SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(g) of
The Securities Exchange Act of 1934
SYNERGY TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1379164
(State or other jurisdiction (I.R.S. Employer
Identification No.)
of incorporation or organization)
Suite 210, 214
11th Ave. S.E., Calgary,
Alberta Canada T2G 0X8
(Address ofprincipal executive offices) (Zip Code)
(888) 378-6633
Registrant's telephone number, including area code
Securities to be registered pursuant to Section 12(b)of the Act:
Title of each class
Name of each exchange on
which
to be so registered:
each class is to be registered:
None
None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of class
Common
50,000,000 Shares of
Common Stock
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . .1
General Description and Development of Business .1
The Registrant's Business . . . . . . . . . . . .4
a. Business of Carbon Resources Limited . .5
1. The Heavy Oil (CPJ) Technology . . .5
2. The Process . . . . . . . . . . . .5
b. Business of SynGen Technologies Limited .7
1. The Gas-To-Liquids (GTL) Technology7
2. Standard System . . . . . . . . . .8
3. The Market. . . . . . . . . . . . .8
(a) Shell Oil Company . . . . . .9
(b) Exxon . . . . . . . . . . . .9
(c) Statoil of Norway . . . . . .9
(d) Sasol. . . . . . . . . . . . .9
(e) Syntroleum. . . . . . . . . 10
(f) Syncrude Technology, Inc. . 10
3. An Alternative to LNG . . . . . . 10
4. The Environment . . . . . . . . . 10
5. Products and Applications . . . . 10
6. Technology Development. . . . . . 11
(a) Phase One Development . . . 12
(b) Phase Two Development. . . . 13
c. Business of Stone Canyon Resources Inc.13
1. Oil and Gas Properties. . . . . . 13
(a) Hell's Canyon Lease . . . . 13
(b) Rose Creek Lease. . . . . . 14
(c) Meadow Deep and D Sand Leases15
(d) Wilson Creek Prospect . . . 17
Other Requested Information . . . . . . . . . . 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND CHANGES IN FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . 19
Results of Operations . . . . . . . . . . . . . 21
Cash Flows. . . . . . . . . . . . . . . . . . . 22
Changes in Financial Position . . . . . . . . . 23
Comparison of Results of Operations for the Fiscal Periods ended
December 31, 1997
and 1998 and subsequent quarter ended March 31, 1999.24
Liquidity . . . . . . . . . . . . . . . . . . . 24
Short Term. . . . . . . . . . . . . . . . . . . 24
Long Term . . . . . . . . . . . . . . . . . . . 25
Capital Resources . . . . . . . . . . . . . . . 25
ITEM 3. DESCRIPTIONS OF PROPERTIES . . . . . . . . . 25
Principal Plants and Other Property . . . . . . 25
Oil and Gas Producing Activities. . . . . . . . 26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AS OF MAY 30, 1999 . . . . . . . . 26
Directors and Officers of the Registrant and its Subsidiaries28
a. Management of the Registrant . . . . . 28
b. Management of Stone Canyon Colorado (a wholly-owned
subsidiary of the Registrant). . . . 29
c. Management of Carbon Resources Limited 29
d. Management of SynGen Technologies Limited30
Identification of Significant Employees. . . . 31
Family Relationships. . . . . . . . . . . . . . 31
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . 31
Cash Compensation . . . . . . . . . . . . . . . 32
Compensation Pursuant to Management Contracts.. 33
Other Compensation. . . . . . . . . . . . . . . 33
Compensation of Directors . . . . . . . . . . . 33
Termination of Employment and Change of Control Arrangements33
Key Employees Incentive Stock Option Plan . . . 33
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . 33
ITEM 8. DESCRIPTION OF SECURITIES . . . . . . . . . 34
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . 35
Stockholders. . . . . . . . . . . . . . . . . . 36
Dividends . . . . . . . . . . . . . . . . . . . 36
ITEM 2. LEGAL PROCEEDINGS . . . . . . . . . . . . . 36
Bataa Oil, Inc. . . . . . . . . . . . . . . . . 36
Drake Oil Limited . . . . . . . . . . . . . . . 37
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 38
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES . . 38
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS. . 38
PART F/S
FINANCIAL STATEMENTS AND EXHIBITS. . . . . . . . . . 39
Financial Statements. . . . . . . . . . . . . . 39
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES39
Reports of Independent Public Accountants . . . 39
Financial Statements. . . . . . . . . . . . . . 39
Consolidated Balance Sheets . . . . . . . . . . 39
Consolidated Statements of Operations . . . . . 39
Statement of Equity . . . . . . . . . . . . . . 39
Statement of Cash Flows . . . . . . . . . . . . 39
Notes to Consolidated Financial Statements. . . 39
Supplemental Statement. . . . . . . . . . . . . 39
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . 39
SUPPLEMENTAL OIL AND GAS INFORMATION . . . . . . . . 42
ITEM 1. DESCRIPTION OF BUSINESS
General Description and Development of Business
On February 10, 1997, Synergy Technologies Corporation, a Colorado
corporation (the "Registrant"), was incorporated under the laws of the State of
Colorado, under the name of Automated Transfer Systems Corporation.
The Registrant was incorporated for the business of providing ATM
customers with a solution for automated teller machine and electronic transfer
processing. The Registrant was unsuccessful in its research and development.As
of October, 1997, the Registrant had no operations.
On November 24, 1997, the Registrant filed with the State of Colorado
Secretary of State, Articles of Exchange by and between itself and Stone Canyon
Resources, Inc., a Colorado corporation ("Stone Canyon Colorado"), whereby the
Registrant acquired 100% of the outstanding shares of common stock of Stone
Canyon Colorado, in exchange for 2,901,007 shares of common stock of the
Registrant, exchanged on a one share for one share basis. The Registrant, at
that time, also issued an additional 4,539,162 shares of its common stock to
convert $453,916 of Stone Canyon Colorado's debt into equity. Such conversion
caused Stone Canyon Colorado's creditor, Stone Canyon Resources Ltd., a Canadian
corporation ("Stone Canyon Canada") to become the controlling shareholder of
the Registrant, owning more than 50% of its outstanding stock.
Stone Canyon Colorado was incorporated on November 7, 1996, under the
laws of the State of Colorado to acquire, explore and develop oil and gas
resources in North America. Since its incorporation on November 7, 1996, Stone
Canyon Colorado has participated in a variety of activities as follows:
The acquisition of U.S. petroleum and natural gas lease
rights in
Colorado and Wyoming
The acquisition of Canadian petroleum and natural gas
leases rights
in the Province of Alberta
The drilling of exploratory wells
The Registrant intends to continue to develop its oil and gas acquisition
and exploration programs through its wholly-owned subsidiary Stone Canyon
Colorado. (See "-Business of Stone Canyon Resources Inc. ("Stone Canyon
Colorado" below.)
In March, 1998, Stone Canyon Colorado entered into an agreement with
Stone Canyon Canada whereby Stone Canyon Colorado acquired a 33.57% before
pay-out ("BPO") interest and a 16.79% after pay-out ("APO") interest in certain
development lease land location in Wilson Creek Alberta (the "Wilson Creek
Prospect"). Under the terms of the agreement, Stone Canyon Colorado was
required to pay 100% of the drilling and completion costs associated with the
first well drilled on the lease to earn its 16.79% APO interest.
On May 5, 1998, the Registrant, Carbon Resources Limited, Laxarco
Holding Limited and the Registrant's then-controlling shareholder, Stone Canyon
Canada, entered into a share exchange agreement (the "First Laxarco Agreement")
whereby the Registrant acquired 75% of the issued and outstanding shares of
Carbon Resources Limited, a company incorporated pursuant to the laws of the
Republic of Cyprus ("Carbon"), in exchange for the issuance of 10,000,000 shares
of the Registrant. Under the terms of the First Laxarco Agreement, Stone Canyon
Colorado granted to certain shareholders of Laxarco Holding Limited an option to
acquire up to 3,000,000 shares of common stock of the Registrant held by Stone
Canyon Canada. Pursuant to the terms of the First Laxarco Agreement, an
Escrow Agreement dated May 5, 1998 (the "Escrow Agreement"), was entered
into by and between the Registrant and Laxarco Holding Limited, a company
incorporated under the laws of the Republic of Cyprus ("Laxarco") whereby the
10,000,000 shares of the Registrant issued pursuant to the First Laxarco
Agreement were put into escrow to be released upon the successful completion of
the gas-to-liquids technology under development by Carbon. (See "-The
Registrant's Business-Business of SynGen Technologies Limited" below) Under
the terms of the Escrow Agreement, Laxarco has provided an irrevocable voting
power of attorney to the Board of Directors of the Registrant until the
10,000,000 shares are released from escrow. The First Laxarco Agreement further
allows that in consideration of Stone Canyon Canada granting to certain of the
shareholders of Laxarco, an option on 3,000,000 of Stone Canyon Canada's
shares of the Registrant's common stock Stone Canyon Canada would have the right
to require the Registrant to transfer the shares of its subsidiary, Stone Canyon
Colorado, to Stone Canyon Canada upon the completion of all of the intended
transactions between Laxarco and the Registrant. The First Laxarco Agreement
received shareholder approval on June 5, 1998.
Carbon is in the business of developing technologies. Since its
incorporation on April 10, 1998, and the name change to "Carbon Resources
Limited" on April 28, 1998, Carbon has participated in a variety of
activities, as follows:
The acquisition of a proprietary technology for the conversion of gas-to-liquids
The research and development of the gas-to-liquids technology (the "GTL
Technology")
the acquisition of a proprietary technology for the upgrading of heavy oil
(the "CPJ Technology") (the GTL Technology and the CPJ Technology are
referred to herein collectively as the "Technologies")
The establishment of a laboratory facility in Orleans for the testing and
research and development of the technologies
On September 30, 1998, the Registrant and Carbon entered into an
agreement with Stone Canyon Canada for the development of a 4 barrel per day
gas-to-liquids demonstration facility in exchange for granting to Stone Canyon
Canada the Canadian marketing and licensing rights to the GTL Technology.
On January 6, 1999, the Registrant, through Carbon, acquired the shares of
Lanisco Holdings Limited, a company incorporated in the Republic of Cyprus
("Lanisco"), which holds the rights to the CPJ Technology, a proprietary
technology for the upgrading of heavy oil. Under the terms of the agreement
between Lanisco and Pierre Jorgensen, Lanisco and/or Carbon must expend not
less than $1,000,000. towards the development and commercialization of the CPJ
Technology and must pay to Jorgensen a royalty of 65% of the proceeds received
from any licensing fees or royalties derived from the CPJ Technology net of all
operating costs until payment of $1,000,000 at which time Jorgensen's royalty
will revert to 35% of all proceeds received from any licensing fees or royalties
net of all operating costs. The agreement called for the shares of Lanisco to be
transferred to Carbon upon execution of the agreement. The agreement also
establishes a trust whereby Carbon's legal counsel will hold the assignment of
the CPJ Technology until such time as the funding of the $1,000,000. for
commercialization of the CPJ Technology has been completed.
(See "-The Registrant's Business - Business of Carbon Resources Limited".)
On January 8, 1999, the Registrant reached a verbal agreement with Texas
T Petroleum Ltd., a Colorado oil and gas corporation, whereby Lanisco would
acquire 1,000,000 units of common shares of Texas T Petroleum Ltd. and Texas T
Petroleum Ltd. would expend $100,000. towards the re-construction of the 1/2 bbl
per day heavy oil upgrading pilot plant to be reconstructed in Orleans, France.
On February 12, 1999, the Registrant filed a Certificate of Amendment
with the Department of State of the State of Colorado changing its name from
Automated Transfer Systems Corporation to Synergy Technologies Corporation.
The name change was accepted by the State of Colorado on March 2, 1999.
