CONSULTING AGREEMENT
This consulting agreement (the "Agreement") is made and entered into as
of the 23rd day of November, 1999 (the "Effective Date"), by and between MBO,
Inc., a South Carolina Corporation ("MBO") and Save On Energy, Inc. a Georgia
Corporation ("SAVE" or the "Company"), for the purpose of defining and
acknowledging the terms of this Agreement.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Exclusivity. The Company hereby engages MBO on an exclusive basis for the
term specified in Paragraph 2 hereof to render services to the Company as
its corporate finance consultant, financial advisor and consulting adviser
upon the terms and conditions set forth herein.
2. Term and Termination. This Agreement shall be effective for a period of one
year (the "Initial Term"), commencing upon the Effective Date of this
Agreement and may be extended as the parties shall mutually agree in
writing (the "Term"), subject to the establishment of arrangements for
additional compensation and other appropriate terms for such extension.
Beginning 90 days after the Effective Date of this Agreement, either party
may terminate MBO's engagement hereunder at any time by giving the other
party at least 60 days prior written notice, subject to the provisions of
Paragraph 4 through 18, all of which shall survive any termination of this
Agreement. MBO may terminate this Agreement immediately for a breach of
paragraph 5, 6, or 7 or upon any material breach of this Agreement.
3. Services to be Provided. During the Term of this Agreement, MBO shall
provide the Company with such regular and customary consulting advice as is
reasonably requested by the Company, provided that MBO shall not be
required to undertake duties not reasonably within the scope of the
financial advisory and/or consulting services contemplated by this
Agreement. Xxxxxxx X. Xxx will personally provide this consulting advice.
It is understood and acknowledged by the parties that the value of MBO
advice is not readily quantifiable, and that MBO shall be obligated to
render advice upon the request of the Company, in good faith, but shall not
be obligated to spend any specific amount of time in so doing. MBO's duties
may include, but will not necessarily be limited to, providing
recommendations and assisting in the following:
(a) Preparing a business plan and detailed financial objections, including
the formation of the key strategies that will drive the business.
Preparation of this plan is understood to be dependent upon the input
of management and will be based on readily available external
information.
(b) Rendering advice with regard to internal operations, including:
i. the formation of corporate goals and strategies and their
implementation; and
ii. determining the corporate organization structure and personnel.
(c) Preparing a marketing plan and creating the structure for its
execution, including:
i. performing the duties of the Company's chief marketing officer on
an interim basis;
ii. overseeing the development and production the necessary marketing
tools, such as brochures;
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iii. supervising the activities of the Company's distributors and
sales agents;
iv. directing the activities of public relations and/or advertising
agencies that the Company may engage; and
v. assisting the overall execution of the marketing component of the
plan.
(d) Assisting the Company in preparing the filings and taking the actions
necessary to become a "Reporting Company";
(e) Rendering advice and providing assistance in connection with the
preparation of interim and annual financial reports;
(f) Rendering advice with regard to the following corporate finance
matters:
i. structuring and changes in the capitalization of the Company;
ii. changes in the Company's corporate structure;
iii. redistribution of shareholdings of the Company's stock;
iv. sales of securities in private transactions;
v. the Company's financial structure and its divisions or
subsidiaries;
vi. securing, when and if necessary and possible, additional
financing through banks and/or insurance companies; vii.
alternative uses of corporate assets; and viii. structure and use
of debt.
(g) Rendering advice or assistance with regard to any of the following
merger or acquisition activities:
i. the acquisition and/or merger of or with other companies;
ii. divestiture or any other similar transaction; and
iii. the sale of the Company itself (or any significant percentage,
assets, subsidiaries or affiliates thereof); and
(h) Rendering advice and/or assistance with regard to any of the following
capital raising activities:
i. bank financing or any other financing from financial institutions
or individuals (including but not limited to revolving credit
facilities, lines of credits, term loans, rediscounted credit
facilities, senior and junior loans, whether collateralized or
unsecured, etc.);
ii. assist in preparing the Private Placement Memorandum;
iii. assist in identifying a placement agent for the Company's
securities; and
iv. assist in identifying an underwriter in any public offering of
the Company's securities.
