under this agreement or otherwise for vacation pay, sick leave, retirement benefits, social security, worker's compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind.
4. NATURE OF RELATIONSHIP; INVENTIONS.
- (a) Independent Contractor Status.
- (i) The relationship of the parties under this agreement is one of independent contractors, and no joint venture, partnership, agency, employer-employee, or similar relationship is created in or by this agreement. Neither party may assume or create obligations on the other party's behalf, and neither party may take any action that creates the appearance of such authority.
- (ii) The Manager has the sole right to control and direct the means, details, manner, and method by which the Services will be performed, and the right to perform the Services at any time, place, or location. The Manager or the Manager's staff shall perform the Services, and the Company is not required to hire, supervise, or pay any assistants to help the Manager perform those Services. The Manager shall provide insurance coverage for itself and its staff.
- (b) Inventions Retained and Licensed. Attached as Exhibit A to this agreement is a list of all intellectual property that the Manager made before its agreement with the Company (the "Prior Inventions") that belong to the Manager, that relate to the Company's proposed business, products, or research and development, and that are not assigned to the Company under this agreement. If no list is attached, the Manager represents that there are no Prior Inventions. If disclosure of a Prior Invention would cause the Manager to violate an existing confidentiality agreement, the Manager may not list the Prior Invention in **Exhibit A **but shall instead provide the name of the invention, a list of the party or parties to which it belongs, and an explanation of why full disclosure was not given. A space is provided in Exhibit A for this purpose. If in the course of providing services to the Company, the Manager incorporates into a Company product, process, or machine a Prior Invention owned by the Manager or in which the Manager has an interest, the Company will be granted and have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, and sell that Prior Invention as part of or in connection with that product, process, or machine.
- (c) Company Inventions. The Manager has no right or interest in any work or product resulting from the Services the Manager performs for the Company, or any of the documents, reports, or other materials the Manager creates in connection with those Services (collectively, the "Company Inventions"), and has no right to or interest in any copyright to the Company Inventions. The Company Inventions have been specially commissioned or ordered by the Company as "works made-for-hire," as that term is defined in the United States Copyright Act, and the Company is therefore the author and the owner of all copyrights in the Company Inventions.
- (d) Disclosure of Company Inventions. The Manager shall promptly disclose in writing to the Company all Company Inventions that the Manager has authored, made, conceived, or first actually reduced to practice, alone or jointly with others.
- (e) Assignment of Company Inventions. If the Company Inventions or any parts of those are deemed not to have been works made-for-hire, the Manager hereby assigns to the Company all interest the Manager may have in the Company Inventions, including all copyrights, publishing rights, rights to use, reproduce, and otherwise exploit the Company Inventions in all formats or media and all channels, whether now known or created in the future.
- (f) Patent and Copyright Registrations. The Manager shall assist the Company or its designee, at the Company's expense, to secure the Company's rights in the Company Inventions and any copyrights, patents, mask work rights, or other intellectual property rights relating to the Company Inventions in all countries, including by disclosing to the Company all pertinent information and data with respect to those, by signing all applications, specifications, oaths, assignments, and other instruments that the Company deems necessary to apply for and obtain those rights and to assign and convey to the Company, its successors, assigns, and nominees the exclusive interest in the Company Inventions, and any copyrights, patents, mask work rights, or other intellectual property rights relating to those. When it is in the Manager's power to do so, the Manager shall sign or cause to be signed these instruments or papers after the termination or expiration of this agreement. If the Manager provides assistance after the termination or expiration of this agreement at the Company's request, the Company shall pay the Manager a reasonable rate for any time spent. If because of the Manager's mental or physical incapacity or for any other reason the Company cannot secure a signature to apply for or pursue any application of any United States or foreign patents or copyright registrations covering Company Inventions or original works of authorship assigned to the Company, the Manager hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Manager's agents and attorneys in fact, to act for and on behalf of the Manager to sign and file those applications and to do all other lawfully permitted acts to further the prosecution and issuance of patent or copyright registrations with the same legal force and effect as if they had been signed by the Manager.