On March 22, 1999 the Registrant, Stone Canyon Colorado (a wholly
owned subsidiary of the Registrant) and Revival Resources Ltd., an Alberta
corporation, entered into an agreement whereby Stone Canyon Colorado acquired
a 22.38% APO interest in the Wilson Creek Prospect (See "Business of Stone
Canyon Resources Inc. (Stone Canyon Colorado)" below) as well as Revival's
respective interest in certain other development leases located in the
Province of
Alberta. Under the terms of the agreement the Registrant will issue a total of
63,801 shares of common stock at a deemed value of US$0.53125 per share for
total value of US$33,895 in full and final payment for the leases.
On June 25, 1999, Carbon which at the time was 75% owned by the
Registrant, and Laxarco entered into an Amendment to the Assignment of
Technology Agreement, by which it had obtained the proprietary rights to the GTL
Technology, which was agreed to by the Registrant, amending such certain terms
of the agreement. The purpose of such Amendment was to clarify Carbon's
obligation regarding the construction and completion of a pilot unit utilizing
the GTL Technology, the commercialization thereof and to confirm that neither
party had committed any breaches of the underlying agreement.
On June 25, 1999, the Registrant, Laxarco, Carbon and Stone Canyon
Colorado entered into an amendment agreement amending the terms of the First
Laxarco Agreement of May 5, 1998. The purpose of such Amendment was to,
among other items, clarify the source of the license for the GTL Technology, the
obligation of Carbon regarding the development of the GTL Technology and
confirm delivery of certain corporate approval documents.
On June 25, 1999, the Registrant entered into a second share exchange
agreement with Laxarco to acquire the remaining 25% of the shares of Carbon
owned by Laxarco in exchange for the issuance of 3,000,000 shares of the
Registrant's common stock (the "Second Laxarco Agreement"), thus making
Carbon a wholly-owned subsidiary of the Registrant.
On June 25, 1999, the Registrant entered into an Amended and Restated
Escrow Agreement whereby the 3,000,000 shares of the Registrant issued under
the Second Laxarco Agreement were added to the Escrow Agreement (the
"Amended Escrow Agreement"). The Amended Escrow Agreement calls for
Laxarco to deliver an irrevocable power of attorney in favor of the Board of
Directors of the Registrant to vote such 3,000,000 shares until such time as
they are released from escrow. The Amended Escrow Agreement further sets forth
the events upon which the 10,000,000 and the 3,000,000 shares of the Registrant
will be released to Laxarco. The 10,000,000 shares will be released upon the
earlier of the: (i) prove-up of the GTL Technology; and (ii) the receipt of an
independent report attesting to the commercial viability of the CPJ Technology.
The 3,000,000 shares will be released upon the latter of the two (2) events.
The release of any ofthe shares is further conditioned upon the Registrant
receiving perfection of title to both of the Technologies.
On June 25, 1999, the Registrant incorporated SynGen Technologies
Limited pursuant to the laws of the Republic of Cyprus and transferred its
interest in the GTL Technology from Carbon to SynGen Technologies Limited.
On June 26, 1999, the Registrant executed a share exchange agreement
with Texas T Petroleum Ltd., a Colorado corporation ("Texas T"), whereby Texas
T will acquire from the Registrant, fifty percent (50%) of the issued and
organized shares of Carbon in exchange for the issuance of 2,000,000 units of
Texas T, each unit consisting of one share of common stock and one share
purchase warrant entitling the holder to purchase one additional share of Texas
T common stock at $1.00 per share within two years from June 25, 1999, and the
payment of $900,000 by Texas T for the development of the CPJ Technology.
The Registrant's Business
The Registrant has its registered and records office at #800-303 East 17th
Avenue, Denver Colorado and its executive offices at #210-214 11th Avenue S.E.,
Calgary, Alberta, Canada T2G 0X8.
The Registrant, through its subsidiaries, also maintains offices in Houston
Texas, London, England and a laboratory facility in Orleans, France. ( See
"DESCRIPTION OF PROPERTIES".)
The Registrant conducts its operations through its subsidiaries, Stone
Canyon Colorado and SynGen Technologies Limited, which are wholly-owned
subsidiaries of the Registrant, and through its 50% owned subsidiary, Carbon.
(See "-General Description and Development of Business".)
a. Business of Carbon Resources Limited
Carbon Resources Limited has acquired the right to develop two (2)
unique proprietary technologies - the GTL Technology and the CPJ Technology
(See "Other Requested Information - Patents"). After the Registrant's
acquisition of Carbon, it believed it was advantageous to transfer the GTL
Technology into a separate wholly-owned subsidiary, SynGen Technologies
Limited. (See "-Business of SynGen Technologies Limited" below.)
1. The Heavy Oil (CPJ) Technology
(a) Background of the Technology
The CPJ Process was invented and developed by Pierre Jorgensen, a
retired French process engineer who spent his career dealing with the fluid
catalytic crackers, cokers, visbreakers, and bottom of the barrel refinery
economics. Once retired, he spent years at Orleans University to obtain a
PhD. At his own expense, he funded the experimental work on this process,
which was the basis of his doctoral thesis. The objective of Mr. Jorgensen's
experimental work was to show that not only could his process upgrade heavy oil
to a valuable light oil, but also to show that his process could replace the
fluid catalytic cracker, coker, hydrocracker and visbreaker processes of a
typical refinery. As a practical process engineer, Mr. Jorgensen typically
compares his process results with those observed in commercial practice on the
same raw materials. He has made test runs on atmospheric bottoms, vacuum tower
bottoms, and waste lube oil for re-refining purposes. Mr. Jorgensen's pilot
plant was in operation in Orleans during 1989-1990 and has been reassembled
in Orleans for evaluation of potential client oils.
As stated above, Mr. Jorgensen set out to show that his process was a
suitable replacement for processing the bottom of the barrel. Accordingly, much
of his comparison studies were to compare his process against conventional
processing for various heavy feeds. The Registrant believes that the CPJ
Process produces a greater volume of desirable middle distillate fractions than
do the conventional processes. The CPJ Process converts most of the feed into
products that can be recovered via atmospheric distillation alone or marketed as
an upgraded crude oil.
2. The Process
The CPJ Process is a non-catalytic process and is completely thermal
driven. Based upon an instantaneous thermal shock, the process breaks long
hydrocarbon molecules on average into two equal parts (minimizing production of
gases and coke). Heavy molecules are placed at an initial state below the
conditions for natural thermal cracking and then activated by thermal mechanical
energy transfer from a jet of steam, CO2, and/or nitrogen gas. This effect is
quickly obtained in a jet nozzle shearing the feed molecules.
This very high speed, prepared mixture then returns to thermodynamic
steady state in a reactor soaker, giving stable end products, in a short time
and at an adequate moderate pressure. The choice of operating temperature is
also geared to avoid glassy deposits on the reactors from the metals content of
the heavy crude feed. Extractor-separators working at near atmospheric pressure
separate the products without the requirement for large and expensive vacuum
technology. The convenient set of extractors, acting in a blending extracting
mode, produce recycle streams and final products. The first extractor, which is
hot, keeps the polyaromatic components, containing high metals and ash content,
out of most of the products. The water extract contains substantial metals and
sulfurous compounds.
General operating conditions of the CPJ process:
Non catalytic (insensitive to metals, nitrogen, sediments, etc )
Non vacuum
Thermal driven
Working at moderate pressure
Relatively safe technology and process (no oxygen required and all reactions are
endothermic)
No costly hydrogen needed (high pressure, metallurgical constraints, and ammonia
production are avoided)
Key Words Denoting Characteristics of the Technology
Conservative H/C ratio.
No Hydrogen rejection
No limitation on metals, sulfur, nitrogen, or water on feed.
Quick mechanical-energetic activation of reaction by:
Blending shearing nozzle transferring energy from steam (or gases such as CO2)
to feed.
Feed preheated to just under natural thermal cracking conditions, avoiding coke
deposits in the furnace.
Controlled breaking of heavy molecules into two equal parts (avoiding gas
production) and, furthermore, negligible hydrogen is rejected.
Rapid stabilization of final products in a void pressurized reactor soaker
(without catalyst or trays).
Little or no coke production. Only small production of friable soot deposits
extracted, giving a soft powder, which is entrained in by-products (heavy gas
oil or
heavy fuels).
Mixer-decanter-extractor operating at near atmospheric pressure to separate
final products and recycle streams.
No Vacuum operation required for separation of hydrocarbons.
Hot Extractor produces polyaromatic products with high metals content that
results in the demetallization of the feed and avoids strong metals deposit on
the reactor soaker wall from the recycle.
The decanted liquid water contains an extraction of metals, potential ash
sediments, and sulfurous compounds .
Due to water, final primary products are produced in stable but easy to break
oil-water emulsions.
b. Business of SynGen Technologies Limited
On June 25, 1999, the Registrant incorporated SynGen Technologies
Limited , a company incorporated pursuant to the laws of the Republic of Cyprus
("SynGen Technologies"), as a wholly owned subsidiary to allow for the transfer
of all rights and interest in the proprietary gas-to-liquids technology from
Carbon.
SynGen Technologies is a company committed to reducing greenhouse
gases by converting them to valuable petroleum products. The conversion of
remote gas reserves into valuable synthetic fuels such as jet fuel and diesel
(synfuels) is considered to be the focus of the natural gas industry for the
21st century. SynGen Technologies holds the rights to a patented process
(SYNGEN) for a low cost conversion of associated gases and high CO2 natural gas
to synthesis gas that is especially well suited for conversion to synthetic
fuels via the Fischer-Tropsch process. The patent for this technology was
registered in France on January 13,1997 and was accepted on October 20, 1997.
The US and international patents were applied for on January 13, 1998. SynGen
Technologies holds a further license to proprietary Fischer-Tropsch technology
which includes a hydrocarbon chain limiting catalyst.
SynGen Technologies possesses a truly innovative route to syngas for the
Fischer-Tropsch process. Invented and perfected through several patents over the
past 12 years, a new process to convert natural gas via high-energy plasma has
been developed and patented. Dr. Albin Czernichowski, the inventor, assigned
the patents for his SYNGEN process to Laxarco who assigned the patents to
Carbon. Synergy Technologies acquired the shares of Carbon and transferred
all rights and interest in the technology to SynGen Technologies. The SYNGEN
process offers substantial savings in capital costs ("CAPEX") and operating
costs ("OPEX") over conventional syngas formation.
The new process has been extensively tested at the laboratory level and is
believed to produce a superior feedstock for the Fischer-Tropsch process. In
addition, a variation of the SYNGEN process allows natural gases with CO2 levels
up to 35% to be converted to synfuels economically. From a global warming
context and in view of proposed governmental carbon taxes, this is believed to
be a tremendous breakthrough.
1. The Gas-To-Liquids (GTL) Technology
SYNGEN offers to the oil and gas industry a patented process for the
generation of syngas from natural gases. The essence of the technology is
passing the gas at moderate temperature through a plasma arc generated by
electricity. The arc excites the molecules providing the energy for the chemical
reactions to go forward. The French patent has been issued and U.S. and
international patents are currently under application. This unique process has
been named SYNGEN. Reducing the cost of synthesis gas formation is the most
important hurdle according to the DOE (Department of Energy) and other sources
to commercialization of synfuels on a grand scale. The Registrant believes
SYNGEN accomplishes just that. Highlights of the SYNGEN process are as follows:
Capital Costs (CAPEX) for synthesis gas reduced by more than 40%
No exotic metallurgy required
No sophisticated furnace required
Natural gas up to 35% CO2 can be converted to acceptable synthesis gas
Utility requirement imported from Fischer Tropsch, so little or no OPEX
Patents applied for.