4. Compensation. In consideration for the services rendered by MBO to the
Company pursuant to this Agreement (and in addition to the expense
reimbursements provided for in Paragraph 6 hereof), the Company shall
compensate MBO as follows:
(a) Initial Retainer. The Company shall pay MBO an initial non-refundable
fee in the amount of Ten Thousand Dollars ($10,000) upon its receipt
of the first $250,000 in funding.
(b) Business Plan Preparation. The Company shall pay MBO a further fee in
the amount of Fifteen Thousand Dollars ($15,000) upon completion of
the business plan and financial
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model. MBO agrees to defer this payment until a cumulative total of
Five Hundred Thousand dollars ($500,000) has been raised for and
received by the Company.
(c) Additional Compensation. The Company will pay MBO a further fee of ten
percent (10%) of all equity money that the Company receives as a
result of our efforts, including debt instruments that carry a
provision for conversion into equity. Payment of this fee is due
immediately upon receipt of cleared funds at the Company's bank.
(d) Initial Warrants. The Company shall issue to MBO and/or its designees,
subject to MBO completing certain specified activities, Warrants to
purchase Two Hundred Fifty Thousand (250,000) shares of the Company's
common stock at Seventy-five cents ($0.75) per share in accordance
with the following schedule:
100,000 Warrants upon receipt of $250,000 raised by MBO, and
50,000 Warrants upon completion of the Business Plan and
Financial Model, and
50,000 Warrants upon the receipt of cumulative funds of $500,000,
and
50,000 Warrants upon receipt of a total of $750,000.
All Warrants issued to MBO shall expire three (3) years from the date
of issuance and shall have "piggy back" and demand registration rights
and anti-dilution provisions as are normal and customary.
(e) Monthly Retainer. The Company shall pay MBO a monthly consulting fee
of five thousand dollars ($5,000) per month during the term of this
Agreement, the first payment of which shall be due January 1, 2000.
MBO agrees to defer each month's retainer until the first receipt of
funding above $250,000 for the Company.
(f) Merger and Acquisition Fee. If any Transaction (as hereinafter
defined) is consummated during the Term of this Agreement with any
parties, when such party has been introduced directly or indirectly by
MBO during the Term hereof, the Company shall pay at the closing of
each such Transaction a cash fee equal to the sum of:
i. five percent (5%) of the first five million dollars of the
Aggregate Consideration (as herein after defined) of a
Transaction, plus
ii. four percent (4%) of the second five million dollars of the
Aggregate Consideration of a Transaction, plus
iii. three percent (3%) of the third five million dollars of the
Aggregate Consideration of a Transaction, and plus
iv. two percent (2%) of the Aggregate Consideration over fifteen
million dollars.
v. In no event, however, shall the fee provided for within this
subparagraph be less than $25,000.
vi. Aggregate Consideration is defined and computed as follows:
1) The total sale proceeds and other consideration received
(which shall be deemed to include amounts paid into escrow)
by the Company and/or its shareholders or by a target and/or
its shareholders upon the consummation of the Transaction
(including payments made in installments), inclusive of
cash, securities, notes, consulting agreements and
agreements not to compete, plus the total value of
liabilities assumed.
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2) If a portion of such consideration includes contingency
payments (whether or not related to future earnings or
operations), Aggregate Consideration will include 75% of the
face value of such payments without regard to whether the
conditions for the payment of such contingent amounts have
been or may be satisfied.
