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Exhibit 5.1
MANAGEMENT AGREEMENT
This Management Agreement by and between:
U.S. Technologies Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware ("US Tech" or the
"Company"), and
James V. Warren ("Mr. Warren"), a stockholder in US Tech, and
J.L. (Skip) Moore ("Mr. Moore"), an executive associated with Mr.
Warren,
establishes certain short term, interim management procedures and conditions for
the operation of US Tech as well as certain other related matters all of which
are intended to:
- provide to US Tech during the term of this Agreement the
management expertise and experience of Mr. Warren and Mr.
Moore and
- reorganize certain elements of US Tech such that the Company
can reduce expenses, increase sales, initiate a return to
profitability, and establish a program and strategy for both
internal and external growth.
U.S. Technologies Inc., James V. Warren, and J.L. (Skip) Moore are referred to
collectively herein as the "Parties".
Now, therefore, in consideration of the mutual agreements, covenants,
conditions, and undertakings contained in this Agreement, and for other good and
valuable consideration, the Parties agree as follows:
1. This Agreement will be for an initial term of ninety (90) days from the
date hereof and will be subject to automatic renewal for additional
ninety (90) day terms unless modified or terminated by the Parties.
a. This agreement may be terminated by any of the parties at any
time.
b. Within ten (10) but no less than five (5) business days of the
first or any subsequent expiration date of this Agreement, the
Parties will meet to review the operations and financial
condition of US Tech, the terms and conditions established in
this Management Agreement, and the effect of this Agreement on
the operations and financial results of US Tech.
c. Depending upon this assessment by the Parties as to the
progress of US Tech, the contribution of this Agreement to
that progress, and the fairness of the terms and conditions
established in this Management Agreement to each of the
Parties hereto, this Agreement may be:
i) extended for an additional ninety (90) day period by
mutual consent of the Parties, or
ii) terminated by any of the Parties individually, or
iii) have its terms and conditions modified by mutual
agreement between the Parties.
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iv) The termination of this Agreement or any modification
to its terms and conditions will be made only in
writing, and the corporate records will reflect any
such termination or modification.
2. During the initial and any renewal terms of this Agreement, but subject
to modification as outlined in paragraph 1.b. above, the services of
Mr. J.L. (Skip) Moore will be provided to US Tech at no cost to US Tech
other than expenses incurred by him as outlined in paragraph 2.e below.
a. Mr. Moore will be appointed by the Board of Directors of US
Tech to the position of Executive Vice-President and Chief
Operating Officer of the Company. In this position, Mr. Moore
will generally exercise full and complete operating control
over the management and affairs of the Company subject to the
advice and consent of the Company's Board of Directors and its
senior executive officers.
b. Mr. Moore will generally devote his full time efforts to the
business and affairs of the Company subject only to periodic,
short term requirements for his services by The Spear Group,
Inc.
c. Prior to December 17, 1999, Mr. Moore will submit to Mr.
Warren and Mr. Gregory Earls a report in either verbal or
written form which will outline his observations, short term
operating plans, and recommendations regarding each of the
four current business activities of the Company or short term
opportunities for such activities including:
i) the electronics manufacturing facility at Lockhart,
Texas;
ii) the furniture components manufacturing facility at
Blythe, California;
iii) the motorcycle parts finishing facilities at Moore
Haven and South Bay, Florida; and
iv) the telephone call center operation planned for a
location in Nebraska.
d. Based on this report from Mr. Moore, he and Messrs. Earls and
Warren will collectively establish the short term operating
plan for each of these four activities and for the Company as
a whole.
e. Mr. Moore will be reimbursed by the Company, as and when
incurred, for any and all out-of-pocket expenses directly
related to the execution of his duties with US Tech, including
but not limited to travel expenses, with all such reimbursable
expenses supported by written expense reports submitted by Mr.
Moore to the Company.
f. At such time, if ever, that Mr. Moore becomes a salaried
employee of the Company, his compensation will be established
by the Board of Directors of US Tech and, in addition to a
salary and benefits commiserate with his position and
responsibilities, will include an incentive bonus plan based
on his contribution to the return to profitability, growth,
and success of US Tech.
