Exhibit
ITEM 22-9(a)
Selling Agreement for Energy District 111 LLC
SELLING AGREEMENT
This Selling Agreement ("Agreement"), is entered into as of October 15th,
1999, by and among Power Source, a Nevada corporation, and Power Energy Group
a Nevada LLC, ("Promoter").
Recitals
A. The Company is a Nevada corporation which desires to establish, fund and
contract for the funding of one or more California limited liability companies
("LLC or LLC's") to be managed by Promoter. If successfully funded, each LLC
will be managed by LLC, unless otherwice specified and will assume control of
LLC management activities. Each LLC will acquire exclusive rights of income
stream, relating to the sale of electricity by the Company in sertain
territories within the State of California. Additionally, funding of each LLC
will be intended to provide working capital for each LLC and to reimburse
offering expenses related to LLC.
B. Promoter is a Nevada LLC to be retained by the Company to sell districts in
the State of California and/or other states as permited by law. Units in each
such LLC are referred to herein as the "Units".
In consideration of the foregoing and following premises, promises,
representations, warranties, covenants and conditions, and for other good and
valuable consideration, the sufficiency, adequacy and receipt of which is hereby
acknowledged, the parties hereby agree as follows:
Agreement
1. Recitals. The Recitals are a material part of this Agreement.
2. Engagement of Promoter. The Company hereby engages Promoter, and Promoter
hereby accepts the engagement by the Company to market and sell the Units
pursuant to the terms and conditions of and subject to the restrictions
contained in this Agreement. Promoter shall handle all package requests and
fulfill all such requests as it deems appropriate. Promoter shall coordinate all
customer service activities between and among prospective and investing partners
identified by or through Promoter.
3. Advertising and Support. Promoter may advertise the sale of Units within
state or federal securities guideline. Promoter may offer or sell the Units by
any form of general solicitation or general advertising, including, but not
limited to the following: 1)any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television, radio or through the internet or online service providers; or
2) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. The Company shall provide Promoter with
training support and investor promotional materials, including, without
limitation, brochures and support documents, etc. Promoter is responsible for
lead generation, which may be supplemented by The Company (television and cable
broadcast infomercials and network marketing programs).
3.1. Offers and Sales of Units. Promoter represents and warrants that at
the time of selling the Units to a prospective purchaser Promoter will
possess a factual basis of evaluating a prospective offeree's financial
circumstances and sophistication to determine whether an investment in the Units
is appropriate for the prospective offeree in light of the merits and risks of
the investment in the Units. To that end, Promoter shall review any and all
subscription applications submitted to Promoter.
3.2. Representations. Promoter shall instruct any prospective investor that
any and all representations with respect to the Units are contained in and
limited to the representations made in the offering memorandum for the
LLC in which the prospective investor is contemplating investing.
3.3. Compliance With Applicable Laws. Selling Agent shall instruct Selling
Agent's ISO's to comply with any and all federal, state and local laws
applicable to their business and its activities in connection with this
Agreement.
3.4. Provision of Offering Materials. Any and all information provided to
prospective investors in the Units by Promoter shall be limited to the offering
memorandum, subscription agreements and LLC agreement for the LLC at issue and
related materials provided to Promoter by the Comapny, in connection with the
offering and sale of the Units.
3.5. Compliance Activities. Promoter acknowledges and agrees that the
performance of certain compliance activities regarding investor participation in
the LLC is a responsibility of Promoter hereunder. Promoter shall perform the
following compliance activities ("Compliance Activities"), which shall include,
without limitation, the following:
3.5.1. Promoter shall receive from the LLC or, if applicable, its
escrow agent, a copy of each subscription application package (the
"Application") submitted by any person or entity submitting such an application
package for admission as a member in the LLC (such persons are referred
to herein as "Prospective Member");
3.5.2. Promoter shall review each Application to determine whether the
Prospective Partner submitting such application properly completed and executed
such Application;
3.5.3 Promoter shall examine each Application to determine whether the
Prospective Partner completing such Application meets the suitability and other
qualifications set forth in such Application and the LLC Memorandum for
admission to the LLC as a Member.