5. USE OF TRADEMARKS.
The Manager may use, reproduce, and distribute the Company's service marks, trademarks, and trade names (if any) (collectively, the "Company Marks") in connection with the performance of the Services. Any goodwill received from this use will accrue to the Company, which will remain the sole owner of the Company Marks. The Manager may not engage in activities or commit acts, directly or indirectly, that may contest, dispute, or otherwise impair the Company's interest in the Company Marks. The Manager may not cause diminishment of value of the Company Marks through any act or representation. The Manager may not apply for, acquire, or claim any interest in any Company Marks, or others that may be confusingly similar to any of them, through advertising or otherwise. At the expiration or earlier termination of this agreement, the Manager will have no further right to use the Company Marks, unless the Company provides written approval for each such use.
6. CONFIDENTIAL INFORMATION.
- (a) Confidentiality. During the Term, the Manager may have access to or receive certain information of or about the Company that the Company designates as confidential or that, under the circumstances surrounding disclosure, ought to be treated as confidential by the Manager ("Confidential Information"). Confidential Information includes information relating to the Company or its current or proposed business, financial statements, budgets and projections, customer identifying information, potential and intended customers, employers, products, computer programs, specifications, manuals, software, analyses, strategies, marketing plans, business plans, and other confidential information, provided orally, in writing, by drawings, or by any other media. The Manager will treat the Confidential Information as confidential and will not disclose it to any third party or use it for any purpose but to fulfill its obligations in this agreement. In addition, the Manager shall use due care and diligence to prevent the unauthorized use or disclosure of such information.
- (b) Exceptions. The obligations and restrictions in subsection (a) do not apply to that part of the Confidential Information:
- (i) was or becomes publically available other than as a result of a disclosure by the Manager in violation of this agreement;
- (ii) was or becomes available to the Manager on a nonconfidential basis before its disclosure to the Manager by the Company, but only if:
- A. the source of such information is not bound by a confidentiality agreement with the Company or
- is not otherwise prohibited from transmitting the information to the Manager by a contractual, legal,
- fiduciary, or other obligation; and
- B. the Manager provides the Company with written notice of its prior possession either (I) before the
- effective date of this agreement or (II) if the Manager later becomes aware (through disclosure to the
- Manager) of any aspect of the Confidential Information as to which the Manager had prior possession,
- promptly on the Manager so becoming aware;
- (iii) is requested or legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, or similar processes), or is required by a regulatory body, to be disclosed. However, the Manager shall:
- A. provide the Company with prompt notice of these requests or requirements before making a
- disclosure so that the Company may seek an appropriate protective order or other appropriate
- remedy; and
- B. provide reasonable assistance to the Company in obtaining any protective order. If a protective
- order or other remedy is not obtained or the Company grants a waiver under this agreement, the
- Manager may furnish that portion (and only that portion) of the Confidential Information that, in
- the written opinion of counsel reasonably acceptable to the Company, the Manager is legally
- compelled or otherwise required to disclose. However, the Manager shall make reasonable efforts
- to obtain reliable assurance that confidential treatment will be accorded any part of the Confidential
- Information disclosed in this way; or
- (iv) was developed by the Manager independently without breach of this agreement.
- (c) Obligation to Maintain Confidentiality.
- (i) Confidentiality. At all times during its work with the Company, the Manager shall hold in strictest confidence, and not use, except for the benefit of the Company, or to disclose to any person, firm, or corporation without the prior written authorization of the Company, any of the Company's Confidential Information.
- (ii) Term. The Manager shall maintain the confidentiality and security of the Confidential Information until the earlier of:
- A. such time as all Confidential Information disclosed under this agreement becomes publicly known
- and is made generally available through no action or inaction of the Manager; or
- B. the third anniversary of the termination of the Manager's work with the Company. However, to the
- extent that the Company has disclosed information to the Manager that constitutes a trade secret
- under law, the Manager shall protect that trade secret for as long as the information qualifies as
- a trade secret.