SynGen Technologies has access to a proprietary Fischer-Tropsch process
developed in Russia. Fischer-Tropsch processes have been used for over fifty
years in Russia and considerable R & D efforts have been expended to improve
catalysts. Typical Fischer-Tropsch processes produce wax from syngas in
addition to the desired middle distillates. A catalyst to limit wax formation
would result in improved yield and reduced Fischer-Tropsch CAPEX and OPEX,
resulting in a more economically attractive process. The catalyst technology
available through SynGen Technologies limits hydrocarbon chain length,
preventing wax formation and producing hydrocarbons in the diesel jet fuel
range. SynGen Technologies believes its licensed catalyst technology will be
state of the art as compared to other available catalysts.
2. Standard System
The initial commercial SYNGEN/FischerTropsch systems will be designed
to process 100 million cubic feet (MMCFD) of gas per day into nominally 10,000
barrels of synfuel product. An increasingly important characteristic of all
of the
SYNGEN/Fischer-Tropsch systems products is the fact that they do not contain
undesirable and/or harmful aromatics, nitrogen, or sulfur compounds.
Legislation and regulatory requirements continue to add support for the broader
use of synfuel products for these reasons. Versions of the standard system will
continue to evolve and technology enhancements will continually be made to the
basic system to fit both onshore and offshore locations.
3. The Market
The world's known gas reserves are estimated to be approximately 4,500
trillion cubic feet, of which approximately half are situated in areas presently
considered to be "remote", without markets and/or pipelines. SYNGEN/Fischer-
Tropsch systems are ideal for gas producers having sizable reserves but no
immediate markets or existing pipeline systems available to them.
SynGen Technologies will face competition in the marketplace, however, it
believes its system to be superior because of its CAPEX and OPEX advantage. In
addition, most of the potentially competitive systems under development are not
for license to public markets. SynGen Technologies' Fischer-Tropsch should be
significantly less expensive than any system manufactured by major oil
companies.
Potential competitors may eventually elect to either utilize SynGen Technologies
/Fischer-Tropsch Systems or license the SYNGEN technology as a more cost-
effective method of achieving their objectives. The following companies are
involved in the synfuel industry in some capacity.
(a) Shell Oil Company
Shell's gas-to-liquids process, which was originally developed as the
Gulf/Badger system, was sold to Shell Oil by Chevron following its acquisition
of Gulf Oil.
Shell's first commercial plant, which is now called the Shell Synthetic
Middle Distillate System, has now been operating for two years in Malaysia, at a
reported cost of $1.2 billion. The high cost is partly due to the fact that
Shell uses
a fixed tube reactor, which was developed by Gulf in 1980. A second major cost
factor is related to the extensive orientation to petrochemical products in
this plant.
Shell does not appear to offer its technology to third parties.
(b) Exxon
Little is known about Exxon's work to date except that its catalysts are
also cobalt based, but in conjunction with titanium rather than alumina.
Exxon has
reportedly spent over $150 million in development. It is understood that Exxon
will only use its system for company owned and/or operated projects. The Exxon
system is not expected to be cost competitive with the SynGen Technologies'
commercially engineered Fischer/Tropsch System.
(c) Statoil of Norway
Based upon third party information, it is believed that Statoil lacks
satisfactory catalyst technology and at the present time is not pursuing
commercialization.
(d) Sasol
Sasol of South Africa has been converting South African coal reserves into
synthetic fuels for years. Sasol currently has a gas-to-oil system in
operation. However, it continues to use iron catalysts that produce CO2 and
entails recycling resulting in reduced selectivity and productivity. There are
indications that Sasol is considering licensing their technology to others but
only in cases where they have an equity interest in the project. It is the
Registrant's understanding and belief that Sasol has recently entered into a
technology licensing agreement with Chevron.
(e) Syntroleum
Syntroleum is a public company located in Tulsa, Oklahoma, which offers
gas-to-liquids technology. Syntroleum, together with Brown & Root, announced
their first "commercial" enterprise on December 11, 1997. The venture is
expected to produce some 2,500 barrels per day of product. The Syntroleum
process is not believed to be as efficient or cost effective, as compared to the
SYNGEN technology.
(f) Syncrude Technology, Inc.
Syncrude Technology Inc. is a Texas corporation operating out of
Pittsburgh, Pennsylvania. They claim a revolutionary Slurry Bubble Column
Reactor but to date only bench scale data is available to support their claims.
3. An Alternative to LNG
Gas-to-Liquids systems are a serious competitor to the Liquefied Natural
Gas industry, particularly when producers sell FOB to end users with no added
value through conversion of the producer's gas. Prospective LNG projects
throughout the world are natural targets for the SYNGEN/Fischer-Tropsch
systems and thereby constitute an important primary marketing thrust. The
capital costs of a gas-to-liquids system are approximately one third of
comparable LNG facility costs, and margins on an MCF basis are at least treble
for synfuel products, depending upon country of origin and related
transportation costs.
A SYNGEN/Fischer-Tropsch System precludes the need to utilize
specialized transport vessels, which handle 6 BCF of gas equivalent and cost
$275 million per ship. In addition to liquefaction and transportation costs,
LNG must be re-gasified and converted into usable products through capital
intensive plants at the destination. Conversely, synfuel products are either
used locally or are shipped less expensively and are immediately ready for
market.
4. The Environment
In many countries of the world, associated gas from crude oil production is
vented or flared due to the lack of an economic sales opportunity creating
environmental concerns. These emissions contribute substantially to the global
warming effect, as unburned hydrocarbons and CO2 (considered greenhouse gases)
are released into the atmosphere, and efforts are being pursued on a global
basis to reduce these emissions.
5. Products and Applications
An increasingly important characteristic of all SYNGEN/Fischer-Tropsch
System products is the fact that synfuel products are environmentally
attractive in that they do not contain undesirable and/or harmful aromatics,
nitrogen, or sulfur compounds. Legislation and regulatory requirements
continue to add support for the broader use of synfuel products. The advantages
of synfuels are as follows:
No aromatic content
Smokeless jet fuel and diesel
No sulfur in products
Cetane number 70 or above (diesel)
Premium blending stocks
Smaller gas reserves required
No dedicated customers required
Refinery diesel is rated at a cetane number of 45. Diesel produced by the
SYNGEN/ Fischer-Tropsch System will be very high grade diesel rated at a cetane
number of 70+. This superior diesel fuel should command a premium price over
regular diesel.
SYNGEN/Fischer-Tropsch System diesel will be used to blend and
enhance low quality or normal diesel fuels. Diesel is used extensively in the
trucking and transportation industries, including the railroad industry.
SYNGEN/Fischer-Tropsch Systems products can also be reformulated relatively
inexpensively into Jet A fuel for aircraft.
As a refined product, naphtha commands a price related to, but in excess,
of crude oil. SYNGEN/Fischer-Tropsch System naphtha lends itself to numerous
applications in the chemical industry, notably as a premier ethylene
feedstock, and
can also be transformed into a variety of related fuel forms.
Although remote gas, which typically has no existing pipeline
infrastructure, may in most cases be the most attractive source of gas for the
SYNGEN/FischerTropsch process, other potential sources include:
Refinery hydrocarbon waste gases which are excess to refinery fuel needs
Alaskan natural gas, which after conversion to synfuel could be transported
to the US West Coast refineries via the existing pipeline
Associated gas being flared during crude oil production including offshore
platforms
Coal gas
US natural gas converted specifically to target the most stringent clean
fuels specifications
US natural gas considered too high in impurities for economic pipeline use.
6. Technology Development
The terms of the First Laxarco Agreement committed the Registrant to
fund the phase one and phase two development of the gas-to-liquids Technology
of which Carbon held a 100% interest, subject to the payment of 25% of the
revenues attributable to the licensing of gas-to-liquids Technology to
Laxarco.
The Registrant was required to fund a total of $6,000,000 over the entire
project.
(a) Phase One Development
Phase One development of the SYNGEN technology has been on-going in
Orleans, France. On September 30, 1998, the Registrant executed a letter
agreement with Stone Canyon Canada whereby Stone Canyon Canada has agreed
to construct a 4 barrel ("bbl") per day demonstration facility in Alberta,
Canada to
showcase SYNGEN's GTL process in return for the Canadian marketing and
licensing rights to the process. The Registrant and Stone Canyon Canada
contracted the services of Bower Damberger Rolseth Engineering Ltd., an Alberta
corporation, in early 1999 to prepare the mechanical design for the 4bbl/day
facility and prepare a capital cost estimate. Renaissance Energy Ltd., an
Alberta corporation, has agreed to provide the Registrant with a well head
located in Taber, Alberta to provide feed gas for use with the demonstration
facility. Capital costs associated with the demonstration facility are as
follows:
This table is expressed in Canadian dollars:
<TABLE>
<S> <C>
4 bbl/day Demo Plant
Glidarc Technologies engineering fees $ 323,354
Corporate overhead 97,006
Patent fees 73,196
Travel 119,728
Courier/Mail 7,840
Equipment/Services 2,437,255
Site work 200,000
Contingency 50,000
TOTAL COST $3,308,379
</TABLE>
As of June 20, 1999, Stone Canyon Canada has advised the Registrant that it
has received from the Canadian Government a CDN $700,000 award to be used
towards the funding of the 4 bbl per day demonstration plant. The CDN $700,000
award came from Natural Resources Canada's CANMET Energy Technology Center
(CETC), the Canadian Government's premier organization devoted to the
development of clean, energy-saving technologies. The award comprises 25% of
allowable costs of the demonstration plant (as determined by CANMET), and
will be repayable by Stone Canyon Canada at a low interest rate upon
commercialization of the gas-to-liquid process.
The facility has been designed to include a SYNGEN reactor to produce
sufficient synthesis gas from natural gas for feedstock for a 4 bbl per day
capacity Fischer-Tropsch Unit. The various components making up the
demonstration facility will be skid mounted and mated together to be operated as
if a single "plant". Test runs will then be conducted for a minimum 90 day
period to determine optimum operating parameters for the overall process. The
Fischer-Tropsch process is a proven process, however, SynGen Technologies will
be using a proven hydrocarbon chain limiting catalyst supplied under license
from the Novocherkassk Plant of Synthetic Products near Rostov, Russia. SynGen
Technologies is of the opinion that operation of its SYNGEN/Fischer Tropsch
demonstration plant will allow for its technical personnel to gather data and
modify the process resulting in greater improved efficiencies and/or
operating parameters for the GTL process. SYNGEN expects a further 30 days
from the end of the test period will be required to compile test data and
prepare a report presenting results. Stone Canyon Canada has advised the
demonstration plant should be ready to commence testing in mid-2000.
(b) Phase Two Development
Second stage development will include the design, engineering and
construction of a 500 bbl per day SYNGEN reactor. Current budgets estimate the
total cost of this project to be approximately $500,000 US. The Registrant
intends to test the 500 bbl per day reactor in conjunction with a partner at an
overseas location as feed gas in North America is presently too costly. The
Registrant, through its affiliation with Stone Canyon Canada, will attempt to
obtain government assistance in Canada and Alberta to offset high costs of
feed gas should the reactor be developed in North America. Feed gas required
for the 500 bbl per day reactor is approximatley 5 million cubic feet per day.
At present, the cost per thousand cubic feet of gas in North America is
approximately US$2.00, which would result in a direct expense of US$10,000
per day for feed stock to process in the 500 bbl reactor. The Registrant
intends to operate the SYNGEN reactor for a minimum of 150 days which would
esult in total gas costs of US$1,500,000 at present price levels in North
America,therefore a review of alternative overseas locations where less costly
feed stock can be obtained for use with the test facility is ongoing. The
Registrant will not operate a Fischer Tropsch system with the 500 bbl per day
SYNGEN reactor in an attempt to keep development costs at a minimum. It is
anticipated that the reactor will take three months to design and four months to
construct depending on the test facility location.
c. Business of Stone Canyon Resources Inc. (Stone Canyon
Colorado)
Stone Canyon Colorado, the Registrant's wholly-owned subsidiary was
incorporated in Colorado on November 7, 1996, with the objective of acquiring
and developing oil and gas properties. On November 24, 1997 Stone Canyon
Colorado became a wholly-owned subsidiary of Automated Transfer Systems
Corporation. Stone Canyon Colorado holds varying interests in certain oil and
gas leases in Colorado and Wyoming and in the Province of Alberta, Canada.
