MANAGEMENT SERVICES AGREEMENT
AGREEMENT by and between J R Group, LLC, , a New York limited liability
company (together with its successors and permitted assigns, "J R Group"), and
Whitestone Group, LLC, New York, New York, a New York limited liability company
(together with its successors and permitted assigns, "Whitestone"), dated as of
this __ day of November, 1999.
WHEREAS, Whitestone, an affiliate of J R Group , has developed expertise in
and facilities to provide certain management services; and
WHEREAS, the J R Group and its owners desires to take advantage of the
experience and facilities of Whitestone in order to improve the functioning of J
R Group, consolidate management functions and economic value in Whitestone and
to take advantage of efficiencies of scale;
NOW, THEREFORE, in consideration of the mutual promises set forth herein
and other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. GENERAL MANAGEMENT SERVICES
Whitestone agrees to provide general management services to J R Group,
including:
(a) investment and management of cash on hand of J R Group pending investment,
in accordance with policies established by J R Group;
(b) monitoring safekeeping and custody services provided by other parties with
respect to J R Group's assets;
(c) cooperating fully with J R Group and its outside auditors with respect to J
R Group's audit function;
(d) administration of benefit plans that may be implemented by J R Group for
its officers;
(e) administration of payroll and payroll taxes, if any;
(f) all other management or administrative functions necessary for the
operations of J R Group and
(g) all other services incident to the foregoing.
In providing such services, Whitestone will comply with all written
policies and procedures established by J R Group.
2. LENDING AND LOAN AND INVESTMENT MANAGEMENT SERVICES
Whitestone agrees to provide investing, lending and loan management
services to J R Group, including:
(a) providing credit analysis and underwriting services and advice regarding
investments and loans proposed to be extended by J R Group;
(b) preparation of investment and loan contracts and other documents in
connection with transactions managed by J R Group;
(c) establishing and maintaining investment and loan documentation files,
including, among other things, credit files and collateral files;
(d) collecting and maintaining current financial statements for investee
companies and borrowers and other information, documents and reports
required by loan agreements or J R Group policies;
(e) reviewing credit files and loan documentation at loan origination, and
acting to correct exceptions to J R Group loan policies;
(f) collecting and remitting payments as directed by J R Group;
(g) preparing and mailing borrower bills and notices;
(h) conducting collection activities in connection with delinquent accounts,
and providing to J R Group periodic reports with respect to its collection
activities as well as recommendations regarding delinquent accounts;
(i) periodically reviewing investments, loans and loan documentation for
compliance with investment contracts, loan terms and loan policies
according to compliance covenants and schedules established by mutual
agreement, and reporting the results of these reviews to J R Group;
(j) monitoring the insurance coverage of property securing loans for compliance
with requirements of the loan terms and J R Group's policies, and
attempting to cure any noncompliance;
(k) providing information in response to inquiries from borrowers and investee
companies, and otherwise performing routine customer services with respect
to the investments and loans;
(l) providing advice to the Managing Members of J R Group regarding investing,
lending and related policies; and
(m) providing any other services incident to the foregoing.
J R Group will provide such powers of attorney, evidences of authority or
other documents as are necessary and appropriate to allow Whitestone to perform
the lending, investing and loan management services pursuant to this Agreement.
In providing such services, Whitestone will comply with the written
policies and procedures established by J R Group relating to investment and loan
policies, procedures and monitoring, and other matters bearing on the investment
and loan management services to be provided by Whitestone pursuant to this
Agreement. The investing, lending and loan management services provided by
Whitestone hereunder will be subject to the direction and supervision of such
officers of J R Group that are assigned responsibility for such activities.
3. REGULATORY COMPLIANCE SERVICES
Whitestone agrees to provide regulatory compliance services to J R Group,
including:
(a) preparing any and all applications for permits necessary for J R Group to
conduct its business;
(b) preparing all regulatory reports or information required to be filed by J R
Group with any applicable regulatory authority;
(c) maintaining all records and data required by applicable law to be
maintained by J R Group with respect to its operations;
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(d) cooperating fully with J R Group with respect to examinations of J R
Group's operations by applicable regulatory authorities; and
(e) providing all other services incident thereto.
4. SAME DEGREE OF CARE; BEST EFFORTS
In performing services pursuant to this Agreement, Whitestone will use its
best efforts and exercise the same degree of care and effort it would exercise
with respect to its own functions of a like nature, and at a minimum will cause
its officers and employees to devote sufficient time, attention and resources to
the affairs of J R Group as to the management and conduct of the business in a
manner consistent with the best practices of the industry and will not give
preference or priority with respect to such matters over any other entity for
which it provides the same or similar services as to J R Group. However, in no
way does this Agreement provide any incidence of control, either directly or
indirectly, of any investment decisions of J R Group.
5. PAYMENT; REIMBURSEMENT OF EXPENSES
In consideration of the services to be performed by Whitestone pursuant to
this Agreement, J R Group will pay an annual fee , in four equal quarterly
installments. Such annual fee shall be an amount equal to J R Group's annual
gross receipts less the amount of $70,000.00; quarterly installments shall be
paid in arrears and shall be based upon estimates of expected annual revenues
and adjusted within 45 days of the conclusion of each fiscal year. The annual
fee for any one-year term in which a cancellation of this Agreement is effective
will be calculated by multiplying the total annual fee set forth above, by a
fraction, the numerator of which is the number of days in the term of this
Agreement prior to the effective date of the cancellation, and the denominator
of which is 365.