3.5.4 Promoter shall contact each Prospective Partner submitting an
Application telephonically and obtain answers to all of the questions contained
in Exhibit "A" to this Agreement (the "Compliance Script") in a recorded
telephone conversation with each such Prospective Member;
3.5.5 Within ten (10) days of receipt of each Application by Promoter, shall
communicate in writing to the Managing Partner of the LLC, whether each such
Prospective Member is qualified to become a Member in the LLC. This
communication shall be in the form of Exhibit "B" attached hereto and
incorporated herein by this reference;
3.5.6 Promoter shall be telephonically available to the Company to answer
questions during the Offering period; and
3.5.7 Promoter shall take such further actions as Promoter, The Company and the
LLC deem reasonably necessary in connection with and in furtherance of this
Agreement and Promoter's duties hereunder.
4. Use of Promoter's Materials. The parties agree that the Company exclusively
will provide to Promoter all marketing, promotional and distribution materials
to be used by Promoter in the marketing and sale of the Units. The Company will
provide no other information or materials to Promoter. Notwithstanding anything
to the contrary herein, Promoter shall arrange for the preparation of the
offering memorandum and related materials for each LLC, such as the Exhibits to
the offering memorandum (subscription agreements, tax opinions, LLC, etc.), and
any promotional video, glossy pocket folder with promotional attachments and/or
The Company approved sales script.
5. Leads and Customer Lists. The Company shall in no way control, the method of
client and lead generation engaged in by Promoter except as provided for in 3
above. All members, Prospective members, customers, leads, customer lists and
related name, address, contact, referral, phone numbers and related information,
whether provided or generated by Selling Agent or Promoter, shall at all times
remain the sole and exclusive confidential proprietary information and property
of Selling Agent, and shall not be used in any way, directly or indirectly, by
Promoter or its affiliates, principals, attorneys, agents, subsidiaries, parent
entities or assigns for any purpose not authorized in advance, in writing by
Promoter.
6. Communications With Company. The Company shall keep Promoter apprised in
writing of all material information affecting the sale of the Units of any LLC
by Promoter pursuant to the terms of this Agreement.
7. Receipt of Proceeds. All proceeds from the marketing and sale of Units by
Promoter will be remitted directly by the subscribing member to the LLC or, if
applicable, the LLC escrow agent, and not to the Promoter. Promoter shall not
instruct any potential investor to remit any funds directly to Promoter, and any
funds received by Promoter from any potential investor shall be forwarded via
overnight courier for next day delivery to the LLC or the LLC escrow agent, and
no funds (or portion thereof) so received by Promoter shall under any
circumstances be retained by Promoter.
8. Compensation. As full and exclusive compensation for the services provided by
Promoter hereunder, The Company will grant to Promoter an exclusive, freely
transferable Five (5) year renewable option beginning on the effective date of
this Agreement October 15,1999, which LLC's shall have the right to
participation in all profits pertaining to Districts, based on 35% of the
adjusted gross profits from the distribution and offering of PowerSource
electricity services provided by the Company in the State of California and any
other states that become available Promoter agrees with exclusive minimum goal
of one district minimum per month as follows, no minimum for first sixty (60)
days one distict sold each month thereafter. Units sales shall commence
immediately upon completion of sales contract, memorandum, subscription
agreements and brochures. The Option for each such Territory may be exercised by
Promoter for the flat fee price of $240,000 to be paid by Promoter to
PowerSource. In addition, the Initial Managing Member, Power Energy Group, LLC
and PowerSource shall receive two (2) Founder's Units, five (5) Founder's Units
and three (3) Founder's Units, respectively, for their efforts in connection
with each District LLC. (Note: PowerSource's Founder's Units shall not
participate in the District LLC's Distributable Cash). In the event of the
exercise of one or more of these options, the Limited Liability Company entity
exercising the option shall become a licensed local affiliate of PowerSource,
with the exclusive right to participation in all profits, based on 35% of the
adjusted gross profits from the distribution and offering of The Company's
retail electric in their District for a period of twenty-five (25) years, with
additional rights to extend such initial period for five (5) successive five (5)
year terms.