Exploration has already begun on some properties with limited success.
1. Oil and Gas Properties
(a) Hell's Canyon Lease
Stone Canyon Colorado holds a 5% interest in 720 acres in Wyoming known
as the Hell's Canyon Lease. The Hell's Canyon lease is situated along the
northwest edge of the proven Minnelusa productive trend on the moderately
southwest dipping eastern flank of the Power River Basin in northeastern
Wyoming. The acreage is located in Sections 16 and 9, Township 52 North, Range
70 W6M, in Campbell County, Wyoming. The lease area purchased encompasses 1 and
1/8 Sections in total and has the spacing to provide three to five well sites.
In November 1997 Stone Canyon Colorado participated in the drilling of the
first exploratory well on the Hell's Canyon Lease. Geological information on
the prospect provided by the Operator, Bataa, Oil, Inc., indicated the lease to
be located in an area where the necessary Minnelusa sand traps were present.
Based on additional information compiled from an analysis of well data on The
Long Tree Field in a south adjoining section, the Duncan well NWNW of Section 16
and the ARCO well SWNE of Section 16, the Operator determined the optimal well
site location to be in the NENW of Section 16. Geological reports prepared for
the Operator indicated that should the first test well encounter in excess of 50
feet of Minnelusa sandstone then the resulting field could accommodate four to
five productive wells.
The Hell's Canyon State 21-16 test well was drilled to a total depth of 8,120
feet in mid November, 1997, targeting the Minnelusa formation. Upon reaching
total depth the well was logged and a drill stem test (DST) performed. Data
indicated the top of the Minnelusa sandstone to be structurally lower than
anticipated and log water saturations should the well to be wet. The DST
confirmed the log evaluation. The well was declared to be a dry hole and was
subsequently abandoned. Drilling and abandonment costs in respect to Stone
Canyon Colorado's interest totaled US $16,937.
The Registrant does not intend to participate in any further drilling on
this lease and the lease is being offered for sale.
(b) Rose Creek Lease
Stone Canyon Colorado holds a 20% interest in the Rose Creek Lease, which
is located 16 miles west of Meeteetse, Wyoming and 25 miles south of Cody,
Wyoming, encompassing all or part of 9 Sections in Townships 48 and 49 North,
Range 103, W6M for a total of 2,808 acres. The Rose Creek structure is
situated on the Northwest flank of the prolific oil producing Big Horn basin of
Wyoming where adjacent fields have made most of their production from the
Phosphoria and Tensleep formations. The Registrant participated in the drilling
of the first test well on this lease in April 1997. The operator, Bataa Oil,
Inc., situated the well site for the State 32-2 well on what was believed to
be the highest point of the northeast-southwest of the Phosphoria and
Tensleep formations at an optimal position of approximately 4,500 ft. This
seismic study confirmed the Tensleep formation to be structurally high with
the potential to produce several million barrels of oil. The first test well
was drilled to a total depth of 5,503 feet and was logged. The geological well\
report prepared by Subsurface Inc. indicated possible economic showings in both
the Phosphoria and Tensleep formations and it was determined to complete the
well. Attempts to complete encountered substantial water in the Tensleep zone
and a squeeze job was unsuccessful. Further attempts to complete the Upper and
Lower Phosphoria formations again encountered substantial water and were
unsuccessful. The Operator recommended a polymer shut off treatment that was
rejected by the joint venture partners and the well was declared to be a dry
hole in July 1997 and was subsequently abandoned. Stone Canyon Colorado
previously held a 15% interest in the Rose Creek leasees and acquired a further
5% interest subsequent to year end bringing its total interest to 20%. Such
further interest was obtained through the forefeiture of a lease interest by a
previous participant and acquired by Stone Canyon Colorado at no cost.
Total funds expended on the drilling, completion and abandonment of the State
23-2 well totaled US $82,500.00. The Registrant is participating in a
geological evaluation of the prospect to determine other potential drilling
targets. This evaluation will be undertaken during July/August 1999.
(c) Meadow Deep and D Sand Leases
In August 1996 Stone Canyon Colorado reached an agreement with several
parties to purchase a cumulative 50% interest in the Meadow Deep and D Sand
Development Leases located in the States of Wyoming and Colorado, which
encompass a total combined area of 5,162.5 acres. Under the agreements, Stone
Canyon Colorado was responsible to pay 100% of the drilling costs of the first
test well drilled in the Meadow Deep leases to earn its 50% after payout
interest.
The D Sand Leases were to be drilled on the basis of each respective party's
working interest percentage.
Stone Canyon Colorado acquired a 100% before payout working interest in
the Meadow Deep Prospect, subject to a 7.00% Ad Valorem and Severance Tax,
freehold royalty of 12.5% and gross overriding royalty of 5.0%. Stone Canyon's
interest in these leases is subject to a dispute with Bataa Oil, Inc. and
certain founding shareholders regarding representations made in connection with
the acquisition of these leases and operating costs since that time. (See
"LEGAL PROCEEDINGS" in Part II below)
Meadow Deep Prospect:
Based on information supplied by the operator, Bataa Oil, Inc., the Meadow
Deep Prospect is located in the Southwestern part of the Powder River Basin
within the former Meadow Creek North Production Unit in Sections 14, 25, 26, 34,
35 & 36, Township 42 North, Range 78 West in Johnston Country, Wyoming,
encompassing a total of 1,962.5 acres. The project operator, Bataa Oil, Inc.,
prepared a drilling recommendation with the Cretaceous First and Second Frontier
and the Pennsylvanian Tensleep formations at 6,500 and 9,500 feet respectively,
as the main objectives. The project consisted of an infill drill program on 40
acre sweet spots offsetting good wells. It was the intent of the Registrant
to participate in the drilling of one 9,000 foot test well to the Tensleep
zone to prove up a field with estimated potential reserves of 5 to 10 MMSTB.
A report prepared by G & H Production Company, LLC states: "In the Meadow
Deep Area only 3 wells have penetrated the Tensleep. However, the reserve
potential is much greater with potential in the 5 to 10 MMBO range." Initial
capital costs to drill and complete the wells were initally estimated by the
operator at $360,000 US. Further capital costs for remedial work overs and
eventual well abandonment and lease reclamation would be required at a future
date.
An Appraisal Report dated September 1, 1996 prepared by Citadel
Engineering Ltd., Petroleum Consultants, based on information supplied by the
operator, Bataa Oil, Inc., states, "Discovered in 1949 on a major structural
trend in the
Powder River Basin, the Greater Meadow Creek area has produced more than 40
MMSTB of oil, 80 BSCF of gas and 70 MMSTB of water. A review of available data
indicates infill and step out locations remain in the First Frontier and
Tensleep formations. Eleven (11) wells completed in the First Frontier have
produced 1.3 MMSTB of oil, 21.2 Bscf of gas and 30 MSTB of water. These lands
became available after the Federal government had them re-posted at public land
auction".
D Sand Prospect
Based on information supplied by the operator, Bataa Oil, Inc., the D Sand
Prospect is located in the Denver Julesberg Basin, Young Field in Morgan County,
Colorado in Sections 1,2, E/2 3, E/2 10, 11, 12, 13, 14, 15, E/2 22, 23 & 24,
Township 4 North, Range 58 West, encompassing a total of 3,200 acres. The
Registrant had planned to participate in the drilling of three (3) wells, one
(1) well in
fall 1998 and two (2) wells in 1999 as part of a step-out drilling program.
This field
extension program is based on 3-D seismic data and is targeting the D-Sand.
Initial capital costs to drill and complete the wells were estimated at $125,000
US. Further capital costs for remedial workovers and eventual well abandonment
and lease reclamation would be required at a future date. The following
information is extracted from an informational sheet on the D-Sand Prospect as
prepared for the operator, Bataa Oil, Inc., by Mr. D. Murphy, P.Eng.:
General Information:
Location: Denver Julesberg Basin
Formation: D-Sand (Channel Sand)
Depth: 4,000 to 6,500 ft.
Number of wells: 2-12 per field
Geological Information:
Height: 10 to 30 ft.
Porosity: 10 to 18%
Permeability: 50 to 200 md
Initial Pressure: 2,000 to 2,500 psi
The Registrant hoped to prove up a field with a reserve potential of 250,000
STB to 1,500,000 STB (primary recovery) and 1,000 to 7,000 MMCF gas. Stone
Canyon Colorado owns a 50% working interest, which is subject to a 7.00% Ad
Valorem and Severance Tax, Freehold royalty of 12.5% and gross overriding
royalty (gorr) of 5.0% in the D Sand Leases.
Based on information supplied by the operator, Bataa Oil, Inc., the September
1, 1996 Appraisal Report prepared for Stone Canyon Colorado by Citadel
Engineering Ltd., Petroleum Consultants, includes a summary table, as set forth
below, reflecting to a 50% interest in the Meadow Deep and D Sand Leases.
Appraised Report (Constant Dollar Values)
Cash-flow in Thousands of Dollars (U.S.)
<TABLE>
DISCOUNTED
Working Interest Net
Reserves
Oil Gas Oil Gas
Oil MMscf MSTB MSTB Undisc. 10% 12% 15% 20%
(1) (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved 202 1,213 167 999 1,230 738 673 589 477
Undeveloped
Land 275 275 275 275 275
5,163 acres
TOTAL 202 1,213 167 999 1,505 1,013 948 864 752
(1) Sales gas volume measured at 14.65 psia and 60 F
</TABLE>
To date the Registrant has not expended any capital on the exploration or
development of these leases and the Registrant does not intend to pursue
development of these leases unless and until the ownership and litigation
issues can be resolved. (See PART III, ITEM 2 "LEGAL PROCEEDINGS".)
(d) Wilson Creek Prospect
Stone Canyon Colorado executed a farm-out agreement effective March, 1998
to earn an interest in certain lands in the Wilson Creek Area, Alberta,
Canada. The land subject to the above farmout agreement is located in Township
43, Range 5,W5M, and encompasses 640 acres with the P&NG rights covering
multiple geological zones including the Banff, Pekisko, Ellerslie, Glauconite,
Ostracod, Viking, Cardium and Belly River.
Under the terms of the agreement Stone Canyon Colorado was required to pay
100% of the drilling and completion costs attributable to a 33.57% interest in
the first test well drilled on the land to earn their working interest. Stone
Canyon Colorado committed to drill a test well to a total depth of 2,250 metres
to earn a 33.57% interest in the well Before Pay Out ("BPO"). The first test
well was drilled in March of 1998. A high-risk exploration opportunity with
excellent upside potential, the Wilson Creek 14-34 well had promising logs
and DST's and Stone Canyon Colorado participated in the completion of the
well in September 1998. Completion attempts produced flow rates below those
anticipated by the Operator and therefore the Operator has suspended the well
for further review. The Board of Directors are presently assessing further
development opportunities on this lease prior to making any additional
development decisions with respect to the remaining lease land or further
re-works to increase existing production from the initial test well.
Should the well produce in paying quantities, Stone Canyon Colorado will
receive 100% of the revenues attributable to the 33.57% bpo interest, subject
to gross over-riding royalties, until payout. Upon payout Stone Canyon
Colorado will revert to a total 16.79% interest in the well. The lease has
surface to basement P&NG rights and the spacing for a single gas well and three
oil wells.