3) If the Aggregate Consideration for the Transaction consists
in whole or in part of securities, for the purposes of
calculating the amount of Aggregate Consideration, the value
of such securities will be the value thereof on the day
preceding the consummation of the Transaction as the Company
and MBO agree; provided, however, that in the case of
securities for which there is a public trading market, the
value will be determined by the average last sales price for
such securities for the last twenty (20) days prior to such
consummation as determined by MBO and communicated by MBO to
the Company. If there is no public trading market for such
securities but securities have been sold in a private
placement within the past 24 months, the fair market value
shall be based upon the gross sales price in the last such
private placement. For other property received or receivable
as a part of the Aggregate Consideration and the parties are
unable to agree, then each of MBO and the Company will
select an investment banking firm respected in the merger
and acquisition field to determine a value and the midpoint
between the two values established by the two independent
experts will be the fair market value for the purpose
hereof.
vii. For the purposes of this Agreement, any of the following events
shall constitute a "Transaction":
1) The sale, outside of the ordinary course of business, of the
Company or a majority of its assets, securities, or business
by means of a merger, consolidation, joint venture, exchange
offer or purchase or sale of stock or assets, or any
transaction resulting in any change of control of the
Company or its assets or business; or
2) The purchase by the Company, outside of the ordinary course
of business, of another company or a majority of its assets,
securities or business by means of a merger, consolidation,
joint venture, exchange offer or purchase or sale of stock
or assets.
(g) Third-Party Debt Placements. In the event MBO is involved in
originating a debt facility, inclusive of revolving credit facilities,
lines of credits, term loans, rediscounted credit facilities, senior
and junior loans, whether collateralized or unsecured, etc., (the
"Credit Facility") with a bank or other institutional lender (the
"Lending Source"), the Company will pay MBO a fee of two percent (2%)
of the maximum amount of the Credit Facility. In the event MBO is
involved in arranging an increase in a Credit Facility, the Company
will pay MBO a fee of two percent (2%) of the increase from the
maximum amount of the existing Credit Facility to the maximum amount
of the new Credit Facility. In no event, however, shall the fee
provided for within this subparagraph be less than $25,000.
(h) Strategic Alliances and Partnerships. In the event MBO introduces the
Company to a joint venture partner or customer and sales develop as a
result of the introduction, the Company agrees to pay a "Commission"
of two percent (2%) of total sales generated directly from this
introduction during the first three (3) years following the date of
the first sale. Total sales shall mean cash receipts less any
applicable funds, returns, allowances, credits and
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shipping charges and monies paid by the Company by way of settlement
or judgment arising out of claims made or threatened against the
Company. Commission payments shall be paid on the 15th day of each
month following the receipt of customers' payment. In the event any
adjustments are made to the total sales after the commission has been
paid, the Company shall be entitled to an appropriate refund or credit
against future payments due under this Agreement.
5. Payment of Fees. All fees to be paid pursuant to this Agreement are due and
payable to MBO in cash at the closing or closings of any transaction as
specified in Paragraph 4 hereof or within 10 days upon presentation of
invoices as specified elsewhere.
6. Expense Reimbursement. In addition to the compensation payable hereunder,
and regardless of whether any transaction set forth in Paragraphs 3 or 4
hereof is proposed or consummated, the Company shall reimburse MBO for all
travel and out-of-pocket expenses incurred in connection with the services
performed by MBO pursuant to this Agreement, including without limitation,
hotel, food and associated expenses, telephone calls and legal expenses.
Any travel or other reimbursable expenses in excess of $500 per month shall
be approved in advance by the Company.
7. Payment Terms. Invoices for consulting fees, other fees and expense
reimbursement are due and payable immediately upon presentation. Unpaid
invoices will accrue interest at the rate of one percent (1.0%) per month
or part thereof.
8. Continuing Obligation. In the event that this Agreement shall not be
renewed or if terminated for any reason notwithstanding any such renewal or
termination, MBO shall be entitled to a full fee as provided under
Paragraph 4 hereof, for any transaction for which the discussions were
initiated during the Term of this Agreement and which is consummated within
a period of twelve (12) months after non-renewal or termination of this
Agreement.
9. Confidentiality. The Company acknowledges that all opinions and advice
(written or oral) given by MBO to the Company in connection with MBO's
engagement are intended solely for the benefit and use of the Company in
considering the transaction to which they relate, and the Company agrees
that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of MBO to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the company make any public references to MBO, or use
MBO's name in any annual reports or any other reports or releases of the
Company without MBO's prior written consent.