Promoter shall not construe this Agreement as a license to sell Electricity. Any
understanding regarding the marketing of electricity or electrical services by
Promoter may be defined under separate agreement.
Additional Compensation In Warrants.
PowerSource hereby grants Selling Agent39,000 warrants (the "Warrant Grant"),
each warrant granting the option to Promoter, or its assigns, to purchase 1
(one) share of the Common Stock of Power Source at $2.50 per share. The options
have an expiration date of 180 calendar days from the date of complete District
purchase. Each Territory described in Exhibit "C" that is not funded by or
through Promoter on or before October, 2004 (the Funding Date), the number of
warrants granted to Promoter by PowerSource in the Warrant Grant shall be
reduced by 1,000. For example, in the event that Promoter funded only twenty
(20) of the thirty-nine (39) Districts by the Funding Date then the total number
of warrants granted pursuant to the Warrant Grant would be from 39,000 to
20,000, 39,000 maximum Warrant Grant less (19 unfunded Territories x 1,000
warrants per unfounded Territory.)
9. Term. The term of this Agreement shall begin on the earlier of October 15th,
1999, or the date that the last party to execute this Agreement so executes and
continue until October, 2004, unless sooner terminated pursuant to the terms of
this Agreement. Upon the expiration of the Term, the Agreement shall only be
extended by the written Agreement of both parties. The terms and conditions of
this Agreement relating to non-circumvention, proprietary and confidential
information, any options granted hereunder and any representations and/or
warranties of the Company shall survive termination of this Agreement.
10. Early Termination. Either party may terminate this Agreement, with or
without cause, by giving the other party (60) days written notice of its
intention to so terminate. Upon early termination pursuant to this section, or
any other section, the Company will return any and all materials provided to it
by Selling Agent within five (5) days of the effective date of termination.
Company shall not retain any copies of any materials provided by Promoter
relating to the Units. In the event of termination of this Agreement, Promoter
will, as of the effective date of such termination, cease all activities
relating to the marketing and sale of Units.
11. Independent Contractor. Neither party shall be deemed to be an employee of
the other party, each party being an independent contractor free to pursue and
control the methods by which it achieves any result in any matter controlled by
this Agreement, subject to the terms and conditions of this Agreement. Promoter
shall bear full responsibility for the manner in which it conducts its marketing
and sales activities.
12. Taxes and Expenses. Selling Agent is responsible for paying any and all
taxes, federal, state, local and otherwise, received by Selling Agent pursuant
to the terms of this Agreement. Selling Agent shall be solely responsible for
any and all expenses incurred in connection with the marketing and sale of the
Units, except for the costs of the promotional and marketing packages which
Promoter shall provide to Selling Agent at Promoter's expense. The Company
agrees to provide such promotional and marketing packages to Promoter at no cost
to Promoter. Material provided at no cost should not exceed $5,000 of expense
for such material per District funded by Promoter.
13. Representations and Warranties. The parties hereto hereby undertake,
represent and warrant the following with respect to themselves, which shall
survive the termination of this Agreement:
13.1. No Conflicting Obligations. No party has entered into any oral or written
agreement which would impair any of the rights granted and obligations incurred
under this Agreement, or limit the effectiveness of this Agreement. The
execution and delivery of this Agreement will not result in a breach of, or
default under, any other agreement, law or regulation to which any of the
respective parties is subject;
13.2. No Threatened, Pending or Conflicting Claims or Actions. The parties are
not aware of any threatened, pending or conflicting claims or actions which may
limit or impair their respective abilities to enter into this Agreement or
adversely affect any of the rights granted or obligations incurred hereunder;
13.3. No Violation or Infringement. The full exercise of the rights granted to
the respective parties and the obligations incurred by the respective parties
hereunder will not violate or infringe upon any rights of any third party;
13.4. Good Faith. The parties will act in good faith in connection with this
Agreement.