J R Group will reimburse Whitestone for all direct, out-of-pocket expenses
incurred by Whitestone in connection with the services provided pursuant to this
Agreement. J R Group promptly will pay such bills, invoices, or the like,
delivered to it for payment by Whitestone or such other person who has rendered
goods or services in connection with the performance by Whitestone of services
pursuant to this Agreement and Whitestone will have no liability with respect to
payment for any such bills.
6. TERM OF AGREEMENT; CANCELLATION; RENEWALS
The term of this Agreement will be one year, and either party may cancel
this Agreement at any time, effective ten days following the delivery of written
notice to the other party.
7. AMENDMENTS, WAIVERS
All amendments or waivers of the provisions of this Agreement must be in
writing.
8. INDEMNIFICATION
J R Group and any successor agrees to indemnify and hold (a) Whitestone,
and (b) its officers, employees, and agents (to the extent serving in such
capacity, each such person an
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"Indemnified Party"), harmless against all losses, claims, damages, expenses, or
liabilities, joint or several, to which Whitestone or an Indemnified Party may
become subject in any way related to or arising out of the performance by
Whitestone of services rendered pursuant to this Agreement. In addition, J R
Group agrees to reimburse Whitestone and the Indemnified Party for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, or liability or any action in respect
thereof, including, without limitation, losses, claims, damages, expenses,
liabilities, costs, or expenses arising out of any dispute whether or not
Whitestone is a party to such dispute; provided, however, that J R Group shall
not be liable under the foregoing indemnity agreement with respect to any loss,
claim, damage, expense, or liability to the extent that a court having
jurisdiction over such matters shall have determined by a final judgement that
such loss, claim, damage, expense, or liability resulted primarily from the
willful misconduct or gross negligence of or violation of law by Whitestone or
the Indemnified Party. In regards to any legal expenses incurred by Whitestone
in connection with this indemnification, J R Group shall only be liable for the
expenses of one attorney unless such attorney determines, in his/her judgment,
that he/she cannot represent both parties under applicable law or ethical rules.
This indemnification agreement will remain in effect regardless of any
termination of this Agreement.
9. AUDIT; EXAMINATION AND COPIES
Whitestone agrees to cooperate fully with J R Group or its designee in
connection with J R Group's audit functions or with regard to examinations by
regulatory authorities. J R Group acknowledges that Whitestone is not
responsible under this Agreement for providing audit services or for auditing J
R Group's records or data.
Whitestone will permit J R Group or its authorized representatives, at any
time during Whitestone's business hours but with three days' written notice, to
examine all books and records relating to the services provided under this
Agreement and meet with any officers, employees, and independent accountants to
discuss affairs, finances and accounts of J R Group and/or Whitestone.
Whitestone will keep satisfactory books and records pertaining to the services,
and will permit J R Group or its representatives, at J R Group's expense, to
make a photostatic or other copies of such of these records as it or they may
desire.
10. NO IMPERMISSIBLE TYING ARRANGEMENTS
Neither party hereto has entered this Agreement or fixed or varied the
terms of this Agreement based upon the provision of other services, goods, or
credit from either party or based upon either party's not obtaining services,
goods, or credit from another person.
11. SEVERABILITY
If any provision of the Agreement is invalid or enforceable then, to the
extent possible, all of the remaining provision of this Agreement shall remain
in full force and effect and shall be binding upon the parties hereto.
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12. CHOICE OF LAWS
This Agreement and the rights and obligations hereunder shall be governed
by and construed in accordance with the laws of the State of New York, including
the choice of law rules thereof.
13. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original.
14. ENTIRE AGREEMENT
This Agreement embodies the entire agreement of the parties in relation to
the subject matter herein and supersedes all prior understandings or agreements,
oral or written, between the parties hereto.
15. SUCCESSORS AND ASSIGNS
This Agreement may not be assigned by Whitestone without the written
consent of J R Group, the Insurer and the Certified Investors. This Agreement
shall be binding on the successors and assigns of the parties hereto.
16. TITLES; DEFINED TERMS
Titles and subtitles are for convenience of reference only. Unless
otherwise defined herein, capitalized terms have the meanings assigned to them
in the Note and Warrant Purchase Agreements dated as of September 30, 1999.
17. NOTICES
Any notice, request, demand, consent, approval or other communication to
any party hereto shall be effective when received and shall be given in writing,
and delivered in person against receipt therefor, or sent by registered mail,
postage prepaid or courier service to its address as it shall hereafter furnish
in writing to the other. All such notices and other communication shall be
deemed given on the date received by the addressee.
[Signature Page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives on the date first written
above.
J R GROUP, LLC
Attest:
______________________________ By: __________________________________
Title: Managing Member
WHITESTONE GROUP, LLC
Attest:
_______________________________ By: __________________________________
Title: Managing Member
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