Stone Canyon Colorado and the Registrant executed an agreement with
Revival Resources Ltd. effective March 22, 1999, to acquire their 22.38% APO
interest in the Wilson Creek Prospect as well as their respective interests in
certain other development leases located in the Province of Alberta. Under the
terms of the agreement, the Registrant will issue a total of 63,801 shares of
common stock a deemed value of US$0.53125 per share for total value of
US$33,895 in full and final payment for the leases. As of the date of this
filing the shares had been allocated but not yet issued.
Other Requested Information
(1)-(2) Distribution methods; Statutes of publicly announced products- None.
The Registrant is currently in the development phase of its technologies
products.
(3) Competitive Conditions. The oil and gas industry is highly competitive.
The Registrant faces competition from large numbers of oil and gas companies,
public and private drilling programs and major oil companies engaged in the
acquisition, exploration, development and production of hydrocarbons in all
areas in which it may attempt to operate in the future. Many of the programs and
companies so engaged possess greater financial and personnel resources than the
Registrant and therefore have greater leverage to use in developing technologies
establishing plants and markets, acquiring prospects, hiring personnel and
marketing. Accordingly, a high degree of competition in these areas is expected
to continue. The markets for crude oil and natural gas production have increased
substantially in recent years. Oil prices have stabilized generally, but the
world market for crude oil should be considered unstable due to uncertainty in
the Middle East. There is considerable uncertainty as to future production
levels of major oil producing countries. Significant increases in production
could create additional downward pressure on the price of oil. A precipitous
drop in oil & natural gas prices in the future market occurred in January 1998,
but the Registrant does not expect to be adversely affected further.
(4) Sources of raw materials and names of technologies - None. The
Registrant is currently in the development phase of its technologies and
products. The Registrant has executed a license agreement with the Novocherkassk
Plant of Synthetic Products in Rostov, Russia, to utilize its proprietary
catalyst. The Registrant will purchase the catalyst as required.
(5) Dependence on a Single Customer or a Few Customers - None. The
Registrant has no customers at this time.
(6) Patents - The Registrant, through its subsidiaries, has the following
patents and patent applications on file in regards to the Technologies (all of
which have been assigned to one of its subsidiaries):
1. French Patent Application No. 97-10989: A CZERNICHOWSKI,
P. CZERNICHOWSKI "Assistance Electrique D'Oxydation Partelle d'Hydrocarbures
Legers Par L'Oxygene". Filing Date 01.09.97 This application was accepted on
October 20, 1997.
2. French Patent Application No. 97-00364: A CZERNICHOWSKI,
P. CZERNICHOWSKI, "Conversion D'Hydrocarbures Assistee par Les Arcs
Electrirques Gissants En Presence De La Vapeur D'Eau Et/ou De Gaz Carbonique".
Filing Date: 13.01.97
3. USA and PCT Patent Applications Nos. US5371-00100 and
PCT/US98/00393: A CZERNICHOWSKI, P. CZERNICHOWSKI, "Conversion of
hydrocarbons assisted by gliding electric arcs in the presence of water vapor
and/or carbon dioxide". Filing date: 12.01.98
4. USA and PCT Patent Applications Nos US5407-00500 and
PCT/US98M8027: A CZERNICHOWSKI, P. CZERNICHOWSKI, "Electrically assisted
partial oxidation of light hydrocarbons by oxygen". Filing Date: 23.08.98
5. French Patent Application No. 981283: P JORGENSEN,
"Conversion profonde jumelant la demetallisation et la conversion de bruts,
residus ou huiles lourdes en liquides legers, a l'aide de composes oxygens purs
ou impurs (H20, CO2, CO accompangnes de H2, N2 SH2 etc)". Filing date 16.10.98
(7)-(8) Need for Governmental Approval; Government Regulations - The
Registrant at this time is unaware of any governmental laws, rules or
regulations that are applicable to its operations or those of its subsidiaries.
The registrant is aware that in order to commence construction and operation of
demonstration plants for the technologies in the Province of Alberta, Canada,
certain approvals from the Alberta Energy Utility Board and other Alberta
regulatory bodies will be necessary. The Registrant expects that should it
determine to construct the plants in any jurisdiction that there will be
governmental laws, rules or regulations with which the Registrant must comply.
(9) Registrant Sponsored Research and Development
(a) Since the acquisition of the GTL Technology in May 1998, the
Registrant has expended $478,859 to the quarter ended March 31, 1999 in the
development thereof in consulting fees and expenses directly related to the
"prove-up" of the GTL Technology.
(b) Since its acquisition in January 1999, the Registrant has expended
$100,121 to the quarter ended March 31, 1999 in the further research and
development of the CPJ Technology.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant has no ongoing primary income source at this time. Capital
from equity issues or borrowings is required to fund future operations.
During the period ended December 31, 1997, the Registrant raised $33,000.00
from its initial placement of common stock. Stone Canyon Colorado, the
Registrant's wholly owned subsidiary, had debt on its balance sheet of $453,916
which was due and payable to Stone Canyon Canada prior to the acquisition of
Stone Canyon Colorado by the Registrant. Subject to the share exchange
agreement between the Registrant and Stone Canyon Colorado, the Registrant
exchanged a total of 2,901,007 shares of its common stock on a one for one basis
with Stone Canyon Colorado. In addition, the Registrant retired the loan
payable by Stone Canyon Colorado to Stone Canyon Canada through the issue of
4,539,162 shares of common stock at the time of the acquisition.
During the year ended December 31, 1998, the Registrant raised $175,000
from equity private placements and issued a total of 10,000,000 shares of common
stock at a deemed value of $0.10 per share ($1,000,000) subject to the terms
of a share exchange agreement between the Registrant and Laxarco, whereby the
Registrant acquired 75% of the issued and outstanding shares of Carbon, the
holder of a 100% interest in and to a patented and proprietary gas-to-liquids
technology. Subsequent to the year ended December 31, 1998, and during the
quarter ended March 31, 1999 the Registrant raised an additional $595,157 from
equity private placements completed under a Regulation D, Rule 504 offering.
In addition, the Registrant entered into an agreement with Stone Canyon
Canada, an Alberta corporation and an affiliate of the Registrant, whereby
Stone Canyon Canada is required to fund the design and construction of a 4 bbl
per day demonstration facility to test SynGen Technologies' patented GTL process
in return for the Canadian licensing and marketing rights to the technology. To
December 31,1998 the Registrant and its subsidiaries had expended a total of
$437,435 in relation to the development of the GTL technology and have invoiced
Stone Canyon Canada for reimbursement of applicable expenses totaling $370,799
(inclusive of a surcharge of 2.5% on all applicable charges for management of
the accounts) in respect of the 4 bbl/day demonstration facility. To December
31, 1998 the Registrant had received a total of $88,448 in reduction of this
account receivable. These 4 bbl/day project expense amounts are recorded as
project income on the Registrant's audited financial statements to the year
ended December 31, 1998. All other amounts expended in relation to the
development of the GTL technology are recorded as oil technology acquisition
costs on the balance sheet. Subsequent to the year ended December 31,
1998 and during the quarter ended March 31, 1999 the Registrant expended an
additional $43,962 on development of the GTL technology.
Subsequent to the year ended December 31, 1998 and pursuant to the
acquisition of Lanisco Holdings Limited effective January 6, 1999 the Registrant
entered into an option agreement January 8, 1999 with Texas T Petroleum Ltd., a
Colorado corporation, whereby the Registrant received payment of $100,000 in
consideration for the granting of an option to Texas T Petroleum Ltd. whereby
Texas T Petroleum would expend an additional $100,000 towards the
re-construction of a heavy oil upgrading pilot plant in Orleans France, to earn
the right to negotiate to acquire a 50% interest in and to the heavy oil
upgrading technology. The option consideration received is recorded as income
on the Registrant's financial statements to March 31, 1999. The Registrant
expended option funds received to acquire 1,000,000 Units of Texas T
Petroleum Ltd. at $0.10 per Unit effective January 8, 1999 which amount is
recorded as an investment on the balance sheet to March 31,1999. As of March
31, 1999 the Registrant and its subsidiaries had expended a total of $101,121
on development of the heavy oil upgrading technology. As at the quarter
ended March 31, 1999 total of $65,470 had been received from Texas T Petroleum
Ltd. in relation to invoices forwarded from the Registrant for reimbursement
in relation to the re-construction of the heavy oil upgrading facility.
Results of Operations
During its initial period of operations ended December 31, 1997, the
Registrant purchased certain exploration oil and gas leases at a total cost of
$458,080. These leases were development prospects and no revenue was generated
during this initial period. The Registrant also expended a total of $67,016 in
general and administrative costs to the period ended December 31, 1997. The
majority of the administrative costs were paid to computer consultants and
former directors of the Registrant in relation to the initial project of the
Registrant involving the provision to ATM customers of a solution for
automated teller machines and electronic transfer processing.
During the year ended December 31, 1997, the Registrant expended
approximately $99,962 on exploratory drilling on two of the US leases which were
subsequently declared dry holes. During the most recently completed fiscal
year, the Registrant was invoiced a total of $229,859 for drilling and
completion charges on development of a Canadian lease. The Registrant expended
$90,427 during the fiscal year ended December 31, 1998 in relation to such
invoices. There was no further reduction to the amount outstanding in relation
to these invoices to March 31, 1999. No funds have been expended on the further
development of the Registrant's oil and gas leases to the quarter ended March
31, 1999.
In May 1998, the Registrant acquired a seventy-five percent (75%) interest in
Carbon, a Cyprus corporation, through a share exchange agreement which
resulted in the Registrant issuing a total of 10 million shares of common stock
at a deemed value of $0.10 per share. In June 1999, the Registrant acquired the
remaining twenty-five percent (25%) of Carbon in exchange for the issue of an
additional 3 million shares of common stock at a deemed value of $0.10 per
share. The total of 13 million shares issued in connection with the acquisition
of Carbon are currently being held in escrow pending the Technologies being
proven to be commercially viable. Neither of the two technologies currently
under development by the Registrant and its subsidiaries SynGen Technologies
Limited and Carbon, have been proven commercially viable as yet. All or a
portion of the 13 million shares issued for the acquisition of the two
technologies are subject to verification of commercial viability.
Subsequent to the acquisition and to the quarter ended March 31, 1999, the
Registrant expended $478,859 on research and development related to the gas-to-
liquids Technology. It is expected that significant expenditures will be
incurred during the next nine to twelve months to prove the efficacy of the
gas-to-liquids Technology. All expenses related to the development of the 4 bbl
per day demonstration facility will be incurred by Stone Canyon Canada in
return for the Canadian marketing and licensing rights to the gas-to-liquids
Technology. The Registrant anticipates the cost for the design, engineering
and construction of such facility to be approximately US$2 million. However,
the Registrant will continue to be responsible for, and need to locate
funding to the meet the costs of ongoing development of the gas-to-liquids
technology.
The Registrant and Texas T Petroleum Ltd. have entered into a series of
transactions whereby Texas T will fund a significant portion of the costs
associated with the development of the CPJ Technology. The Registrant
intends to transform its current 1/2 bbl per day upgrading facility into a
500-1,000 bbl per day unit. The cost of engineering and developing the
"scale up" of the current unit to a 500-1,000 bbl per day unit is anticipated
to be $500,000 and the cost of constructing such a facility will be
approximately $2-3 million.
The Registrant's arrangements with Texas T have allowed it to bring the CPJ
Technology to its current level of development and will meet a significant
portion of the costs described in the preceding paragraph. In total, Texas T is
obligated to provide the Registrant (or its subsidiaries or assigns) with US$1
million in cash and 3 million units of Texas T. Each Texas T unit consists
of one (1) share of common stock and a warrant to purchase one (1) share of
common stock; 1 million of the warrants are priced at US$0.50 per share and the
other 2 million warrants are priced at US$1.00 per share.