13.5 Authorization and Agreement of Sales. The Company agrees for the protection
of all parties involved that there will be no Independent Sales Offices (ISO's)
selling Districts for PowerSource, Inc., without authorization and agreement of
both The Company and Promoter, other than Power Capital Funding Group, Inc. and
its ISO's disclosed in Exhibit "D".
13.6. Pro Rata Payout of Funds Raised. As funds are cleared in the escrow
account for each LLC, the agent for each such LLC shall pay out on Friday of
each week such funds as have cleared through the preceding Tuesday of each week.
The total amount payable to Power Source pro rata as funds are raised shall be
equal to $240,000 assuming full funding of each LLC. All funds shall be paid out
to PowerSource, Promoter and other persons and/or entities in accordance with
written escrow instructions drafted by or at the direction of Promoter, on pro
rata basis.
14. Promoter's Representations and Warranties.
14.1. No Bar To Contract. The Company is not subject to any agreement which
would restrict its ability to enter into this Agreement with Power Caital
Funding Group, Inc.;
14.2. No Claims or Actions. The Company is not aware of any claims or actions
which limit or impair the rights granted or obligations incurred by it
hereunder;
14.3. Limitation on Actions. Promoter's remedies for any actual or alleged
breach of this Agreement by Promoter shall be limited to money damages, and
the total amount of money damages to which Promoter shall be entitled in the
event of breach of this Agreement by Promoter shall in no event exceed the
amount of option fees paid to Promoter pursuant to the terms of
this Agreement. Further, Promoter shall not proceed and is absolutely barred
from seeking any recovery of any type from any person or entity other than
Selling Agent, and neither Promoter, its affiliates, agents, employees,
independent contractors, attorneys or clients may seek recovery from any person
or entity other than Selling Agent.
14.4. Non-Circumvention. Company shall not disrupt, damage, impair, or interfere
with the business of Promoter by way of interfering with or raiding Selling
Agent's employees, or disrupt Promoter relationships with its customers,
potential customers, agents, vendors, representatives, or otherwise. Company
further agrees that Company will not, directly or indirectly, for Company or on
behalf of, or in conjunction with any other person, firm, partnership, or
corporation, divert or take away or attempt to divert or take away, call on or
solicit or attempt to solicit the business or patronage of any of Promoter
customers, patrons, suppliers, including but not limited to those with whom
Company Company became acquainted as a result of Promoter relationship with
Promoter, such as parties seeking to raise money for other projects which they
may have in the future. The parties agree that Promoter actual damages in the
event of any such circumvention of Promoter by Company in breach of this
covenant would be extremely difficult to determine, and therefore the parties
agree that a reasonable estimate of such damages is an amount equal to fifty
percent (50%) of the gross offering price of any and all projects which Company
undertakes to sell or otherwise participate in any way with any person or entity
introduced to Company by Promoter who is any way associated with, whether
directly or indirectly, Promoter or any project which Promoter is selling or
otherwise involved. Company has disclosed all existing relationships, if any,
which it has at the time of execution of this Agreement with any persons or
entities who would not be subject to terms of this paragraph on a separate
Exhibit to this Agreement, which, if applicable, is attached hereto and
incorporated herein by this reference.
14.5. Non-Disclosure.
14.5.1. Confidential Information Defined. For purposes of this Agreement,
Confidential Information shall mean: proprietary ideas, techniques, products,
formulas, discoveries, formats, processes, improvements and enhancements which
relate to the development and acquisition of capital, capital funding and
capital acquisition resources, Selling Agent's business plans, agreements,
research, programs, teaching techniques, trade secrets, research and development
and test results, specifications, data, know-how, formats, strategies,
forecasts, unpublished financial data, information, budgets, projections and
customer and supplier identities and characteristics, customer lists, customer
leads or potential customers or those persons or entities for whom the Parties
performs services for, marketing strategies, trade secrets, copyrightable works
of authorship, trademarks and service marks and like information. Confidential
Information shall be defined broadly and shall also include the following: 1)
any information that has commercial value or other utility in the business of
the Parties or their Customers or that the Parties or their Customers are likely
to engage in, and 2) any information which if disclosed, would be detrimental to
the Parties or their Customers, whether or not such information is identified as
Confidential Information.