- (d) Remedy. Money damages may not be a sufficient remedy for any breach of this section by the Manager and, in addition to all other remedies, the Company may seek (and may be entitled to) as a result of that breach, specific performance and injunctive or other equitable relief as a remedy.
8. OTHER ACTIVITIES.
During the Term, the Manager is free to engage in other independent contracting activities, except that the Manager may not accept work, enter into contracts, or accept obligations inconsistent or incompatible with the Manager's obligations or the scope of Services to be rendered for the Company under this agreement.
9. RETURN OF PROPERTY.
Within five business days of the expiration or earlier termination of this agreement, the Manager shall return to the Company, retaining no copies or notes, all Company products, samples, models, property, and documents relating to the Company's business including reports, abstracts, lists, correspondence, information, computer files, computer disks, and other materials and copies of those materials obtained by the Manager during and in connection with its work with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork or creative work, notebooks, and similar items relating to the Company's business, whether prepared by the Manager or by others, remain the Company's exclusive property.
10. INDEMNIFICATION.
- (a) Of Company by Manager. At all times after the effective date of this agreement, the Manager shall indemnify the Company and its subcontractors, officers,
members, managers, employees, owners, sublicensees, affiliates, subsidiaries, successors, and assigns (collectively, the "Company Indemnitees") from all damages, liabilities, expenses, claims, or judgments (including interest, penalties, reasonable attorneys' fees, accounting fees, and expert witness fees) (collectively, the "Claims") that any Company Indemnitee may incur and that arise from:- (i) the Manager's gross negligence or willful misconduct arising from the Manager's carrying out of its obligations under this agreement;
- (ii) the Manager's breach of any of its obligations or representations under this agreement; or
- (iii) the Manager's breach of its express representation that it is an independent contractor and in compliance with all applicable laws related to work as an independent contractor. If a regulatory body or court of competent jurisdiction finds that the Manager is not an independent contractor or is not in compliance with applicable laws related to work as an independent contractor, based on the Manager's own actions, the Manager will assume full responsibility and liability for all taxes, assessments, and penalties imposed against the Manager or the Company resulting from that contrary interpretation, including taxes, assessments, and penalties that would have been deducted from the Manager's earnings if the Manager had been on the Company's payroll and employed as a Company employee.
- (b) Of Manager by Company. At all times after the effective date of this agreement, the Company shall indemnify the Manager and its officers, members, managers, employees, agents, contractors, sublicensees, affiliates, subsidiaries, successors, and assigns (collectively, the "Manager Indemnitees") from all Claims that the Manager Indemnitees may incur arising from:
- (i) the Company's operation of its business;
- (ii) the Company's breach or alleged breach of, or its failure or alleged failure to perform under, any agreement to which it is a party; or
- (iii) the Company's breach of any of its obligations or representations under this agreement. However, the Company is not obligated to indemnify the Manager if any of these Claims result from the Manager's own actions or inactions.
11. FORCE MAJEURE.
A party will not be considered in breach or in default because of, and will not be liable to the other party for, any delay or failure to perform its obligations under this agreement by reason of fire, earthquake, flood, explosion, strike, riot, war, terrorism, or similar event beyond that party's reasonable control (each a "Force Majeure Event"). However, if a Force Majeure Event occurs, the affected party shall, as soon as practicable:
- (a) notify the other party of the Force Majeure Event and its impact on performance under this agreement; and
- (b) use reasonable efforts to resolve any issues resulting from the Force Majeure Event and perform its obligations under this agreement.
12. GOVERNING LAW.
- (a) Choice of Law. The laws of the state of
govern this agreement (without giving effect to its conflicts of law principles). - (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in
County, .
13. AMENDMENTS.
No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.
14. ASSIGNMENT AND DELEGATION.
- (a) No Assignment. Neither party may assign any of its rights under this agreement, except with the prior written consent of the other party. All voluntary assignments of rights are limited by this subsection.
- (b) No Delegation. Neither party may delegate any performance under this agreement, except with the prior written consent of the other party.
- (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.
