--------------------------------------------------------------------------------
Joel S. Dumaresq
PRESIDENT
Solar Energy Limited
112 C Longview Drive, Los Alamos, New Mexico 87544
(Name and Address of Person Authorized to Receive Notices
and Communications on Behalf of the Person Filing Statement)
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William Stocker, ESQ
34700 Pacific Coast Highway, #303
Capistrano Beach, CA 92624
(949) 248-9561
fax (949) 248-1688
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FORM 10-K-SB-A1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-30060
Solar Energy Limited
(formerly Salvage World, Inc. )
(originally Taurus Enterprises, Inc.)
Delaware 76-0418364
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
112 C LONGVIEW DRIVE, LOS ALAMOS, NEW MEXICO 87544
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 672-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 12/31/99 13,153,911
Yes[x] No[] (Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.)
[] (Indicate by check mark if disclosure of delinquent filers ( 229.405) is not
and will not to the best of Registrant's knowledge be contained herein, in
definitive proxy or information statements incorporated herein by reference or
any amendment hereto.)
As of 12/31/99:
the aggregate number of shares held by non-affiliates was approximately
11,903,911.
the number of shares outstanding of the Registrant's Common Stock was
13,153,911
Exhibit Index is found on page 32.
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Table of Contents
Un-Numbered Item: Introduction 3
Item 1. Description of Business 3
(a) Business Development 3
(b) Business of the Issuer 4
Item 2. Description of Property 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Market for Common Equity and Stockholder Matters 12
(a) Market Information 12
(b) Holders 12
(c) Dividends 12
(d) Sales of Unregistered Common Stock from inception 13
(e) Description of Securities 15
Item 6. Management's Discussion and Analysis or Plan of Operation 17
(a) Plan of Operation: Next Twelve Months 17
(b) Discussion and Analysis of Financial Condition and
Results of Operations 18
Item 7. Financial Statements 21
Item 8. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure 21
Item 9. Directors and Executive Officers, Promoters and
Control Persons; Compliance with Section
16(a) of the Exchange Act 22
Item 10. Executive Compensation 25
Item 11. Security Ownership of Certain Beneficial Owners
and Management 28
Item 12. Certain Relationships and Related Transactions 30
(a) JADE/RECO 30
(b) Original HAT shareholders Internal Agreements 30
Item 13. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 31
(a) Financial Statements 31
(b) Form 8-K Reports 31
(c) Form 10-QSB Reports 31
(d) Exhibits 31
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PART I
UN-NUMBERED ITEM: INTRODUCTION
This Annual Report on Form 10K-SB-A amends our Form 10-K-SB Annual Report
for the year ended December 31, 1999, responsive to Comments of the Staff in
review of our 1934 Act Registration Statement which became effective after the
close of 1998. That 1934 Securities Exchange Act registration of our common
stock has become effective during 1999, but has not yet cleared final comments
by the Staff of the Securities and Exchange Commission.
As a result of this amendment process certain more current information is
provided as subsequent developments and events, occurring after December 31,
1999.
* The common stock of Solar Energy Limited was listed on the OTC Electronic
Bulletin Board ( OTCBB ) (symbol XSEL ). It has ceased to be so listed for the
reason that our 1934 Act Registration has not cleared comments, and will
continue on NQB Pink Sheets until SEC comments have been cleared and our OTCBB
listing can be restored.
ITEM 1. DESCRIPTION OF BUSINESS.
(A) BUSINESS DEVELOPMENT. We are a research and development company focusing
on developing cost-effective solutions to the earth's most pressing challenges:
water, energy and pollution.
(1) FORM AND YEAR OF ORGANIZATION. Solar Energy Limited (the
"Registrant", "Company" and more frequently "We","Us" or "Our") was first
incorporated in Delaware as Taurus Enterprises, Inc. on January 5, 1994, and
re-incorporated in Nevada on August 20, 1996 as Salvage World, Inc.
On December 17, 1997, we effected a Plan of Reorganization and Merger of
Salvage World, Inc. into Solar Energy Limited, a private Delaware Corporation,
the effect of which merger changed the name of the Corporation and moved its
place of incorporation from Nevada to Delaware. That reorganization also
involved the acquisition of Hydro-Air Technologies, Inc. ("HAT") initially as a
wholly-owned subsidiary. In April, 1999, we acquired Renewable Energy
Corporation ( RECO )(also as a wholly-owned subsidiary). No change of control of
our corporation resulted from either or both acquisitions.
The history of our share issuances, from our inception to date, is
provided, in Item 5, sub-item (d) of this Report.
(2) BANKRUPTCY, RECEIVERSHIP, OR SIMILAR PROCEEDING. None.
(3) ANY MATERIAL RECLASSIFICATION OR REORGANIZATION. We have mentioned
two acquisitions, about which additional disclosure will now be provided. We are
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presently, as of the date of this Amended Report of August 2, 2000, engaging in
the process of a material reorganization, about which also, more disclosure will
be provided:
(i) HAT. We acquired Hydro-Air Technologies, Inc. ("HAT"), for stock,
initially as a wholly-owned subsidiary, from its nine shareholders. For issuance
details, please refer to Item 5, sub-item (d). Most significant among the HAT
Founders, was Dr. Mel Prueitt, one of our two Principal Scientists. Originally,
HAT was to function as an operating subsidiary, but that internal organization
has been put on hold.
(ii) RECO. We acquired Renewable Energy Corporation ( RECO ), our
wholly-owned subsidiary from Dr. Reed Jensen, its founder, owner, and developer
of its technologies, and the originator of its Patent, for escrowed stock and
some cash. For issuance and acquisition details, please refer to Item 5,
sub-item (d). Dr. Jensen is the other of our two Principal Scientists.
Neither of these two acquisitions, individually or together, resulted in a
change of control of Solar Energy Limited, directly or indirectly. The HAT
founders shareholders aggregated own 5.33% of our issued and outstanding common
stock. The RECO founding shareholder owns 2.66% of our issued and outstanding
common stock. At all times, since December 17, 1997, our corporation has been
controlled by its principal shareholder/investors, about whom or which, more
disclosure is provided in Item 11 of this Amended Report.
Both Dr. Prueitt and Dr. Jensen are scientists formerly associated with Los
Alamos National Laboratory. For more information about them, please see Item 9
of this Amended Report.
(iii) JADE. We are proceeding with a further reorganization, by which
we intend to sell RECO to Jade Electronic, Inc. ("JADE") in a related-party
transaction, by which, following the sale, we control Jade Electronic, Inc., as
our corporate asset. There are many details surrounding this program which will
be the subject of further disclosure in this Amended Report. Please refer to
sub-item (b)(3), following, of this Item 1 for a continuation of this discussion
and disclosure.
(B) BUSINESS OF THE ISSUER. We were organized in our present form in late
1997 to focus on developing cost-effective solutions to the earth's most
pressing challenges: water, energy and pollution. We are a research and
development company, and not a manufacturing or marketing company at this time.
Our Company's thrust is to explore and/or develop alternative energy systems and
water projects that are environmentally friendly in addition to being
economically viable and competitive.
We have been and continue to be a development stage company, substantially
in start-up mode, since the inception of our current business plan in December
of 1997. All of our operations to date have been in the nature of research and
development. We have acquired our developmental technology in the form of the
direct acquisitions previously mentioned. Our aim and focus is the development
of new and renewable energy sources and water projects. We consider our
acquisitions as direct acquisitions, and not reverse acquisitions, because no
change of control has resulted.
We have no projects presently available for commercialization. We remain in
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a research and development mode. We have not addressed issues of marketing or
distribution of products yet, for the reason that our work has not reached the
stage where such matters are appropriate to consider. When we have perfected
working prototypes of products we deem ready for market, we will most likely
expect to license the manufacture and marketing of these products to others, or
to engage in joint-venture relationships with marketing and distribution
companies.
Hydro-Air Technologies, Inc. (our first acquisition) was a development
stage company, founded by Dr. Melvin L. Prueitt, David Jones, Stanley Prueitt
and Leslie Speir, which company had developed certain intellectual property
rights with which they intended to generate commercially viable electrical power
using the energy generated by the heat of evaporation of water. The intellectual
property rights are called Hydro-Air Renewable Power System ( HARPS ) which
includes two U.S. Patents, one granted on September 3, 1996 (number 5,551,238)
and a second granted on July 28, 1998 (number 5,784,886), as well as Air
Conditioner Energy System ("ACES") which includes a U.S. Patent (and
International filings) granted December 28, 1999 (number 6006538).
We regarded and currently regard this acquisition of HAT as an investment
by us in future growth of demand for both HARPS and ACES. Our original plan was
to aggressively develop HARPS and ACES, but experience has caused us to re-think
our priorities in two significant respects:
(1) PROJECTS DEFERRED. Both the HARPS and ACES projects have proven
difficult to develop to the stage of working prototypes. The technical problems
are complex and expensive to solve and would require more capital and time than
we can currently commit; however,
(2) DERIVATIVE BENEFITS. The preliminary work and experiments done and
the test results generated by our preliminary work on HARPS and ACES. have
suggested and proven applicable and useful to other derivative projects which
appear to us more likely to become commercially viable. For this reason,
Management no longer regards HAT as an operating subsidiary, but as a passive
subsidiary. This internal change of structure has had no effect upon our
relationship with Dr. Prueitt, who continues to participate with us in various
continuing capacities, and is entirely a matter of internal organization. HAT
remains a New Mexico Corporation capable of being reactivated at such time as
Management deems such reactivation useful.
Persons interested in more information about HARPS and ACES are referred to
Item 6, sub-item (b)(2) for a discussion of future prospects.
(3) CURRENT DEVELOPMENT PROGRAMS. Each of the following projects, listed
below, is designed on a stand-alone basis. We believe that these technologies
will be of global significance in both economic and environmental terms. We
believe that when and if any of these projects become marketable products,
significant profitability will inure to our corporation. Each of our projects is
described in more technical detail, with graphical display, on our web-site:
http://www.solarenergylimited.com. Our web-site is continuously updated.
(4) SOLAR ENERGY'S PROJECTS. Each of the following projects, originally
conceived by Dr. Prueitt is in a prototype stage as of the date of this Amended
Report. The "prototype stage" is not a single stage, but a series of testing
stages referred to as "Phases".
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(5) SOLAR ENERGY'S EMPLOYEES. The total number of employees is nine
full-time and five part-time, of which Solar Energy employees are seven
full-time and three part-time, and RECO, our wholly-owned subsidiary, are two
part-time and two full-time employees. There are four consultants that do work
for both Solar and RECO.
(i) SOLAWATT (THE PRODUCTION OF ELECTRICITY FROM SOLAR ENERGY).
SOLAWATT will be the production of electricity estimated by us to be
one-third the current conventional cost. SOLAWATT is the name for our unique
plastic-film solar collectors, which are placed directly on the ground. Our
patent application for SOLAWATT (filed under its original and former name
SPAESS) is S.N. 09/396,653.
The continuing development and refinement of these collectors is important
for the additional reason that these solar collectors are applicable to and
provide one of the basic sub-systems to many aspects of Solar Energy Limited's
projects, both currently and long-term.
Each day, the amount of energy striking the earth from the sun is believed
sufficient to provide electric power for the human race for 175 years at the
present rate of consumption. PV panels are an excellent way to gather some of
this energy, but the problem is that they turn off when the sun goes down. The
traditional solar panels and processes have proved to be expensive for the
practical production of electric power compared to the economies of electricity
made with fossil fuel. SOLAWATT will provide economically produced power from
the sun 24 hours per day. The power output decreases at night, but the demand
for electricity also decreases at night. On hot summer days when a large amount
of electric power is needed to run air conditioners, SOLAWATT performs at its
best. SOLAWATT panels, consisting of tough plastic films with appropriate
optical properties could conceivably be formed by an automated process in a
factory and placed on large rolls. Transported to the field, the panels, which
might be several hundred meters in length, can simply be rolled out onto the
ground. Channels for water and air are provided in the panels. Insulation on the
bottom of the panels is not necessary, since the ground becomes part of the heat
energy storage system.
PHASE I prototype field testing, at high altitude (7,000 feet), was completed
in November 1999. An initial proof-of-theory test was conducted in late November
1999. It consisted of an ad hoc field demonstration and verification of computer
simulations and calculations, proving the viability of the concepts that the
absorption of solar energy by water-filled plastic film collectors creates heat
energy which is then absorbed in part into the ground, which acts as a battery
and an overnight power storage source.
PHASE II prototype testing will extend from March through September of 2000. It
consists of erecting further refined SOLAWATT collectors, simulating the
anticipated final design of manufactured collectors for testing and evaluating
the prototype. It further consists of construction and evaluation of a vacuum
chamber for use in the molecular deposition on plastic films, and conduct energy
storage tests of our several collector versions. In order to test solar energy
collectors, in early stages, it is necessary to prime the process with some
external electricity. Phase II includes improving collector efficiency with an
aim to eliminating the need for external supplemental energy to demonstrate the
process.
The last aspect of Phase II SOLAWATT will be to couple the collector with
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SUNSPRING (the project to be described next) to produce fresh water from
seawater.
PHASE III SOLAWATT will extend from March 2001 to June 2001. (See SUNSPRING
phases.) Concurrently with SUNSPRING Phases, this Phase will include
incorporation of various outside consultant reports, findings and
recommendations regarding the plastic films, fabrication and molecular
deposition. Production of fresh water will be deemed partial success. If the
production of fresh water is equal to our calculations and projections, that
will be deemed a complete success. The last aspect will be to seek and secure
fabricators, probably by joint-venture to proceed to commercialization.
SOLAWATT AND SUNSPRING are now being developed simultaneously for the
reason that they both use our SOLAWATT solar energy collectors.
(ii) SUNSPRING (THE PRODUCTION OF FRESH WATER FROM SEAWATER).
SUNSPRING will produce fresh water using only seawater and our unique solar
energy collectors in a reverse osmosis ("RO") desalination process that will
require no electric motors or outside power source. Osmosis is the result of
placement of fresh water one side and seawater on the other side of a
semi-permeable membrane. The result is fresh water flowing through to the
seawater side. Reverse Osmosis is the application of a significant pressure on
the salt water side, forcing water through the membrane and leaving the salt
behind.
SUNSPRING's fresh water cost is estimated by us to become (at current
values) $0.29 per thousand gallons, low enough for use in irrigation. Current
plants around the world are producing fresh water for about $3.00 to $6.00 per
thousand gallons, with the larger plants producing at the lower rate.
Present-day RO plants draw electric power from the utility grid running an
electric motor, driving a high-pressure water pump to supply seawater to the RO
unit. The effluent brine from the RO unit flows through a hydraulic motor to
recover some of the energy. This method is inefficient. Our SUNSPRING project
contemplates much improved efficiency.
PHASE I SUNSPRING will extend through September 2000. It will consist of an
actual field demonstration to prove the computer theory of using SOLAWATT
collectors in a Reverse Osmosis system to desalinate seawater.
PHASE II SUNSPRING will extend March to June, 2001. It will consist of further
refinement of design to eliminate outside electrical sources (i.e., more
efficient utilization of project produced/available heat energy). We will
specify optimum component materials and improve the desalination production. We
will proceed then to incorporate insight from outside consultants' reports
(Please see SOLAWATT Phases above, for comparative timetables.)
PHASE III SUNSPRING will extend through September 2001, and will consist of
selection of commercial sources to supply our specified materials and of
fabricators to produce SOLAWATT solar collectors for commercial use. We will
construct two working field models of the commercial desalination unit, for due
diligence, marketing, joint-venture and financing purposes.
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(iii) MECH (AN INTERNAL COMBUSTION ENGINE).
MECH's mission is to design an internal combustion engine having one-third
the size of a conventional engine with the same power and 25% greater
efficiency. The MECH engine could have a wide variety of applications from
vehicles and propeller driven aircraft, to lawn mowers and chain saws.
Internal combustion engines have a theoretical efficiency of well over 50%,
but the actual efficiency of present-day car engines is only half that number. A
large part of the energy loss is due to sliding friction of the pistons in the
cylinders. It is well known that sliding friction can be a hundred times as
great as rolling friction. We have filed a patent application and made a small
working prototype of a new engine design called MECH, which substitutes rolling
friction for sliding friction in an internal combustion engine. MECH stands for
Motor, Expander, Compressor and Hydraulics. The concept can be adapted to an
internal combustion engine, gas expander, compressor and hydraulic pump or
hydraulic motor.
PHASE I MECH extended from October 1999 to June 2000, and consisted of
research, design and the manufacture of a 2-cylinder prototype.
PHASE II MECH will extend from July 2000 through December 2000, and will
consist of research, design and development of (a) a 4-cylinder, 4-cycle
fuel powered MECH engine; and (b) a 4-cylinder gas expander. (This gas
expander sub-project, like our solar collectors, will have application
across other projects.)
Computer simulations will be performed to determine design parameters.
Engineering designs will be submitted to a machine shop for fabrication.
Completed engine and expander models will then be thoroughly tested. Problem
areas will be identified and corrected. Feasibility of mass production of the
two units will be investigated. We will then seek to secure a joint-venture
partner, preferably a current engine manufacturer.
PHASE III MECH will extend from March 2001 to September 2001, and will consist,
first, of optimizing the parameters of design and investigating improved or
different material types and possible coatings. We will then consult with
experts in these fields, for due diligence evaluation and comparison of the MECH
engine, with the gas expander, to the statistics of existing engines.
The end result of this Phase will be an engine that will be able to be
mass-produced commercially under license from Solar Energy Limited, the parent
corporation. At this point, we will have a marketable product, and time to
market it. We would then need to investigate the various possible markets for
such an engine and the rights to use it in manufactured products, and attend
trade shows, and pursue various trade publications and information sources, to
make our engine known.
(6) RENEWABLE ENERGY CORPORATION. ( RECO )(our wholly-owned subsidiary)
is also a development stage company. It was founded by Dr. Reed Jensen. Dr.
Jensen has developed certain intellectual property rights for a process called
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Direct Solar Reduction of CO2 to Fuel and Feedstock, which rights and patented
process (U.S. Patent number 6066187) the Company intends to develop into a
commercially viable system. This process utilizes solar energy to directly
reduce CO2 that would have been released into the atmosphere while producing
chemical feedstock, fuel (methane, diesel, etc.) and green or environmentally
friendly electricity and oxygen as by-products. We regard the acquisition of
RECO as a long-term investment in the growing world market for renewable energy
sources and the reduction of pollution, especially greenhouse gases.
Unlike HAT, RECO is considered an operating subsidiary. Please see next
sub-item (6) "JADE" for information about our reorganization of RECO.
Each of the following projects has been developed by Dr. Jensen, with
Renewable Energy Corporation.
(i) SOLAREC (PRODUCTION OF FUEL AND ELECTRICITY).
SOLAREC will use only solar energy plus carbon dioxide (CO2) from the
atmosphere to produce a clean usable fuel (gasoline, diesel, etc.) with
electricity and oxygen as byproducts.
PHASE I SOLAREC, the measurement of the spectrum of hot CO2 is already complete
and shows the expected radical red shift that makes hot CO2 absorb solar
photons.
PHASE II SOLAREC prototype testing is currently underway, with the intention of
continuing through Phase III over the next 24 months. These tests consist of
mirror segment manufacture, solar array assembly, pointer-tracker tests, and
further research testing of receiver.
PHASE III SOLAREC will involve the two most critical work packages: hot runs
with an absorption booster incorporating optical work, and primary mirror
segment upgrades. In Phase III, we will prove that natural sunlight from a
practical, high-efficiency solar concentrating reflector system will
successfully perform contact preheating and direct disposition and reduction of
CO2 to CO in correct quantitative amounts. It will include diagnostics for
temperature, pressure, chemical composition, flow rates, and other parameters.
PHASES IV-VI SOLAREC. At the successful completion of Phase III, we would expect
to continue with our currently proposed Phases IV through VI, including a
full-scale module demonstration, and integrated system demonstration, then
separator and synthesizer, final system design and vendor qualifications
This project continues to progress under budget and on schedule.
(ii) HTWO.
HTWO is the concept to produce from coal, economical, pure hydrogen, while
dramatically reducing CO2 emissions for use in the growing fuel cell business.
Existing fossil fuel-based industrial production of hydrogen generates nearly as
much CO2 as the normal operation of an internal combustion engine. This project
is currently at a computer concept, research and feasibility stage and will
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greatly depend upon the success of the next twelve month phase of SOLAREC.
PATENT STATUS: Patent applications have been filed for SOLAWATT, SUNSPRING
and MECH. SOLAREC is patented in the United States.
(7) JADE. We are in the process of culminating a further reorganization,
by which we intend to sell RECO to Jade Electronic, Inc., a Nevada corporation,
("JADE") in a related-party transaction, by which, we would initially own 63%
control of Jade Electronic, Inc., as another corporate asset, before any further
placements. By agreement of about April 28, 2000 we are to sell RECO to JADE, in
exchange for 8,500,000 shares of JADE common stock, and $180,000 cash. The text
of this agreement is reproduced as Exhibit 10.4
The authorized capital of JADE is two hundred million shares of common
stock, of par value $0.001 per share, of which 5,000,000 shares are issued and
outstanding, immediately before the transaction. The issuance to us of 8,500,000
shares results in our initial 63% ownership of the resulting 13,500,000 shares,
immediately after the transaction. This transaction may be viewed as an
acquisition by us of JADE as a controlled subsidiary. This transaction is deemed
by management to better position our assets for both future funding programs and
more focused development of both SOLAREC technology and a marketing strategy for
it. Although we own RECO 100% immediately before the transaction, and own it
only 63% immediately afterwards, we would be selling that 37% of RECO for
$180,000, which we can apply to our own funding requirements. We believe that,
so positioned, the resulting RECO/JADE corporation could seek its financing
independently of us, on its own merits, and with its own management (to be
determined) to the mutual benefit of both corporations.
This is a related-party transaction, for the reason that one or more
officers, affiliates or promoters of JADE are believed to be shareholders or
affiliates of shareholders of this parent corporation. This transaction is
partially executed and partially executory. We would expect to report more fully
on the details of this transaction and timing of its actual final closing in our
Quarterly Report on Form 10-QSB, for three months and six months ended June 30,
2000. That report is due on or before August 15, 2000.
OTHER REVENUE GENERATION. In all of our projects, our business plan has
been to produce a working late-phase prototype that can be tested and proven as
to efficiency and cost-effective marketability.
RISK FACTORS. The overriding risk factors facing us, in the development of
our promising projects, are the range of foreseeable disappointments: (1) The
technology may not work, in the end, and be unprovable in a full working
prototype; (2) The technology may work well, but the cost of producing units may
be sufficiently greater than expected, that such units may not be salable; (3) A
competing technology, or inventive competitor, may arise which would obviate our
advancements and render our programs functionally obsolete; any number of other
unforeseen events could dramatically alter our prospects for profitability.
