SUPPORT SERVICES AGREEMENT
Support
Services Agreement
(this
"Agreement") dated as of May 1, 2007 (the "Effective Date") between Monarch
Bay
Management Company, LLC, a California limited liability company ("MBMC") and
STI
Group, Inc., a Delaware corporation (“STI”).
WHEREAS,
STI
wishes to engage MBMC to provide the Services (as defined below) on the terms
and conditions set forth herein and MBMC wishes to be so retained;
NOW
THEREFORE,
in
consideration of the premises and of the mutual covenants, conditions and
agreements contained herein, the parties agree as follows:
ARTICLE
ONE
SERVICES
1.1 Management
Services.
STI
hereby engages MBMC to perform the Management Services set forth in Schedule
1
hereto for the benefit of STI, and MBMC agrees to perform such Management
Services, on the terms and conditions set forth herein.
1.2 Facility
and Administrative Services.
STI
hereby engages MBMC to perform the Facility and Administrative Services set
forth in Schedule 1 hereto for the benefit of STI, and MBMC agrees to perform
such Facility and Administrative Services, on the terms and conditions set
forth
herein.
1.3 Business
Development Services.
STI
hereby engages MBMC, on a non-exclusive basis, to identify and introduce to
STI
potential parties to product development relationships, licensing relationships,
customer or distribution relationships and other similar transactions or
relationships with STI (each, a “BD Transaction”).
1.4 Creditor
Resolution Services.
STI
hereby engages MBMC, on a non-exclusive basis, to resolve on behalf of STI
certain claims of STI’s creditors (the “Creditor Claims”). STI will advise MBMC
in writing of the Creditor Claims and the confirmed debt of each Creditor Claim
(“Confirmed Debt”) for which, it requires MBMC’s services. MBMC will, use its
reasonable efforts to negotiate the Creditor Claims and to attempt to effect
a
reasonable and fair settlement, discharge, or release of Creditor Claims (the
“Creditor Resolution Services”). MBMC will consult with STI on a regular basis
with respect to the Creditor Claims assigned to it and prior to presenting
any
final agreement to a creditor will consult with STI and STI will specifically
approve any such proposed final agreement.
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1.5 Other
Services.
STI may,
from time to time, engage MBMC to perform other services for the benefit of
STI
(“Other Services”). The scope of, the applicable fee for, and any additional
terms and conditions relating to any such other services shall be reflected
in a
Services Addendum to this Agreement in the form of Exhibit A
hereto.
1.6 Reporting.
STI
shall have the right to request written reports at any time during the term
of
this Agreement, which shall be furnished within 30 days after such request,
describing the progress, status of, and other matters pertaining to the
Management Services, the Facility and Administrative Services, the Creditor
Resolution Services and any Other Services provided pursuant to Section 1.5
(collectively, the “Services”) as STI shall request. STI may freely utilize all
such information arising out of the performance of the Services under this
Agreement in any manner desired.
ARTICLE
TWO
COMPENSATION
2.1 Compensation.
(a)
Retainer.
Upon
execution of this Agreement, STI will issue to MBMC 5,000 shares of its Series
A
Preferred Stock, par value $.001 per share, as a non-refundable retainer fee
for
the Services provided by MBMC hereunder.
(b)
Management
Services.
For
each month during the term of this Agreement, STI will pay to MBMC a fee in
respect of the Management Services (the “MS Fee”) equal to $20,000 in cash. The
MS Fee will be due and payable on the first business day of such month and
is
non-refundable.
(c)
Facility
and Administrative Services.
For
each month during the term of this Agreement, STI will pay to MBMC a fee in
respect of the Facility and Administrative Services (the “FAS Fee”) equal to 10%
of the MS Fee in cash. The FAS Fee will be due and payable on the first business
day of such month and is non-refundable.
(d)
Business
Development Services.
STI
will pay to MBMC a fee (the “BD Fee”) equal to 6% of STI’s total revenue from
any BD Transaction involving STI and a partner or customer introduced to STI
by
MBMC (each, a “BD Transaction”) that is entered into during the term of this
Agreement or any Tail Period (as defined below)). The BD Fee will be due and
payable in cash, when and as the associated revenue from the BD Transaction
is
collected by STI. Notwithstanding the foregoing, the BD Fee payable with respect
to any BD Transaction will be reduced by the amount of any fees paid by STI
to
any investment banker or finder engaged by STI to represent it in such BD
Transaction.
(e)
Creditor
Resolution Services.