15. COUNTERPARTS; ELECTRONIC SIGNATURES.
- (a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
- (b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.
16. SEVERABILITY.
If any one or more of the provisions contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.
17. NOTICES.
- (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
- (b) Addresses. A party shall address notices under this section to a party at the following addresses:
- If to the Company:
, - If to the Manager:
, - (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.
18. WAIVER.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
19. ENTIRE AGREEMENT.
This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement about the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
20. HEADINGS.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
21. EFFECTIVENESS.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
22. NECESSARY ACTS; FURTHER ASSURANCES.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this agreement on the date stated opposite that party's signature.
| Date: _____________________________ | By: _________________________________________________________ |
| Name: |
|
| Date: _____________________________ | By: _________________________________________________________ |
| Name: |
[PAGE BREAK HERE]
EXHIBIT A
LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP
1. Except as listed in section 2 below, the following is a complete list of all Prior Inventions that were made, conceived, or first reduced to practice by the Manager, alone or jointly with others, before its agreement with the Company:
| add border DDDDDDDDDDDDDDDDDDDD |
DDDDDDDDD | DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD |
|---|---|---|
| Title | Date | Identifying Number or Brief Description |
| The Manager has no inventions or improvements to list. | __________ (Initials) |
||||
| I have attached _____ additional sheets to this Exhibit A. | __________ (Initials) |
2. Because of an existing confidentiality agreement and the duties of confidentiality that the Manager owes to the parties listed below, the Manager cannot complete the disclosure in section 1 above with respect to the inventions or improvements listed generally below:
| add border DDDDDDDDDDDDDDDDDDDDDDDDdDD |
DDDDDDDDDDDDDDDDD | DDDDDDDDDDDDDDDDDDDDDDDDD |
|---|---|---|
| Invention or Improvement | Party Names | Relationship |
| I have attached _____ additional sheets to this Exhibit A. | __________ (Initials) |
||||
| Date: __________________________________________________ | |||||
| By: __________________________________________________ | |||||
| Name: |
|||||
How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
Management services agreement: How-to guide
Hiring an outside manager offers several advantages compared to hiring an internal employee, such as keeping costs down and saving time on recruiting and training. If these factors make this option a good fit for your business needs, utilize an outside management firm to provide management services and keep your business organized.
There are risks to businesses using outside managers, the most dangerous of which is that those individuals will be reclassified as employees. If this happens, the company using the managers must reimburse the IRS or state tax authority for delinquent employment taxes, interest, and penalties. Although a business can't insulate itself absolutely from reclassifications or contract audits, written agreements can offer a certain amount of protection from such charges.
A suitable agreement is a better starting point to answer questions about work parameters, responsibilities, payment terms, business operations, and services provided. You can even specify what and how often the manager offers reports on the business and more with a management services agreement.
Once the parties agree on contract terms and have signed the attached form, each party can focus on its area of expertise—the company on the development of its business and the manager on the company's day-to-day management.
Factors to consider while drafting a management services agreement
1. Examine the contents of the agreement
The agreement protects the parties’ rights during the contract term. The parties must describe the services provided by the manager in a separate document and attach it to this agreement. This document must contain:
- The goals of this arrangement
- Any agreed-on terms
- Description of the manager’s tasks, goals, milestones, and any specific results expected
- Clarity on the terms and conditions of the agreement
2. Review the agreement
Allow both parties enough time to review the agreement document to avoid any misunderstandings. Review the completed agreement carefully to ensure all relevant deal points are included. Don't assume any expectations or terms are agreed upon if they aren't explicitly stated in the document.
3. Sign the agreement
Once the agreement is drafted and ready, sign two copies of it, one for the company and the other for the manager. Keep a copy of the signed agreement for your reference. At the end of its term, both parties can revisit its provisions and consider whether to renew.
A written agreement is the first step in establishing an individual’s independent contractor status. Once signed, both parties must follow its terms exactly and perform similar services to ensure that status is maintained.