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ENVIRONMENTAL ISSUES: We shall comply fully with Resource Conservation
Recovery Act ("RCRA"), the key legislation dealing with hazardous waste
generation, management and disposal. We currently produce a very limited amount
of chemical waste from our laboratory operations. Our Hazardous Waste Management
Service is Perma-Fix of New Mexico, Inc. a Notifying Transport, Transfer
Station, and Used Oil Marketer (EPA # NM0000182121). We are currently in
compliance with all environmental laws and will continue to comply.
Each one of our projects is environmentally friendly. They will be what are
commonly called "green" products. We are aware of no environmental regulations
specifically applicable to our projects or the products they may become, with
one possible exception. Our reverse osmosis projects contemplate the use of
seawater which may result in higher than normal concentration of salt in the
water that is output or refiltered to capture the salt for resale. It is not
desirable to discharge this salinated water back into the ocean as salty brine.
Accordingly one feature of the use of this product is either to re-dilute the
resulting seawater brine with fresh seawater or to harvest the salt for resale.
Either process renders the output safe and clean for return of water to the
ocean. There are no other environmental issues known or contemplated by us,
which affect our operations or projects. We are, like all others, subject to all
environmental laws and regulations.
YEAR 2000 (Y2K) ISSUES. We have encountered no year 2000 computer problems
of our own, or in connection with any suppliers or correspondents. Management
has determined that no such problems or issues existed or exist which has
affected or will affect us.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's principal offices are located at 112 C Longview Drive, Los
Alamos, New Mexico, 87544. The facilities consist of a leased plant and building
of about 3,400 square feet, including offices and laboratory facilities in which
prototype development is on-going. The two year lease provides for rent of
$55,200 payable at $2,300 per month. We pay for fire, flood and damage insurance
of the premises and for premises liability to third persons, in addition to
normal utilities. Our facilities are located minutes away from the prestigious
Los Alamos National Laboratory.
ITEM 3. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company, as of the
preparation of this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no Shareholder Meetings or matters submitted to shareholders during
1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND STOCKHOLDER MATTERS.
(A) MARKET INFORMATION. The Company, has one class of securities, Common
Voting Equity Shares ( Common Stock ). The Company's Securities may be quoted in
the over-the-counter market, but there is a young, sporadic and potentially
volatile trading market for them. Quotations for, and transactions in the
Securities, are capable of rapid fluctuations, resulting from the influence of
supply and demand on relatively thin volume. There may be buyers at a time when
there are no sellers, and sellers when there are no buyers, resulting in
significant variations of bid and ask quotations by market-making dealers,
attempting to adjust changes in demand and supply. A young market is also
particularly vulnerable to short selling, sell orders by persons owning no
shares of stock, but intending to drive down the market price so as to purchase
the shares to be delivered at a price below the price at which the shares were
sold short.
The common stock of Solar Energy Limited was listed on the OTC Electronic
Bulletin Board ( OTCBB ) (symbol XSEL ). It has ceased to be so listed for the
reason that our 1934 Act Registration has not cleared comments, and will
continue on NQB Pink Sheets until SEC comments have been cleared and our OTCBB
listing can be restored. Based upon standard reporting sources
(www.BigCharts.com), the following information is provided:
<TABLE>
<CAPTION>
<S> <C> <C>
period . high bid low bid
---------------------------
1st 1999 2.90 1.75
2nd 1999 1.95 0.80
3rd 1999 1.05 0.15
4th 1999 0.75 0.25
1st 2000 1.00 0.375
======== ======== =======
2nd 2000 0.906 0.3125
</TABLE>
The foregoing price information is based upon inter-dealer prices without
retail mark-up, mark-down or commissions and may not reflect actual
transactions.
(B) HOLDERS. Management calculates that the approximate number of holders of
the Company's Common Stock, as of December 31, 1999, the number of shareholders
was approximately 270.
(C) DIVIDENDS. We have not paid any cash dividends on our Common Stock, and do
not anticipate paying cash dividends on our Common Stock in the next year. We
anticipate that any income generated in the foreseeable future will be retained
for the development and expansion of our business. Future dividend policy is
subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, debt service, capital
requirements, business conditions, the financial condition of the Company and
12
<PAGE>
other factors that the Board of Directors may deem relevant.
(D) SALES OF UNREGISTERED COMMON STOCK FROM INCEPTION. Solar Energy Limited
(the "Registrant" and sometimes "we","us" or "our") was first incorporated in
Delaware as Taurus Enterprises, Inc. on January 5, 1994, and re-incorporated in
Nevada on August 20, 1996 as Salvage World, Inc. On August 20, 1996. Taurus made
its original issuance of 25,000,000 share to 18 founders in 1994, pursuant to
section 4(2) of the Securities Act of 1933.
During 1996, Salvage placed an additional 451,250 shares, at $0.10 per
share pursuant to Regulation D, Rule 504, to four sophisticated investors, with
preexisting relationships with then current management. These investors were
approached by management. No offers were extended to persons who did not invest.
On December 17, 1997, the Shareholders approved a proposal to Reverse
Split the Common Stock of the Corporation 20 to 1; with the provision that no
Shareholder owning 100 shares or more shall be reversed or reduced below 100
Shares. The 25,451,260 shares were reduced to 1,272,562, and the adjustment for
small shareholders was 5,949 shares, for a total post-reverse of 1,278,511.
There was an upward adjustment for the provision that no shareholder be
reversed below 100 shares of 5,949 shares.
On December 17, 1997, we effected a Plan of Reorganization and Merger of
Salvage World, Inc. into Solar Energy Limited, a private Delaware Corporation,
the effect of which merger changed the name of this Corporation, move its place
of incorporation from Nevada to Delaware. That reorganization also involved the
acquisition of Hydro-Air Technologies, Inc. ("HAT") initially as a wholly-owned
subsidiary. The issuance of shares was made to the original HAT shareholders
pursuant to section 4(2)/Rule 145. The first phase issuance of 170,400 was made
about April 15, 1998. The second phase issuance of 530,000 shares was made on
October 23, 1998. The amount of shares issued and possibly to be issued for HAT
in future is summarized as in Item 12, Related Transactions.
On April 14, 1999, we acquired Renewable Energy Corporation ( RECO )(also
as a wholly-owned subsidiary) for 350,000 shares to its owner pursuant to
section 4(2)/Rule 145. RECO was acquired 100% from its owner developer Dr. Reed
Jensen, an individual unrelated to us, for 350,000 escrowed shares of the common
stock of this Issuer, plus $20,000 cash. In addition to those shares for direct
acquisition, 150,000 shares have been reserved un-issued for possible future
employee and performance options. No options for the acquisition of these option
shares has been adopted.
No change of control of our corporation resulted from either acquisition,
or of them both.
Also on December 17, 1997, shareholders approved the placement of up to
10,000,000 additional shares of common stock, at $0.10, pursuant to Regulation
D, Rule 504. A total of 7,800,000 shares were placed.
About July 23, 1998, we placed 125,000 restricted shares to three
knowledgeable investors.
13
<PAGE>
About November 10, 1998, we placed a further 2,000,000 shares, in reliance
on Rule 504, to four accredited off-shore investors, at $0.01 per share. As
before, these investors were known to management and affiliates before the
investment and had complete access, by virtue of that relationship to the kind
of information which registration would have provided. No offers were extended
to persons who did not invest.
On April 27, 1999, we placed an additional 100,000 restricted securities,
at $1.00 per share, pursuant to section 4(2) to a single accredited investor.
Management determined the investor's accreditation by reference to income,
net-worth and previous investment experience.
On or about November 22, 1999, we placed an additional 800,000 shares to a
single accredited investor, at $0.18 per share, pursuant to section 4(2).
Management determined the investor's accreditation by reference to income,
net-worth and previous investment experience.
The resulting total issued and outstanding 13,153,911 is further
illustrated in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Series # Taurus Salvage Solar Energy
Issuances (20 to 1)
------------------------------------------------------
4(2). . . . . . 25,000,000 1,250,000
------------------------------------------------------
Rule 504 . . . 451,260 22,562
------------------------------------------------------
Subtotal . . . . 25,451,260 1,272,562
======================================================
Adjustment . . . . . . . . . . . . 5,949
------------------------------------------------------
Subtotal . . . . . . . . . . . . . 5,949
------------------------------------------------------
Interim Total. . . . . . . . 1,278,511 1,278,511
------------------------------------------------------
4(2)/Rule 145 . . . . . . . . . . . . . . . . 700,400
------------------------------------------------------
7 4(2)/Rule 145. . . . . . . . . . . . . . . . 350,000
------------------------------------------------------
Rule 504 . . . .. . . . . . . . . . . . . . 7,800,000
------------------------------------------------------
Rule 504 . . . . . . . . . . . . . . . . . . 125,000
------------------------------------------------------
Rule 504 . . . .. . . . . . . . . . . . . . 2,000,000
------------------------------------------------------
4(2). . . . . . . . . . . . . . . . . . . . . 100,000
------------------------------------------------------
4(2). . . . . . . . . . . . . . . . . . . . . 800,000
------------------------------------------------------
Total Issued . . . . . . . . . . . . . . . 13,153,911
======================================================
</TABLE>
14
<PAGE>
(E) DESCRIPTION OF SECURITIES.
(1) CAPITAL AUTHORIZED AND ISSUED. We are authorized to issue 50,000,000
shares of a single class of Common Voting Stock, of par value $0.001, of which
13,153,911 are issued and outstanding.
(2) COMMON STOCK. All shares of Common Stock when issued were fully paid
for and nonassessable. Each holder of Common Stock is entitled to one vote per
share on all matters submitted for action by the stockholders. All shares of
Common Stock are equal to each other with respect to the election of directors
and cumulative voting is not permitted; therefore, the holders of more than 50%
of the outstanding Common Stock can, if they choose to do so, elect all of the
directors. The terms of the directors are not staggered. Directors are elected
annually to serve until the next annual meeting of shareholders or until their
successor is elected and qualified. There are no preemptive rights to purchase
any additional Common Stock or other securities. The owners of a majority of the
common stock may also take any action without prior notice or meeting which a
majority of shareholders could have taken at a regularly called shareholders
meeting, giving notice to all shareholders thereafter of the action taken. In
the event of liquidation or dissolution, holders of Common Stock are entitled to
receive, pro rata, the assets remaining, after creditors, and holders of any
class of stock having liquidation rights senior to holders of shares of Common
Stock, have been paid in full. All shares of Common Stock enjoy equal dividend
rights. There are no provisions in the Articles of Incorporation or By-Laws
which would delay, defer or prevent a change of control.
(3) SECONDARY TRADING. This refers to the marketability to resell the
securities in brokerage transactions, and that marketability is generally
governed by Rule 144, promulgated by the Securities and Exchange Commission
pursuant to 3 of the Securities Act of 1933. Securities which have not been
registered pursuant to the Securities Act of 1933, but were exempt from such
registration when issued, are generally Restricted Securities as defined by
Rule 144(a). The impact of the restrictions of Rule 144 are (a) a basic one year
holding period from purchase; and (b) a limitation of the amount any shareholder
may sell during the second year, as to non-affiliates; however, as to shares
owned by affiliates, the second-year limitation of amounts attaches and
continues indefinitely, at least until such person has ceased to be an affiliate
for 90 days or more. The limitation of amounts is generally 1% of the total
issued and outstanding in any 90 day period.
(4) UNRESTRICTED SHARES OF COMMON STOCK. There are 13,153,911 shares
issued and outstanding, 1,250,000 shares are held by affiliates and 11,903,911
shares are owned by non-affiliates. We estimate that 11,203,511 may be or have
become unrestricted securities which could be sold in brokerage transaction in
compliance with Rule 144.
OPTIONS AND DERIVATIVE SECURITIES. We have no outstanding options or derivative
securities. We have no shares issued or reserved which are subject to options or
warrants to purchase, or securities convertible into common stock. In connection
with this statement please note the information provided in Item 12
Relationships and Transactions, respecting the HAT shareholders speculative
entitlement to receive additional shares, which entitlement we have
characterized as unlikely to materialize in the foreseeable future.
15
<PAGE>
RISKS OF "PENNY STOCK." The Company's common stock may be deemed to be "penny
stock" as that term is defined in Reg.Section 240.3a51-1 of the Securities and
Exchange Commission. Penny stock share stocks (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ) listed stocks must still meet requirement (i) above); or (iv) in
issuers with net tangible assets less than $2,000,000 (if the issuer has been in
continuous operation for at least three years) or $5,000,000 (if in continuous
operation for less than three years), or with average revenues of less than
$6,000,000 for the last three years.
Section 15(g) of the Securities Exchange Act of 1934, as amended, and Reg.
Section 240.15g-2 of the Securities and Exchange Commission require broker
dealers dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Securities and Exchange Commission
requires broker-dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker -dealer
made the determination in (ii) above; and (iv) receive a signed and dated copy
of such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
RISKS OF STATE BLUE SKY LAWS. In addition to other risks, restrictions and
limitations which may affect the resale of the existing shares of our common
stock, consideration must be given to the Blue Sky laws and regulations of
each State or jurisdiction in which a shareholder wishing to re-sell may reside.
Some States may distinguish between companies with active businesses and
companies whose only business is to seek to secure business opportunities, and
may restrict or limit resales of otherwise free-trading and unrestricted
securities. We have taken no action to register or qualify its common stock for
resale pursuant to the Blue Sky laws or regulations of any State or
jurisdiction. Accordingly offers to buy or sell our existing securities may be
unlawful in certain States
16
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
We are a research and development company with no revenues and no immediate
source or expectation of revenue generation. We have had no revenues since
inception. We have been funded by our shareholder investors. Virtually all of
the funding/working capital raised to date has been allocated for research and
development of our several prototype projects. All costs incurred in the design
and building of a prototype for the HARPS system during the 1998 year was
expensed in research & development. No costs were capitalized due to the
experimental nature of the project and the lack of documented feasibility that
the system would produce the results necessary to place into production. During
1999, other projects were being developed and the HARPS project was placed on
hold. All projects developed us are experimental in nature and are recorded as
research and development expenses. Of our total expenses in 1999 of $569,462,
research and development accounted for 399,792.
(A) PLAN OF OPERATION: NEXT TWELVE MONTHS. Our plan for the twelve months,
July 2000 - July 2001, is discussed in this Item 6. First, in general terms we
intend to continue the development of our prototypes SOLAWATT, SUNSPRING and
MECH ourselves, through this reporting corporation; and we intend to pursue the
development of our prototypes SOLAREC and HTWO through Jade Electronic, Inc., a
Nevada corporation, as indicated in Item 1, sub-item (b)(3) previously.
(1) CASH REQUIREMENTS AND OUR NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS.
We have depended and do depend on continued support from our principal
shareholders to cover any shortfall. Please refer to (b)(1) of this Item for
more information. There is no binding agreement by which these or any
shareholders are committed to continue funding our research and development.
While our shareholders have indicated no lack of continuing support, if our
required funding is not provided, we may not be able to continue as a going
concern.
We require approximately $3,000,000 to meet our budgetary requirements for
the next 12 months.
HEAD OFFICE/LAB COSTS:
rent 30,000
utilities (heat, electricity, water, etc.) 16,000
office supplies 12,000
phone, fax, courier, website maintenance 28,000
office equipment (computers, etc.) 30,000
insurance (business, medical, etc.) 10,000
travel, entertainment 36,000
outside consultants 35,000
legal (including patent costs, public company
filings,etc.) 90,000
accounting, audit 75,000
-------
362,000
SALARIES:
Chief Scientist (SOLAREC) 65,000
Chief Scientist (SUNSPRING) 65,000
Interim CEO 25,000
Process Development Engineer (SOLAREC) 63,000
Project Manager, Mechanical Engineer 140,000
Optical/Electrical Engineer 61,000
17
<PAGE>
Technical Staff 150,000
Clerical 50,000
Marketing/Investor Relations Team 90,000
Miscellaneous support, casual labor 150,000
Comptroller 30,000
-------
889,000
PROJECT PROTOTYPES:
SOLAREC PHASE III (hardware, equipment, tests) 175,000
SUNSPRING PHASES III & IV (parts, assembly,testing) 550,000
SOLAWATT PHASES II & III 200,000
MECH PHASES II & III
(parts, expander, engine,and manufacture prototypes) 200,000
1,125,000
---------
SUBTOTAL 2,376,000
Research & Development 20% Contingency 470,200
----------
TOTAL $2,886,200
==========
The sources of these funds may include further advances by our
Shareholders, further bridge financing from other accredited and sophisticated
investors, and/or proceeds from the $180,000 note from JADE. They may include
successful governmental grant applications. They may include packaging other
projects for sale in transactions similar to RECO/JADE, for stock and cash, in
which we retain control and receive some cash or notes.
GOING CONCERN. Note 2 of our Auditor's report states: "The Company has had
recurring operational losses for the past several years and is dependent upon
financing to continue operations. The financial statements do not include any
adjustments that might result from this uncertainty. The issues relating to
this note are discussed above and in the following paragraphs of this Item.
In summary, our circle of principal shareholders are committed to our
continued operations. We have reported that our activities are sufficiently
funded for the next twelve months. Any unexpected shortfall will be covered by
our principal shareholders as advances or additional internal placements. Beyond
our minimal requirements for the activities described in Item 1 of Part I and
this Item, we will seek additional capital for future needs and for the
expansion of our activities from development stage to operational stage.
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(1) OPERATIONS AND RESULTS FOR THE PAST TWO FISCAL YEARS. We have been
entirely devoted to research and development for the past two years, 1999 and
1998. We continue to be so devoted. Our progress has been described in detail in
Item 1 sub-item (b). Some of the information so reported there is subsequent
information to the close of 1999.
The principal result of our operations, aside from progress in our
development as disclosed, has been the decision to defer HARPS and ACES
indefinitely. See (2) next following, Future Prospects, for more information.
The following table summarizes the information contained in our financial
statements.
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
12/31/99 12/31/98 12/31/97 From
Inception
----------------------------------------------------------------------------
Total Assets (*). . . . $ 772,662 $ 435,696 $ 500 0
----------------------------------------------------------------------------
Total Liabilities (**). 503,795 269,642 0 0
----------------------------------------------------------------------------
Revenues. . . . . . . . 0 0 0 0
----------------------------------------------------------------------------
Operating Expenses. . . 569,462 944,690 4,000 1,543,165
(***)
----------------------------------------------------------------------------
Other Income (interest) 8,276 5,244 0 13,520
----------------------------------------------------------------------------
Net Earnings or (Loss). (561,186) (939,446) (4,000) (1,529,645)
----------------------------------------------------------------------------
Per Share Earnings
or (Loss) . . . . . . (0.045) (0.182) (0.003) (0.406)
----------------------------------------------------------------------------
Weighted Average. . . . 12,378,911 5,164,228 1,278,511 3,766,694
Common Shares
Outstanding
-----------------------------------------------------------------------------
</TABLE>
(*) ASSETS. We continue to maintain sufficient cash to deal with current
expenses. Pursuant to our acquisition of RECO, we advanced $50,000 during 1998
as an unsecured loan to RECO. Please see Note 9 to our Audited Financial
Statements, for the capitalization and expensing of these amounts. Please see
Note 5 for information about our Property and Equipment, and Note 6 relating to
our patent costs. We recorded goodwill in connection with our acquisition of HAT
and RECO as described in Note 7 to those Statements.
Due to the negative equity position of HAT, a total of $83,346 was recorded
and is being amortized over a 5 year period. The realization of this asset is
contingent upon HAT's ability to generate revenues from HARPS and ACES. These
projects have been deferred indefinitely, in favor of other projects.
We also recorded goodwill in connection with RECO due to its negative
equity position. A total of $439,900 was recorded upon acquisition and is being
amortized over a ten year period. The realization of this asset is contingent
upon RECO's ability to generate revenues from its developmental projects.
assets acquired . . . . . . . . . . . . . . . . 49,516
liability assumed . . . . . . . . . . . . . . . 49,416
equity acquired . . . . . . . . . . . . . . . . . 100
cash investment . . . . . . . . . . . . . . . . 20,000
value of stock issued . . . . . . . . . . . 420,000
goodwill calculation
total given up in acquisition . . . . 440,000
excess of assets over liabilities . . . . 100
-------
total goodwill . . . . . . . . . . . . . . . 439,900
19
<PAGE>
(**) LIABILITIES. We have notes payable to a related party (Note 8 of our
Audit). FCIC a shareholder of Solar Energy Limited advanced $300,000 to HAT
during 1997 and $200,000 during 1998 for phase one expense requirements. The
$500,000 has been repaid. Cesare Bette, a shareholder, loaned us $100,000 during
1998 as a short term working capital loan. It was repaid in February 1999.
Baycove Investments, Ltd., a shareholder, loaned us $308,387 and $110,252 during
1998 and 1999, respectively. The loans are non-interest bearing and due on
demand. The balance of these loans at December 31, 1999, and 1998, were $418,639
and $110,252, respectively. Dr. Reed Jensen, a shareholder, loaned us $20,000
during 1999. The loan is non-interest bearing and due upon demand. We made
payments of $10,000 on the loan and the balance due at December 31, 1999 was
$10,000.
(***) OPERATING EXPENSES. In 1998, our largest expenses were bad debt,
financial services, legal and accounting, research and development, and travel.
Each of these items greatly reduced in 1999 (we have no 1999 bad debts), except
research and development, our primary activity, which has appropriately
increased.
RESEARCH AND DEVELOPMENT.All costs incurred in the design and building of a
prototype for the HARPS system during the 1998 year was expensed in research &
development. No costs were capitalized due to the experimental nature of the
project and the lack of documented feasibility that the system would produce the
results necessary to place into production. During 1999, other projects were
being developed and the HARPS project was placed on hold. All projects developed
by Solar are experimental in nature and are recorded as research and development
expenses.
(2) FUTURE PROSPECTS. No efforts have been made to date to identify
other companies to manufacture or to identify probable or targeted licensees. We
have determined to await commercially viable prototype readiness before
addressing manufacturing and marketing issues. We do not expect to achieve
significant sales, if any, in the next twelve to eighteen months.
We have mentioned that HARPS and ACES have been deferred for the future. We
expect to turn our attention to these projects in 18 months to two years.
Disclosure is now provided as to what those deferred projects are.
HARPS refers to certain technology, patents, and intellectual property
rights to the concept producing electricity using the energy of evaporation of
water. One quart of water has about one-twentieth the energy of a quart of
gasoline. The process derived from this technology, called Hydro Air Renewable
Power Systems ( HARPS ), is (theoretically) an efficient and environmentally
friendly energy source, using only dry air and water (either fresh, ocean, or
waste water) to produce electricity while at the same time cleaning the air!
Initial internal computer driven studies conducted by the Company indicate that
electricity could be produced more economically than currently generated by
nuclear or fossil fuel plants. A partially working prototype was built in Los
Alamos. We believe the concept and science is sound, but the project is too
expensive and time-consuming to develop at this time.
ACES refers to a project called Air Conditioner Energy System ( ACES ).