For
Creditor Claim which MBMC successfully resolves, STI will pay to MBMC a fee
(the
“CR Fee”) equal to 20% of the Effected Savings (as defined below) in respect of
such Creditor Claim. “Effected Savings” means the amount of the Confirmed Debt
less the amount which is actually paid by STI to settle the Creditor Claim.
At
the STI’s option (if STI’s common stock is then quoted on the OTCBB), CR Fees
may be paid in the form of shares of STI’s common stock (registered under Form
S-8 or other form to permit the free and immediate resale by MBMC’s designated
principals and otherwise unlegended and unrestricted), with the number of shares
payable determined based on a valuation of the common stock equal to 80% of
the
closing bid price of the common stock on the OTCBB on the trading day
immediately preceding the date of delivery of such shares to MBMC’s designated
principals. Payment of each CR Fee shall be made as part of and contemporaneous
with the settlement date of the Creditor Claim to which it relates.
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(f)
Other
Services.
IF STI
has engaged to perform any Other Services, STI will pay to MBMC the fee
specified for such Other Services in the applicable Services Addendum (the
“Other Services Fee”). Unless otherwise specified in the applicable Services
Addendum, the Other Services Fee will be due and payable in cash on the first
business day of each month during which the Other Services are provided and
will
be non-refundable.
2.2 Reimbursement.
STI will
reimburse MBMC for any and all reasonable expenses incurred by MBMC in
connection with MBMC's performance of the Management Services and any Other
Services; provided,
however,
that
any such expenses must be pre-approved by STI and otherwise adhere to control
procedures implemented by STI. All requests for reimbursement for expenses
must
be accompanied by documentation in form and detail satisfactory to STI. STI
will
reimburse MBMC for expenses incurred in compliance with this Section 2.2 within
fifteen days following STI’s receipt of MBMC’s invoice therefore.
ARTICLE
THREE
REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1 Representations
and Warranties.
Each
party represents and warrants to the other that:
(a)
It
has not entered into any agreement, whether written or oral, in conflict with
this Agreement; and
(b)
It
has the full power and authority to enter into this Agreement.
3.2 MBMC’s
Covenants.
MBMC:
(a)
shall
act as an independent contractor with no authority to obligate STI by contract
or otherwise;
(b)
shall
exercise only such powers and perform such duties as may from time to time
be
vested in MBMC or assigned to MBMC by STI;
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(c)
shall
devote such time and effort as is reasonably necessary to provide the
Services;
(d)
shall
comply with all applicable laws in the performance of the Services; and
(e)
shall
not assign or subcontract performance of this Agreement or any of the Services
to any person, firm, company or organization without STI’s prior written
consent;
ARTICLE
FOUR
CONFIDENTIAL
INFORMATION
4.1 Confidentiality.
MBMC
shall, during the term of this Agreement and for a period of five years
thereafter, keep all STI Confidential Information confidential and use such
information only for the purposes expressly set forth herein. STI Confidential
Information shall mean all information concerning STI or its current or planned
business, which is disclosed to MBMC by STI or which results from, or in
connection with, any Services performed pursuant to this Agreement.
4.2 Access.
MBMC
agrees to limit the access to STI Confidential Information to only those persons
under MBMC's direct control who, with STI’s knowledge and consent, are
responsible for performing the Services set forth in Article One.
4.3
Authorized
Disclosure.
MBMC
shall have no obligation of confidentiality and non-use with respect to any
portion of STI Confidential Information which (i) is or later becomes generally
available to the public by use, publication or the like, through no act or
omission of MBMC; (ii) is obtained from a third party who had the legal right
to
disclose the information to MBMC; or (iii) MBMC already possesses as evidenced
by MBMC’s written records predating receipt thereof from STI.
4.4 Return
of Information.
Upon the
termination of this Agreement, MBMC will promptly return to STI all materials,
records, documents, and other STI Confidential Information in tangible form.
MBMC shall retain no copies except as required by law of such materials and
information and, if requested by STI, will delete all STI Confidential
Information stored in any magnetic or optical disc or memory.
4.5 Third
Party Information.
MBMC
shall not, in connection with the Services to be performed under this Agreement,
disclose to STI any information, which is confidential or proprietary to MBMC,
or any third party.
ARTICLE
FIVE
INDEMNITY;
LIMITATION OF LIABILITY
5.1 Indemnity.
(a)
STI
will indemnify and hold harmless MBMC against any and all losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, reasonably incurred, as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which MBMC is
a
party), directly or indirectly, caused by, relating to, based upon, arising
out
of, or in connection with this Agreement or MBMC's performance hereunder, except
to the extent primarily caused by the gross negligence or willful misconduct
of
MBMC.