4. Notarize the agreement
Depending on the nature of its terms, you may decide to have your agreement witnessed or notarized. This will limit later challenges to the validity of a party’s signature.
If your agreement is complicated, contact an attorney with legal experience to help draft a document that meets your needs.
Important sections in a management service agreement
The following instructions will help you understand the terms of your agreement. Please review the entire document before starting your step-by-step process.
1. Introduction
This section identifies the document as a management services agreement. Add the effective date when the agreement will be signed, identify the parties involved, and what type of organization they are. The hiring party is called the “company,” and the service provider is called the “manager.” They're collectively referred to as “parties.”
2. Recitals
The “whereas” clauses, referred to as recitals, define the world of the agreement and offer key background information about the parties. In this agreement, the recitals include a simple statement of one party’s intent to enter into a management services arrangement with the other party.
3. Appointment/acceptance
Here, the parties acknowledge that one party will be the manager of the other party’s (company’s) organization. The details of the additional services provided by the manager must be attached to the agreement.
4. Responsibilities
This section will list each party’s responsibilities under the agreement. Essentially, the manager agrees to perform the agreed-on services with adequate attention and care, and the company agrees to assist in this performance by providing necessary information and guidance.
If need be, add additional obligations (e.g., on the manager’s request, the company will provide regular feedback about the services being provided) and information about minimum hours of service that the manager will provide to the company.
5. Nature of relationship
This section explains that the manager isn't an employee or partner of the company. This distinction is important for legal reasons, including insurance coverage requirements, liability, and taxes. The agreement emphasizes this divide, but both parties should maintain the line between independent contractors and employees in performing their duties. Review your state laws governing independent contractors to ensure the agreement follows local restrictions.
6. Term
This section allows you to:
- Specify how long you want the first term of the agreement to last. By calling it the “initial term,” you aren't obligating yourself to any additional terms—it may be the only one. Enter the number of years you want the initial term to last.
- Enter the number of days advance notice the parties must give to end the agreement.
7. Insurance coverage
This section mentions that both parties must obtain or maintain all applicable insurance coverage. Enter the minimum amount that this coverage should be. This will vary depending on the size of your business and the extent of the services offered.
8. Confidential information
This section defines confidential information for purposes of the agreement and explains how the manager will treat that information, e.g.,
- The manager can use the information only for purposes intended by the agreement (e.g., if the information was disclosed to help the manager complete its services, the information can be used only for that purpose)
- The manager must treat the information as intellectual property and can discuss the information only with specific individuals within the company.
9. Representations and warranties
This clause details the parties’ promises under the agreement. Each party agrees to enter into the arrangement based on the conditions in this section (e.g., each can enter the agreement and satisfy its terms).
10. Compensation
This section sets up the rules w.r.t. payments and its terms, like,
- A flat fee will be paid to the manager in exchange for the performance of the services under the agreement. The fee structure is initially stated as the total yearly amount, but this fee can be paid in installments pursuant to the parties’ agreement. Enter the frequency with which you want payments to be forwarded to the manager’s bank account (e.g., weekly fee, monthly fee, etc).
- The circumstances under which no payments will be made.
- The payments outlined are the manager’s only compensation for its services under the agreement.
- The manager will pay for their internal expenses. This is another reflection that the company and the manager function as separate entities (i.e., not as employer and employee). However, expenses that the manager incurs specifically in performing services for the company will be reimbursed if sufficient evidence of those expenses is provided to the company.
- The manager is responsible for paying their taxes on the money they receive (i.e., it isn't receiving a “salary” as an employee of the company, and the company won't withhold those amounts on its behalf as a standard corporate practice).
11. Reporting
This provision mentions that the manager provides periodic reports on their services. You can designate a contact person at the company to receive these reports, indicate how frequently they should be provided, and specify the type of information to be supplied.
12. Work for hire
This section grants ownership of all work performed by the manager to the company under this agreement, including completed products and materials produced during creation.
13. No conflict of interest; other activities
This section confirms that the manager promises not to work with any other company or product that competes with the current company. However, the manager can work with other companies if it doesn't harm the current company or its interests.