This project is similar in theory to HARPS. The difference is that the ACES
units are to be primarily for single family residences. They would be small,
20
<PAGE>
self-contained roof mounted units that produce electricity with a unique
bi-product, cold air. That is, they provide electricity 24 hours a day while air
conditioning a house. The theory also relies on the heat of vaporization of
water but is simpler than the HARPS. Excess power can be sold to the utility
company. A model/prototype will be built in tandem with HARPS by the same
developmental team.
SUMMARY. We do not expect to achieve profitability in the next twelve
months. We are making significant progress in developing and proving our
technologies. We are dependent for funding on the support of our shareholders.
There is no assurance that funding will not run out. We are not ready to go to
the public markets. We have re-positioned RECO with a view to its ability to go
to the public markets with its projects earlier than the rest of our programs.
There is no assurance that we will succeed in our various efforts. While no
guarantee can be given as to when or whether we will achieve significant
revenues and profitability, a reasonable estimate is believed to be eighteen
months to two years from the date of this Amended Report.
ITEM 7. FINANCIAL STATEMENTS.
Please see the Attachment F-99-A of this Amended Report for Audited
Financial Statements for the years ended December 31, 1999 and 1998.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
The Remainder of this Page is Intentionally left Blank
21
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Joel S. Dumaresq (36) is the President and CEO of Solar Energy Limited.
Lon LaFlamme (age 50) was engaged by management to steer operations of
Solar Energy Limited as Interim President and CEO for the period from May 1 to
July 31, 2000, while Joel Dumaresq took a three month leave of absence for
personal matters.
Norman Wareham (46) is the our Secretary-Treasurer and Chief Financial
Officer,
The Board of Directors of this Company, Solar Energy Limited, consists of,
Dr. Melvin L. Prueitt, Joel S. Dumaresq, Norman Wareham, David Jones and Dr.
Reed Jensen. For further biographical information please refer to our Website,
www.solarenergylimited.com.
Lon LaFlamme (age 50) was engaged by management to steer operations of
Solar Energy Limited as Interim President and Chief Executive Officer from May 1
to July 31, 2000, and to recommend changes if any to its operations and
organization. Having accomplished his mission of mobilizing staff, realigning
commercially viable project priorities, and crafting written project profiles
for a website update and support literature in plain English rather than
technical language, LaFlamme immediately assumes the full-time role of Solar
Energy's Marketing/Investor Relations Manager effective August 1, 2000.
Shareholder and Board member, Joel Dumaresq, a seasoned public company leader
for over a decade, resumes the uncompensated role of President and Chief
Executive Officer, effective August 1, 2000.
Mr. LaFlamme had a 23 year tenure with EvansGroup (Publicist) Marketing,
assuming the role of President/CEO one of the dominant integrated marketing
companies in the Western United States. As one of three on the executive
committee, he collaboratively joined in overseeing that corporation's ten-office
system. He was instrumental in establishing an environmental affairs division,
focusing on utility, air pollution control and environmental engineering. Under
his leadership, he and that company garnered National, regional and local awards
of excellence. Most recently, he has provided consulting services for U.S. and
international clients, served as marketing professor at Brigham Young
University, the largest private university in North America. He has also
authored three published novels.
Joel S. Dumaresq (36) is the President and CEO of Solar Energy Limited.
(Please see previous information of interim CEO Lon LaFlamme.) He is also CFO
of Nifco Synergy, Inc. developing financial controls and systems for Expert
Software Developer with operations in Canada, the United States and Mexico, and
was instrumental in securing $27 million Class 12 Software financing for the
company. Mr. Dumaresq was President of Westair Aviation, Inc., responsible for
re-organizing and re-financing this air ambulance company. His experience with
22
<PAGE>
corporate finance, institutional equity sales and investment brokerage spans the
past decade. rom 1986 through 1995, he served in various capacities in the
investment banking industry. (1987-1983) Dominion Securities (Vancouver),
Capital Markets Group; (1993-1994 )BC Dominion Securities (Vancouver)
International Sales and Investment Advisor; (1994-present) Pashleth Investments
Ltd. (Richmond B.C.) President. From 1995 through 1997, specifically, RBC
Dominion Securities (a Division of Royal Bank), five years in institutional
equity sales, and four years in retail sales. Mr. Dumaresq was president of
Westair Aviation a regional air service company. He is currently a director of
Wattage Monitor, Inc., (OTCBB:WMON)(wattagemonitor.com) a provider of on-line
information on deregulated electric utility rates available to consumers and
suppliers of electricity (since March 1999); and also Booktech Corp (ASX symbol
BTC)(www.booktech.com) an on-line publisher (since April 2000). He is also a
director of Smartsources.com, a U.S. public software and information company
(since 1999).
Norman Wareham (46) is the our Secretary-Treasurer and Chief Financial
Officer, and has served since 1997. He has a comprehensive background in
implementing information systems for public and private companies, with
particular expertise in financial management and tax planning. He is also
president of Wareham Management Ltd., a private company engaged in management
consulting for public and private companies. From 1995 to 1996 he was an
accountant with the Certified General Accounting firm (Canada) of Wanzel,
Sigmund, & Overes. From 1993 to 1995 he served as President and CEO of
Transatlantic Financial Corp., a private investment banking company. He was
president of Global Financial Corporation in the British West Indies, and has
been a public accountant for 25 years, owning two accounting firms. Mr. Wareham
is currently on the board of directors and is chief financial officer for
several public companies, including the ZMAX Corporation, (since 1996) and
Cybernet Internet Services International, Inc. He is currently a director of
United States companies: Aquaplan, Inc., British Brasses Ltd., Viper Resources,
Inc. and WattMonitor, Inc. He is a director of Canadian companies Anthian
Resources Corporation and Oko Gold Corporation, since 1998 and 1997,
respectively.
Dr. Melvin L. Prueitt (age 67) is the Chairman of the Board of Directors of
Solar Energy Limited, and President of our wholly-owned subsidiary, Hydro-Air
Technologies, Inc. and one of our two principal scientists. Dr. Prueitt received
his B.S. from the Brigham Young University, his M.S. from the University of
Arizona and his Ph.D. from the University of New Mexico, all in physics.
Following his graduation from the University of Arizona, Dr. Prueitt joined the
Los Alamos National Laboratory where he remained until 1994. He retired from
LANL in 1994. From 1997 to present he has served on the Board of Directors for
Solar Energy Limited and Hydro Air Technologies, Inc. He has also been engaged,
substantially full-time, in the affairs of our research and development
projects.
Dr. Prueitt, who holds 12 U.S. patents, was the first to determine the
temperature of lighting strokes. A prolific research scientist and writer, he
has written three books and has been published in over 30 publications. He is
listed in Who s Who in the West, Who s Who in America Index, Men of Achievement,
Dictionary of International Biography and Contemporary Authors.
David Jones, 55, is one of our Directors. He brings to the Company 17 years
of business experience resulting from starting and developing Jomar Systems,
Inc., which specialized in the design and manufacture of nuclear assay
23
<PAGE>
equipment, and 32 years of systems development experience involving electronic
circuit design, mechanical apparatus design, application software and firmware
design, manufacturing and integration. In addition to publishing several
articles on nuclear instrumentation and methods, Mr. Jones holds a patent for
"Method & Apparatus for Controlling Multiple Motors". In 1992, David F. Jones
was awarded the "Excellence in Enterprise" award by the Los Alamos Economic
Development Corporation, the Los Alamos National Bank and the Los Alamos
National Laboratory. From 1996 and currently, he has been contracted to the Los
Alamos National Laboratory to provide project planning and procedure writing in
support of the Technical Safety Requirements (TSR) implementation at the
Plutonium and CMR facilities. Duties included establishing and maintaining a
work breakdown structure and resource loaded schedule for all TSR implementation
work and the writing of surveillance procedures at both facilities.
Dr. Reed Jensen (63) is a one of our Directors and our other principal
scientist, and a Director of our second subsidiary, Renewable Energy Corporation
(RECO). Since January 1999, Dr Jensen has been the President and Chief Scientist
of RECO. From 1998 to 1999, he had been engaged as a Program Manager for CO2
sequestration, at Los Alamos National Laboratory ( LANL ). From 1995 to 1998,
Dr. Jensen was Deputy Director for Environmental Program Management, LANL. He
was responsible for the establishment of environmental stewardship at Los
Alamos. From 1993 to 1995, he was engaged in Research at LANL in Nuclear fuel
cycle separations from molten salt media and high temperature gas kinetics.
From 1986 to 1993, he was Deputy Associate Director with line management
responsibility for over 1000 chemistry and materials people including chemistry
and materials divisions, at LANL centers and program offices. From 1981 to 1986,
he was Program manager and technical leader for Isotope LANL Separation and
Laser Programs. From 1974 to 1981, he was Division Leader and Deputy responsible
for quality of the technical work, and Role Division Leader LANL engaged
primarily in technical leadership. From 1972 to 1974, he was Group Leader, LANL
Technical director of activities for about 50 people, in developing giant pulse
chemical lasers and inventing the nozzle expansion/laser dissociation method for
uranium isotope separation. From 1969 to 1972, he was a Staff Member,
Geomagnetic field tracing with barium jets, chemical, LANL kinetics and chemical
lasers. From 1967 to 1969, he was Assistant Professor of Chemical laser
kinetics, Environmental science and Chemistry, Brigham Young University. From
1966 to 1967, he was Staff Member, Weapons explosives initiation and kinetics of
LANL explosions, and engaged in CO2 laser research. He was educated at the
University of California at Berkeley, doing Postdoctoral Studies in Laser
Chemical Kinetics (1965-1966 school year); and Brigham Young University, Provo,
Utah, earning his Ph.D., 1965, in Physical Chemistry and his B.A., 1960, in
Chemistry and Mathematics. He enjoys a reading knowledge of German and French,
and is fluent in Spanish, by formal study and residence in Hispanic countries.
His awards include NIH Postdoctoral Fellow (1965-1966), NDEA Graduate Fellow
(1962-1965), Outstanding Thesis Award (1965), Army Commendation Medal (for
technical work, 1962), U.S. Department of Energy Certificate of Appreciation
(1989), American Academy of Environmental Engineers Excellence in Environmental,
Engineering Superior Achievement Award (1998).
Leslie Speir is a Director of our Subsidiary, Hydro-Air Technologies. He
was a consultant and recently joined us as a salaried employee. For the past
five years, he was Senior Designer for the Process Equipment Section, Merrick
and Company, having participated in the Cold Vacuum Drying Facility for the
24
<PAGE>
Department of Energy, and he designed equipment for the Pit-9 Waste Reclamation
Characterization Facility. He brings to us the solid technical experience in
systems design, and in heading up mechanical design teams. He enriches us with
specialized knowledge and experience in construction, operation and maintenance
of electro-mechanical and hydraulic systems, refrigeration equipment, gas
chromatographies, ultra high vacuum systems, and mass pectrometer leak
detectors, as well as engineering stress and dynamic drive train and basic
nuclear physics calculations and radiation exposure computations, heat flow
calculations and operation and maintenance of nuclear reactors including
pressurized water sodium cooled and gas cooled variation. He is also trained and
experienced in health physics surveying techniques and radiological hazards
control.
Stanley Prueitt is a Director of our Subsidiary, Hydro-Air Technologies. He
remains with us as a consultant and brings to us a range of business, management
and personnel skills along with solid experience in project controls and
coordination. His executive experience includes marketing, franchising, news
director, and business start-up, and the organization of public companies. He
speaks, reads and writes Scandinavian languages and is an experienced
motivational speaker and conductor of public seminars, a very active member of
the New Mexico Mounted Patrol. From 1995 until 2000, he worked full time on
staff of Los Alamos National Laboratories, as Senior Projects Control
Coordinator, and has devoted part-time to our SUNSPRING project.
Dr. Prueitt and Dr. Jensen, our two principal scientists, are engaged in
the affairs of our research and development projects substantially full-time.
Our other officers and directors provide insubstantial time to our affairs, as
needed, but have not been required to devote more than minimal time to us, at
the present time.
Dr. Melvin L. Prueitt, and Stanley Prueitt are father and son.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely upon a
review of Forms 3, 4 and 5 furnished to us, if any, we are not aware of any
person who at any time during the fiscal year ended December 31, 1999 was a
director, officer, or beneficial owner of more than ten percent of the Common
Stock of the Company, and who failed to file, on a timely basis, reports
required by Section 16(a) of the Securities Exchange Act of 1934 during such
fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
We have not and do not compensate our Directors for their attendance at
Board meetings, or service in their corporate capacities as Directors. (This
includes Dr. Prueitt and Dr. Jensen, our two principal scientists.) We have not
and do not compensate our Officers, Mr. Dumaresq and Mr. Wareham for their
official roles, for the reason that those gentlemen have not been required to
devote substantial time to our affairs. Mr. LaFlamme, our interim CEO and
President, and our employees including those who may also be Officers and/or
Directors are compensated for their day to day business operations services.
Dr. Prueitt and Dr. Jensen, our two principal scientists are engaged in the
affairs of our research and development projects substantially full-time and are
compensated for this scientific work. Our other officers and directors provide
insubstantial time to our affairs, as needed, but have not been required to
devote more than minimal time to us, in their capacities as such, at the present
time. The Company has no retirement, pension, profit sharing, or insurance or
medical reimbursement plans.
25
<PAGE>
Dr. Prueitt is the Chairman of our Board of Directors. He is not an
executive officer of our corporation. Dr. Prueitt has been compensated hourly,
at $35 per hour. He will be salaried at $60,000 per year prospectively.
Dr. Reed Jensen and Ann Traynor are the only full-time employees of RECO.
Dr. Jensen is salaried at $60,000 per year. Currently he receives consultation
payments for work on HAT and Solar Energy projects. 150,000 shares have been
reserved for employees of RECO, to be issued, if at all, pursuant to a plan not
yet developed. No employee plan will be developed until commercially viable
products are developed, and until this subsidiary achieves profitability.
See Executive and Directors Compensation table on the following page.
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards Payouts
A b c d e f g h i
Securi-
Other Restric- ties All Other
Name Annual ted Under- Compen-
And Compen- Stock lying LTIP Compen
Principal . Salary Bonus sation ($) Awards Options Payouts sation
Position Year ($) ($) ($) SARs (#) ($) ($)
----------------------------------------------------------------------------------------------------------------
Joel Dumaresq 1999 0 0 0 0 0 0 0
President/CEO (1)
1998 0 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
</TABLE>
NOTES TO TABLE:
(1)Lon LaFlamme, while serving as interim President and CEO received
compensation in the amount of $25,000. He did not receive any options,
shares or other compensation.
We issued a total of 700,400 shares to or for HAT. We are required to issue
to or for HAT one additional share for each $2.00 of earnings generated by HAT
from the HARPS project, as determined by Generally Accepted Accounting
Principles (GAAP) to a maximum of 3,502,000 additional investment shares. There
have not been revenues to date, so that no further issuances have been made to
or for HAT. There is no indication when or if these shares or any of them will
be earned. The HARPS project has been deferred, indefinitely.
This discussion is complicated by those internal arrangements among the
former HAT shareholders, and their Hydro-Air Founders LLC. The HAT Founders LLC
is a kind of trust arrangement for the shares issued to it and the shares which
may become issuable to it, when and if HAT/HARPS produced earnings. Their
Founders Agreement sets up a formula for distribution in proportion to their
continuing participation. Please see Item 12 following, for more information and
for citation to the appropriate exhibits provided with this filing. In order to
determine how the HAT founders would distribute their Founders Agreement shares,
the computation would include factors such as hours and other participation not
yet ascertainable.
Since it is impossible to determine whether or whom shares may be
issued in the future, no tabular presentation of these multiple contingencies is
practicable, except to show the amount issued, that maximum amount which could
be issued, and the distribution by percentages of those shares, assuming the
maximum issuance, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HAT Shareholder . . . . . Issued % If Issued
===================================================
Melvin L. Prueitt . . . . 67,239 10 350,200
---------------------------------------------------
David Jones . . . . . . . 33,619 5 175,100
---------------------------------------------------
Stanley D. Prueitt. . . . 33,619 5 175,100
---------------------------------------------------
27
<PAGE>
---------------------------------------------------
Leslie Speir. . . . . . . 33,619 5 175,100
---------------------------------------------------
Dana Hansen and Linda . . 14,008 2 70,040
Hansen
---------------------------------------------------
Ara Lee Stevens . . . . . 5,603 1 35,020
---------------------------------------------------
Baycove Investments, Inc. 140,080 20 700,400
---------------------------------------------------
Hydro-Air Founders, LLC . 372,613 53 1,856,060
---------------------------------------------------
Total HAT. . . . . . . . 700,400 100 3,502,000
===================================================
</TABLE>
It is important to understand that these relationships and agreements among
and between the original HAT shareholders and the Hydro-Air Founders pre-existed
our acquisition of HAT and are internal matters to the shareholders of that
former subsidiary. Our obligation to HAT is only to issue additional shares per
formula if and when HAT generates earnings to us. It is not presently likely
that any of these additional shares will be earned in the foreseeable future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
To the best of our knowledge and belief the following disclosure presents,
as of the date of this Report, December 31, 1999, the total beneficial security
ownership of all Directors and Nominees, naming them, and by all Officers and
Directors as a group, without naming them, known to or discoverable by us, and
the total security ownership of all persons, entities and groups, known to or
discoverable by us, to be the beneficial owner or owners of more than five
percent of any voting class of our stock. More than one person, entity or group
could be beneficially interested in the same securities, so that the total of
all percentages may accordingly exceed one hundred percent. We have only one
class of stock, issued and outstanding, namely Common Voting Equity Shares.
In the following table, the total beneficial ownership of shares is shown.
All of the shares issued for the acquisition of HAT are shown as
owned/attributed to each of the HAT Founders. Please refer to Item 12 of this
Part III for more acquisition about the internal share ownership relationships
of the HAT owners with respect to each other.
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address of Beneficial Owner . . . . . . Share %
Ownership
--------------------------------------------------------------------
Dr. Melvin L. Prueitt (1) . . . . . . . . . . . . 700,400 5.33
161 Cascabel
Los Alamos, New Mexico, 87544
Chairman/Director
--------------------------------------------------------------------
Joel S. Dumaresq. . . . . . . . . . . . . . . . . 20,000 0.15
#5 4360 Agar Drive
Richmond BC Canada V7B 1A3
President/Director.
--------------------------------------------------------------------
Norman Wareham. . . . . . . . . . . . . . . . . . 0 0.00
1177 West Hastings
Vancouver BC 2V6 E2K Secretary-
Treasurer/Director
--------------------------------------------------------------------
David M. Jones (1). . . . . . . . . . . . . . . . 700,400 5.33
131 San Ildefonso
Los Alamos, New Mexico, 87544 Director
--------------------------------------------------------------------
Dr. Reed Jensen.. . . . . . . . . . . . . . . . . 350,000 2.66
121 La Vista
Los Alamos, New Mexico, 87544 Director
--------------------------------------------------------------------
Officers and Directors as a Group . . . . . . . . 1,770,800 13.48
====================================================================
Stanley Prueitt . . . . . . . . . . . . . . . . . 700,400 5.33
2848 A. Walnut Street
Los Alamos, NM 87544 Director Subsidiary
--------------------------------------------------------------------
Leslie Speir (1). . . . . . . . . . . . . . . . . 700,400 5.33
PO Box 4172
Fairview Station
Espanola, NM 87533 Director Subsidiary
--------------------------------------------------------------------
Hydro-Air Founders (1). . . . . . . . . . . . . . 700,400 5.33
1177 West Hastings
Vancouver BC V6E 2K3
--------------------------------------------------------------------
Givigest Fiduciary SA . . . . . . . . . . . . . . 800,000 6.09
Corso Elvezia 4
6900 Lugano Switzerland
--------------------------------------------------------------------
Baycove Investments, Ltd. (2) . . . . . . . . . . 940,000 7.16
1177 West Hastings
Vancouver BC V6E 2K3
--------------------------------------------------------------------
Baycove Capital Corp. (2) . . . . . . . . . . . . 940,000 7.16
1177 West Hastings
Vancouver BC V6E 2K3
--------------------------------------------------------------------
</TABLE>
(1) The Founders of HAT are the interested persons in the Hydro-Air Founders.
Instead of displaying the actual shares of each, the total of all is
shown as attributed to each. Please see Item 12, Relationships and Transactions,
for more information and disclosure.
CHANGES IN CONTROL. There are no arrangements known to Registrant,
including any pledge by any persons, of securities of Registrant, which may at a
subsequent date result in a change of control of Registrant.
29
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(A) JADE/RECO. Dr. Reed Jensen and Dr. Melvin Prueitt have been identified as
initial directors of the Jade Electronic, Inc., the acquiror of RECO, in a
transaction in which we acquire control of JADE. (Exhibit 10.4).
(B) ORIGINAL HAT SHAREHOLDERS INTERNAL AGREEMENTS. The founders of HAT are
interested persons in the Hydro-Air Founders, LLC, an entity created by the
founders of HAT to determine the ultimate and phased distribution of shares
issued and to be issued to HAT for its acquisition by this Issuer.
Founders Agreement. (Exhibit 10.3) Pursuant to that certain Founders
Agreement, David F. Jones, Melvin L. Prueitt, Stanley Prueitt, and Leslie Speir
(individually referred to by name or as a "HAT Shareholder," and collectively
referred to as "HAT Shareholders") and Hydro-Air Technologies, Inc., ("HAT") a
New Mexico corporation (Corporation") agreed to a plan of organization,
management and funding for the HAT and for ownership of their interest in the
Solar Energy Limited. The sum and substance of this agreement is that the
Founders Shares , that is the shares issued to Hydro-Air Founders, LLC, would be
distributed to the Founders according to a formula keyed to their future
participation, measured by hours, and by specific kinds of tasks. This Founders
agreement is internal to the Founders of HAT and does not further concern Solar
Energy Limited, this reporting corporation.
We issued a total of 700,400 shares to or for HAT. We are required to issue
to or for HAT one additional share for each $2.00 of earnings generated by HAT,
as determined by Generally Accepted Accounting Principles (GAAP) to a maximum of
3,502,000 additional investment shares. There have not been revenues to date, so
that no further issuances have been made to or for HAT. There is no indication
when or if these shares or any of them will be earned.
Voting Trust Agreement. (Exhibit 5) The HAT shareholders also created a
Voting Trust, to hold and manage the shares covered by their Founders Agreement.
This agreement is also internal to the Founders and Shareholders of HAT, and
does not further concern Solar Energy Limited.
Stock Restriction Agreement. (Exhibit 10.2) The HAT shareholders also
created a private stock restriction agreement, to limit the ability, as between
the Founders and Shareholders, to resell the shares of stock issued to them, in
connection with the acquisition of HAT by Solar Energy Limited.
The Founders Agreement, the Voting Agreement, and the Stock Restriction
Agreement effectively precede the acquisition by us of HAT. We are not a party
to these internal agreements of the HAT Founders and Shareholders.
30
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS. Amended Audited Consolidated Financial Statements,
for the years ended December 31, 1999, and 1998 are attached as Exhibit F-99-A.
(B) FORM 8-K REPORTS. None.