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(b)
The
indemnification provisions shall be in addition to any liability which STI
may
otherwise have to MBMC or the persons indemnified below in this sentence and
shall extend to the following: MBMC, its affiliated entities, members,
employees, legal counsel, agents and controlling persons (within the meaning
of
the federal securities laws), and the officers, directors, employees, legal
counsel, agents and controlling persons of any of them. All references to MBMC
in this Article Five shall be understood to include any and all of the
foregoing.
5.2 Limitation
of Liability.
MBMC
shall not have any liability (whether direct or indirect, in contract or tort
or
otherwise) to STI for or in connection with this Agreement or MBMC’s performance
hereunder, except to the extent that any such liability is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
to
have resulted primarily from MBMC's gross negligence or willful misconduct.
In
no case shall MBMC’s liability (whether direct or indirect, in contract or tort
or otherwise) to STI for or in connection with this letter agreement or MBMC’s
performance hereunder exceed the aggregate fees paid by STI to MBMC
hereunder.
ARTICLE
SIX
TERM
AND TERMINATION
6.1 Term.
The
initial term of this Agreement shall be from the Effective Date through the
first anniversary thereof (the “Initial Term”). After the Initial Term, the term
of this Agreement will automatically be extended for an additional successive
one-year periods unless either party provides written notice to the other party
of its intent not to so extend the term at least 30 days before the expiration
of the then current term.
6.2 Termination.
This
Agreement may be terminated by either party upon the breach of a material term
hereof by the other party, which breach remains uncured for 30 days after the
date that the non-breaching party has served written notice on the other party,
which notice will set forth the basis of such breach and the non-breaching
party's intent to terminate the Agreement.
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6.3 Effect
of Termination.
Upon the
expiration or termination of this Agreement, each party shall be released from
all obligations and liabilities hereunder except those arising under Articles
Four, Five and Eight; provided that, following such termination, MBMC shall
be
entitled to receive (a) all amounts payable by STI to MBMC through the date
of
expiration or termination and (b) 100% of the BD Fees with respect to any BD
Transactions consummated within a period of twelve months following the
termination of this Agreement (the “Tail Period”) with any party identified or
introduced by MBMC to STI.
ARTICLE
SEVEN
MISCELLANEOUS
7.1 Relationship
of the Parties.
(a)
STI
is a sophisticated business enterprise that has retained MBMC for the limited
purposes set forth in this letter agreement, and the parties acknowledge and
agree that their respective rights and obligations are contractual in nature.
STI recognizes that the relationship contemplated hereby is not an exclusive
relationship for MBMC or any of its personnel. Each party disclaims an intention
to impose fiduciary obligations on the other by virtue of the engagement
contemplated by this Agreement.
(b)
The
Services do not include requiring MBMC to engage in any activities for which
an
investment advisor's registration or license is required under the U.S.
Investment Advisors Act of 1940, or under any other applicable federal or state
law; or for which a "broker's" or "dealer's" registration or license is required
under the U.S. Securities Exchange Act of 1934, or under any other applicable
federal or state law. MBMC's work on this engagement shall not constitute the
rendering of legal advice, or the providing of legal services, to STI.
Accordingly, MBMC shall not express any legal opinions with respect to any
matters affecting STI.
(c)
MBMC
will be responsible for making appropriate filings and payments to the federal,
state and local taxing authorities, including payments of all withholding and
payroll taxes due on compensation received hereunder, estimated income payments,
employment and self-employment taxes, if applicable.
7.2 Waiver.
None
of
the terms of this Agreement may be waived except by an express agreement in
writing signed by the party against whom enforcement of such waiver is sought.
The failure or delay of either party in enforcing any of its rights under this
Agreement shall not be deemed a continuing waiver of such right.
7.3 Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties with respect
to
the subject matter hereof and supersedes all prior agreements and understandings
among the parties (whether written or oral) relating to said subject
matter.
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7.4
Amendments.
This
Agreement may not be released, discharged, amended or modified in any manner
except by an instrument in writing signed by a duly authorized officer of STI
and MBMC.
7.5
Assignment.
STI has
specifically contracted for the Services of MBMC and, therefore, MBMC may not
assign or delegate MBMC's obligations under this Agreement, either in whole
or
in part, without the prior written consent of STI.