10. Independent Contractors. The Company acknowledges that MBO is in the
business of providing consulting and financial services advice to others.
Nothing herein contained shall be construed to limit or restrict MBO in
conducting such business with respect to others, or in rendering such
advice to others. MBO, and specifically Xxxxxxx X. Xxx, shall perform its
services hereunder as an independent contractor and not as an employee of
the Company or an affiliate thereof. It is expressly understood and agreed
to by the parties hereto that MBO shall have no authority to act for,
represent or bind the Company or any affiliate thereof in any manner,
except as may be agreed to expressly by the Company from time to time.
11. Reliance. The Company recognizes and confirms that, in advising the Company
and in fulfilling its engagement hereunder, MBO will use and rely on data,
material and other information furnished to MBO by the Company. The Company
acknowledges and agrees that in performing its services under this
engagement, MBO may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same.
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12. Notices. Any notice or communication permitted or required hereunder shall
be in writing and shall receipt requested, or (ii) by facsimile, to the
respective parties as set forth below, or to such other address as either
party may notify the other of in writing:
If to the Company, to: Save On Energy, Inc.
Xxxxxxx Xxxxxxxxxx Xxxxxx, Xxxxx 000
4851 Georgia Xxxxxxx 00
Xxxxxx Xxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxx
Its: President
If to MBO, to: MBO, Inc.
00 Xxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxx
Its: President
13. Indemnification. MBO and the Company have entered into a separate letter
agreement dated the date hereof (the "Indemnity Letter"), providing for the
indemnification of MBO by the Company and for the indemnification of the
Company by MBO in connection with MBO's engagement hereunder.
14. Counterparts. This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
15. Assignability and Modification. This Agreement is not assignable and cannot
be modified or changed, nor can any of its provisions be waived, except by
the mutual agreement in writing of all parties.
16. Governing Law. This Agreement shall be governed by the laws of the State of
Georgia.
17. Severability. Each paragraph, term or provision of this Agreement shall be
considered severable and if, for any reason, any paragraph, term or
provision is determined to be invalid or contrary to any existing or future
law or regulation, such will not impair the operation, or effect the
remaining portions, or this Agreement.
18. Dispute Resolution. The parties shall attempt amicably to resolve
disagreements by negotiating with each other. In the event that the matter
is not amicably resolved through negotiation, any controversy, dispute or
disagreement arising out of or relating to this Agreement (a "Controversy")
shall be submitted to a nationally recognized arbitration association, such
as the American Arbitration Association, for final binding arbitration,
which shall be conducted by a single arbitrator (the "Arbitrator") in
Atlanta, Georgia, pursuant to Arbitration Rules of the American Arbitration
Association (the "Rules"). Notwithstanding anything to the contrary
contained in the Rules, the Arbitrator shall not award consequential,
exemplary, incidental, punitive or special damages.
If any party shall desire relief of any nature whatsoever from any other party
as a result of any Controversy, such party will initiate such arbitration
proceedings within a reasonable time, but
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in no event more than one (1) year after the facts underlying said Controversy
first arise or become known to the party seeking relief (whichever is later).
The failure of such party to institute such proceedings within said period shall
be deemed a full waiver of any claim for such relief. Arbitrator may award the
prevailing party its costs for the arbitration proceeding, including its
reasonable attorneys' fees and costs. The parties agree that the decision and
award of the Arbitrator shall be taken, but that such award or decision may be
entered as a judgment and enforced in any court having jurisdiction over the
party against whom enforcement is sought. Any equitable relief awarded under
this paragraph shall be dissolved upon issuance of the Arbitrator's decision and
order.
The parties hereto hereby consent to the jurisdiction of the federal courts or
the state courts located in Atlanta, Georgia for any proceedings under this
paragraph.
Save On Energy, Inc.
By: /s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx
Its: President
MBO, Inc.
By: /s/ Xxxxxxx X. Xxx
------------------
Xxxxxxx X. Xxx
Its: President
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