The foregoing arrangements were the result of verbal and written agreements
between the Registrant and Texas T. January 8, 1999, the Registrant granted
Texas T the option to acquire fifty percent (50%) of the Registrant's interest
in the CPJ Technology. In exchange for such option, Texas T paid US$100,000
towards the development of the CPJ Technology and a subsidiary of the Registrant
acquired 1 million Units of Texas T, with each Unit priced at $0.10. The
Registrant and Texas T then executed a share exchange agreement dated as of June
26, 1999, whereby Texas T acquired from the Registrant fifty percent (50%) of
the issued and organized shares of Carbon (which at that time was owned 100% by
the Registrant) and thereby a 50% interest in and to the proprietary CPJ
Process. The consideration for such interest is an additional US$900,000 and 2
million Texas T Units. The shares of Carbon to be transferred to Texas T
under such agreement, as well as the 2 million Texas T Units, are currently
being held in escrow pending fulfillment of Texas T's $900,000 funding
obligation.
The Registrant expects additional development costs, once Texas T has
fulfilled its obligation, of approximately $1.5-$2.5 million which will be
divided equally among the two shareholders of Carbon (i.e. the Registrant and
Texas T). The Registrant expects to be funded by potential licensees, joint
venture partners and/or other financing vehicles.
Cash Flows
The Registrant and its subsidiaries have achieved no revenues from operations
in either 1997 or 1998. Income was generated to the year ended December 31,
1998 by the reimbursement of GTL project expenses by Stone Canyon Canada
totaling $370,799 of which $88,448 has been received and $282,351 remains an
outstanding account receivable to March 31, 1999. In addition, the Registrant
received $100,000 in option consideration to March 31, 1999 from Texas T
Petroleum Ltd. in relation to agreements reached January 8, 1999 in respect of
the development of the CPJ Process and a further $454 in consulting fees. The
Registrant and its subsidiaries do not expect to generate project revenues
during the remainder of the current fiscal year to December 31, 1999.
Therefore, the Registrant and its subsidiaries are dependent upon private
placements, loans and/or joint venture arrangements, such as the separate
agreements recently negotiated with Stone Canyon Canada and Texas T Petroleum
Ltd. to fund future operations until it develops sufficient revenue from its
assets. Current budgets project revenues to commence in the year 2000.
If such sources of funds are not located, the Registrant will not be able to
meet its objectives and may be forced to sell assets.
Changes in Financial Position
During 1997, the Registrant's current and long term assets increased by
approximately $487,000 primarily as a result of the acquisition of certain oil
and gas properties by Stone Canyon Colorado, the Registrant's wholly owned
subsidiary acquired as a result of a share exchange effective November 24, 1997.
At the year ended December 31, 1997 liabilities totaled approximately $38,000
and consisted of outstanding accounts due to creditors.
During 1998, the Registrant's assets increased by approximately $1.3 million
primarily due to the acquisition of 75% of Carbon through the issue of 10
million shares at a deemed value of $0.10 per share ($1,000,000). Current assets
increased primarily as a result of an increase in accounts receivable of
$282,351 reflecting income realized from the invoicing of project expenses with
respect to the GTL technology to a third party for reimbursement. While the
balance sheet reflects a reduction in the Oil Lease Acquisition account as a
result of $171,019 in lease development costs expended during the previous
period being expensed through the operating accounts, the Registrant was
invoiced $229,859 (and expended a total of $90,427 with respect to such
invoice) on development of its Alberta, Canada leases to the year ended
December 31, 1998. To the quarter ended March 31, 1999 the Registrant's
assets increased further with the addition of $100,000 in option
consideration received and invested in the acquisition of share capital and the
expenditure of $100,121 on development of the CPJ Process and $43,962 on the
development of the GTL technology.
Current liabilities at December 31, 1998 amounted to $834,965 and consisted
primarily of loans payable with respect to funds advanced for general working
capital by various related and un-related parties, and outstanding accounts due
to creditors of the Registrant and its subsidiaries. Of the outstanding loans
payable at December 31, 1998, $156,500 was due to a related party with a
director and officer in common to the Registrant and its subsidiaries; $116,396
was due to various unrelated, arm's length parties and $67,309 was due to a
Colorado corporation in respect of a refundable deposit received in respect of
the development of the GTL technology. Of the outstanding accounts due to
creditors, there remained upaid a total of $153,838 in respect of project
expenses for the development of the GTL technology. (This amount is also
reflected on the balance sheet as an account receivable due from Stone Canyon
Canada in respect of their September 30, 1998 agreement to fund all project
expenses in relation to the development of the GTL technology and construction
of the 4 bbl per day demonstration facility.) The remaining balance in accounts
payable of $340,922 reflects amounts due to approximately 30 creditors for
various aspects of the general operations of the Registrant and its subsidiaries
including management services, consulting services, investor relations
activities, advertising and promotion, secretarial services, office expense,
rent, legal, accounting and transfer services and various other general fees
and charges. To the subsequent quarter ended March 31, 1999, the
Registrant's liabilities decreased as a result of the conversion of certain
creditors' outstanding loans to capital shares in the aggregate amount of
$411,311.
Shareholders equity at December 31, 1997 was approximately $449,000
inclusive of a loss from operations of $67,016. As of December 31, 1998 the
shareholders equity had increased to $918,059 inclusive of an accumulated loss
from operations of $772,854. Total issued and outstanding share capital as of
the year ended December 31, 1997 was 9,989,669 common shares as compared to a
total of 20,332,526 common shares as of December 31, 1998. As at the subsequent
quarter ended March 31, 1999, total issued and outstanding share capital was
21,522,840 common shares with total shareholders' equity increasing to
$1,513,236, inclusive of a small gain from operations totaling $20.
The Registrant will require additional equity loans to meet its primary
business goal of bringing its development technologies to the market.
Comparison of Results of Operations for the Fiscal Periods ended December
31, 1997 and 1998 and subsequent quarter ended March 31, 1999.
The Registrant had no operating revenues to the year ended December 31,
1997. For the year ended December 31, 1998 the Registrant realized revenues
from project expenses reimbursed in respect of the development of the GTL
technology of $370,799 and an additional $100,454 in option and consulting
consideration to the quarter ended March 31, 1999.
The Registrant incurred operating losses of $67,016 in 1997 and accumulated
losses of $772,854 in 1998, which resulted in losses per share of $0.02 and
$0.05 respectively. There was a small gain to the quarter ended March 31, 1999
totaling $20. However, the Registrant anticipates the fiscal year ended December
31, 1999 will continue to reflect losses and minimal revenues. Current budgets
and project time lines project revenues from licensing fees as a result of the
marketing of one or both of the Registrant's development technologies will be
generated during the year ending December 31, 2000.
Liquidity
The Registrant expects that its need for liquidity will increase in 1999 and
2000 in anticipation of expending funds to develop its heavy oil upgrading and
gas-to-liquids technologies.
Short Term
On a short term basis the Registrant does not generate any revenue to cover
operations. The Registrant will continue to be dependent on equity funds
raised, joint venture arrangements and/or loan proceeds to meet current and
recurring liabilities, general working capital and technology development
expenses until such time as the Registrant is generating net annual revenues.
The Registrant's current liabilities of $834,965 exceeded current assets
of $309,253 as at the year ended December 31, 1998 by $525,712. A total of
$353,000 of the current liabilities was owed to various individuals with respect
to funding the ongoing development of the technology and general working
capital. These individuals agreed to convert these short term liabilities into
equity during the first quarter of fiscal 1999 and as at March 31, 1999 current
liabilities exceeded current assets by $334,736. Certain amounts totaling
$65,470 presently included in the current liabilities as an investor deposit
as at the quarter ended March 31, 1999 will be re-allocated to project income
upon receipt of total funds of $100,000, fulfilling the terms of the option
agreement.
Long Term
Presently on a long term basis, the Registrant has no fixed assets.
Asset value will be dependant on the successful development of the two
proprietary technologies and proof of their commercial viability.
As mentioned above the Registrant does not presently generate any ongoing
revenue. It is anticipated that operations will have minimal net cash flow to
the fiscal year ended December 31, 1999. The Registrant will remain reliant on
the successful development and marketing of the heavy oil upgrading process and
gas-to-liquids process for possibility of future income.
Capital Resources
The primary capital resources of the Registrant are its stock which may be
illiquid because of resale restrictions and/or as a result of unproven
development technologies encompassing the major assets of the Registrant.
As of the date of this filing the Registrant and its subsidiaries had material
commitments within the next year of approximately $3 million. These
commitments are either to finance and/or to arrange to have financed, continuing
research and development relating to its technology. Certain of these committed
expenditures have been financed by divestiture of certain marketing and
licensing rights and/or sale of an interest in and to one or both of the
Registrant's proprietary processes.
ITEM 3. DESCRIPTIONS OF PROPERTIES
Principal Plants and Other Property
(i) The Registrant's property holdings are as follows:
(1) Suite 210 214 11th Avenue, S.E.
Calgary, Canada T2G 0X8
The Registrant subleases this property from CMJ Consulting,
Inc. (see "CERTAIN RELATIONSHIPS AND RELATED
PARTY TRANSACTIONS") at the rate of $2,000 per
month; This property includes 1,200 square feet and serves as
the Registrant's administrative headquarters.
(2) 14 Rue Jean Moulin
Orleans, France
The Registrant rents this property for $1,038 US per
month. This property includes 2,000 square feet and the Registrant
uses these facilities for its research laboratories where it tests
and develops its CPJ and GTL Technologies.
(3) 5215 Spanish Oak
Houston, Texas 77066
This space is made available to the Registrant in
connection with its consulting agreements with Glidarc Technologies.
The Registrant uses these facilities for its project management and
oversight of the research and development activities.
(4) 8 Bellevue Road
London, England SW177EG
This space is made available to the Registrant in
connection with its consulting agreements with Dow's Port Technical
Services. The Registrant uses this property in conjunction with the
activities at its Houston offices and Orleans testing facilities.
Oil and Gas Producing Activities
See Item 1, "DESCRIPTION OF BUSINESS - The
Registrant's Business-Business of Carbon Canyon
Resources, Inc - Oil and Gas Properties".
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AS OF MAY 30, 1999
(a) Beneficial owners of five percent (5%) or greater, of the Registrant's
Common Stock based upon 21,874,526 shares issued and outstanding as at June 8,
1999. (This figure does not include 1,828,000 unexercised share purchase
warrants.) No Preferred Stock is outstanding as of the date hereof
<TABLE>
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Owner Class
<S> <C> <C> <C>
Common shares Laxarco Holding Limited 10,000,000* 46%
2 Sofouli Street, Nicosia
Cyprus 1522
Common Shares Stone Canyon Canada 1,980,355** 9%
Suite 210 - 214 11th
Avenue SE, Calgary,
Alberta T2G 0X8
</TABLE>
* This figure does not include 3,000,000 shares reserved for issue but not yet
issued as of the date of this filing
** This figure does not include 210,000 unexercised share purchase warrants
(b) The following sets forth information with respect to the Registrant's
Common Stock beneficially owned by each Officer and Director, and by all
Directors and Officers as a group.
<TABLE>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Ownership
<S> <C> <C> <C>
Common Thomas Cooley- 500,000 shares owned 2.1%
Director and Officer directly
of Carbon Resources
Limited
Common Thomas Cooley 125,000 shares owned .53%
by Mr. Cooley's wife
Caroly Cooley
Common Cameron Haworth 7,000 shares owned
directly .03%
Common James Shone 500 shares owned .002%
Director of Synergy directly
Technologies
Corporation and
Stone Canyon Colorado
Inc.
Common Jacqueline Danforth 68,500 shares owned 0.3%
Director and Officer directly
of Synergy Technologies
Corporation, Carbon
Resources Limited,
SynGen Technologies
Limited and Stone
Canyon Colorado
Common Argonaut Management Group 114,857 shares 0.5%
Beneficial owner:
Jacqueline Danforth
who is the sole
shareholder, officer
and director
Common shares held 815,857 shares 3.44%
by directors and
officers as a group
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Directors and Officers of the Registrant and its Subsidiaries
a. Management of the Registrant
The following table furnishes the information concerning the directors of the
Registrant as of June 31, 1999. The directors of the Registrant are elected
every year and serve until their successors are elected and qualify.