7.6 Severability.
If any
provision of this Agreement is, becomes, or is deemed invalid, illegal or
unenforceable in any jurisdiction, such provision shall be deemed amended to
conform to the applicable laws so as to be valid and enforceable, or, if it
can
not be so amended without materially altering the intention of the parties
hereto, it shall be stricken and the remainder of this Agreement shall remain
in
full force and effect.
7.7 Headings.
Article
and Section headings contained in the Agreement are included for convenience
only and are not to be used in construing or interpreting this
Agreement.
7.8 Notices.
All
notices provided for in this Agreement shall be in writing and shall be deemed
effective when either served by personal delivery or sent by express, registered
or certified mail, postage prepaid, return receipt requested, to the other
party
at the corresponding mailing address set forth below or at such other address
as
such other party may hereafter designate by written notice in the manner
aforesaid.
7.9 Force
Majeure.
MBMC
shall be excused for failure to provide the Services hereunder to the extent
that such failure is directly or indirectly caused by
an
occurrence commonly known as force majeure, including, without limitation,
delays arising out of acts of God, acts or orders of a government, agency or
instrumentality thereof (whether of fact or law), acts of public enemy, riots,
embargoes, strikes or other concerted acts of workers (whether of MBMC or other
persons), casualties or accidents, delivery of materials, transportation or
shortage of cars, trucks, fuel, power, labor or materials or any other causes,
circumstances or contingencies that are beyond the control of MBMC; provided,
however, that MBMC shall use its best efforts to resume provision of the
Services as soon as possible. Notwithstanding any events operating to excuse
performance by MBMC, this Agreement shall continue in full force for the
remainder of its term and any renewals thereof.
7.10 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original and all of which together shall constitute one and the same
document, binding on all parties notwithstanding that each of the parties may
have signed different counterparts.
7.11 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
state of California and the parties to this Agreement hereby submit to the
exclusive jurisdiction of the courts, both state and federal, in the County
of
Orange, State of California.
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IN
WITNESS WHEREOF,
the
parties have entered into this Agreement on the date first above
written.
MONARCH
BAY MANAGEMENT COMPANY, LLC
|
By:
Xxxxx Xxxxx
|
|||
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Title:
Managing Member
|
|||
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Address:
00000 Xxxxxx Xxxxx Xx #000
Xxx
Xxxx Xxxxxxxxxx, XX 00000
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STI
GROUP, INC.
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|||
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By:
Xxxxx Xxxxxxx
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|||
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Title:
Chief Executive Officer
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Address:
00000 Xxxxxx Xxxxx Xx #000
Xxx
Xxxx Xxxxxxxxxx, XX 00000
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Schedule
1
Management
Services
| · |
Make
available an individual acceptable to STI in its sole discretion
to serve
as Chief Financial Officer of STI.
|
| · |
Perform
all principal accounting and financial officer
duties.
|
| · |
Direct
all finance, accounting and treasury functions including cash forecasting,
cash management, operational budgeting, month-end closing, and ensure
accuracy and compliance in accounting/financial
reporting.
|
| · |
Re-engineer
the Finance Department - transform finance operations through improved
processes, advising on financial performance, evaluation of outsourcing
options, best management practices, evaluating/appraising strategic
partnerships.
|
| · |
Support
fundraising activities.
|
| · |
Analyze
financial and operating information for management to facilitate
decision-making and provide input for corrective action, where
applicable.
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| · |
Recommend/implement
improvements to ensure the integrity of the company’s financial
information and systems.
|
| · |
Forecast
and monitor financial information against goals and operating
strategy.
|
| · |
Manage/oversee
relationships with independent auditors, banks and investment banking
community.
|
| · |
Handle
financial negotiations with other third party
relationships.
|
| · |
Prepare
quarterly updates to the financial
forecast.
|
| · |
Lead
the financial due diligence
efforts.
|
| · |
Lead
the integration of accounting and finance systems for
mergers.
|
Facility
and Administrative Services
| · |
Provision
of corporate headquarters office
space.
|
| · |
Provision
of utilities, telecommunications, cleaning and other services related
to
maintaining corporate headquarters office
space.
|
| · |
Shipping
and postage related to corporate headquarters
functions
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Attachment
A
Services
Addendum
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Scope
of Other Services:
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Other
Services Fee:
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Other
Terms and Conditions:
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| Acknowledged and agreed by: | ||||
| STI GROUP, INC. | ||||
| By: | ||||
|
Date:
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MONARCH
BAY MANAGEMENT COMPANY, LLC
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||||
| By: | ||||
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Date:
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