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3. As of the execution date of this Management Agreement, Mr. Gregory
Earls ("Mr. Earls"), Chairman, President, and a major stockholder of US
Tech, agrees to nominate, and to vote his shares and any and all shares
under his control including the Series A Convertible Preferred Stock,
for the election of Mr. James V. Warren as a Director of US Tech for a
term of no less than one year.
a. During the initial and any renewal term of this Management
Agreement, Mr. Earls will also appoint or elect Mr. Warren to
the positions of Co-Chairman of the Board of Directors and
Co-Chief Executive Officer of the Company in each case to
serve with Mr. Earls in these capacities sharing equally the
responsibilities and duties associated with these executive
positions.
b. In general, however, the executive duties of Mr. Warren will
be devoted principally to the day-to-day operations,
accounting, sales, and marketing affairs of the Company; the
executive duties of Mr. Earls will be devoted to the Company's
financing and long term financial affairs, investor relations,
and its acquisition program or other external growth
opportunities.
i) Both Mr. Warren and Mr. Earls will keep each other
well informed as to their activities and decisions
made on behalf of the Company and will make no
significant material change in either the operations
or future direction of the Company without the advice
and consent of the other.
c. Neither Mr. Warren nor Mr. Earls will devote their full time
efforts to US Tech but will devote such time as is reasonable
required to exercise their duties and responsibilities on
behalf of the Company.
d. At any time that Mr. Earls and Mr. Warren cannot reach mutual
agreement as to any action or decision related to the
operations of the Company, they will submit the action or
decision in dispute to the Company's Board of Directors for
final decision or, in the event the Board cannot reach a
consensus, Mr. Earls and Mr. Warren will appoint an additional
Board member to cast the deciding vote.
4. During the initial and any renewal term of this Management Agreement or
until such time as this provision under the Agreement is modified, Mr.
Warren will not be compensated by US Tech with regard to his executive
positions with the Company.
a. Mr. Warren will be reimbursed by the Company, as and when
incurred, for any and all out-of-pocket expenses directly
related to the execution of his duties with US Tech, including
but not limited to travel expenses, with all such reimbursable
expenses supported by written expense reports submitted by Mr.
Warren to the Company.
5. During the initial and any renewal term of this Management Agreement or
until such time as this provision under the Agreement is modified, Mr.
Earls will waive and will not receive his compensation formally
provided by US Tech and will serve in his executive positions as an
unsalaried employee of the Company.
a. Mr. Earls will be reimbursed by the Company for any and all
out-of-pocket expenses directly related to the execution of
his duties with US Tech, including but not limited to travel
expenses, with all such reimbursable expenses supported by
written expense reports submitted by Mr. Earls to the Company.
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b. It is understood that Ms. Dana Rochelle, assistant to Mr.
Earls, will continue to devote her part time efforts to the
affairs of US Tech and will be compensated by US Tech for this
work at the rate of $20,000 per year.
6. During the term of this Agreement, any appointment to the Company's
Board of Directors or any nomination for election to such a Board seat
other than those held by Mr. Earls and Mr. Warren will be mutually
agreed by Mr. Earls and Mr. Warren.
7. Mr. Earls and Mr. Warren will talk by telephone at least weekly during
the initial term of this Management Agreement and no less than
bi-weekly during any renewal term of the Agreement regarding the
affairs and status of the Company in general as well as their
individual areas of responsibility in particular.
a. The Board of Directors of the Company with Mr. Moore as an
invited participant will meet, either in person or by
telephone, at least once each month while this Management
Agreement is in effect and will meet in person within ten (10)
but no less than five (5) business days prior to the first or
any subsequent expiration date of this Agreement.
8. It is the intention of the Parties to transfer as quickly as reasonably
feasible the accounting and banking activities of US Tech from the
Company's facility in Lockhart, Texas to offices in Atlanta, Georgia,
and to establish one or more bank accounts for US Tech in Atlanta.
a. In general, these accounting and banking activities will be
under the direction of Mr. Moore who may also hire either a
part or full-time accountant or bookkeeper as an employee of
US Tech.
b. Each individual facility of US Tech will maintain a petty cash
account which will be funded periodically from the principal
Company accounts in Atlanta and will be subject to the control
of Mr. Moore.
c. All Company checks or other withdrawals from the principal
bank accounts of US Tech will require no less than two
signatures from among the following:
i) Mr. J.L. (Skip) Moore,
ii) Mr. James V. Warren,
iii) Mr. C Gregory Earls, or
iv) the bookkeeper hired as an employee of US Tech.
d. During the term of this Agreement or until modified as
provided in paragraph 1.b above, both the office space and
reasonable computer time needed to perform the accounting
functions for US Tech will be provided at no cost to US Tech.