14. Termination
This section explains that certain actions or events, including written notice or material breach, will cause the agreement to end out of time (i.e., before the services are completed or the end of the term, if any). Write in the amount of notice a party must give of its intent to terminate or to notify the other of a breach.
15. Return of property
Even though it may seem obvious that the manager should return any property after the agreement ends, this paragraph clearly states that. You need to specify the time period within which the manager has to return such property after the agreement is over.
16. Indemnification
This provision allocates responsibilities between the parties if problems arise in the future and protects each party from the consequences of the other’s negligent or intentional conduct.
17. Use of trademarks
This rule mentions that the manager can't misuse the company's trademarks or get a trademark that looks like the company's. For instance, if someone is working for ABC, they can't apply for a trademark on a product with the name ABC, like Jane's ABC Products. Also, this section states that the manager can't use the company's trademarks once the agreement ends.
18. No publicity
This section states that the manager can’t make significant public statements on the company’s behalf without their specific permission.
19. Amendments
This clause indicates that any changes to the document are ineffective unless they are made in writing and signed by both parties.
20. Assignment
This section explains that each party must obtain the other’s written permission before assigning its obligations and interests.
21. Successors and assigns
This clause says that the rights and duties of the parties will be transferred to their heirs or, in the case of companies, to the successor organizations or organizations that have been allowed to take the rights and duties.
22. Force majeure
This provision releases a party from its obligations if its performance is made impossible by an event beyond its control (e.g., flood, earthquake, etc.). This release is effective only if circumstances prevent that party from completing its tasks.
23. No implied waiver
This section explains that if either party allows the other to ignore or break an obligation under the agreement, it doesn't mean that the party waives any future rights to require the other to fulfill those (or any other) obligations.
24. Notice
This part provides a list of addresses where all the official or legal communication should be delivered. Please provide the mailing address for both the company and the manager.
25. Governing law
This provision allows the parties to choose the state laws that will be used to interpret the document.
26. Counterparts; electronic signatures
This clause states that if the parties sign the agreement in different locations or use electronic devices to transmit signatures, all the separate pieces will be considered part of the agreement. This provision ensures that business can be transacted efficiently without sacrificing the agreement's validity.
27. Severability
This section protects the terms of the agreement as a whole, even if one part is later invalidated. For example, if a state law is passed prohibiting choice-of-law clauses, it won't undo the entire document. Instead, only the section dealing with the choice of law would be invalidated, leaving the remainder of the agreement enforceable.
28. Headings
This part explains that the headings at the start of each section are meant to structure the document and shouldn't be considered as operational parts of the note.
Frequently asked questions
What is a management services agreement?
A management services agreement (also known as a master service agreement) is a legal document that facilitates the business relationship between two parties. It outlines the duties of the parties when one organization hires another to manage a particular business or service.
What is the purpose of the management agreement?
From an accounting perspective, hiring outside managers is cheaper than employing a full-time individual. In addition to the apparent expenses of salaries, bonuses, and other compensation, employees can subtly cost a company, requiring further investments in benefits, payroll taxes, insurance premiums, office space, and equipment. Such additional costs aren’t necessary for external managers. Companies can use these individuals for specific tasks according to business needs. They can avoid the legal minefields of hiring and firing staff according to the ebb and flow of the market. Large corporations choose experts to provide services when needed and can avoid the cost and hassle of providing additional education or training to current employees.
What is the essential information needed to draft a management services agreement?
Here's the information you'll need to have handy to complete management services agreements:
- Who it's coming from: Determine if a business or individual is sending the document and have the name and contact information ready
- Who it's going to: Know who this document is going to and have the individual or business name and contact information ready. If it's a business, make sure you know the business type (LLC, corporation, etc.)
- Which state will govern it: Specify the state so it's clear what state laws apply to the document
- Subject matter: Have a summary of the general duties and responsibilities of the manager ready
- Time period: Be clear about how long you want this agreement's initial term to be and whether or not it will renew
Free Management Services Agreement Template
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