<TABLE>
<S> <C> <C> <C>
Name Age Title Term of Service
Cameron Haworth 39 President, Director 12/97 to Present
James Shone 25 Director 12/97 to Present
Jacqueline Danforth 27 Sec./Treasurer, Director 12/97 to Present
</TABLE>
Mr. Cameron Haworth, B.Sc. President & Director
Mr. Haworth who has been with the Registrant since December 1997, obtained his
B.Sc. in December 1987 from the University of Wyoming and a Degree in Petroleum
Technology from SAIT in 1984. Mr. Haworth is currently employed by Schlumberger
(formerly REDA Services) as the sales manager. Mr. Haworth has several years of
experience in the oil and gas industry supervising and coordinating the
marketing, sales and field services and order initiation for the Canadian
market. Mr. Haworth has extensive experience in preparing business plans and
presentation material. Mr. Haworth has been an officer and director of Stone
Canyon Canada from July 1997 to present and an officer and director of Stone
Canyon Colorado from January 1998 to present.
Ms. Jacqueline Danforth - Secretary/Treasurer, Director
Ms. Danforth, has been an officer of the Registrant since December 1, 1997,
has been a director of Carbon since May 22, 1998 and a director of SynGen
Technologies Limited since June 25, 1999. Ms. Danforth has spent the past
several years in the employ of publicly traded companies. Ms. Danforth provides
contract administrative and accounting services to these companies and is
familiar with all aspects of day to day administration including public
reporting requirements under Canadian regulatory rules.
Ms. Danforth has recently expanded her duties to include a stronger
focus on the oil & gas sector and has attended numerous courses and seminars
offered by CAPL and the University of Calgary to familiarize herself with the
industry. Ms. Danforth has been an officer of Stone Canada Colorado from
November 14, 1996 to date. Ms. Danforth is also a nominee holder of
thirty-three percent (33%) of the outstanding shares of CMJ Consulting Ltd.
which has management and administrative contracts with the Registrant. Ms.
Danforth is currently completing her CGA.
James Shone, B.Comm., Director Mr. Shone has been with the Registrant since
December 1997, is currently employed by the Business Development Bank of Canada
(BDC) in the finance department and is serving his first term on the Board of
a publicly trading Company. Previously employed with the Trust Company of the
Bank of Montreal as a client service officer, Mr. Shone is fully versed in the
review and assessment of the financial operations of corporate operations. Mr.
Shone takes an active role in the management of the Company's financial
operations and annual corporate expenditures. Mr. Shone is familiar with
financial statement review and preparation, budgeting and financial
forecasting. Mr. Shone is a graduate of McGill University. Mr. Shone has
been a director of Stone Canyon Colorado since January 1998.
b. Management of Stone Canyon Colorado (a wholly-owned
subsidiary of the Registrant)
Directors and Officers of Stone Canyon Colorado are as follows:
<TABLE>
<S> <C> <C> <C>
Name Age Title Term of Service
Cameron Haworth 39 President, Director 1/98 to Present
James Shone 25 Director 1/98 to Present
Jacqueline Danforth 27 Secretary/Treasure, Director 1/98 to Present
</TABLE>
For information on Cameron Haworth, Jacqueline Danforth and James Shone,
see "Management of Synergy Technologies Corporation", above.
c. Management of Carbon Resources Limited
Directors and Officers of Carbon Resources Limited are as follows:
<TABLE>
<S> <C> <C> <C>
Name Age Title Term of Service
Thomas E. Cooley 58 President, Director 5/98 to Present
Jacqueline Danforth 27 Director 5/98 to Present
Dema Consultants Ltd. -- Secretary 5/98 to Present
</TABLE>
Thomas Cooley, P.E.- Mr. Cooley has been the President and director of Carbon
since May 1998 and has been a director of SynGen Technologies Limited since June
25,1999. Mr. Cooley is the former President of Kvaerner Membrane Systems, a
company which supplies polymeric membrane based systems worldwide for CO2
removal. A well regarded process engineer, he pioneered the use of membranes
for natural gas treating and has been active in the field for over 20 years.
Mr. Cooley received his B.S. in Chemical Engineering from Rice University and is
a registered P.E. in both Texas and Alberta. He is often referred to as the
"father of natural gas treating membranes".
Mr. Cooley holds three U.S. patents. Mr. Cooley is an officer and director of
Media Dreams, dba Glidarc Technologies (see " CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS").
Dema Consultants Ltd., a Cyprus corporation, is the registered secretary of
Carbon.
For information on Jacqueline Danforth, see "Management of Synergy Technologies
Corporation", above.
d. Management of SynGen Technologies Limited
Directors and Officers of SynGen Technologies Limited are as follows:
<TABLE>
<S> <C> <C> <C>
Name: Age Title Term of Service
Jaqueline Danforth 27 Director 6/25/99 to Present
Thomas E. Cooley 58 Director 6/25/99 to Present
Dema Consultants Ltd. -- Secretary 6/25/99 - Present
</TABLE>
For information on Ms. Danforth, see "-Management of Synergy
Technologies Corporation" above; for information on Mr. Cooley, see "-
Management of Carbon Resources Limited" above.
The Board of Directors of SynGen has no nominating, auditing or
compensation committee.
The term of office for each director is one (1) year, or until his/her
successor is elected at the Registrant's annual meeting and qualified. The term
of office for each officer of the Registrant is at the pleasure of the board of
directors.
Identification of Significant Employees
Dr. Albin Czernichowski Dr. Czernichowski, who is the co-inventor of the
SYNGEN process, currently teaches and performs his research as the 1st class
professor at the University of Orleans (France). A graduate in Chemical
Engineering at the Technical University of Wroclaw (Poland), he also received
his Ph.D. and Habilitation grades in Physical Chemistry and then the full
professor position (1979). For almost 40 years he has been involved in different
fields of Plasma Chemistry.
Supervisor of 21 Master's and 18 Ph.D theses, he is the author of 6 monographs
and textbooks, 63 papers published in scientific journals, 155 other papers
(conferences,communications), 30 patents and more than 62 reports. For the past
10 years he has been developing plasma reactors for hydrocarbon conversion
processes such as heavy hydrocarbons cracking and hydrogenation, light
hydrocarbons cracking, reforming or partial oxidation in order to produce H2,
CO, C2H2, C2H4 as well as the hydrogen sulfide destruction and its full or
partial alorization for oil & gas industry and geothermy. Work related to
environmental clean up has included such applications as VOC abatement in flue
gases, flue-gas SOX or NOX reduction to elements, soot after-burning, and
CO2 dissociation.
Robert W. Cooley Mr. Cooley who is currently involved in project management
for SynGen Technologies and Carbon holds a degree in Business Administration
from Texas A & M University. Since his graduation in 1972, Mr. Cooley has been
employed with a number of major manufacturers related to the oil and gas
industry, holding positions in marketing, sales and project mangement. Mr.
Cooley's most recent employment was in the capacity of Manager, Projects, for
Kvaerner Membrane Systems from 1994 to 1998 during which time his
responsibilities included overseeing of engineering design and project
management.
John D. Bruce Mr. Bruce, who provides marketing and corporate development
services to SynGen Technologies and Carbon, is a senior consulting engineer
with Dow's Port Technical Services Limited, a registered Channel Island company
providing business development, oil and gas related technical services and
support to the petroleum industry worldwide. Since graduation from Montana
State University, his experience includes project or engineering and management
roles with Refinery Engineering, C&I Girdler, Delta Engineering in Houston and
London, and C.G. Doris Engineering in Paris. Mr. Bruce was instrumental in
identifying the potential of the plasma technology of Dr. Czernichowski. Mr.
Bruce assisted in funding the ongoing R&D and coordinated the technical liaisons
leading to the SYNGEN reactor. He currently maintains an office in London, U.K.
Family Relationships
Robert Cooley is the brother of Thomas Cooley.
ITEM 6. EXECUTIVE COMPENSATION
Cash Compensation
Compensation paid by the Registrant for all services provided during the
fiscal year ended December 31, 1998, (1) to each of the Registrant's five most
highly compensated executive officers whose cash compensation exceeded
$60,000 and (2) to all officers as a group is set forth below under directors.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
----------------------------------------
Annual Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Principal Year Salary($) Bonus($) Other Annual Restricted Securities LTIP Other
Position Compensation Stock Award($) Underlying
Options/SARS
Jacqueline Danforth
Secretary/Treasurer
and Director 1997 0 0 0 0 0 0 0
Jacqueline Danforth
Secretary/Treasurer
and Director 1998 0 0 0 0 0 0 0
Jacqueline Danforth
Secretary/Treasurer
and Director 1999 0 0 0 0 0 0 0
Cameron Haworth
President/Director 1997 0 0 0 0 0 0 0
Cameron Haworth
President/Director 1998 0 0 0 0 0 0 0
Cameron Haworth
President/Director 1999 0 0 0 0 0 0 0
Thomas Cooley,
President of Carbon
Resources Limited 1998 81,666.62* 0 0 0 0 0 $932
Thomas Cooley,
President of Carbon
Resources Limited 1999 45,120.00 0 0 0 0 0 0
* There remained an unpaid balance due to Mr. Cooley of $23,333.32 as of
December 31, 1998 which was settled in full prior to the date of this filing.
</TABLE>
Compensation Pursuant to Management Contracts.
Ms. Danforth receives $250.00 per month for administrative services. Mr.
Cooley receives compensation for his services through a consulting agreement
between the Registrant and Glidarc Technologies (see " - CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS").
Other Compensation - None; no stock appreciation rights or warrants
exist.
Compensation of Directors
The Registrant did not pay any compensation services provided as directors
during the fiscal year ended December 31, 1998.
Termination of Employment and Change of Control Arrangements
None.
Key Employees Incentive Stock Option Plan
None.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Effective May 20, 1998, Stone Canyon Canada, a corporation of which Ms.
Danforth and Mr. Haworth are each a director and officer, of which Ms. Danforth
is a greater than 5% shareholder, acquired 200,000 Units of the Registrant,
pursuant to an offering pursuant to Regulation S under the Securities Act of
1933.
The Units were acquired at $0.50 per Unit each Unit consisting of one common
share and one share purchase warrant entitling the holder to acquire one
additional share of common stock.
Effective July 2, 1998, Stone Canyon Canada a corporation of which Mr.
Haworth and Ms. Danforth are each a director and officer, of which Ms. Danforth
is a greater than 5% shareholder, acquired 10,000 Units of the Registrant
pursuant to pursuant to Regulation S under the Securities Act of 1983. The Units
were acquired at $0.50 per Unit each Unit consisting of one common share and one
share purchase warrant entitling the holder to acquire one additional share of
common.
Effective September 30, 1998, Stone Canyon Canada, a private Canadian
corporation of which Mr. Haworth and Ms. Danforth are each a director and
officer, and of which Ms. Danforth is a greater than 5% shareholder, and the
Registrant executed an agreement whereby Stone Canyon Canada was required to
pay the costs of development of a 4bbl/day test facility for a gas-to-liquids
technology currently under development by the Company in return for the
Canadian licensing and marketing rights to the technology. As of the end of the
last fiscal year Carbon Resources Limited, a subsidiary of the Registrant was
due a total of $324,205 from Stone Canyon Canada in respect of development costs
chargeable to the development of the 4bbl/day facility.
On February 10, 1999, the Registrant commenced a private placement of its
common stock under Rule 504 of Regulation D at $0.50 per Unit. Each Unit
consisted of one (1) share of common stock and one (1) warrant excercisable
during the next two (2) years. The Units were priced at $0.50 US per Unit. The
Registrant completed this offering on April 6, 1999, with proceeds of $750,000
for 1.5 million units. No commissions fees, underwriting fees, discounts or
other selling expenses were paid.