(C) FORM 10-QSB REPORTS. We filed a quarterly report, with un-audited
financial statements, for the three months ended March 31, 2000. That report is
being amended contemporaneously with this Amended Annual Report. Second Quarter
Report, for the six months ended June 30, 2000, is expected to be filed on or
before August 15, 2000.
(D) EXHIBITS. Please see Exhibit Index immediately following.
The Remainder of this Page is Intentionally left Blank
31
<PAGE>
Exhibit # Table Category / Description of Exhibit Page Number
Table
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
F-1 Audited Financial Statements: Solar Energy Limited: Consolidated:
December 31, 1999 and 1998 34
--------------------------------------------------------------------------------
[3] ARTICLES/CERTIFICATES OF INCORPORATION, AND BY-LAWS
--------------------------------------------------------------------------------
3.1 Certificate of Incorporation: Solar Energy Limited. 48
3.2 Articles of Incorporation: Hydro-Air Technologies, Inc. 50
3.3 By-Laws: Hydro-Air Technologies, Inc. 53
3.4 Articles of Renewable Energy Corporation 57
3.5 Reorganization: Salvage World and Solar Energy Limited 60
3.6 Merger of Salvage World and Taurus 65
--------------------------------------------------------------------------------
[5] VOTING TRUST
--------------------------------------------------------------------------------
5 Voting Trust Agreement: Internal to HAT 70
--------------------------------------------------------------------------------
[6] MATERIAL CONTRACTS/ACQUISITION
--------------------------------------------------------------------------------
10.1 First Amendment to Offer to Purchase and Plan of Internal
Funding and Share Release and Plan of Reorganization and
Acquisition (HAT) 73
10.2 Stock Restriction Agreement: Internal to HAT 84
10.3 Founders Agreement: Internal to HAT 90
10.3 Purchase Agreement for acquisition of Renewable
Energy Corporation 97
10.4 Offer to Purchase Jade Electronic Inc./Solar Energy Limited
(RECO) 102
--------------------------------------------------------------------------------
32
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the individual capacities
and on the date indicated.
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc. )
(originally Taurus Enterprises, Inc.)
Dated: August 2, 2000
/s/Dr. Melvin L. Prueitt /s/Joel S. Dumaresq
Dr. Melvin L. Prueitt Joel S. Dumaresq
Chairman/Director President/Director
/s/Norman Wareham /s/David M. Jones
Norman Wareham David M. Jones
Secretary/Treasurer/Director Director
/s/Dr Reed Jensen
Dr. Reed Jensen
Director
33
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT F-99-A
AMENDED AUDITED FINANCIAL STATEMENTS:
SOLAR ENERGY LIMITED: CONSOLIDATED:
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
34
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
35
<PAGE>
C O N T E N T S
Accountants' Report 37
Consolidated Balance Sheets 38
Consolidated Statements of Operations 39
Consolidated Statements of Stockholders' Equity 40
Consolidated Statements of Cash Flows 41
Notes to the Consolidated Financial Statements 42
36
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Solar Energy Limited
We have audited the accompanying consolidated balance sheets of Solar Energy
Limited (a Development Stage Company) as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999, 1998, 1997 and from inception on
January 5, 1994 through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Solar Energy Limited
(a Development Stage Company) as of December 31, 1999 and 1998 and the results
of its operations and cash flows for the years ended December 31, 1999, 1998,
1997 and from inception on January 5, 1994 through December 31, 1999 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring operating losses and is
dependent upon financing to continue operations. These factors raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/Crouch, Bierwolf and Chisholm
Crouch, Bierwolf and Chisholm
Salt Lake City, Utah
March 7, 2000
37
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Balance Sheets
December 31,
1999 1998
--------------------------------------------------------------------------------
ASSETS
Current assets
Cash . . . . . . . . . . . . . . . . . $ 263,371 $ 286,627
Employee advance . . . . . . . . . . . . . . . . . 0 213
Notes receivable (Note 9) . . . . . . . . . . . . 0 50,000
Total Current Assets . . . . . . . . . . . . . 263,371 336,840
------------- -------------
Property & Equipment (Note 5) . . . . . . . . 25,297 16,653
------------- -------------
Other Assets
Organization costs (Note 1) . . . . . . . . . . . 0 2,181
Patent Costs (Note 6) . . . . . . . . . . . 33,549 9,808
Goodwill (Note 7) . . . . . . . . . . . . . 445,908 66,677
Deposits . . . . . . . . . . . . . . . . . . . . 4,537 3,537
------------- -------------
Total Other Assets . . . . . . . . . . . . . . 483,994 82,203
------------- -------------
Total Assets . . . . . . . . . . . . $ 772,662 $ 435,696
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . 58,973 44,236
Accrued liabilities . . . . . . . . . . . . . 16,183 15,154
Notes payable-related party (Note 8) . . . . 428,639 210,252
------------- -------------
Total Current Liabilities . . . . . . . 503,795 269,642
============= =============
Stockholders' Equity
Common Stock, authorized
50,000,000 shares of $.0001 par value,
issued and outstanding 13,153,911 and
11,903,911 shares respectively . . . . . . . 1,315 1,190
Additional Paid in Capital . . . . . . . 1,797,197 1,133,323
Deficit Accumulated During the
Development Stage . . . . . . . . . . . (1,529,645) (968,459)
-------------- -------------
Total Stockholders' Equity . . . . . . . 268,867 166,054
============== =============
Total Liabilities and Stockholders' Equity . $ 772,662 $ 435,696
============== =============
The accompanying notes are an integral part of these financial statements
38
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statements of Operations
Cumulative
For the years Total
ended December 31, Since
1999 1998 1997 Inception
--------------------------------------------------------------------------------
Revenues: $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ----------
Expenses:
Amortization . . . . . . . . . . 67,981 19,866 500 89,847
Depreciation . . . . . . . . . . .6,516 0 0 6,516
Bank Charges . . . . . . . . . . 1,152 983 0 2,135
Bad Debt . . . . . . . . . . . . . . 0 225,000 0 225,000
Consulting . . . . . . . . . . . 48,007 16,675 0 66,900
Filing Fees . . . . . . . . . . . . .0 0 0 235
Financial Services . . . . . . . 4,512 180,000 3,500 196,552
Interest Expense . . . . . . . . . . 0 15,923 0 15,923
Legal and accounting . . . . . 26,294 90,089 0 128,883
Office . . . . . . . . . . . . . 4,459 3,072 0 7,531
Promotion . . . . . . . . . . . . . 275 15,666 0 15,941
Notary . . . . . . . . . . . . . . . 0 0 0 20
Research & Development . . . . 399,792 288,088 0 687,880
Travel . . . . . . . . . . . . . 10,474 89,328 0 99,802
--------------------------------------------------------------------------------
Total Expenses . . . . 569,462 944,690 4,000 1,543,165
======================================================================
Other Income (Expenses)
Interest Income . . . . . . . . 8,276 5,244 0 13,520
Net (Loss) . . . . . . . . . . $(561,186) $(939,446) $(4,000)$(1,529,645)
===============================================
Net Loss Per Share . . . . . $ (.045) $ (.182) $ (.003) $ (.406)
===============================================
Weighted average
shares outstanding . . . . . . 12,378,911 5,164,228 1,278,511 3,766,694
===============================================
The accompanying notes are an integral part of these financial statements
39
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount capital Stage
--------------------------------------------------------------------------------
Balance at beginning of development
stage-January 5, 1994 . . . . . . . . . . 0 $ 0 $ 0 $ 0
----------------------------------------------
1/5/94-Stock issued for
organization cost . . . . . . . . 1,250,000 125 2,375 0
Net loss December 31, 1994 . . . . . . . 0 0 0 (500)
----------------------------------------------
Balance, December 31, 1994 . . . 1,250,000 125 2,375 (500)
==============================================
Net loss December 31, 1995 . . . . . 0 0 0 (500)
----------------------------------------------
Balance, December 31, 1995 . . . 1,250,000 125 2,375 (1,000)
==============================================
10/96-Shares issued for
cash at $2.00 . . . . . . . . . . . 13,000 1 25,999 0
11/96-Shares issued for
cash at $.09 . . . . . . . . . . . . 8,312 1 761 0
12/96-Shares issued for
cash at $.20 . . . . . . . . . . . . 1,250 0 251 0
Stock split rounding adjustment . . . 5,949 1 (1) 0
Net loss December 31, 1996 . . . . . 0 0 0 (24,013)
----------------------------------------------
Balance, December 31, 1996 . . . 1,278,511 128 29,385 (25,013)
==============================================
Net loss December 31, 1997 . . . . . . . 0 0 0 (4,000)
----------------------------------------------
Balance, December 31, 1997 . . . 1,278,511 128 29,385 (29,013)
==============================================
1/98-Shares issued for acquisition of
Hydro-Air Technologies, Inc. . . . 700,400 70 (70) 0
6/98-Sares issued for
cash at $.10 per share . . . . . 7,800,000 780 779,220 0
7/98-Shares issued for
cash at $1.00 per share . . . . . . 125,000 12 124,988 0
11/98-Shares issued for
cash at $.01 per share . . . . . 2,000,000 200 199,800 0
Net loss for the year
ended December 31, 1998 . . . . . . . . . 0 0 0 (939,44)
------------------------------------------------
Balance, December 31, 1998 . . . 11,903,911 1,190 1,133,323 (968,459)
==============================================
4/99-Shares issued for
cash at $1.00 per share . . . . . 100,000 10 99,990 0
1/99-Shares issued for
acquisition of Renewable
Energy Corporation at
$1.20 per share . . . . . . . . . 350,000 35 419,965 0
10/99-Shares issued for
cash at $.18 per share . . . . . . 800,000 80 143,920 0
Net loss for the year
ended December 31, 1999 . . . . . . . . 0 0 0 (561,186)
------------------------------------------------
Balance, December 31, 1999 . . 13,153,911 $1,315 $1,797,197 $(1,529,645)
================================================
The accompanying notes are an integral part of these financial statements
40
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Consolidated Statement of Cash Flows
January 5,
1994 (inception
of the
development
For the years stage) to
ended December 31, December 31,
1999 1998 1997 1999
--------------------------------------------------------------------------------
Cash Flows From Operating
Activities
Net loss . . . . . . . . . $(561,186) $(939,446) $(4,000) $(1,529,645)
Adjustments to reconcile
net loss to net cash
provided by operations
(net of acquisition):
Amortization/Depreciation . . . 74,497 21,968 500 98,465
Bad Debt . . . . . . . . . . . . 0 225,000 0 225,000
Stock issued for services . . . . 0 180,000 0 180,000
Increase/Decrease in:
Employee advance . . . . 213 (176) 0 37
Accounts payable . . 14,321 34,770 0 49,091
Accrued expenses . . . 1,029 15,154 0 16,183
Net Cash Flows Used In
Operating Activities . . . (471,126) (462,730) (3,500) (960,869)
--------------------------------------------------
Cash Flows From Investment
Activities:
Cash acquired from subsidiary . 42,733 204,956 0 247,689
Cash paid for patent costs . . (28,872) (3,917) 0 (32,789)
Cash paid for property
& equipment . . . . . . . . . (17,378) (8,397) 0 (25,775)
Cash paid for deposits . . . . (1,000) (3,537) 0 (4,537)
Cash paid for notes receivable . . . 0 (275,000) 0 (275,000)
----------------------------------------------------
Net Cash Provided by Investing
Activities . . . . . . . . . . (4,517) (85,895) 0 (90,412)
---------- ---------- --------- ------------
Cash Flows From Financing
Activities:
Issued common stock
for cash . . . . . . . . . . 244,000 925,000 0 1,196,013
Cash received on advance
by shareholders . . . . . . . 318,387 410,252 0 728,639
Cash paid on debt
financing . . . . . . . . . (110,000) (500,000) 0 (610,000)
----------------------------------------------------
Net Cash Provided by Financing
Activities . . . . . . . . . 452,387 835,252 0 1,314,652
---------- ---------- ---------- ------------
Net increase (decrease)
in cash . . . . . . . . . . . (23,256) 286,627 (3,500) 263,371
Cash, beginning of year . 286,627 0 3,500 0
--------- ---------- --------- ------------
Cash, end of year . . . $ 263,371 $ 286,627 $ 0 $ 263,371
--------- ---------- --------- ------------
Supplemental Cash Flow Information
Cash Paid For:
Interest . . . . . . . $ 0 $ 15,923 $ 0 $ 15,923
Taxes . . . . . . . . $ 0 $ 0 $ 0 $ 0
========= ========== ========= ============
The accompanying notes are an integral part of these financial statements
41
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to The Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Solar Energy Limited ("the Company") was incorporated as Taurus
Enterprises, Inc. under the laws the State of Delaware on January 5, 1994.
The Company was organized primarily for the purpose of operating a used
automobile brokerage firm. The Company did not become operational and abandoned
its attempts to establish the brokerage operation.
In August of 1996 its shareholders decided to reactivate the Company, merge
the Company with Salvage World, Inc., a private company, change the name to
Salvage World, Inc. and reincorporate in the state of Nevada.
On December 17, 1997 the Company merged with Solar Energy Limited (Solar) a
Delaware corporation organized on July 24, 1997 and changed the name to Solar
Energy Limited. The surviving corporation is the Delaware corporation and the
authorized shares were changed to 50,000,000 par value $.0001. Solar's
headquarters are located in Los Alamos, New Mexico.
On January 1, 1998 the Company issued the initial 170,400 shares of stock
and on October 21, 1998 an additional 530,000 share were issued for the
acquisition of 100% of Hydro-Air Technologies, Inc. (Hydro) a New Mexico
corporation organized June 18, 1997. Hydro owns various rights to patented
intellectual property called Hydro-Air Renewable Power System ("HARPS"), and has
developed a prototype system to generate electricity from the evaporation of
water. Hydro's headquarters are located in Los Alamos, New Mexico. This
business combination was accounted using the purchase method. Operations of
Hydro have been included in the consolidated statement of operations since
January 1, 1998. The Company valued the acquisition at $83,346, the amount of
goodwill recorded for the acquisition.
In January 1999 the Company issued 350,000 shares of stock for the
acquisition of 100% of Renewable Energy Corporation (RECO) a New Mexico
corporation organized November 30, 1998. RECO owns various rights to patented
intellectual property associated with the solar recycling of CO2 to fuel.
RECO's headquarters are located in Los Alamos, New Mexico. The Company valued
the acquisition at $440,000 consisting of cash paid of $20,000 and stock valued
at $420,000. The Company acquired RECO assets of $49,500 and assumed liabilities
of $49,400. The acquisition was recorded using the purchase method of a business
combination. The statement of operations of RECO has been included in the
consolidated statements of operation from January 1, 1999. RECO had no
operations in 1998, therefore no proforma information is presented. The Company
recorded $439,000 of goodwill in connection with this acquisition (see Note 7).
The Company is in the development stage according to Financial Accounting
Standards Board Statement No. 7 and is currently focusing its attention on
raising capital in order to pursue its goals.
b. Accounting Method
The Company recognizes income and expenses on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements. Fully diluted earnings per share is not presented because it is
anti-dilutive.
42
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (Continued)
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating loss
carryforwards totaling approximately $1,349,645 that will be offset against
future taxable income. These NOL carryforwards begin to expire in the year
2009. No tax benefit has been reported in the financial statements because the
Company believes there is a 50% or greater chance the carryforward will expire
unused.
Deferred tax assets and the valuation account is as follows at December 31,
1999 and 1998.
1999 1998
-------------------------------------------------------------------
Deferred tax asset:
NOL carrryforward $ 458,880 $ 268,076
Valuation allowance (458,880) (268,076)
----------- -----------
Total $ 0 $ 0
f. Organization Costs
The Company incurred $2,500 of organization costs in 1994. These
costs, which were paid by shareholders of the Company, were exchanged for
1,250,000 shares of common stock. Organization costs are being amortized on a
straight line method over a 60 month period. These costs will be recovered only
if, the Company is able to generate a positive cash flow from operations. Hydro
incurred costs of $3,116 for their organization. All organizational costs were
fully amortized during 1999 to conform with recently issued accounting
standards.
g. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. In these financial
statements, assets involve extensive reliance on management's estimates. Actual
results could differ from those estimates.
h. Principles of Consolidation
The Consolidated Financial Statements include the accounts of Solar Energy
Limited and its wholly owned subsidiaries Hydro-Air Technologies, Inc. (1999
and 1998) and Renewable Energy Corporation (1999 only). All intercompany
accounts and transactions have been eliminated in the consolidation.
43
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 Summary of Significant Accounting Policies (Continued)
i. Bad Debt
During 1998, the Company loaned an individual $225,000 for development
expenses incurred in research technology which the Company intended to acquire.
The advances were not collected and the Company expensed them as bad debt.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has had recurring
operating losses for the past several years and is dependent upon financing to
continue operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. It is management's plan
to raise sufficient funds to develop the next phase of the HARPS Technology and
then begin to manufacture and market the HARPS Power system.
NOTE 3 - Development Stage Company
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating substantially
all of its efforts in raising capital and developing its business operations in
order to generate significant revenues.
NOTE 4 - Stockholders' Equity Transactions
Pursuant to the plan or reorganization and merger agreement dated August
20, 1996, the Company merged Taurus Enterprises, Inc. (a public company) with
Salvage World, Inc. (a private company). The shareholders of Taurus returned
their stock and received stock in the new combined entity named Salvage World,
Inc. The Company changed the par value of its common stock from $.0001 to
$.001.
Pursuant to the merger agreement dated December 17, 1997, the Company
merged with Solar Energy Limited and the shareholders of Salvage received shares
in the new combined Solar entity. The Company then changed the par back to
$.0001 and the new authorized capital became 50,000,000. The Board then
authorized a 1 for 20 reverse stock split. These financial statements have been
retroactively restated to reflect the split.
The Company has issued 700,400 shares of stock to acquire 100% of the stock
of Hydro-Air Technologies. The acquisition agreement between the Company and
Hydro-Air Technologies provides an initial issuance of stock at the beginning of
phase one, and additional issuances throughout the development process to arrive
at no less than 4,000,000 shares or 40% of the outstanding stock. Because Hydro
had a negative equity position goodwill was recorded and no value was assigned
to the stock issued.
The Company issued 7,800,000 shares of common stock at $.10 and 2,000,000
shares of common stock at $.10 for cash and services in an exempt 504 offering
which raised $800,000 during 1998.
The Company also issued 125,000 shares of common stock for $125,000 in a
505 exempt offering.
44
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 4 - Stockholders' Equity Transactions (Continued)
During January 1999, the Company issued 350,000 shares of its common stock
to acquire 100% of the stock of Renewable Energy Corporation. The shares were
valued at $1.20 each net of a 40% discount due on their restricted nature based
on the trading value of the stock at the time.
During May 1999, the Company issued 100,000 shares of its common stock for
cash of $100,000.
During November 1999, the Company issued 800,000 shares of its common stock
for cash of $144,000.
NOTE 5 - Property & Equipment
Property and equipment consists of the following at December 31, 1999 and
1998:
1999 1998
--------------------------------------------------------------------------------
Office Equipment & Furniture $ 26,496 $ 11,020
Tools 1,539 1,539
Auto 6,522 6,522
34,557 19,081
Accumulated Depreciation (9,260) (2,428)
------------- ------------
Net Property & Equipment $ 25,297 $ 16,653
============ ============
Depreciation expense for the years ended December 31, 1999 and 1998 is
$6,516 and $2,102, respectively.
NOTE 6 - Patent Costs
The Company has incurred legal costs in connection with the Patent process
which the Company has rights to, and has therefore capitalized those costs and
is amortizing them over a five year period. Amortization expense attributable
to patents during 1999 and 1998 was $7,312 and $778, respectively.
NOTE 7 - Goodwill
The Company recorded Goodwill in connection with the acquisition of Hydro,
due to the negative equity position of Hydro. A total of $83,346 was recorded
upon acquisition and is being amortized over a 5 year period. The realization
of this asset is contingent upon Hydro's ability to generate revenues from the
HARPS process.
The Company also recorded Goodwill in connection with the acquisition of
RECO due to the negative equity position of RECO. A total of $439,900 was
recorded upon acquisition and is being amortized over a ten year period. The
realization of this asset is contingent upon RECO's ability to generate revenues
from the Solar Energy process.
45
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 8 - Notes Payable - Related Party
FCIC a shareholder of the Company advanced $300,000 to Hydro Air during
1997 and $200,000 to the Company during 1998 for phase one expense requirements.
$500,000 has been paid back, leaving a $0 balance due at December 31, 1998.
Cesare Bette, a shareholder, loaned the Company $100,000 during 1998 as a
short term working capital loan. The advance was repaid in February 1999.
Baycove Investments, Ltd., a shareholder, loaned the Company $308,387 and
$110,252 during 1999 and 1998, respectively. The loans are non-interest bearing
and due upon demand. The balance of these loans at December 31, 1999 and 1998
is $418,639 and $110,252, respectively
Reed Jensen, a shareholder, loaned the Company $20,000 during 1999. The
loan is non-interest bearing and due upon demand. The Company made payments of
$10,000 on the loan and the balance due at December 31 1999 is $10,000.
NOTE 9 - Notes Receivable/Acquisition of RECO
Pursuant to a purchase agreement between the Company and Renewable Energy
Corporation (RECO) the Company advanced $50,000 during 1998 as an unsecured
loan. Upon the closing at January 31, 1999, $30,000 of the loan converted to
equity of RECO and the Company became 100% owners of the common stock. The
remaining $20,000 of the unsecured loan was advanced for startup costs and is
considered as a cost of the investment in RECO. According to the agreement, the
Company issued 350,000 shares to the shareholders of RECO. This business
combination was accounted for using the purchase method.
In addition, the agreement specifies a commitment by the Company to provide
working capital loans of $5,700,000 to it' subsidiaries throughout various
phases of development.
NOTE 10 - Commitments
The founder of the HARPS technology has granted Hydro an exclusive license
to develop, manufacture and market the same. For the license Hydro is committed
to a 1% royalty on gross sales of the units and 1/2% royalty on the sale of the
electrical power generated by any power plants owned by Hydro.
The Company is committed to an operating lease for office space in Los
Alamos, New Mexico that expires in August 2000. Future minimum lease payments
are as follows at December 31, 1999.
2000 $ 18,400
-----------------
Total $ 18,400
=================
NOTE 11 - Fair Value of Financial Instruments
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amounts.
46
<PAGE>
SOLAR ENERGY LIMITED
(formerly Salvage World, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 11 - Fair Value of Financial Instruments (Continued)
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of notes payable approximate fair value.
NOTE 12 - Prior Period Restatement
The Company recorded services in connection with stock issued for cash at a
discount. The 1998 statement of operations was restated to reflect $180,000 in
expenses for these services. The balance sheet and statement of cash flows also
reflect the restatement.
47
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION: SOLAR ENERGY LTD.
--------------------------------------------------------------------------------
48
<PAGE>
CERTIFICATE OF INCORPORATION
OF
Solar Energy Limited
FIRST, The name of this corporation is Solar Energy Limited.