14.5.2. Handling Of Confidential Information. Promoter acknowledges that the
Confidential Information is essential to the goodwill of the business of Selling
Agent. Promoter shall hold and maintain the Confidential Information in
strictest confidence and in trust for the sole and exclusive benefit of Selling
Agent. Promoter shall not use for its own benefit, publish or otherwise disclose
to others, or permit the use by others for their benefit or to the detriment of
Selling Agent, any of the Confidential Information. Promoter shall carefully
restrict access to the Confidential Information to those of its officers,
directors, and employees who clearly need such access in order to participate on
behalf of Promoter in discharging the duties of Promoter hereunder. Promoter
will advise each of the persons to whom it provides access to any of the
Confidential Information that such persons are strictly prohibited from making
any use, publishing or otherwise disclosing to others, or permitting others to
use for their benefit or to the detriment of Selling Agent, any of the
Confidential Information. Promoter shall take all necessary action to protect
the confidentiality of the Confidential Information, except for its disclosure
as stated in this paragraph.
14.6. Authority. The person or persons executing this Agreement on behalf of
Promoter are duly authorized by any necessary action of Promoter to execute this
Agreement on Promoter's behalf and such person or persons possess(es) the
authority to so execute.
14.7 Provision of Managing Partner for LLC. Promoter shall be responsible for
the designation and establishment of the initial manager for each LLC until such
time as the LLC has been established and funded. The initial managers' duties
shall include but not be limited to receiving all correspondence from Unit
purchasers, immediately depositing all funds received from investors to LLC
account, preparing receipt for deposit and funds distribution report to
accountants, preparing records to be turned over to PowerSource at completion of
each LLC's funding, same day notification and full disclosure of receipt of
purchaser information and subscription agreement, notifying purchasers of all
company news releases and arranging for required tax reporting with accountants.
14.8 Contract between The Company Entities. PowerSource is to arrange for the
provision of the energy, electricity, expertise and services necessary to permit
each LLC to accomplish the marketing, distribution and resale of electricity to
the retail market place, to hold, invest, utilize, develop, sell and otherwise
properly manage each LLC and any distributions to each LLC and distributions to
each LLC's investors. Additionally through contract between PowerSource and
between those entities and third parties, The Company has the resources and will
provide to each LLC in sufficient quantities to reasonably satisfy demand in
each LLC Territory wholesale energy, advertising, promotion, retail sales
generation, support and service, monthly billing systems for retail customers,
operating reports, net earnings reports and mechanisms for distribution of
earnings to each LLC and each such LLC's investors on a calendar quarterly
basis, with the first such distribution for each LLC to occur on the date that
is six months after the date of commencement of operations for each such LLC.
14.9 Exclusivity of Agreement. This Agreement grants exclusive rights to fund
LLC units for the subject matter of this Agreement to Promoter for each and
every territory described in Exhibit "C", subject to Promoter's meeting the
minimum performance standards described herein.
14.10 Liquidity Option. The Company shall establish and provide to the investors
in each LLC a mechanism for exchanging LLC interest for an interest in
PowerSource within twelve months of the full funding of each LLC.
15. Devotion of Resources to Project. The Company shall devote the resources,
time, skill and effort necessary or helpful to fulfill its obligations,
commitments and duties set forth in this Agreement. The Company understands and
agrees that Promoter may promote, market and sell investments, opportunities and
ventures other than the Units so long as such activities do not materially
interfere with Selling Agent's obligations, commitments and duties under this
Agreement.