US Tech will, however, pay for any required computer hardware,
software, additional software site licenses, or additional
accounting program modules required for the transfer of its
accounting functions to Atlanta.
e. US Tech will not borrow funds or raise other long term or
investment capital without the prior approval of its Board of
Directors.
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9. US Tech will indemnify and hold its directors, officers, employees, and
agents, including without limitation Messrs. Earls, Warren, and Moore,
harmless against losses, claims, damages, and liabilities, joint or
several, to which they, acting in their individual or joint capacities,
may become subject in connection with their services to be rendered
under the provisions of this Agreement, excepting only that the Company
will not be liable with respect to any losses, claims, damages, or
liabilities that a court having jurisdiction determines resulted from
the willful misfeasance or gross negligence of the subject individual.
a. US Tech agrees to reimburse, as and when incurred, each such
indemnified person for all reasonable legal fees, expenses of
counsel, and other expenses related to any actions or
proceedings to which they may become subject in connection
with their services to the Company or any matters which are
the subject of this Agreement. The provisions of this
paragraph 9 will survive the term of this Agreement.
b. Throughout the initial and any renewal term of this Agreement,
US Tech will maintain in full force and effect a Directors and
Officers Liability Insurance Policy with a policy limit of no
less than one million dollars ($1,000,000).
10. In no event shall Messrs. Earls, Warren, Moore, or any parties
affiliated with them either individually or collectively be responsible
for any debts or other obligations of US Tech, for its continuing
losses, or for any adverse effects of their decisions regarding the
operations of the Company, changes in these operations, or the future
direction of US Tech.
11. As a means of improving the short term financial results of US Tech and
relieving the immediate impact on its earnings and eventual demands on
its cash flow, the Board of Directors of the Company will modify the
terms of its Series A Convertible Preferred Stock to eliminate the nine
percent (9%) dividend payable on this Preferred Stock subject to the
agreement of USV Partners, LLC, holder of all currently outstanding
Series A Convertible Preferred Stock, to such dividend elimination and
to the related modification of their Investment Agreement with the
Company dated as of July 16, 1998.
a. As compensation to the holders of the Series A Convertible
Preferred Stock for the elimination of this dividend, the
Conversion Price as established in Section 5 of that certain
"Amended Certificate of Designations, Preferences and Rights
of Series A Convertible Preferred Stock of U.S. Technologies
Inc." executed February 24, 1999 will also be modified such
that the Conversion Price will be the average last sale price
per share of Common Stock of US Tech for the twenty (20)
trading days immediately prior to the execution date of this
Management Agreement which Conversion Price is $0.122 per
share.
b. Mr. Earls will use his best efforts, including if applicable
casting his USV Partner LLC votes, to have USV Partners, LLC
consent to these modifications of the Series A Convertible
Preferred Stock and the related Investment Agreement between
USV Partners, LLC and US Tech.
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c. It is understood that the above changes to the Series A
Convertible Preferred Stock are permanent in nature and will
not be effected by the expiration, termination, or
modification of this Management Agreement.
12. USV Partners, LLC will use its best efforts to sell as promptly as
feasible up to 300,000 shares of the Company's authorized but unissued
Series A Convertible Preferred Stock at a price of ten dollars ($10.00)
per share.
a. The proceeds from the sale of these shares will be used by the
Company to pay certain past due vendor and other payables, as
agreed to Mr. Earls and Mr. Warren, for general working
capital needs, to support early term losses, and for other
investment needs of the Company during the period of this
Agreement and the related efforts for its return to
profitability and positive cash flow.
b. A total of two hundred thousand dollars ($200,000) has already
been advanced to US Tech by USV Partners prior to the date of
this Agreement as a subscription for the purchase of twenty
thousand (20,000) of these Preferred Shares, and this
subscription is hereby approved by the Parties.