SECOND: Its registered office in the State of Delaware is to be located at
1313 N. Market Street, Wilmington DE 19801-1151, County of New Castle. The
registered agent in charge thereof is The Company Corporation, address "same as
above."
THIRD: The nature of the business and, the objects and purposes proposed to
be transacted, promoted and carried on, are to do any or all the things herein
mentioned as fully and to the same extent as natural persons might or could do,
and in any part of the world, vis:
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The amount of the total authorized capital stock of this
corporation is divided into 50,000,000 shares of stock at .0001 par value.
FIFTH: The name and mailing address of the incorporator is as follows:
Regina Cephas, 131 N. Market St., Wilmington DE 19801-1151.
SIXTH: The Directors shall have power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital, and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of the holders of a
majority of the capital stock issued and outstanding, the Directors shall have
the authority to dispose, in any manner, of the whole property of this
corporation.
The By-Laws shall determine whether and to what extent the accounts and
books of this corporation, or any of them shall be open to the inspection of the
stockholder; and no stockholder shall have any right of inspecting any account,
or book or document of this Corporation, except as conferred by the law of the
By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings and
keep the books, documents and papers of the Corporation outside of the State of
Delaware, at such places as may be from time to time designated by the By-Laws
or by resolution of the stockholders or directors, except as otherwise required
by the laws of Delaware.
SEVENTH: Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach involves: (1)
a director's duty of loyalty to the corporation of its stockholders; (2) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for unlawful payments of dividends or unlawful
stock purchase or redemption by the corporation; or (4) a transaction from which
the director derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws
of the State of Delaware, make, file and record this Certificate and do certify
that the facts herein are true; and I have accordingly hereunto set my hand.
DATED: July 24, 1997 /s/Regina Cephasy
Regina Cephasy
49
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 3.2
ARTICLES OF INCORPORATION: HYDRO-AIR TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
50
<PAGE>
ARTICLES OF INCORPORATION
OF
HYDRO-AIR TECHNOLOGIES, INC.
The undersigned acting as an Incorporator of a corporation under the New Mexico
Business Corporation Act [53-11-1 to 53-18-12 NMSA 1978 (1993 Repl.)] adopts the
following Articles of Incorporation for the corporation:
ARTICLE I
Its corporation name will be Hydro-Air Technologies, Inc.
ARTICLE II
It is organized to provide research and development in the production of
power utilizing the heat vaporization of water and for every other purpose
permitted by the Business Corporation Act.
ARTICLE III
It will have authority to issue one class of 250,000 shares of no par value
common stock.
ARTICLE IV
Its initial registered office address will be 161 Cascabel, Los Alamos, NM
87544, and its initial registered agent at that address will be Melvin L.
Prueitt.
ARTICLE V
The names and addresses of the four Directors who will constitute its
initial Board of Directors and who have consented to serve as Directors until
the first annual meeting of shareholders or until their successors are elected
and qualify are:
Melvin L. Prueitt Stanley D. Prueitt
161 Cascabel 2848-A Walnut Street
Los Alamos NM 87544 Los Alamos NM 87544
David F. Jones Leslie G. Speir
131 San Ildefonso Road PO Box 4172
Los Alamos NM 87544 Fairview Station
Espanola NM 87533
ARTICLE VI
Each director who qualifies under Section 53-12-2(e) NMSA 1978 (1933
Repl.), as amended from time to time, shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director of the Corporation.
ARTICLE VII
The name and address of the Incorporator is:
Melvin L. Prueitt
161 Cascabel
Los Alamos NM 87544
DATED this 18th day of June, 1977.
/s/Melvin L. Prueitt
Melvin L. Prueitt, Incorporator
51
<PAGE>
AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT
BY INITIAL REGISTERED AGENT
I, Melvin L. Prueitt, being duly sworn, accept appointment by Hydro-Air
Technologies, Inc. as its Initial Registered Agent, pursuant to the Business
Corporation Act (53-12-3 NMSA 1978 (1993 Repl.)].
/s/Melvin L. Prueitt
Melvin L. Prueitt, Incorporator
STATE OF NEW MEXICO
COUNTY OF LOS ALAMOS
On this 18th day of June, 1997, Melvin L. Prueitt personally appeared
before me, a Notary Public in and for the State and County aforesaid, and
acknowledged that he does hereby accept the appointment as the initial
Registered Agent of Hydro-Air Technologies, Inc., the corporation applying for
Certificate of Incorporation in the foregoing Articles of Incorporation.
(Seal)
/s/Ruth A. Salinger
Ruth A. Salinger
Notary Public
My Commission Expire:
7-27-01
52
<PAGE>
--------------------------------------------------------------------------------
EXHIBIT 3.3
BY-LAWS: HYDRO-AIR TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
53
<PAGE>
BYLAWS
OF
HYDRO-AIR TECHNOLOGIES, INC.
I
SHAREHOLDERS
A. MEETINGS: The Annual Meeting of Shareholders will be held on the
first day of June at the hour of 6:00 p.m. at the place fixed by the Board.
Special Meetings of Shareholders may be called by the President, the Board, of
the holders of thirty (30%) percent of the shares entitled to vote at the
meeting and will be held at the time and place fixed by the person calling the
Special Meeting. If the place of meeting is not fixed, the meeting will be held
at the registered office of the Corporation.
B. NOTICE: Written Notice stating the time, place, and, if a Special
Meeting, the purpose, will be delivered not less than ten, nor more than fifteen
days before the meeting date either personally or by mail at the direction of
the President, the Secretary, or the persons calling the meeting, to each
Shareholder of record entitled to vote at the meeting. If mailed, a Notice is
deemed delivered when deposited postage prepaid in the United States mail
addressed to the Shareholder at the address shown by the Corporation transfer
books.
C. QUORUM - VOTING: A majority of the shares entitled to vote
represented in person or by proxy will constitute a quorum at a meeting of
Shareholders. A quorum once attained continues until adjournment despite
voluntary withdrawal of enough shares to leave less than a quorum. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter will be the act of the
Shareholders unless the vote of a greater number or class voting is required by
the Business Corporation Act.
II
Directors
A. NUMBER, TENURE, QUALIFICATION, ELECTION: The Board will consist of
six Directors who will be elected annually by the Shareholders at their Annual
Meeting to serve until their successors have been elected and qualified. A
Director need not be a Shareholder or a New Mexico resident. A Director may be
removed with or without cause by the Shareholders, or may resign. If there is
more than one Director, vacancies may be filled by a majority of the remaining
Directors though less than a quorum. If no Directors, remain, the Shareholders
shall elect new Directors. Newly created directorships may be filled by the
Directors for a term of office continuing only until the next election of
Directors by the Shareholders.
B. MEETINGS: An Annual Meeting of the Board will be held without
notice immediately following the Shareholders' Annual Meeting. Special Meetings
of the Board may be called by any Director or Officer and will be held at the
time and place fixed by the person calling the Special Meetings. Written Notice
stating the time, place and purpose of the Special Meeting will be delivered
either personally, by mail, or by telegram at the direction of the person
calling the meeting, to each Director at least twenty-four (24) hours before the
Special Meeting time. If mailed, or telegraphed, a Notice is deemed delivered
when deposited, postage or charges prepaid, with the transmitting agency,
addressed to the Director.
C. QUORUM - ACTION: A majority of the number of Directors then in
office will constitute a quorum at Board Meetings. A quorum once attained
continues until adjournment despite voluntary withdrawal of enough Directors to
leave less than a quorum. The act of a majority of the Directors present at a
meeting at which a quorum is present will be the act of the Board. The Directors
54
<PAGE>
will manage the business and affairs of the Corporation and may act only as a
Board with each Director having one vote. The Board of Directors, by resolution
adopted by a majority of the full Board, may designate from among its members
one or more committees each of which shall have and may exercise all the
authority of the Board to the extent provided by law.
III
Officers
A. NUMBER, TENURE, QUALIFICATION AND ELECTION: The officers of the
Corporation will be President, Vice President, Secretary and Treasurer, and such
other officers as the Board may decide, who will be elected annually by the
Board at its Annual Meeting to serve until their successors are elected and
qualified. Officers need not be Shareholders, or Directors, or New Mexico
residents. An officer may be removed with or without cause by the Board, or may
resign. Vacancies and newly created offices will be filled by the Board. One
person may hold more than one office, but no person may be both President and
Secretary. Officers will perform the duties, and will have the power and
authority, assigned by the Board, incident to the office, and provided in the
Bylaws.
B. PRESIDENT AND VICE PRESIDENT: The President, or the Vice President
during the absence, disability, or failure to act of the President, will be the
chief executive officer of the Corporation, will preside at all Corporation
meetings, and when authorized will execute and deliver documents in the name of
the Corporation.
C. SECRETARY AND ASSISTANTS: The Secretary, or any Assistant Secretary
during the absence, disability, or failure to act, of the Secretary, will keep
and have custody of, the record of Shareholders, the stock transfer books, and
the minutes of the proceedings of the Shareholders and Directors, will give all
Notices required, and when authorized will execute, attest, seal, and deliver
documents of the Corporation.
D. TREASURER AND ASSISTANTS: The Treasurer, or any Assistant Treasurer
during the absence, disability, or failure to act, of the Treasurer, will be
custodian of the property of, and will be responsible for keeping, correct and
complete books and records of account for the Corporation.
IV
ACTION WITHOUT A MEETING
Any action required or permitted to be taken at a meeting of Shareholders
or Directors may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by all of the Shareholders entitled to vote
with respect to the subject matter thereof, or by all the Directors, as the case
may be.
V
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder or Director,
a waiver thereof in writing signed by the person entitled to the notice is
equivalent to the giving of the notice. The attendance of a Shareholder in
person or by proxy, or of a Director, at a meeting constitutes a waiver of
notice of the meeting except when attendance is for the sole purpose of
objecting because the meeting is not lawfully called or convened.
VI
SEAL
The Board may adopt a corporate seal which the Corporation may use by
impressing or affixing it or a facsimile thereof, but the failure to have or
affix a corporate seal does not affect the validity of any instrument or any
action taken in reliance thereon or in pursuance thereof.
VII
SHARE CERTIFICATES AND TRANSFER
The Board will adopt a form of certificate to represent the shares of the
Corporation. Each Shareholder is entitled to a certificate, signed by the
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President or Vice President, and the Secretary or an Assistant Secretary, and
representing the number of full and fractional fully paid shares owned by the
Shareholder. Share transfer and issuance will be done by the Secretary, or the
designee thereof, in the manner provided by the Business Corporation Act and
Uniform Commercial Code of New Mexico. The name and address of the Shareholder
to whom the certificate is issued, the number and class of shares represented,
and the date of original issue or from whom transferred shall be entered on the
record of Shareholders of the Corporation. The person or entity in whose name
shares stand on the record of Shareholders of the Corporation will be the
Shareholder and will be deemed by the Corporation to be the owner of the shares
for all purposes whether or not the Corporation has other knowledge. Shares will
be transferred only on the stock transfer books of the Corporation.
VIII
MONETARY MATTERS
A. FUNDS AND BORROWING: The depository for corporate funds, the
persons entitled to draw against these funds, the person entitled to borrow on
behalf of the Corporation, and the manner of accomplishing these matters will be
determined by the Board.
B. COMPENSATION: The compensation for the Directors and Officers will
be established by the Board. Compensation of employees will be established by
the President subject to review by the Board.
C. FISCAL YEAR: The fiscal year of the Corporation will be established
by the Board.
IX
INTERESTED PARTIES
No transaction of the Corporation will be affected because a Shareholder,
Director, Officer or Employee of the Corporation is interested in the
transaction. Such interested parties will be counted for quorum purposes, and
may vote, when the Corporation considers the transaction. Such interested
parties will not be liable to the Corporation for the party's profits, or the
Corporation's losses, from the transaction.
X
AMENDMENTS
These Bylaws may be altered, amended, or repealed by the Board unless the
power to do so is reserved to the Shareholders by the Articles of Incorporation.
SECRETARY'S CERTIFICATE
I certify the foregoing to be the true copy of the Bylaws duly adopted by
the Corporation on the 15th day of July 1997.
/s/Stanley D. Prueitt
Stanley D. Prueitt
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EXHIBIT 3.4
ARTICLES OF RENEWABLE ENERGY CORP.
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ARTICLES OF INCORPORATION
The undersigned acting as an Incorporator of a corporation under the New
Mexico Business Corporation Act adopts the following Articles of Incorporation
for the corporation.
ARTICLE I
Its corporate name will be Renewable Energy Corporation.
ARTICLE II
It is organized to develop advanced solar energy and solar fuels processes
and for every other purpose permitted by the Business Corporation Act.
ARTICLE III
It will have authority to issue one class of 100,000 shares of no par value
common.
ARTICLE IV
Its initial registered office address will be Suite 1000, 6555 Americas
Parkway, N.E., Albuquerque, New Mexico, and its initial registered agent at that
address will be Graham Browne.
ARTICLE V
The name and address of the two Directors who will constitute its initial
Board of Directors is:
Reed Jensen
121 La Vista
Los Alamos, New Mexico 87544
Nancy P. Jensen
121 La Vista
Los Alamos, New Mexico 87544
DATED: November 25, 1998.
/s/Gabriel M. Parra
GABRIEL M. PARRA
Suite 1000
6555 Americas Parkway, N.E.
Albuquerque, New Mexico
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ACCEPTANCE OF APPOINTMENT
AS REGISTERED AGENT
The undersigned, being duly sworn, accepts appointment as Registered Agent
pursuant to the Business Corporation Act for Renewable Energy Corporation, a New
Mexico corporation.
/s/ Graham Browne
GRAHAM BROWNE
STATE OF NEW MEXICO
COUNTY OF BERNALILLO
Signed and sworn before me on November 25, 1998 by Graham Browne.
/s/ Victoria Wiley
Notary Public
My commission expires:
January 2, 2002
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EXHIBIT 3.5
REORGANIZATION, SALVAGE WORLD AND SOLAR ENERGY LIMITED CORP.
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PLAN OF REORGANIZATION AND MERGER
BY WHICH
SALVAGE WORLD, INC.
(A NEVADA CORPORATION)
SHALL MERGE INTO AND BECOME
SOLAR ENERGY LIMITED
(A DELAWARE CORPORATION)
THIS PLAN OF REORGANIZATION AND MERGER is made and dated this day of
December 17, 1997, by and between the above referenced corporations, and shall
become effective on the Effective Date as defined herein.
I. THE INTERESTED PARTIES
A. THE PARTIES TO THIS PLAN OF MERGER
1. SALVAGE WORLD, INC. ( Salvage ), 774 Mays Blvd. #10, Incline Village NV
89451, a Nevada Corporation, was duly incorporated in Nevada on August 28, 1996.
2. SOLAR ENERGY LIMITED ( Solar ), 1177 W. Hastings, Vancouver BC V6E 2K3,
a Delaware Corporation, was duly incorporated in Delaware on July 24, 1997.
II. RECITALS
A. THE CAPITAL OF THE PARTIES:
1. THE CAPITAL OF SALVAGE consists of 100,000,000 shares of common voting
stock of $.001 par value authorized, of which no shares have been or are issued
or outstanding.
2. THE CAPITAL OF SOLAR consists of 50,000,000 shares of common voting
stock of $.0001 par value authorized, of which no shares have been issued or are
outstanding.
B. THE BACKGROUND FOR THE MERGER: Salvage desires to locate its Corporate Situs
in Delaware.
C. THE BOARDS OF DIRECTORS of both Corporations respectively have determined
that it is advisable and in the best interests of each of them and both of them
that they merge with and into the Delaware Corporation, in order to change the
domicile of the resulting Corporation to Nevada in accordance with IRS
368(a)(1)(F), to adopt the name of the Delaware Corporation as the name of the
resulting and surviving Delaware Corporation, and to retain the operational
history and continuity of the Nevada corporation, as may be permissible by law,
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subject to such reporting and qualifying provisions as the law may require.
D. THE SHAREHOLDERS OF SALVAGE, the Nevada corporation, having met on December
17, at a meeting of shareholders, duly called upon notice, approved the merger,
by affirmative vote 24,339,750, abstaining 2,500 votes, and against 12,500,
there being a total issued and outstanding of 24,451,250, and 24,354,750 shares
present and voting, this agreement was approved and adopted by the Board of
Directors of Salvage in a manner consistent with the laws of Nevada and the
constituent documents of the Salvage.
E. APPROVAL BY SOLAR, THE DELAWARE CORPORATION, THERE BEING NO SHARES ISSUED OR
OUTSTANDING, IMMEDIATELY PRECEDING THE MERGER, OR AT ANY TIME BEFORE THE
ADOPTION OF THIS AGREEMENT BY THE BOARD OF DIRECTORS OF SOLAR, THIS AGREEMENT
WAS APPROVED BY SOLAR PURSUANT TO THE SECOND SENTENCE OF SUBSECTION (F) OF
SECTION 251 OF THE DELAWARE GENERAL CORPORATIONS LAW.
III. PLAN OF MERGER
A. REORGANIZATION AND MERGER: The Delaware corporation and the Nevada
corporation are hereby reorganized and the Nevada corporation is hereby merged
with and into the Delaware corporation.
1. The Delaware Corporation: The former Salvage World, Inc., of Nevada will
become and thereafter be Solar Energy Limited, of Delaware. The Nevada
corporation will retain its corporate personality and status, and will continue
its corporate existence uninterrupted, in and through, and only in and through
the surviving Delaware corporation.
2. The Delaware Corporation: shall become and thereafter be the successor
Nevada corporation.
B. EFFECTIVE DATE: This Plan of Reorganization and Merger shall become effective
immediately upon approval and adoption by the parties hereto, in the manner
provided by the law of the places of incorporation and constituent corporate
documents, and the time of such effectiveness shall be called the effective date
hereof.
C. SURVIVING CORPORATION: The Delaware corporation shall survive the merger
herein contemplated and shall continue to be governed by the laws of Delaware,
and the separate corporate existence of the Nevada corporation shall cease
forthwith upon the effective date hereof.
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Rights of Dissenting Shareholders: The Delaware corporation is the
entity responsible for the rights of dissenting shareholders whether pursuant to
the laws of Delaware, of Nevada or otherwise.
a. Service of Process in Delaware: the Resulting Corporation may be
served with process in Delaware in any proceeding for the enforcement of the
rights of a dissenting shareholder, if any, pursuant to any extent required by
the laws thereof. The President of the Nevada corporation hereby irrevocably
appoints the Secretary of State of Delaware as agent to accept service of
process for the Nevada corporation with respect to any such proceeding to the
extent required by the laws thereof.
b. Agent for Mailing Process to the Nevada corporation: the Nevada
corporation hereby further complies with the laws of Delaware by designating a
person to whom process served upon the Secretary of that State may be forwarded
and mailed: William Stocker, Special Counsel, P.O. Box 4980, Laguna Beach CA
92652.
D. SURVIVING ARTICLES OF INCORPORATION: the Articles of Incorporation of the
surviving corporation as filed and/or last amended shall be the Articles of
Incorporation of the surviving corporation following the effective date hereof
unless and until such Articles be amended in accordance with the laws of
Delaware.
E. SURVIVING BY-LAWS: the By-Laws of the Surviving corporation shall become and
remain by the By-Laws of the Surviving Corporation until and unless they be
amended in accordance with the laws of Delaware.
F. CONVERSION OF OUTSTANDING STOCK: Forthwith upon the effective date hereof,
each and every issued and outstanding share of Salvage World, Inc. common voting
stock shall be converted into one share of Solar Energy Limited The holders of
certificates representing shares of the Nevada corporation may surrender them to
the transfer agent for common stock of the resulting corporation, which is and
shall be Madison Stock Transfer, 1813 East 24th Street, Brooklyn NY 11229.
G. FURTHER ASSURANCE, GOOD FAITH AND FAIR DEALING: the Directors of each Company
shall and will execute and deliver any and all necessary documents,
acknowledgments and assurances and to do all things proper to confirm or
acknowledge any and all rights, titles and interests created or confirmed
herein; and both companies covenant hereby to deal fairly and good faith with
each other and each others shareholders.
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THIS PLAN OF REORGANIZATION AND MERGER is executed on behalf of each
Company by its duly authorized representatives, and attested to, pursuant to the
laws of its respective place of incorporation and in accordance with its
constituent documents.
SALVAGE WORLD, INC. SOLAR ENERGY LIMITED
(A NEVADA CORPORATION) (A DELAWARE CORPORATION)
by by
/s/ Donald J. Wells /s/ Joel M. Dumaresq
Donald J. Wells Joel M. Dumaresq
President President
/s/ Joseph A. Kane /s/ Norman Wareham
Joseph A. Kane Norman Wareham
Secretary Secretary
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EXHIBIT 3.6
MERGER OF SALVAGE WORLD AND TAURUS
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ARTICLES AND PLAN OF MERGER
BY WHICH
TAURUS ENTERPRISES INC.
(A DELAWARE CORPORATION)
SHALL MERGE INTO AND BECOME
SALVAGE WORLD, INC.
(A NEVADA CORPORATION)
THESE ARTICLES AND PLAN OF MERGER are made effective and dated this day of
August 28, 1996, by and between the above referenced corporations, sometimes
referred to herein as "Taurus" and "Salvage" respectively.
I. THE INTERESTED PARTIES
A. THE PARTIES TO THIS PLAN OF MERGER
1. TAURUS ENTERPRISES INC. ( Taurus ), 3131 S.W. Freeway #46, Houston TX
77098, a Delaware Corporation, was duly incorporated in Delaware on January 5,
1994.
2. SALVAGE WORLD, INC. ( Salvage ), 774 Mays Blvd. #10, Incline Village NV
89451, a Nevada Corporation, was duly incorporated in Nevada on August 28, 1996.
II. RECITALS
A. THE CAPITAL OF THE PARTIES:
1. THE CAPITAL OF TAURUS consists of 100,000,000 shares of common voting
stock of $.0001 par value authorized, of which 25,285,000 shares are issued and
outstanding.
2. THE CAPITAL OF SALVAGE consists of 100,000,000 shares of common voting
stock of $.001 par value authorized, of which no shares have been or are issued
or outstanding.
B. THE BACKGROUND FOR THE MERGER: Taurus desires to locate its Corporate Situs
in Nevada, for the reason that its principal offices and principal place of
business is located in the western United States.
C. THE BOARDS OF DIRECTORS of both Corporations respectively have determined
that it is advisable and in the best interests of each of them and both of them
that they merge with and into the Nevada Corporation, in order to change the
domicile of the resulting Corporation to Nevada in accordance with IRS
368(a)(1)(F), to change the name of the resulting and surviving Nevada
corporation, and to retain the operational history and continuity of the
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Delaware corporation, its Tax I.D. Number, its SEC Number and other
identification numbers and filing status's as may be permissible by law, subject
to such reporting and qualifying provisions as the law may require.