16. Assignment. Provider may not transfer or otherwise encumber this Agreement
or the rights hereunder, without prior agreement of PowerSource. The Company may
only assign its rights, interest or duties in this Agreement provided the
assignee/transferee is qualified, licensed and fully capable, including
financially capable of carrying on the operations, duties distributions and
responsibilities of The Company to the LLC's and their mutual customers and
suppliers. 17. Representation of Understanding. All parties to this Agreement
acknowledge and agree that the terms of this Agreement are contractual and not
mere recital, and all parties represent and warrant that they have carefully
read this Agreement, have fully reviewed its provisions with their attorneys,
know and understand its contents and sign the name as their own free acts and
deeds. PowerSource, nor any of their officers, directors, parent corporations or
subsidiaries (collectively PowerSource) have participated in the preparation of
the Offering Memorandum or the offering of the Units themselves. PowerSource's
involvement is limited to that of providing certain consulting and
energy/electric service provider related services as independent contractors.
PowerSource has not been involved with any decisions relating to the Offering
Memorandum or the offering and sale of the Units and has not and will not have
any authority to make any such decisions. PowerSource makes no representation or
warranty concerning the adequacy of any aspect of the disclosure contained in
the Offering Memorandum or any other aspect of the offering of Units. Investors
in the LLC are not making an investment in PowerSource and are not third party
beneficiaries of any agreement between the LLC or any other person or entity and
PowerSource.
17. Representation of Understanding. All parties to this Agreement acknowledge
and agree that the terms of this Agreement are contractual and not mere recital,
and all parties represent and warrant that they have carefully read this
Agreement, have fully reviewed its provisions with their attorneys, know and
understand its contents and sign the same as their own free acts and deeds.
18. Entire Agreement. This Agreement and its attachments and references attached
hereto and discussed herein reflect the final expression of the parties'
agreement and contains a complete and exclusive statement of the terms of that
Agreement, which terms supersede all previous verbal and written agreements.
There are no other agreements, representations, or warranties not set forth
herein. No part of this Agreement may be amended or modified in any way unless
such amendment or modification is expressed in a writing signed by all parties
to this Agreement.
19. Governing Law. The parties to this Agreement agree that all questions
respecting the negotiation, execution, construction, interpretation or
enforcement of this Agreement, or the rights, obligations and liabilities of the
parties hereto, shall be determined in accordance with the applicable provisions
of the laws of the State of California, as amended from time to time.
20. Notices. All notices or other documents under this Agreement shall be in
writing and delivered personally or mailed by certified mail, postage prepaid,
addressed to the party being noticed at its last known address.
21. Non-waiver. The failure of any party to insist upon the prompt and punctual
performance of any term or condition in this Agreement, or the failure of any
party to exercise any right or remedy under the terms of this Agreement on any
one or more occasions shall not constitute a waiver of that or any other term,
condition, right, or remedy on that or any subsequent occasion, unless otherwise
expressly provided for herein.
22. Binding Effect. The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties and their respective successors and
assigns. Nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any person, partnership, or corporation, other
than the parties, their successors and assigns, any benefits, rights, or
remedies under or by reason of this Agreement, except to the extent of any
contrary provision herein contained.
23. Attorneys Fees. Should it be necessary to institute any action to enforce
the terms of this Agreement, the parties hereby agree that the prevailing party
in any such action shall be entitled to recover its reasonable attorneys' fees.
Attorneys' fees and costs include but are not limited to costs for expert
witness and any appeals. This paragraph shall remain independent from any
judgment entered to enforce its terms, shall not merge therewith, and shall
entitle the prevailing party to attorneys' fees and costs incurred in connection
with post judgment collection and enforcement efforts.
24. Severability. If any provision of this Agreement is held by a court to be
unenforceable or invalid for any reason, the remaining provisions of this
Agreement shall be unaffected by such holding.
25. Construction. This Agreement was drafted jointly by the parties and their
attorneys, and its provisions shall not be construed against either party.
26. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. When all of the parties and signatories have
executed any copy hereof, such execution shall constitute the execution of this
Agreement.
27. Headings. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
IN WITNESS WHEREOF, the parties execute this Agreement.
PROMOTER
Power Energy Group, LLC
By: /ss/ Xxxx X. Xxxxxx
--------------------
Xxxx X. Olivia
The Company
POWER SOURCE, CORP..
a Nevada Corporation
By: /ss/ Xxxxx Xxxx
--------------------
Xxxxx Xxxx (Director)
Date: October 15, 1999