c. Mr. Warren or his nominees, subject to their qualification as
exempt investors under Securities and Exchange Commission
(SEC) rules and various state securities laws, will have the
option but not the obligation of subscribing for up to
twenty-five percent (25%) or approximately seventy-five
thousand (75,000) shares of the Series A Convertible Preferred
Stock to be sold in this private offering.
i) At such time, if ever, that this private offering is
fully subscribed, Mr. Earls will advice Mr. Warren
that the share subscription is complete. Mr. Warren
will then have five (5) business days from such
notification in which to advice Mr. Earls of his or
his nominees' intention to purchase a portion or all
of the seventy-five thousand (75,000) shares reserved
for him and will then have fifteen (15) business days
in which to exercise this subscription and purchase
the subject shares.
d. In any event, this private offering of up to 300,000 shares of
the Series A Convertible Preferred Stock will terminate one
year after date of this Agreement unless the offering is
extended by mutual agreement between the Parties.
13. As initial compensation for their contribution to US Tech under this
Agreement, Mr. Warren and Mr. Moore will be granted, as of the date of
this Agreement, qualified stock options under that certain U.S.
Technologies Inc. 1999 Stock Option Plan (the "Stock Option Plan") such
that:
a. Mr. Warren will hold options for the purchase of one million
five hundred thousand (1,500,000) shares of the Common Stock
of the Company and
b. Mr. Moore will hold options for the purchase of 400,000 shares
of the Common Stock.
c. The option price for the purchase of these shares will be
equal to the Conversion Price of the Series A Convertible
Preferred Stock as established in paragraph 12.a above.
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d. The options held by Mr. Warren and Mr. Moore will be fully
vested at such time as this Management Agreement is extended
beyond its initial ninety (90) day term and will expire, to
the extent not previously exercised, on the tenth (10th)
anniversary of that date.
14. Mr. Earls represents to Mr. Warren that, at the present time, he is the
only member of the Board of Directors of the Company.
a. At the present time, there are sufficient authorized but
un-issued shares of common stock of the Company to honor the
options granted hereunder to Mr. Warren and Mr. Moore.
15. This Agreement will not be assignable to any other party by either Mr.
Warren, Mr. Moore, or US Tech. The services to be rendered by Mr.
Warren and Mr. Moore hereunder are personal in nature and are to be
performed only by them in their individual capacities and not by any
other party or nominee.
16. Notices regarding this Management Agreement will be in written form
only and will be delivered by certified mail or express delivery,
return receipt requested, to:
a. The Company: U.S. Technologies Inc.
2001 Pennsylvania Ave., N.W., Suite 675
Washington, DC 20006
Attention: Mr. Gregory Earls
with a copy to: Mr. H. Lee Rust
Florida Corporate Finance
333 Golfside Cove
Longwood, FL 32779
b. Mr. Warren: The Spear Group
6525 The Corners Parkway, Suite 300
Atlanta, GA 30092
Attention: Mr. James V. Warren
with a copy to: Mr. J.L. (Skip) Moore
The Spear Group
6525 The Corners Parkway, Suite 300
Atlanta, GA 30092
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17. This Agreement supersedes any and all other agreements, either oral or
in writing, between the Parties with respect to the subject matter
described herein and contains all of the terms, conditions, and
agreements between the Parties with respect to such subject matter in
any manner whatsoever. Each party to this Agreement acknowledges that
no representations, inducements, promises, or agreements, oral or
otherwise, have been made by any other party or by anyone named herein
and that no other agreement, statement, or promise not contained in
this Agreement will be valid or binding. This Agreement may be changed
or amended only by an instrument in writing signed by all of the
Parties at interest.
This Management Agreement is executed by the Parties on the dates set forth to
indicate their agreement with the terms and conditions contained herein:
On behalf of U.S. Technologies Inc. and in his individual capacity by:
/s/ Gregory Earls Date: November 29, 1999
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Gregory Earls, Chairman
And by Mr. Warren and Mr. Moore in their individual capacities:
/s/ James V. Warren Date: November 29, 1999
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James V. Warren
/s/ J.L.Moore
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J. L. (Skip) Moore -----------------
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