D. THE SHAREHOLDERS OF THE DELAWARE CORPORATION, HAVING VOTED 25,285,000 SHARES
IN FAVOR AND NO SHARES AGAINST THIS PLAN OF MERGER, AND THE INCORPORATOR AND
INITIAL DIRECTORS OF THE NEVADA CORPORATION, NO STOCK HAVING BEEN ISSUED, HAVE
DULY APPROVED THIS PLAN OF MERGER, EACH IN THE MANNER PROVIDED BY THE LAWS OF
ITS OWN STATE OR TERRITORY, AND ITS CONSTITUENT DOCUMENTS.
III. PLAN OF MERGER
A. REORGANIZATION AND MERGER: The Delaware corporation and the Nevada
corporation are hereby reorganized and the Delaware corporation is hereby merged
with and into the Nevada corporation.
1. The Delaware Corporation: The former Taurus Enterprises Inc. of Delaware
will become and thereafter be Salvage World, Inc., of Nevada. The Delaware
corporation will retain its corporate personality and status, and will continue
its corporate existence uninterrupted, in and through, and only in and through
the Nevada corporation.
2. The Nevada Corporation: The new Nevada Corporation, formed or being
formed in Nevada, shall become and thereafter be the successor Nevada
corporation.
B. EFFECTIVE DATE: These Articles and Plan of Merger shall become effective
immediately upon approval and adoption by the parties hereto, in the manner
provided by the law of the place of incorporation and its constituent corporate
documents, and the time of such effectiveness shall be called the effective date
hereof.
C. SURVIVING CORPORATION: The Nevada corporation shall survive the merger herein
contemplated and shall continue to be governed by the laws of Nevada, and the
separate corporate existence of the Delaware corporation shall cease forthwith
upon the effective date hereof.
Rights of Dissenting Shareholders: The Nevada corporation is the entity
responsible for the rights of dissenting shareholders whether pursuant to the
laws of Delaware, of Nevada or otherwise.
a. Service of Process in Delaware: the Resulting Corporation may be
served with process in Delaware in any proceeding for the enforcement of the
rights of a dissenting shareholder, if any, pursuant to any extent required by
the laws thereof. The President of the Nevada corporation hereby irrevocably
appoints the Secretary of State of Delaware as agent to accept service of
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process for the Nevada corporation with respect to any such proceeding to the
extent required by the laws thereof.
b. Agent for Mailing Process to the Nevada corporation: the Nevada
corporation hereby further complies with the laws of Delaware by designating a
person to whom process served upon the Secretary of that State may be forwarded
and mailed: William Stocker, Corporate Counsel, P.O. Box 4980, Laguna Beach CA
92652.
D. SURVIVING ARTICLES OF INCORPORATION: the Articles of Incorporation of the
surviving corporation as filed and/or last amended shall be the Articles of
Incorporation of the surviving corporation following the effective date hereof
unless and until such Articles be amended in accordance with the laws of Nevada.
E. SURVIVING BY-LAWS: the By-Laws of the Nevada corporation shall become and
remain by the By-Laws of the Surviving Corporation until and unless they be
amended in accordance with the laws of Nevada.
F. CONVERSION OF OUTSTANDING STOCK: Forthwith upon the effective date hereof,
each and every issued and outstanding share of Taurus Enterprises Inc. common
voting stock shall be converted into one share of the Salvage World, Inc. The
holders of certificates representing shares of the Delaware corporation may
surrender them to the transfer agent for common stock of the resulting
corporation.
G. FURTHER ASSURANCE, GOOD FAITH AND FAIR DEALING: the Directors of each Company
shall and will execute and deliver any and all necessary documents,
acknowledgments and assurances and to do all things proper to confirm or
acknowledge any and all rights, titles and interests created or confirmed
herein; and both companies covenant hereby to deal fairly and good faith with
each other and each others shareholders.
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THIS ARTICLES AND PLAN OF MERGER is executed on behalf of each Company by
its duly authorized representatives, and attested to, pursuant to the laws of
its respective place of incorporation and in accordance with its constituent
documents.
SALVAGE WORLD, INC. SALVAGE WORLD, INC.
(A NEVADA CORPORATION) (A NEVADA CORPORATION)
by by
/s/Joseph A. Kane /s/Donald J. Wells
Joseph A. Kane Donald J. Wells
Secretary President
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EXHIBIT 5
VOTING TRUST AGREEMENT
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VOTING TRUST AGREEMENT
David F. Jones, Melvin L. Prueitt, Stanley Prueitt, and Leslie Speir
(individually "Shareholder" and collectively, "Shareholders"), and Melvin L.
Prueitt ("Voting Trustee") agree:
1. Recitals. Each Shareholder owns stock in Hydro- Air
Technologies, Inc., a New Mexico corporation ("Corporation"). Corporation is
issuing shares of Corporation to Voting Trustee ("Shares") so that the Shares
may be issued to the Shareholders or others as provided in Founders Agreement
dated the same date as this Voting Trust Agreement among the Shareholders and
the Corporation ("Founders Agreement") and to maintain the availability of the
Shares in the event the Corporation is acquired as set out in the Founders
Agreement. The Shareholders execute this Voting Trust Agreement ("Agreement") to
implement the Founders Agreement.
2. Book Entry. Upon receipt by Voting Trustee of the Shares, the
Voting Trustee will establish and maintain book entry records of the beneficial
ownership of the Shares in the Voting Trust established by this Agreement
("Voting Trust").
3. Removal of Shares From Voting Trust. Shares may be removed
from this Voting Trust when they are to be issued as Founder Shares or
Discretionary Shares pursuant to the Founders Agreement ("New Shares").
4. Exchange of Shares. In the event of the acquisition of the
Company by The Acquisition Company, the Voting Trustee will exchange the Shares
of the Corporation which are subject to this Voting Trust to The Acquisition
Company in exchange for equivalent Shares in The Acquisition Company Shares.
The Acquisition Company Shares will then be "Shares" subject to this Voting
Trust and the Founders Agreement.
5. Voting. At all meetings of shareholders of Corporation, and in
all proceedings affecting Corporation, the Voting Trustee will vote the Shares
registered in the Voting Trust name in such manner as the Shareholders direct.
The Voting Trustee will not be liable for the consequence of any vote cast or
action taken in good faith.
6. Dividends. Shareholders will be entitled to receive from the
Voting Trustee payments equal to any cash dividends received by the Voting
Trustee on the Shares. If any dividends are declared in additional shares of the
Corporation, the Voting Trustee will retain such additional shares, which will
be deemed to have been deposited under the terms of this Agreement.
7. Termination. This Agreement will terminate upon the date all
of the Shares have been issued as Founder Shares or Discretionary Shares under
the Founders Agreement or may be terminated in writing prior to that date by the
Trustee. Upon termination, the Voting Trustee will deliver any Shares which
were not issued as Founder Shares or Discretionary Shares to the Shareholders as
provided in the Founders Agreement.
8. Transfer of Stock to Successor Voting Trustee. Los Alamos
National Bank is designated as successor Voting Trustee. If the Voting Trustee
becomes incapacitated or dies, the conservator or personal representative of the
Voting Trustee will take all necessary action to deliver all Shares owned by the
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Voting Trust to the successor Voting Trustee to be held by the successor as if
the successor was the original Voting Trustee subject to the terms of this
Agreement.
9. Binding Effect. This Agreement will inure to the benefit of,
and be binding upon: (i) every person or entity who is the record, legal or
beneficial owner of Shares, whether by issue or transfer, including without
limitation any spouse, representative, transferee, owner, nominee, grantee,
successor and assign of the Shareholders, and (ii) the Voting Trustee, any
successor Voting Trustee and their successors, personal representatives, and
transferees, is governed by and construed in accordance with the laws of New
Mexico, is specifically enforceable and may be modified only in writing.
DATED: 10/14 , 1997.
SHAREHOLDERS: /s/ David F. Jones
DAVID F. JONES
/s/ Melvin L. Prueitt
MELVIN L. PRUEITT
/s/ Stanley Prueitt
STANLEY PRUEITT
/s/ Leslie Speir
LESLIE SPEIR
VOTING TRUSTEE: /s/ Melvin L. Prueitt
MELVIN L. PRUEITT
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EXHIBIT 10.1
FIRST AMENDMENT TO OFFER TO PURCHASE AND PLAN OF INTERNAL FUNDING AND SHARE
RELEASE AND PLAN OF REORGANIZATION AND ACQUISITION
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FIRST AMENDMENT TO OFFER TO PURCHASE
AND
PLAN OF INTERNAL FUNDING AND SHARE RELEASE
AND
PLAN OF REORGANIZATION AND ACQUISITION
This First Amendment to Offer to Purchase and Plan of Internal Funding and Share
Release and Plan of Reorganization and Acquisition ("Reorganization Agreement")
is made and entered into by and between Solar Energy Limited, a Delaware
corporation ("Solar"), Hydro-Air Technologies, Inc, a New Mexico corporation
("HAT"), and Melvin L. Prueitt, David F. Jones, Stanley D. Prueitt, Baycove
Investments, Inc. ("FCIC"), Leslie Speir, Dana Hansen, Linda Hansen, Ara Lee
Stevens and Hydro-Air Founders LLC (collectively "HAT Shareholders"). This
Reorganization Agreement will also be executed by Solar Acquisition Corporation
("New Corporation"), a New Mexico corporation and a subsidiary of Solar once it
comes into existence.
I. RECITALS.
This Reorganization Agreement amends and supplements the Offer to Purchase
("Offer") entered into by First Capital Invest Corp., HAT and Melvin L. Prueitt,
David F. Jones, Stanley D. Prueitt, and Leslie Speir (collectively "Founders")
on July 5, 1997. Under the terms of the Offer, First Capital Invest Corp.
agreed to provide a public company ("Pubco") which would be the vehicle used to
acquire all of the assets, businesses and capital stock of HAT. Solar is the
public company that FCIC has now made available for purposes of consummating the
transactions contemplated by this Reorganization Agreement. The HAT
Shareholders want Solar, a public company, to acquire HAT in order to attract
the capital necessary for the development of HAT's HARPS technology. The boards
of directors of Solar and HAT have approved the acquisition of HAT by Solar
through the creation of New Corporation by Solar and the merger of New
Corporation into HAT ("Merger"). For federal income tax purposes, it is
intended that the Merger qualify as a reorganization within the meaning of
Section 368 of the Code.
II. DEFINITIONS.
A. "Closing Date" shall mean the date on which the parties hereto shall
close the transactions contemplated herein.
B. "Code shall" mean the Internal Revenue Code of 1986, as amended.
C. "Commission" shall mean the Securities and Exchange Commission.
D. "Effective Date" shall mean the date this Reorganization Agreement
is executed.
E. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
F. "Previously Disclosed" shall mean disclosed in writing prior to the
execution of the Offer.
G. "Rights shall" mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock.
H. "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
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I. "Securities Act" shall mean the Securities Act of 1933, as amended.
J. "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
K. Other terms as defined in this Reorganization Agreement.
III. PLAN OF REORGANIZATION.
A. New Corporation.
1. Organization. Solar will cause New Corporation to be organized
under New Mexico law, authorized to issue 125,000 shares of no par value common,
and to carry on all business activities. Once formed New Corporation will adopt
and become bound by the terms of this Reorganization Agreement.
2. Funding. After organization of New Corporation, Solar will
transfer to New Corporation, $125.00 in exchange for 125,000 shares of New
Corporation stock ("New Corporation Stock").
B. Merger of New Corporation and HAT.
1. Merger. New Corporation will merge into HAT pursuant to the
terms of a Plan of Merger ("Plan of Merger") substantially in the form of
attached Exhibit A. The Plan of Merger, the Offer and this Reorganization
Agreement are the plan of reorganization required by the Code.
2. Surviving Corporation. Both Solar and HAT shall survive the
reorganization herein contemplated and shall continue to be governed by the laws
of their respective states of incorporation. New Corporation will be merged out
of existence.
3. Surviving Articles of Incorporation. The Articles of
Incorporation of Solar and HAT shall remain in full force and effect, unchanged.
4. Surviving By-Laws. The By-Laws of HAT and Solar shall remain
in full force and effect, unchanged.
C. Issuance and Release of Solar stock. Solar and the HAT Shareholders
desire to create an orderly process for the issuance and progressive release of
common stock to or for the benefit of the HAT Shareholders.
1. HAT Shareholders. The HAT Shareholders will receive subject to
this Reorganization Agreement, shares of Solar equal to 40% of the resulting
total issued and outstanding stock of Solar, on a fully-diluted basis, following
certain designated capital formation stages. However, the total number of Solar
shares which will be issued to the HAT Shareholders to meet this obligation is
undeterminable at this time.
2. Initial Issuance. Upon consummation of the Merger, Solar shall
issue to the HAT Shareholders 20% of 40% of the outstanding Solar shares.
3. Phased Release of Shares. The remaining 80% of 40% will be
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issued to the HAT Shareholders in phases based on the following formula: one
share of Solar stock for each $2.00 of earnings generated by HAT, as determined
by Generally Accepted Accounting Principles (GAAP) as provided in the offer.
4. New Investment Shares. The shares to be issued to or for the
benefit of the HAT Shareholders will be new investment shares of Solar, a new
and different security, to be held for investment and not for immediate resale,
in accordance with Rule 145 (Securities Act Regulations 230.145.) The principal
import of which Rule is that such new securities are and shall be deemed to be
Restricted Securities as defined in Rule 144(a).
5. Further Issuances. With respect to further issuances by Solar
to investors, Solar shall issue to the HAT Shareholders additional shares, equal
to 40% of such issuances actually issued to investors, such that the HAT
Shareholders will, if all phased shares are issued, receive and own 40% of
Solar. The additional issuances will be made to the HAT Shareholders in the
same percentages as provided in paragraphs 2 and 3. The parties anticipate that
the following placements will be made:
a. 10,000,000 at $0.10 (Series 3) shares to be offered and
issued pursuant to Rule 504;
b. 2,000,000 at $0.50 (Series 4) shares to be offered and
pursuant to Rule 505 or 506 of Regulation D; and, finally
c. Solar will employ its best efforts to place an additional
1,000,000 shares at not less than $2.00 per share.
6. Additional Compensation. The HAT Shareholders, other than
FCIC, will receive in proportion to their ownership of HAT shares at Closing
$500,000 when the prototype is deemed commercially viable by HAT under the
Offer.
IV. FUNDING OF HAT IN AMPLIFICATION OF THE OFFER:
A. Capital Formation and Earnings. HAT's technology will require
funding, in stages, from development to marketability, and will not immediately
generate earnings. However, if HAT's technology is successful earnings will be
generated, and will contribute to, and eventually obviate the need for
additional capital investment to expand capacity to meet demand.
B. Phases of Committed Funding.
1. Phase One. Phase One Internal Funding by Solar for HAT shall
be $500,000.00, of which $300,000.00 has been advanced previously and which
advance is acknowledged hereby. Phase One shall extend for a period of thirteen
months during which it shall be determined whether or not the technology works
and is marketable. If it shall be so determined, and only if it shall be so
determined, the Internal Funding shall proceed to Phase Two.
2. Phase Two. Phase Two Internal Funding by Solar for HAT shall
be $5,000,000.00.
3. Phase Three. Phase Three Internal Funding shall be generated,
if at all, by earnings generated by HAT, and assumes that the profit center of
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HAT shall have achieved substantial profitability.
4. No guaranty of success. No matter how promising and exciting
the technology and concepts of HAT are to the parties, there can be no guaranty
of success. Public tastes, market conditions, competition, war, natural disaster
or any number of unforeseeable events could disappoint expectations and cause
the parties to re-evaluate their positions.
5. Assumption. Solar hereby expressly agrees to assume all the
responsibilities and obligations of Pubco under the Offer, as well as Solar's
responsibilities and obligations under this Reorganization Agreement. In
addition, Baycove, Inc. expressly agrees to assume all of the responsibilities
and obligations of First Capital Invest Corp. under the Offer, as well as
Baycove's responsibilities and obligations under this Reorganization Agreement.
V. MANAGEMENT OF HAT AND SOLAR.
1. Separate Board of Directors. Solar and HAT shall maintain
separate Boards of Directors. The Board of Directors of Solar shall, during the
term of this agreement, consist of not less than six Directors, not less than
two of which shall be designated by the Board of Directors of HAT; or a greater
number of Directors divisible by three of which the Board of Directors of HAT
may designate one third of the total. The Board of Directors of Solar shall be
entitled to non-voting representation on the Board of Directors of HAT. Provided
that management complies with appropriate professional standards of conduct,
each Board shall separately manage its respective area of responsibility. The
existing Directors of Solar shall appoint additional Directors in conformity
with this provision, with all deliberate speed.
2. Officers. The Board of Directors of Solar and HAT shall elect
and appoint new officers as follows: Melvin L. Prueitt shall be the Chairman of
the Board of Solar. Melvin L. Prueitt shall be President and Chairman of the
Board of HAT. The HAT Board may designate such officers of HAT as it may see
fit, subject only to the duty of Solar to insure acceptable standards of
professional conduct and responsibility. The Board of Directors of Solar shall
exercise its sound discretion to recruit and/or elect the Chief Financial
Officer of Solar.
VI. CLOSING.
Closing of the transactions contemplated by this Reorganization Agreement will
be held contemporaneously at the various offices of HAT and Solar, on the first
business day following satisfaction of the conditions precedent set forth
herein. In connection with such Closing, HAT and New Corporation shall execute
articles of merger and shall cause such articles to be delivered to and filed
with the New Mexico State Corporation Commission. The Merger shall be effective
at the time and on the date specified in such articles of merger.
VII. REPRESENTATIONS AND WARRANTIES OF SOLAR.
Solar hereby represents and warrants to HAT, New Corporation and the HAT
Shareholders as follows:
A. Capital Structure of Solar. The authorized capital stock of Solar
consists of 50,000,000 shares of common voting stock, $.0001 par value ( Solar
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Common Stock ), of which 1,278,000 shares are issued and outstanding and no
shares are held in treasury. All outstanding shares of Solar Common Stock have
been duly issued and are validly outstanding, fully paid and nonassessable.
There are no Rights authorized, issued or outstanding with respect to the
capital stock of Solar. None of the shares of Solar's capital stock has been
issued in violation of the preemptive rights of any person.
B. Organization, Standing and Authority of Solar. Solar is a duly
organized corporation, validly existing and in good standing under the laws of
the State of Delaware with full corporate power and authority to carry on its
business as now conducted and is duly qualified to do business in the states of
the United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification and where
failure to so qualify would have a material adverse effect on the financial
condition, results of operations, business or prospects of Solar on a
consolidated basis.
C. Authorized and Effective Agreement.
1. Solar has all requisite corporate power and authority to enter
into and perform all of its obligations under this Reorganization Agreement.
The execution and delivery of this Reorganization Agreement, and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Solar.
2. This Reorganization Agreement constitutes a legal, valid and
binding obligations of Solar, enforceable against it in accordance with its
terms, subject as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. Solar has filed all SEC Documents required by the Securities
Laws and such SEC Documents complied in all material respects with the
Securities Laws.
3. Neither the execution and delivery of this Reorganization
Agreement in the case of Solar, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Solar with any of the
provisions hereof or thereof shall (i) conflict with or result in a breach of
any provision of the articles, charter, code of regulations or by-laws of Solar
or any Solar Subsidiary, (ii) constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon any property or asset of
Solar or any Solar Subsidiary pursuant to, any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to Solar
or any Solar Subsidiary.
VIII. REPRESENTATIONS AND WARRANTIES OF NEW CORPORATION.
New Corporation hereby represents and warrants to HAT and Solar as follows:
A. Capital Structure of New Corporation. The authorized capital stock
of New Corporation consists of 125,000 shares of common stock, no par value (
New Corporation Common Stock ), of which 125,000 shares are issued and
outstanding and no shares are held in treasury. All outstanding shares of New
Corporation Common Stock have been duly issued and are validly outstanding,
fully paid and nonassessable. There are no Rights authorized, issued or
outstanding with respect to the capital stock of New Corporation except as
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Previously Disclosed. None of the shares of New Corporation's capital stock has
been issued in violation of the preemptive rights of any person.
B. Organization, Standing and Authority of New Corporation. New
Corporation is a duly organized corporation, validly existing and in good
standing under the laws of the State of New Mexico with full corporate power and
authority to carry on its business.
C. No New Corporation Subsidiaries. New Corporation does not own,
directly or indirectly, any outstanding capital stock or other voting securities
of any corporation or other organization except for Solar.
D. Authorized and Effective Agreement.
1. New Corporation has all requisite corporate power and authority
to enter into and perform all of its obligations under this Reorganization
Agreement. The execution and delivery of this Reorganization Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of New Corporation.
2. This Reorganization Agreement constitutes a legal, valid and
binding obligations of New Corporation, enforceable against it in accordance
with its terms, subject as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
3. Neither the execution and delivery of this Reorganization
Agreement, in the case of New Corporation, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by New Corporation with any of
the provisions hereof or thereof shall (i) conflict with or result in a breach
of any provision of the articles, charter, code of regulations or by-laws of New
Corporation, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of New
Corporation pursuant to, any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to New Corporation or any New
Corporation Subsidiary.
IX. REPRESENTATIONS AND WARRANTIES OF HAT.
HAT hereby represents and warrants to New Corporation and Solar as follows:
A. Capital Structure of HAT. The capital of HAT consists of 250,000
authorized shares of no par value common voting stock, of which 125,000 shares
are issued and outstanding. All outstanding shares of capital stock have been
duly issued and are validly outstanding, fully paid and nonassessable. The
shares of Common Stock to be issued in connection with the Merger have been duly
authorized and, when issued in accordance with the terms of this Reorganization
Agreement and will be validly issued, fully paid and nonassessable.
B. Organization, Standing and Authority of HAT. HAT is a duly
organized corporation, validly existing and in good standing under the laws of
the State of New Mexico, with full corporate power and authority to carry on its
business.
C. Authorized and Effective Agreement.
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1. HAT has all requisite corporate power and authority to enter
into and perform all of its obligations under this Reorganization Agreement.
Except as Previously Disclosed, the execution and delivery of this
Reorganization Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of HAT.
2. Except as Previously Disclosed, this Reorganization Agreement
constitutes a legal, valid and binding obligations of HAT, enforceable in
accordance with its respective terms subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
3. Neither the execution and delivery of this Reorganization
Agreement nor consummation of the transactions contemplated hereby or thereby,
nor compliance by HAT with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the articles or by-laws
of HAT, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of HAT
pursuant to, any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation, or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to HAT.
X. COVENANTS.
A. Best Efforts. HAT and New Corporation shall each use its best
efforts in good faith to take or cause to be taken all action necessary or
desirable on its part so as to permit consummation of the Merger at the earliest
possible date.
B. Supplementation. The contents of the Offer are incorporated by
reference in this Reorganization Agreement.
XI. CONDITIONS PRECEDENT
A. Conditions Precedent of Solar, HAT and New Corporation. The
respective obligations of the parties to effect the Merger shall be subject to
satisfaction or waiver of the following conditions at or prior to the Closing
Date:
1. All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement and consummation of
the transactions contemplated hereby and thereby shall have been duly and
validly taken.
