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Momentex – Capitalization

Proposal to Investors

Momentex is a Massachusetts limited liability corporation in the process of raising its first round of external investment to fund development of a demonstration site and early stage service roll out. As a limited liability corporation, investors are legally awarded a percentage of equity rather than a number of shares as in a Corporation. In the first stage of funding, Momentex looks to raise $2,000,000 in 80 blocks of $25,000. Momentex anticipates investors would receive 22% of Momentex equity for this initial $2 million (non-dilutive). For the second stage of investment, Momentex will seek an additional $2 million in mid to late 2000 to fund rapid national expansion.

Investment Potential

Momentex anticipates the Gulp & Go service has a strong investment potential with 6 year revenue growth projected at 342% compounded annually. (Momentex uses a 6 year horizon as 1999 is a stub year.) In addition, EBITDA for year 6 is projected at $39,320,000. Based on an EBITDA multiple of 8x21 and a 15% IPO discount, Momentex’s 6 year valuation is estimated $315 million.

An example of equity investment value appreciation based on firm valuation follows. In the middle EBITDA scenario, a $100,000 first round investment for 1.1% of equity is anticipated to be valued at $3 million at the end of year 5 at the time of the anticipated initial public offering. This reflects a 5 year compound annual return on the initial investment of 80%, assuming that the equity is non-dilutive.

Sensitivity of Investor’s Annual Return

2005 EBITDA Multiple Hit Rate
3% 4% 5% 6%
7.0 63% 72% 81% 86%
8.0 67% 76% 85% 90%
9.0 70% 79% 88% 94%

In the case of a strategic investor or buyer, equity value could increase dramatically as these buyers typically pay premiums of 25% or more.

Financing History

Momentex LLC was launched in August 1998 with a $20,000 start-up investment in January 1999 by the Company founders, Melissa Chadwick and Zafar Khan. The founders were each awarded 50% equity for their initial investment. To date, the venture has received no outside investment and prior to the ensuing first round, they have retained 100% of the equity combined.

Exit Strategy

investors in Momentex LLC would be able to realize a return on the appreciation of their investment under the following scenarios:

Initial Public Offering. If Momentex meets growth expectations and demonstrates cash flow and earnings characteristics attractive to the public markets, the Company may seek a public offering to raise capital for further rapid expansion as well as to add liquidity for founders and investors. Momentex anticipates that the high visibility of Gulp & Go service would create strong retail demand for the offering.

Rapid expansion in service locations will help Momentex to penetrate the market with Gulp & Go service, which if fully-penetrated by Momentex would achieve an attractive annual revenue stream in excess of $600 million, reflecting 10% of toll road users purchasing. If, for example, Gulp & Go service has broader availability, exposing more drivers to the service, annual revenues will near $1 billion with 15% of toll road users purchasing. In addition, Momentex views international toll roads, concentrated in Japan and Europe, as a significant source for expansion, with a combined market estimated to be 20% larger than the U.S. market.

Investment or Acquisition by a Strategic Player. Momentex believes that there are a number of beverage companies who would be potential investors or buyers for the Gulp & Go service platform as it offers an already developed operating model for a new distribution channel which can lock out competition and provides a pipeline for new service and product introductions. With the major beverage companies such as Coca-Cola and PepsiCo investing in equity of its bottlers (distributors), they may view an investment in Momentex as a method of securing access to a new distribution channel. In addition, Cadbury Schweppes and Virgin Cola may see this investment as a method of increasing the reach of their struggling beverage brands. Nestle and Starbucks may see Momentex as providing an ideal method to increase the popularity of their packaged coffees through mass distribution within the Gulp & Go service to commuters on the roads.

Momentex also believes that companies in the related areas of service plaza concessions and toll road systems integration would also be possible investors or acquirers. Service plaza concessionaires may view the Gulp & Go platform as an exciting new service offering which could provide the key differentiator in bidding for toll road concession contracts. Toll road systems operators, too, may consider the service as an attractive offering and a way to distinguish itself from other bidders.

21 Sodexho Marriott, Host Marriott Comparables.

Momentex LLC
Table of Contents Appendices
1. Executive Summary
2. Company Overview
3. Service Description
4. Market & Strategy
5. Business Model
6. Management
7. Financials
8. Capitalization
9. Risk Factors
Market Research Survey
Hardware Integration
Software Integration
Internet Integration
Traffic Flow Analysis
Financial Assumptions
Income Statement
Balance Sheet
Cash Flow Statement
All information herein is confidential and belongs to Momentex

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