2. The parties hereto shall have received all regulatory approvals
required or mutually deemed necessary in connection with the transactions
contemplated by this Reorganization Agreement, all notice periods and waiting
periods required after the granting of any such approvals shall have passed and
all conditions contained in any such approval required to have been satisfied
prior to consummation of such transactions shall have been satisfied.
B. Conditions Precedent of Solar and New Corporation. The obligations
of Solar and New Corporation to effect the Merger shall be subject to
satisfaction of the following additional conditions:
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1. The representations and warranties of HAT shall be true and
correct in all material respects as of the date of this Reorganization Agreement
and as of the Closing Date as though made on and as of the Closing Date (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), except as otherwise contemplated by
this Reorganization Agreement or consented to in writing by New Corporation and
Solar.
2. HAT shall have in all material respects performed all
obligations and complied with all covenants required by this Reorganization
Agreement.
C. Conditions Precedent of HAT. The obligations of HAT to effect the
Merger shall be subject to satisfaction of the following additional conditions:
1. The representations and warranties of Solar and New Corporation
shall be true and correct in all material respects as of the date of this
Reorganization Agreement and as of the Closing Date as though made on and as of
the Closing Date (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), except as otherwise
contemplated by this Reorganization Agreement or consented to in writing by HAT.
2. Solar, New Corporation and their subsidiaries shall have in all
material respects performed all obligations and complied with all covenants
required by this Reorganization Agreement and the Agreement of Merger.
XII. TERMINATION, WAIVER AND AMENDMENT.
A. Termination. This Reorganization Agreement and the Agreement of
Merger may be terminated:
1. At any time on or prior to the Effective Date, by the mutual
consent in writing of the parties hereto.
2. At any time on or prior to the Closing Date, by HAT in writing,
if Solar, New Corporation or any Solar or New Corporation Subsidiary has, or by
Solar or New Corporation in writing, if HAT has, in any material respect,
breached (i) any covenant or agreement contained herein or in the Agreement of
Merger or (ii) any representation or warranty contained herein, and in either
case if such breach has not been cured by the earlier of 30 days after the date
on which written notice of such breach is given to the party committing such
breach or the Closing Date.
3. On the Closing Date, by any party hereto in writing, if any of
the conditions precedent set forth above with respect to such party have not
been satisfied or fulfilled.
B. Effect of Termination. In the event this Reorganization Agreement
and the Agreement of Merger are terminated, this Agreement and the Agreement of
Merger shall become void and have no effect, except that (i) the provisions
relating to confidentiality and expenses shall survive any such termination and
(ii) a termination shall not relieve the breaching party from liability for an
uncured willful breach of such covenant or agreement giving rise to such
termination.
C. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Reorganization Agreement and
the Agreement of Merger or in any instrument delivered pursuant hereto or
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thereto shall expire on, and be terminated and extinguished at, the Effective
Date other than covenants that by their terms are to survive or be performed
after the Effective Date, provided that no such representations, warranties or
covenants shall be deemed to be terminated or extinguished so as to deprive HAT,
Solar or New Corporation (or any director, officer or controlling person
thereof) of any defense in law or equity which otherwise would be available
against the claims of any person, including, without limitation, any shareholder
or former shareholder of either HAT, Solar or New Corporation, the aforesaid
representations, warranties and covenants being material inducements to the
consummation by HAT and New Corporation of the transactions contemplated herein.
D. Amendment or Supplement. This Reorganization Agreement may be
amended or supplemented at any time by mutual agreement of the parties hereto.
XIII. MISCELLANEOUS.
A. Expenses. Each party hereto shall bear and pay all costs and
expenses incurred by it in connection with the transactions contemplated in this
Reorganization Agreement, including fees and expenses of its own financial
consultants, accountants and counsel.
B. Entire Agreement. This Reorganization Agreement and the Agreement
of Merger contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and thereunder and supersede all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein or therein. The terms and conditions of this
Reorganization Agreement and the Agreement of Merger shall inure to the benefit
of and be binding upon the parties hereto and thereto and their respective
successors. Nothing in this Reorganization Agreement or the Agreement of Merger,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities.
C. No Assignment. No party hereto may assign any of its rights or
obligations under this Reorganization Agreement to any other person.
D. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by facsimile transmission or overnight express or by registered or
certified mail, postage prepaid, addressed to the parties.
E. Captions. The captions contained in this Reorganization Agreement
are for reference purposes only and are not part of this Reorganization
Agreement.
F. Counterparts. This Reorganization Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
G. Governing Law. This Reorganization Agreement shall be governed by
and construed in accordance with the laws of the State of New Mexico applicable
to agreements made and entirely to be performed within such jurisdiction, except
to the extent federal law may be applicable.
H. Arbitration. The Parties to this agreement have no wish to engage
in costly or lengthy litigation with each other. Accordingly, any and all
disputes which the parties cannot resolve by agreement or mediation, shall be
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submitted to binding arbitration under the rules and auspices of the American
Arbitration Association, as a further incentive to avoid disputes, each party
shall bear its own costs, with respect thereto, and with respect to any
proceedings in any court brought to enforce or overturn any arbitration award.
This provision is expressly intended to discourage litigation and to encourage
orderly, timely and economical resolution of any disputes which may occur.
I. Severability. If any provision of this Letter Agreement or the
application thereof to any person or situation shall be held invalid or
unenforceable, the remainder of the Agreement and the application of such
provision to other persons or situations shall not be effected thereby but shall
continue valid and enforceable to the fullest extent permitted by law.
J. Waiver. No waiver by any party of any occurrence or provision
hereof shall be deemed a waiver of any other occurrence or provision.
This Reorganization Agreement is executed on behalf of each party by its duly
authorized representatives, and attested to, pursuant to the laws of its
respective place of incorporation and in accordance with its constituent
documents.
HYDRO-AIR TECHNOLOGIES, INC. SOLAR ENERGY LIMITED
a New Mexico corporation a Delaware corporation
/s/ Melvin L. Prueitt /s/Joel M. Dumaresq
Melvin L. Prueitt, President Joel M. Dumaresq, President
HYDRO-AIR FOUNDERS, LLC BAYCOVE INVESTMENTS, INC.
a New Mexico limited liability co a Delaware corporation
/s/ Melvin L. Prueitt /s/Irene Poole
Melvin L. Prueitt, Manager Irene Poole
/s/ Melvin L. Prueitt /s/ David F. Jones
Melvin L. Prueitt David F. Jones
/s/ Leslie Speir /s/ Stanley D.Prueitt
Leslie Speir Stanley D. Prueitt
/s/ Dana Hansen /s/ Linda Hansen
Dana Hansen Linda Hansen
/s/ Ara Lee Stevens
Ara Lee Stevens
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EXHIBIT 10.2
STOCK RESTRICTION AGREEMENT
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STOCK RESTRICTION AGREEMENT
David Jones, Melvin L. Prueitt, Stanley Prueitt and Leslie Speir
(individually, a "Named Shareholder" and collectively, "Named Shareholders") and
Hydro-Air Technologies, Inc. ("Corporation") agree:
1. Recitals: Named Shareholders are the record owners of shares
of stock of Corporation. Other persons or entities, such as the spouses or
heirs of Named Shareholders, may now or later have legal or beneficial interests
in such stock. The Corporation and Named Shareholders want to provide for
certain restrictions on such stock, whether owned by Named Shareholders or other
Shareholders of Corporation. This Stock Restriction Agreement ("Agreement") is
intended to provide the Corporation and Named Shareholders with certain rights
to require the sale of stock if a restriction is violated or if a Shareholder's
legal or employment status changes.
2. Definitions: In addition to the other definitions in this
Agreement, the following capitalized terms are defined as follows:
A. "Stock" means all shares of the Corporation (or any other
successor entity to the extent it represents the financial interest originally
derived from the HARPS Technology) now owned or later acquired by a Named
Shareholder or a Spouse of the Named Shareholder.
B. "Shareholder" means any record, legal or beneficial owner
of Stock, whether or not a signatory to this Agreement. If this Agreement
renders void an attempted transfer or encumbrance to a person or entity, that
person or entity is not a "Shareholder" for purposes of this Agreement.
C. "Spouse" means the person married to a Shareholder on the
date of giving Notice or the occurrence of an Event, whichever happens first.
D. "Divorce" means any settlement between a Named Shareholder
and Spouse of their property interest, by agreement or operation of law, as
provided in a legal separation or a dissolution of marriage.
E. "Bankruptcy" or "Bankrupt" means the filing of a petition
commencing a case under the Bankruptcy Code covering a Shareholder.
F. "Death" or "Deceased" means death as determined under the
New Mexico Probate Code, and includes a presumed death as determined under the
New Mexico Probate Code.
G. "Incapacity" or "Incapacitated" means the inability of a
Shareholder, in the opinion of a doctor chosen by the Corporation, to engage in
any substantial, gainful activity for Corporation by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long, continued and indefinite duration.
I. "Notice" means the notice given to Corporation in
connection with its right to require the sale of Stock as provided in this
Agreement.
J. "Obligation" means the obligations of a buyer to a seller
of Stock when a buyer buys Stock as provided in this Agreement.
K. "Permitted Encumbrance" means a security interest securing
an Obligation arising as provided in this Agreement.
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L. "Permitted Transfer" means (i) a transfer of record, legal
or beneficial ownership of Stock to a Named Shareholder by the Spouse of Named
Shareholder, and (ii) a transfer after compliance with this Agreement.
M. "Representative" means the personal representative,
trustee, heir, devisee, surviving joint tenant, or conservator of a Shareholder.
3. Restrictions: The following are restrictions that apply to
Stock:
A. No Shareholder may transfer Stock during the life of the
Shareholder except in a Permitted Transfer (the "Transfer Restriction").
B. No Stock may be encumbered except by a Permitted
Encumbrance (the "Encumbrance Restriction").
C. All Stock is subject to this Agreement.
D. A Named Shareholder will have sole authority to vote,
manage, control, dispose of, or encumber any Stock owned by the Named
Shareholder and the Spouse of the Named Shareholder.
4. Events: The following are events upon the occurrence of which
the right to require the sale of Stock as provided in this Agreement may be
exercised (individually "Event" and collectively "Events"):
A. The transfer of Stock in violation of the Transfer
Restriction.
B. The encumbrance of Stock in violation of the Encumbrance
Restriction, if the encumbrance is not removed within fifteen days after the
encumbrance attaches.
C. The Death, Bankruptcy or Incapacity of a Shareholder.
D. A Divorce as a result of which any record, legal or
beneficial ownership of Stock is retained or acquired by the Spouse of Named
Shareholder, if that Spouse is not also a Named Shareholder.
5. Notice: Upon the occurrence of an Event:
A. If the Event is (i) the Death, Bankruptcy or Incapacity of
the Spouse of a Named Shareholder, or (ii) a Divorce pursuant to which the
Spouse of a Named Shareholder retains or acquires Stock, that Named Shareholder
will have the sole right for sixty days after that Event to elect to acquire the
Stock of the Spouse as if the Spouse, or the Representative of the Spouse, gave
Notice on the date of the Event. If the Named Shareholder does not so acquire
the Stock of the Spouse, the Spouse or the Representative of the Spouse will
give Notice within sixty-five days after that Event covering all Stock owned by
the Spouse.
B. If the Event is any other Event, the Shareholder, or the
Representative of the Shareholder if the Shareholder is Deceased, Bankrupt or
Incapacitated, will give Notice within thirty days after the Event, covering all
Stock owned by the Shareholder and any Spouse of the Shareholder.
C. Notice will be given by personal service or by prepaid
registered or certified mail, return receipt requested, to Corporation at its
registered office and to each other Named Shareholder at the addresses shown on
the Shareholder records of Corporation. If Corporation or another Named
Shareholder knows of the occurrence of an Event that requires a Notice to be
given and that the person responsible for doing so has not given the appropriate
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Notice, Corporation or the other Named Shareholder may give the Notice on behalf
of the person responsible. The Notice is given when served or mailed, will
recite the Event for which Notice is being given, will state the mailing address
of the person giving the Notice, will recite all the terms of any proposed
transfer, and will constitute an irrevocable offer to sell all Stock covered by
the Notice.
6. Right to Buy: Corporation and the other Named Shareholders
will have, as the result of an Event, the right to buy Stock as follows:
A. Corporation will have thirty days from the date Notice is
given within which to elect to buy any or all of the offered Stock. The offeror
will not participate in any capacity in Corporation's decision whether or not to
elect to buy the offered Stock.
B. If Corporation does not elect within the thirty-day period
to buy all the offered Stock, then the Named Shareholders, other than the
offeror, will have an additional twenty days within which to elect to buy any
unbought offered Stock in the proportion of their then shareholdings in
Corporation.
C. If any Named Shareholder does not elect within the
twenty-day period to buy that Named Shareholder's portion of the unbought
offered Stock, then the remaining Named Shareholders, not including the offeror,
will have an additional ten days within which to elect to buy such portion in
the proportion of their then shareholdings in Corporation; if only one such
Named Shareholder wants to buy all or part of the unbought offered Stock, that
Named Shareholder may do so.
D. If Corporation or the Named Shareholders do not elect
within the sixty-day period to buy all the offered Stock, the unbought offered
Stock may either (i) be transferred in accordance with all the terms of any
proposed inter vivos transfer as recited in the Notice, if done within sixty
days after the expiration of the sixty-day period, (ii) be transferred by a
deceased Shareholder's estate to the distributee thereof, (iii) pass by
operation of law, or (iv) be retained, whether or not encumbered, as the case
may be; however, in any event, the unbought offered Stock will continue to be
subject to this Agreement.
E. An election to buy offered Stock may be made only by
giving written notification of that election to the offeror, by personal service
or by prepaid registered or certified mail, return receipt requested; the
election to buy is effective when the written notification is served or mailed.
The proportion of shareholdings of the purchasing Shareholder will be of the
class or series of Stock being offered, and each purchasing Shareholder's
shareholdings will include those of the purchasing Shareholder's Spouse unless
the Spouse is a purchasing Shareholder.
7. Purchase Price and Closing: The purchase price for any Stock
bought as provided in this Agreement by Corporation or a Shareholder as
appropriate will be the Value of the Stock as of either the day preceding the
date of the Event, or the date of giving Notice, whichever is earlier. The
initial Value for each share of Stock is $1.00 Hereafter, annually, at the time
of the Annual Meeting of Shareholders, and the Annual Meeting of Directors of
the Corporation, Corporation and any Named Shareholders will fix the Value for
each share of Stock, and as evidence of having fixed the Value, will execute a
Certificate of Value. If on the date a determination of Value is required
because of the happening of any of the contingencies giving rise to the purchase
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and sale of Stock, Corporation and any Named Shareholders have failed to fix the
Value for a period of more than one year, then the latest fixed Value will be
increased or decreased by the proportionate increase or decrease in the book
value of the Stock since the last Value was fixed, and the latest fixed Value as
adjusted will be the Value. If since the latest Value was fixed, Corporation
paid a Stock dividend on, split or combined its outstanding Stock, then the
latest fixed Value will be adjusted appropriately. The independent public
accountant then servicing the Corporation books will determine book value in
accordance with the method of accounting then being used by Corporation in
preparing its federal income tax return, and that determination will be
conclusive; in making the determination, goodwill, leases, contract rights, and
the like, will be valued in the aggregate at $1.00 unless a different figure has
been consistently shown on the Corporation books. Closing will be at 10:00 a.m.
at Corporation's registered office on the 20th banking day after the end of the
last period during which an election to buy unbought offered Stock may be made.
8. Payment of Purchase Price: At closing the seller of the Stock
will deliver certificates representing the Stock, properly endorsed for
registration of transfer, and the buyer will, at the option of the buyer, either
pay in cash the entire purchase price of the Stock sold to the buyer or pay a
down payment of 25% of the purchase price in cash and the balance in ten equal
semiannual installments beginning one hundred eighty days after closing. This
unpaid balance is the Obligation. The Obligation will be evidenced by a
negotiable promissory note which is accelerable upon default, prepayable without
penalty, and will provide for interest from closing on the unpaid balance
payable semiannually at 10% a year. While an Obligation is unpaid, Corporation
will give the seller reasonable access to the books, financial statements and
records of the Corporation. Corporation is the irrevocable attorney-in-fact for
the seller of Stock to execute any documents appropriate to evidence the
transaction.
9. Security: The seller of the Stock will have a security
interest in Stock sold to a buyer other than Corporation until the obligation of
the buyer is paid. After registration of transfer of the Stock sold to a buyer
other than Corporation, the certificates representing that Stock will be
delivered, endorsed in blank, to a mutually acceptable escrow agent who will
hold the Stock to perfect the security interest of the seller.
10. Subchapter S Election: If Corporation is or becomes an
"electing small business corporation" as provided in Subchapter S of the
Internal Revenue Code, each Shareholder will consent to the elective status
until Corporation and the owners of the majority of the outstanding shares of
Corporation agree to the contrary. No Shareholder may transfer any Stock in any
way that will cause Corporation to lose its status as an "electing small
business corporation." Before any valid transfer of any Stock as provided in
this Agreement, any undistributed Subchapter S earnings will be distributed to
all Shareholders according to their pretransfer pro rata share.
11. Legend: All certificates representing Stock will be marked
"Transfer and encumbrance of the securities represented by this Certificate are
restricted by an Agreement on file at the Corporation office." The restrictions
imposed by this Agreement are those of Corporation as issuer as well as those of
the Shareholders. Transfer or encumbrance of Stock without compliance with this
Agreement is void. Corporation will not register a transfer of Stock without
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proof of compliance with this Agreement. This Agreement is a stop transfer
order.
12. Binding Effect: Every person or entity who is the record,
legal or beneficial owner of Stock, whether by issue or transfer, including
without limitation any Spouse, Representative, transferees, donees, nominees,
grantees, successors and assigns of a Shareholder will be bound by and entitled
to the benefits of the terms of this Agreement. This Agreement supersedes any
other stock restriction agreement among the parties, is specifically
enforceable, constitutes the entire agreement of Corporation and Named
Shareholders with respect to its subject matter, is governed by and construed in
accordance with the laws of New Mexico and may be modified only in writing.
DATED: Oct. 14 , 1997
NAMED SHAREHOLDERS: CORPORATION:
Hydro-Air Technologies, Inc.
/s/ David Jones
David Jones
By Melvin L. Prueitt By Melvin L. Prueitt
/s/ Melvin L. Prueitt /s/ Melvin L. Prueitt
Melvin L. Prueitt Melvin L. Prueitt
/s/Stanley Prueitt
Stanley Prueitt
/s/Leslie Speir
Leslie Speir
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--------------------------------------------------------------------------------
EXHIBIT 10.3
FOUNDERS AGREEMENT
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FOUNDERS AGREEMENT
David F. Jones, Melvin L. Prueitt, Stanley Prueitt, and Leslie Speir
(individually referred to by name or as a "Shareholder," and collectively
referred to as "Shareholders") and Hydro-Air Technologies, Inc., a New Mexico
corporation (Corporation") agree:
. Recital: The Shareholders have incorporated the Corporation to operate a
business which will develop an invention which will produce electrical energy
from chemical processes ("HARPS Technology"). The Corporation has signed an
agreement with First Capital Invest Corp. ("First Capital") by which First
Capital may invest in the Corporation to exploit the HARPS Technology ("Offer To
Purchase"). The Offer To Purchase also provides for possible acquisition of the
Shareholder s interest in the Corporation by a separate company the
("Acquisition Company") in exchange for shares of the Acquisition Company. The
Shareholders have agreed to a plan of organization, management and funding for
the Corporation and for ownership of their interest in the Corporation or in the
Acquisition Company which they hereby reduce to writing.
. Definitions: The following words have the following meanings when used in
this Agreement:
. Company: "Company" means either (i) Corporation or (ii) the
Acquisition Company or any other successor entity to the extent it represents
the financial interest originally derived from the HARPS Technology.
. Company Shares: "Company Shares" means the units of ownership of the
Company.
. Founder: "Founder" means individually and "Founders" means
collectively David F. Jones, Melvin L. Prueitt, Stanley Prueitt and Leslie Speir
and any other person designated as a Founder by the unanimous consent of the
then Founders. The Founders are all Shareholders.
. Founder Shares: Founder Shares means Company Shares issued or
awarded to Founders as Founder Shares.
. Discretionary Shares: Discretionary Shares means Company Shares
issued or awarded as Discretionary Shares to non-Founders by the Founders.
. Investor: Investor means anyone (including a Founder) who makes a
monetary investment in the Corporation.
. Investor Shares: Investor Shares means Company Shares issued to
Investors as Investor Shares.
. W: W means the fraction of full-time work. W is calculated by
taking the total number of authorized hours, as determined by the Board, that
are worked for the Company during the year and dividing by 2,000 (40 hours per
week times 50 weeks, allowing 2 weeks for vacation). The W calculation is based
on the number of authorized hours worked whether or not a salary was paid for
the time worked. W can not exceed 1.0, even if the individual works more than
2,000 hours in a given year. The year, for the purpose of calculating hours
worked begins July 8, 1997, since that is the date notification was given of the
first financial investment.
. Phase 1: Phase 1. means the engineering research and development
that determines the feasibility and practicality of producing HARPS power
plants. This is expected to include the design and fabrication of a prototype
HARPS unit and testing it.
. Phase 2: "Phase 2" means the design and fabrication of commercially
viable HARPS units. Commercially viable will be determined by the sale and
support of HARPS units.
. Proportionately Shared: "Proportionately Shared" means the sharing of
awarded Founders Shares among the Founders proportional to the Founder s
individual contribution to a milestone as determined by the Founders. For the
purpose of the division of an award, each Founder will rank the contribution of
each of the other Founders. Subsequent to this ranking, all rankings will be
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linearly combined to determine the portion awarded to each Founder.
III. Stock Issuance: It is intended that 100,000 Company Shares be
distributed in a manner that will reward individuals that achieve defined
objectives that are beneficial to the Corporation. The following delineates the
method by which Company Shares have or will be issued:
A. The Corporation has initially issued and delivered 2,500 Founder
Shares to each Founder.
B. Dana and Linda Hansen will jointly be issued 2,500 Discretionary
Shares, as compensation for exerting considerable effort over an extended period
of time in an attempt to provide investors for the Corporation.
C. Founders who actively and whole-heartedly (as determined by the
Founders) working for the success of the Company for the first four years:
3,000 Founder Shares per year multiplied by W.
D. The Founder who provides the initial contact(s) that lead to Phase 1
Investment of up to $500,000: 600 Founder Shares per each $100,000 of
investment. (The Founder who provides the initial contact, may share this award
with other Founders or individuals who aid in the procurement of the investment,
in any way he sees fit.) This investment is a singular opportunity and is
closed after the above stated amount of money is received by the Company from a
Board approved investor, unless specifically opened again by the Board.
Investments may be received in stages if all is not needed at once, as
determined by the Board. If a Founder receives an investment sales commission
from the investor, he shall not receive an award of Founder Shares for bringing
in the investment. If the Founder wishes to invest in the Corporation, he
receives both the Founder Shares and the Investor Shares.
E. The Founder who provides the initial contact(s) that lead to Phase 2
Investments of up to $5,000,000: 600 Founder Shares per each $1,000,000 of
investment. (The Founder who provides the initial contact, may share this award
with other Founders or individuals who helped, in any way he sees fit.) This
investment is a singular opportunity and is closed after the above stated amount
of money is received by the Company from a Board approved investor, unless
specifically opened again by the Board. Investments may be received in stages
if all is not needed at once, as determined by the Board. The amount of shares
awarded to the Founder(s) will be based on the amount of money actually
invested, not the amount committed by the investor. If a Founder receives an
investment sales commission from the investor, he shall not receive an award of
Founder Shares for bringing in the investment. If the Founder wishes to invest
in the Corporation, he receives both the Founder Shares and the Investor Shares.
F. Founders who write proposals that result in government grants that
are subsequently awarded and accepted by the Board: 1,000 Founder Shares per
each $100,000. If more than one Founder participates in the submittal of the
successful proposal(s), the Founder Shares awarded will be Proportionately
Shared. This item also applies to procuring grants from companies or other
organizations. Total awards for all grants is limited to 5,000 Founder Shares
unless specifically extended by the Board. The Board will examine all grants
carefully before acceptance to assure that no serious restrictions or other
negative impacts on the Company are involved in the grant.
G. For Melvin L. Prueitt exclusively licensing the HARPS invention to
the Corporation: 8,000 Founder Shares; 2,000 upon signing a license agreement
and 2,000 at the end of each of the following three (3) years from the date of
initial signing.
H. For Founders contribution to the design and construction of the
first successful brine concentrator (prototype): 3,500 Founder Shares. This
award is intended to be Proportionately Shared among the Founders.
I. For Founders contribution to the design and fabrication of the first
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successful power unit (heater, boiler, turbine, and condenser) (prototype):
3,500 Founder Shares. This award is intended to be Proportionately Shared among
the Founders.
J. For Founders contribution to the design and fabrication of the first
commercial HARPS unit: 4,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
K. For Founders contribution to activities in support of the Phase 1
(prototype HARPS production) design and fabrication effort including company
management, project management, procurement, bookkeeping/accounting, legal, and
human resources activities: 2,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
L. For Founders contribution to activities in support of the Phase 2
(commercial HARPS production) design and fabrication effort including company
management, project management, procurement, bookkeeping/accounting, legal, and
human resources activities: 2,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
M. For Founders contribution to marketing the first commercial HARPS
unit in the United States: 3,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
N. For Founders contribution to marketing the first commercial HARPS
unit in a country other than the United States: 2,000 Founder Shares. This
award is intended to be Proportionately Shared among the Founders.
O. For introduction, by a Founder, of a new product that is accepted by
the Board and is subsequently manufactured and marketed by the Company: 3,000
Founder Shares. This award may, at the discretion of the Founders, be
Proportionately Shared among the Founders.
P. For introduction, by a Founder, of a patentable invention that
contributes to the success of the HARPS technology and that is accepted by the
Board. (This award may be applicable even if the Board chooses not to apply for
a patent for the invention, at the discretion of the Founders.): Up to 2,000
Founder Shares. This award may, at the discretion of the Founders, be
Proportionately Shared among the Founders. For the purpose of determining the
number of shares to be awarded, each Founder will rank the number of shares
appropriate for the value of the invention to the Company. Subsequent to this
ranking, all rankings will be linearly combined to determine the number of
shares awarded.
Q. Before any investments or grants are received, Founders may pay for
Board approved business and research expenses (but not salaries or patent
application costs for the first U.S. patent on HARPS technology) on a voluntary
basis. Expenses which are incurred before any investments are received by the
Corporation, such as incorporation expenses, legal fees, the purchase of
equipment, rental of space, and other operating expenses shall be shared by the
Founders on a voluntary basis. Each Founder shall be awarded 1 Founder Share
for each $5 of money supplied for Board approved expenses. A Founder may supply
more than his share of expenses only if other Founders do not supply their
share, and then only in equal shares with the remaining Founders. These
expenses may be reimbursed to the Founders after investments or grants have been
received, if the Founder so wishes, but the corresponding Founder Shares must be
relinquished to the Company. (Some grants to not allow reimbursement of
previous expenses.)
R. At the end of four years, if there are any remaining undistributed
Founder Shares or Discretionary Shares, they shall be distributed among the
Founders in amounts proportional to the number of Shares that each Founder
possesses at that time, and/or, at the discretion of the Founders, to other
deserving individuals. If the Corporation is purchased by another company, the
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remaining shares may be divided at that time, at the discretion of the Founders.
S. Phase 1 investments of $500,000 shall entitle the investors to 20%
of the Corporation. (100% of the Founder Shares and Discretionary Shares will
total 80% of the Corporation.) If the Corporation is not purchased by The
Acquisition Company prior to Phase 2, investments of $5,000,000 shall entitle
the investors to an additional 20% of the Corporation. (100% of the Founder
Shares and Discretionary Shares will total 60% of the Corporation.) Smaller
investments would entitle the investors to a proportionately smaller fraction of
the Corporation.
IV. Record of Services Provided: Each Founder is expected to keep a daily
log of hours spent on the project. The log shall include a note on the type of
activity and the results obtained. A copy of the log shall be sent to the
Corporation monthly, unless specific exemption is issued by the Board. It is
expected that only authorized hours that produce results beneficial to the
Corporation will be reported for this purpose. If the Board comes to the
conclusion that a particular Founder's efforts are not producing sufficiently
beneficial results for the Corporation, the Board may ask the individual to
curtail that activity. The Founder may continue with the activity unless the
Board determines that it negatively effects the Corporation in any way
including, but not limited to, utilization of resources or impairment of other
authorized activities. No shares will be awarded for such unauthorized
activities.
V. Compensation: Compensation for hours worked by Founders will be as
follows:
A. Before any investments are received by the Corporation, the Founders
shall work without any hourly compensation.
B. After some or all of the Phase 1 investment has been made, the
Founders shall work at $35 per hour. If funding is not sufficient, the Board
shall determine what work is most important to be accomplished and halt payment
for all other activities. Founders may bring to the attention of the Board
tasks that should be considered as necessary for Corporation operation and
success.
C. After the acquisition of sufficient funding through investments,
grants, or sales, salaries may be raised at the discretion of the Board, which
shall determine salaries based on the perceived value of the individuals to the
Company.
D. Melvin Prueitt will receive a 1% royalty on gross sales of HARPS
power plants and 0.5% on electric power sold from Company owned power plants.
VI. Management: At all times the Shareholders will vote their Company Shares
so that, unless there is unanimous agreement of the Shareholders to the
contrary:
A. The Articles of Incorporation and Bylaws of the Corporation will not
be amended.
B. No Company Shares will be issued by the Corporation except as
provided in this Agreement.
C. Each Founder may designate one person as a Director and these
Directors will be elected for a period of four years or as long as he remains an
active employee of the Company, which ever time period is shorter. The
Corporation will take the action agreed upon by the majority of the Directors.
Each Director will have an equal vote on any Board action. David F. Jones,
Melvin L. Prueitt, Stanley Prueitt, and Leslie Speir are the initial designated
Directors of the Corporation and have been so elected.
D. The Shareholders have caused the Directors to elect, consistent with
their obligations under law, the following persons to the following Corporation
offices, so long as these persons are ready, willing and able to serve in the
designated positions:
--------------------------------------------------------------------------------
Name Office
--------------------------------------------------------------------------------
Melvin L. Prueitt President and Chairman of the Board
David F. Jones Vice President of Operations
Stanley Prueitt Vice President of Business and Marketing
Leslie Speir Vice President of Engineering
--------------------------------------------------------------------------------
E. The books of the Corporation will be maintained in accordance with
the method required for federal income tax return reporting applied on a basis
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consistent with prior periods and will be subjected to audit at Corporation s
expense upon demand by any Shareholder. Each Shareholder will have access at
any reasonable time to Corporation s books and records.
F. The employment agreements between the Corporation and each of the
Founders will not be changed without unanimous approval by the Board.
G. If the Directors are deadlocked and cannot reach a decision, Melvin
L. Prueitt will nominate and the Shareholders will elect another Director to
break the deadlock.
H. The Corporation will not, except in the ordinary course of business,
(i) borrow money, (ii) transfer all or substantially all of its assets, or (iii)
loan money or assets.
VII. Restrictions: The Corporation and Shareholders will execute a Stock
Restriction Agreement in the form attached as Exhibit 1. The restrictions
imposed by this Stock Restriction Agreement are those of the Corporation as well
as those of the Shareholders. All certificates representing Company Shares will
be marked "Voting, transfer and encumbrance of the securities represented by
this certificate are restricted by the terms of agreements on file at the
Corporation office."
VIII. Voting Trust: The Shareholders and Melvin L. Prueitt, as Voting
Trustee will execute a Voting Trust Agreement in the form agreed to by them
creating a Voting Trust ("Voting Trust"). Corporation will issue and deposit in
the Voting Trust the shares not previously issued which are to be awarded as
Founders Shares or Discretionary Shares. The Voting Trustee will hold the
shares deposited in the Voting Trust ("Voting Trust Shares") and issue such
shares as Founder Shares or Discretionary Shares, and if The Acquisition Company
is to acquire the shares of the Corporation, exchange Corporation shares for The
Acquisition Company shares and hold the Acquisition Company Shares for issuance
as Founder Shares or Discretionary Shares.
IX. Acquisition: If the Corporation is acquired by The Acquisition Company
or any other entity, the non-cash consideration paid for the acquisition of
other than Investor Shares will be allocated among the holders of Founder
Shares, Discretionary Shares, and Voting Trust Shares in proportion to their
then holdings of Founder Shares, Discretionary Shares, and Voting Trust Shares.
The Voting Trust Shares will be issued in accordance with the provisions of the
Voting Trust herein. The cash consideration paid for the acquisition will be
allocated among the owners of the Founders Shares in proportion to their
ownership of Founders Shares.
X. Documentation: This is a binding document setting out the parties intent.
The contribution of capital, issuance or award of Company Shares and other
actions may have occurred before all document giving effect to this Agreement
have been signed. The parties will use their best efforts in good faith to
agree on the matters dealt with herein where future determination is required
and will sign any document and take any action required to accomplish this
intent.
XI. Binding Effect: Every person or entity who is the record, legal or
beneficial owner of Company Shares, whether by issue or transfer, including
without limitation the spouse, heirs, surviving joint tenants, executors,
administrators, trustee, personal representatives, transferees, donees,
nominees, grantees, successors, and assigns will be bound by and entitled to the
benefits of the terms of this Agreement. This agreement is specifically
enforceable, constitutes the entire agreement of the parties with respect to its
subject matter, is governed by and construed in accordance with the laws of New
Mexico and may be modified only in writing by the unanimous agreement of all
parties hereto. A Shareholder will have sole authority to vote, manage,
control, dispose of or encumber any Company Shares owned by the Shareholder and
any spouse of the Shareholder.
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DATED: Oct. 14 , 1997.
SHAREHOLDERS:
/s/David F. Jones
DAVID F. JONES
/s/Melvin L. Prueitt
MELVIN L. PRUEITT
/s/Stanley Prueitt
STANLEY PRUEITT
/s/Leslie Speir
LESLIE SPEIR
CORPORATION: HYDRO-AIR TECHNOLOGIES, INC.,
a New Mexico corporation
By: /s/Melvin L. Prueitt
Melvin L. Prueitt,
President
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--------------------------------------------------------------------------------
EXHIBIT 10.3
PURCHASE AGREEMENT
BETWEEN
SOLAR ENERGY LIMITED AND DR. REED J. JENSEN
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PURCHASE AGREEMENT
BETWEEN:
SOLAR ENERGY LIMITED ("XSEL") as Purchaser. XSEL is a public company
listed on the NASDAQ OTC Electronic Bulletin Board.
(hereinafter referred to as XSEL or Purchaser)
AND:
DR. REED J. JENSEN, ("RJJ") as Vendor. RJJ is a Resident of New Mexico, U.S.A.
(hereinafter referred to as RJJ or Vendor)
RJJ has generated certain intellectual property rights ("IPR"), (some of which
are embodied in a patent application and are being pursued by the U.S.
Department of Energy, ("DOE"). The four inventors responsible for these rights
are Reed J. Jensen, John I. Lyman, Robert D. Guettler and Jopseh King. The
blanket name to be used to describe the process covered by these IPR is Solar
Recycle of C02 to Fuel, ("SRCF").
This Agreement outlines the terms and conditions whereby XSEL offers to retain
RJJ and purchase from him his interest in the IPR pertaining to using solar
energy to manufacture/produce methanol, gasoline and/or diesel fuel from carbon
dioxide. Also included in this Agreement is RJJ's full range of
technical/mechanical options and skills needed to develop the required
technologies and bring them into full commercial production of electricity and
fuels.
TERMS AND CONDITIONS:
1. A new private company, ("Newco") will be formed by RJJ with the
assistance of XSEL. Initially, all the shares of Newco to be owned by RJJ and
RJJ to be the sole director of Newco.
2. On Closing, there will be three Directors of Newco; two of which are to
be appointed by RJJ (of which one is to be RJJ personally) and one to be
appointed by XSEL. On Closing, 100% of the shares of Newco are to be acquired by
XSEL according to the terms outlined in this Agreement.
3. This Agreement shall be executed in Los Alamos, New Mexico on August 7,
1998 with Closing scheduled for December 7, 1998 (or sooner as mutually agreed
upon by XSEL and RJJ).
4. On Closing, RJJ will deliver to Newco all of his IPR to the subject
process for the production of electricity and fuel from C02 as described in
Schedule A attached hereto and forming a part of this Agreement.
5. On Closing, XSEL to acquire 100% of the shares of Newco from RJJ for the
following consideration:
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a) $20,000 as follows:
$10,000 by certified cheque (made payable to RJJ in favour of Newco)
on ratification of this Agreement and the balance of $10,000 to be paid to RJJ
on closing.
b) 350,000 common shares of XSEL to be placed in escrow and released as
outlined as follows:
i) 100,000 shares upon successful completion of Phase III
ii) 50,000 shares upon successful completion of Phase IV
iii) 200,000 shares to be released at the rate of one share per
$2.00 of cash flow generated by Newco.
The definition of "successful completion" and of "cash flow" are as
outlined in Schedule B following.
c) RJJ will receive a royalty of 0.5% of the gross cash flow derived
from the SRCF process. It is assumed that the U.S. DOE will also receive a
royalty which is estimated by RJJ to be 0.3% or less; alternatively 1% to 4% of
net profit.
6. Conditions Precedent and Representation required on Closing of the
Purchaser:
a) that they are legally entitled to enter into this Agreement
b) that they will provide working capital to Newco on a timely basis as
outlined in Schedule B attached hereto and forming a part of this Agreement.
Schedule B contains two development plan schemes (one for forty-eight months and
another for an accelerated forty-two months) showing the major procurement and
operating funds required in order to develop and construct a working pilot plant
producing electricity and fuel from C02 using solar energy. XSEL to decide by
September 30, 1998 whether to proceed with the Accelerated Program or the
Baseline Program.
Commitment must be made to fund total Phases as integral blocks.
Phases I and II are essentially completed utilizing Government funding. A
minimum commitment of $2,400,000 is needed for an accelerated Phase III and
$1,500,000 for the baseline Phase III (with Phases IV and V viewed as separate
blocks-see Schedule D).
c) In addition, a minimum of 150,000 XSEL common shares will be put in
escrow by the Purchaser and will be distributed accordingly by RJJ to key
employees of Newco as follows: 75,000 for use immediately after Closing and
75,000 for use after the completion of Phase III for distribution during Phases
IV through V. Assessments to be made at the end of each Phase.
7. Conditions Precedent and Representations required of the Vendor:
a) that he is legally entitled to enter into this Agreement
b) that RJJ will enter into an exclusive consulting/management contract
(including confidentiality clause) based upon the terms outlined in Schedule C
attached hereto and forming part of this Agreement. Compensation, royalties,
stock options, hours of work, etc., to be mutually agreed upon and such Contract
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to be executed prior to Closing.
c) that RJJ, if requested by XSEL to become one of its Directors, shall
accept the appointment
d) that RJJ will undertake to negotiate the acquisition of the
University of California's and DOE's exclusive licenses which pertain to the
SRCF process and IPR.
8. Miscellaneous General Conditions:
a) Time is of the essence and this Agreement is governed by the laws of
New Mexico and the U.S.A.
b) On execution, this will be a binding Agreement but both parties
agree that additional documentation will be necessary to correctly define this
Agreement and both parties are in accordance to execute such additional
documentation on a timely basis. In particular, those documents conforming to
the Security Exchange Commission's regulations and those pertinent to minimizing
present and future income tax considerations will be included.
c) It is understood that the cost estimates for the various Phases are
today's best estimate by RJJ and are not based on bids nor detailed drawings.
Cost reductions will be motivated by compensation structure (bonus) as outlined
in Schedule C herein. However, possible cost growth increases cannot be
interpreted as bad faith or malfeasance but will become part of the business
viability assessment.
d) If, at any time, XSEL does not provide the requisite resources
delineated in Schedule B herein, all of Newco's IPR as outlined in Schedule A
herein revert to RJJ.
e) It is understood that all IPR conveyed to Newco by RJJ are to be
delivered free and clear of all liabilities other than the royalties as outlined
in Schedule C and possible residual conditions imposed by the U.S. DOE and/or
the University of California pertaining to their licensing packages.
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9. This Agreement is open for acceptance by both Parties until August 7,
1998 (the effective date of this Agreement once ratified).
SIGNED THIS 7th DAY OF AUGUST 1998 IN THE CITY OF LOS ALAMOS, NEW MEXICO,
U.S.A.
SOLAR ENERGY LIMITED
Per: /s/Melvin L. Prueitt Per: /s/Joel Dumaresq
Dr. Melvin L. Prueitt Joel Dumaresq
Chairman President
/s/William Stocker /s/William Stocker
Witness: William Stocker Witness: William Stocker
ACKNOWLEDGED AND AGREED THIS 7th DAY OF AUGUST 1998 IN THE CITY
OF LOS ALAMOS, NEW MEXICO, U.S.A.
By: /s/Reed J. Jensen /s/William Stocker
Dr. Reed J. Jensen Witness: William Stocker
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--------------------------------------------------------------------------------
EXHIBIT 10.4
OFFER TO PURCHASE:
JADE ELECTRONIC INC./SOLAR ENERGY LIMITED (RECO)
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April 10, 2000
OFFER TO PURCHASE
BETWEEN: JADE ELECTRONIC, INC., as Purchaser ("JADE")
JADE is a public company to be listed on the OTC
Electronic Bulletin Board in the U.S.
AND: SOLAR ENERGY LIMITED, as Vendor ("XSEL")
XSEL is a public company listed on the OTC Electronic
Bulletin Board
XSEL owns I 00% of the shares of a private company called Renewable Energy Corp.
(RECO). RECO is incorporated in New Mexico and is a research and development
company focusing on alternative energy sources that are environmentally
friendly. In particular, the main project of RECO is called Solarec which is
the Solar Reduction of C02 into a feedstock and electricity.
JADE hereby agrees to purchase I 00% of the shares of RECO from XSEL on the
following terms and conditions:
1. Price: Book Value of RECO (estimated at $180,000 (all figures in US
dollars) plus eight and one-half (8.5) million shares of JADE (reg 144 shares)
2. Closing Date: June 30, 2000
3. Subject Clause: Subject only to the Board approval of XSEL and to the
personal approval of Dr. R. Jensen and Dr. M. Prueitt; such approvals to be
received on or before June 25, 2000.
4. Representations and Warranties required of the Purchaser on or before
Closing:
a) that it is legally entitled to enter into this transaction;
b) that there are no liabilities in the Company;
c) that it has underway, SEC filings to be listed on small cap NASDAQ
(starting with listing on OTC-BB);
d) that it has $250,000 or equivalent as its only asset;
e) that the draft pro-forma share structure on closing is as follows:
i existing shares outstanding (after 2:1 split) 5,000,000
ii for vend-in of RECO 8,500,000
iii for $250,000 cash (@ .20) 1,250,000
iv for $250,000 cash (@ .25) 1,000,000
v for $3,000,000 cash (@ $3.00) IPO 1,000,000
---------
16,750,00
5. Representations and Warranties required of the Vendor on or before
Closing:
a) that it is legally entitled to enter into this transaction;
b) that RECO has no liabilities other than the ongoing commitment and
obligation to develop Solarec;
c) that the only assets are the intellectual property rights and
patents or patents pending to develop the Solar Reduction of C02 into a
feedstock and electricity; this process is called Solarec by RECO.
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6. Miscellaneous General Conditions:
a) Time is of the essence and this agreement is governed by the laws of
New Mexico;
b) The Board and officers of JADE to consist of:
i Dr. Reed Jensen as President and CEO.
ii Dr. Melvin Prueitt as director
iii Two Directors to be appointed by JADE
c) The Board of RECO to consist of:
i Dr. Reed Jensen as President and CEO
ii Dr. Melvin Prueitt as director
iii A Director to be nominated by Reed Jensen
iv A Director to be nominated by JADE
d) All Directors to be satisfactory to SEC regulators;
e) It is mutually understood that JADE will have a name change to
reflect the new business of the Company (suggested: Renewable Energy Limited -
REEL). It is intended to apply for an IPO as soon as possible after appointing
lawyers, both corporate and security, along with an accounting firm;
f) there will be up to 2,000,000 additional option shares available to
directors, officers, and senior staff. The option price to be determined under
SEC guidelines. The number of shares to be allotted per director/employee to be
determined by a two man committee consisting of Dr. Jensen and a representative
of JADE.
g) Option Agreement
XSEL, through its wholly owned subsidiary, Hydro Air Technologies Inc.
(HAT) owns certain intellectual property rights pertaining to a patent pending
process for the desalination of water called SUNSPRING.
JADE to have the option to purchase from XSEL all the assets of
SUNSPRING (including patents/patents pending) for $50,000 cash plus 2,000,000
shares of
JADE. This option is exercisable on or before June 15, 2000 and is
subject to the following conditions:
i there are no liabilities attached to the SUNSPRING assets;
ii a satisfactory royalty agreement and approved list of assets to
be provided by XSEL. SUNSPRING relies on using a 'solar collector' developed by
XSEL within a system called SPAESS. It is the use of the 'solar collector'
concept that need to be addressed for the royalty consideration.
iii That Dr. Jensen and Dr. Prueitt agree to this purchase.
h) On execution this is a binding agreement but both parties agree that
additional documentation may yet be necessary to properly reflect the terms of
this agreement. In addition, the document may need to be modified to conform to
SEC regulations and to mutually minimize both present and future income tax.
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S I G N E D:
SOLAR ENERGY LIMITED
/s/Joel Dumaresq
Joel Dumaresq
AGREED:
JADE ELECTRONIC INC.
/s/Irene Poole
Irene Poole
105
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