Effective February 17, 1999, CMJ Consulting Ltd., a corporation of which
Ms. Danforth is a director, officer and nominee holder of one-third of the
outstanding stock, acquired 470,000 Units of the Registrant pursuant to an
offering made pursuant to Regulation D under the Securities Act of 1933. The
Units were acquired at $0.50 per Unit, each Unit consisting of one common share
and one share purchase warrant entitling the holder to acquire one additional
share of common stock.
Effective April 5, 1999, CMJ Consulting Ltd., a corporation of which Ms.
Danforth is a director, officer and nominee holder of one-third of the
outstanding stock, acquired 124,686 Units of the Registrant pursuant to an
offering made pursuant to Regulation D under the Securities Act of 1933. The
Units were acquired at $0.50 per Unit, each Unit consisting of one common share
and one share warrant entitling the holder to acquire one additional share of
common stock.
Carbon and Glidarc Technologies have an arrangement whereby Glidarc
provides Carbon with engineering services at a range of hourly rates ranging
from $25 hour to $80 per hour. Mr. Cooley, an officer and director of Carbon,
contracts out his consulting services through Glidarc (of which he is also an
officer and director) to Carbon at the rate of $80.00 per hour.
Ms. Jacqueline Danforth receives $250.00 per month for administrative
services from Stone Canyon Colorado.
ITEM 8. DESCRIPTION OF SECURITIES
The Registrant is presently authorized to issue fifty million (50,000,000)
shares of its $0.002 par value common shares in such classes as the Board may
determine. As of the effective date of this Registration Statement, Twenty One
Million Eight Hundred Seventy-Four Thousand Five Hundred Twenty-Six
(21,874,526) shares of common stock are issued and outstanding.
Common Shares
All shares are fully paid and non-assessable. All shares are equal to each
other with respect to voting, liquidation, and dividend rights. Special
shareholders' meetings may be called by the officers or directors or upon the
request of holders of at least one-tenth (1/10th) of the outstanding shares.
Holders of shares are entitled to one vote at any shareholders' meeting for each
share they own as of the record date fixed by the board of directors. There is
no quorum requirement for shareholders' meetings. Therefore, a vote of the
majority of the shares represented at a meeting will govern even if this is
substantially less than a majority of the shares outstanding. Holders of
shares are entitled to receive such dividends as may be declared by the board of
directors out of funds legally available therefor, and
upon liquidation are entitled to participate pro rata in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, pre-emptive or other subscription rights or privileges with respect
to any shares. Reference is made to the Registrant's Articles of Incorporation
and its By-Laws as well as to the applicable statutes of the State of Colorado
for a more complete description of the rights and liabilities of holders of
shares. It should be noted that the By-Laws may be amended by the board of
directors without notice to the shareholders. The shares of the Registrant do
not have cumulative voting rights,which means that the holders of more than
fifty percent (50%) of the shares voting for election of directors may elect
all the directors if they choose to do so. In such event, the holders of the
remaining shares aggregating less than fifty percent (50%) of the shares
voting for election of directors may not elect all the directors if they
choose to do so. In each event, the holders of the remaining shares aggregating
less than fifty percent (50%) will not be able to elect directors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Registrant's common stock is not now traded on the
"Over-the-Counter" market, but when traded will be quoted in the National
Quotation Bureau or the NASD Electronic Bulletin Board. The following table
sets forth high and low bid prices of the Registrant's common stock for 1997,
1998 and through May 30, 1999, which are the only years the Registrant has been
in existence:
<TABLE>
High Low
<S> <C> <C>
1999
Second Quarter
(Through May 31, 1999) $2.93 $0.59
First Quarter $0.875 $0.437
1998
Fourth Quarter $0.875 $0.375
Third Quarter $2.125 $0.718
Second Quarter $1.938 $0.500
First Quarter $1.437 $0.400
1997
Fourth Quarter $0.500 $0.438
Third Quarter N/A N/A
</TABLE>
Such over the counter market quotations reflect interdealer prices, without
retail mark up, mark down or commission and may not necessarily represent actual
transactions.
Stockholders
As of May 31, 1999, the Registrant had 127 shareholders of record of its
common stock.
Dividends
No dividends on outstanding common stock have been paid within the last
two fiscal years, and interim periods. The Registrant does not anticipate or
intend upon paying dividends for the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
Bataa Oil, Inc.
In October 1999, the Registrant, through its wholly-owned subsidiary,
Stone Canyon Colorado purchased the interest in the leasehold properties
described above in Item 2 "DESCRIPTION OF BUSINESS - The Registrant's
Business- Stone Canyon Colorado". Through December 31, 1997, the Registrant
paid $458,080 for acquisition costs and development costs associated with such
interests.
Such amount was paid to Bataa Oil, Inc., by the founding shareholders of
the Registrant, and the Registrant paid such amount to the founding
shareholders. Bataa Oil, Inc. has also been serving as operator of each lease.
The Registrant also issued 411,842 shares of its common stock to Bataa and
Bataa's designees as part of the consideration for such properties.
The Registrant contends that Bataa represented to the Registrant, its
subsidiaries and/or its affiliates that the price for these properties was set
at the price paid by Bataa for the same. The Registrant has since learned that
Bataa's cost for these properties were far less than the amount charged. The
Registrant has questioned the form of legal title taken for the properties as
well as adequate documentation and disclosure of all underlying obligations,
liabilities and arrangements relating to the properties, between Bataa Oil, Inc.
and G&H Production. with the of the properties, G & H Production. The
Registrant has also learned that these leases may be forfeited due to a failure
to meet a drilling obligation imposed by G & H Production which the Registrant
was not apprised of prior to acquisition of its interest in the leases. The
Registrant has been advised by legal counsel that the issuance of the shares to
Bataa Oil and its designees was without the kind, amount or form of
consideration as authorized by the Board of Directors and could therefore be
deemed to be an invalid issuance. In order to protect the interests of all
shareholders, the Registrant has therefore placed a "stop transfer" with the
transfer company against such 411,842 shares of its common stock issued to
Bataa Oil and its desginees.
As a result of this dispute, Bataa, and certain others, have filed a complaint
in the District Court, County of Denver, in the State of Colorado against the
Registrant, its wholly-owned subsidiary, Stone Canyon Colorado and a significant
shareholder, Stone Canyon Canada. (which was previously the Registrant's sole
controlling shareholder. Such complaint alleges that Stone Canyon Canada has
breached a participation agreement with Bataa and breached a fiduciary duty owed
to Bataa.
The Registrant disputes these allegations, claims they are untrue and is
vigorously defending this lawsuit. The Registrant is also contemplating
bringing a
lawsuit against Bataa and certain founding shareholders for fraud, intentional
misrepresentation, breach of fiduciary duty, damages and punitive damages.
Drake Oil Limited
The Registrant has received infomration regarding a possible claim by Drake
Oil Limited, a corporation organized under the laws of the Federal Republic
of Nigeria ("Drake Oil"), to rights to use of the GTL Technology in Nigeria.
This claim appears to be based on a written memorandum of understanding entered
into by and between Drake Oil and one of the original holders of the patent on
which the GTL Technology is based, Professor Albin Czernichowski (see PART I,
ITEM 5 "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS - Identification of Significant Employees"). It is the
Registrant's understanding and belief that pursuant to such memorandum, Drake
Oil agreed to provide the funding for construction of a pilot plant utilizing
the GTL Technology in Nigeria. However, as of the date of this filing, such
obligation has not been fulfilled by Drake Oil. Nevertheless, Drake Oil has
made a request that Carbon Resources, the current holder of rights to the GTL
Technology, take the place of Prof. Czernichowski and negotiate new terms and
conditions for the completion of such pilot plant.
The Registrant does not believe that it is obligated to acknowledge any
alleged rights of Drake Oil to the GTL Technology. However, the Registrant
intends to try to find an mutually advantageous agreement with Drake Oil that
will allow use of the GTL Technology in connection with an adequate pilot plant
in exchange for certain licensing fees and/or royalties.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
(a) None.
(b) In connection with audits of two most recent fiscal years and any interim
period preceding resignation, no disagreements exist with any former accountant
on any matter of accounting principles or procedure, which disagreements if
not resolved to the satisfaction of the former accountant would have caused him
to make reference in connection with his report to the subject matter of the
disagreement(s).
(c) The principal accountant's report on the financial statements for any of
the past two years contained no adverse opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope, or accounting principles except
for the "going concern" qualification.
(d) The decision to change accountants was approved by the Board of
Directors as the registrant has no audit committee.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
UNREGISTERED STOCK SALES IN THE THREE YEAR PERIOD PRIOR
TO THIS REGISTRATION STATEMENT.
On November 30, 1998, the Registrant commenced a private placement of
its common stock under Rule 504 of Regulation D at $0.50 per Unit. Each Unit
consisted of one (1) share of common stock and one (1) stock warrant. The Units
were priced at $0.50 US per Unit. The Registrant completed this offering on
April 6, 1999, with proceeds of $750,000 for 1.5 million Units. No commission
fees or other selling expenses were paid.
On April 15, 1998, the Registrant comenced a private placement of its Units
pursuant to Regulation S. Each Unit consisted of one (1) share of common stock
and one warrant excercisable any time prior to April 15, 2000. The Registrant
completed this offering on September 30, 1998 with proceeds of $175,000 on the
sale of 350,000 units at $0.50 US per Unit. No commission fees or other selling
expenses were paid.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Corporation Code and the Registrant by-laws offer
protection by way of indemnification to any officer, director or employee of the
Registrant. The indemnification extends to expenses, including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with an action, suit or proceeding if the party acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Registrant and with respect to any criminal proceeding if
the party had no reasonable cause to believe the conduct was unlawful.
The general effect of the above indemnification provisions allow the
employees, directors, and officers of the Registrant to function and engage in
the day to day business activities of the Registrant knowing the Registrant will
offer protection against the threat or event of litigation subject to the
limitations that said individual must exercise good faith and reasonableness.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 or Securities Exchange Act of 1934 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS AND EXHIBITS
The following documents are filed as a part of this report:
Financial Statements: (See Financial Exhibits Index below and Financial
Exhibits furnished as Pages F-1 through F-20).
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING
SCHEDULES
Page
Reports of Independent Public Accountants
F-1
Financial Statements:
F-3
Consolidated Balance Sheets, - March 31, 1999; Dec. 31, 1998 and 1997
Consolidated Statements of Operations, March 31, 1999; Dec. 31, 1998
and 1997 F-4
Statement of Equity
F-5
Statement of Cash Flows
F-6
Notes to Consolidated Financial Statements
F-7-18
Supplemental Statement - Consolidated Statement of Operating
Expenses F-19-20
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Index
Number Description Reference
2.1 Articles of Incorporation filed with the *
Secretary of State February 10, 1997.
2.2 Articles of Exchange by and between *
Automated Transfer Systems, Inc. and
Stone Canyon Resources, Inc. filed with
the Secretary of State November 24, 1997
2.3 Amendment to the Articles of
Incorporation filed with the Secretary of
State March 2, 1999. *
3.1 Specimen Certificate of Common Stock
par value $0.002 per share *
6.1 Assignment of Technology Agreement by
and betweed Laxarco Holding Limited and
Carbon Resources Limited dated May 1,
1998 Filed herewith
6.2 Share Exchange Agreement by and among
Laxarco Holding Limited, Carbon
Resources Limited, The Registrant and
Stone Canyon Resources, Ltd. dated May
5, 1998 Filed herewith
6.3 Escrow Agreement by and between the
Registrant and Laxarco Holding Limited
dated May 16, 1998 Filed herewith
6.4 Agreement for Investor Relations Services
and Compensation by and between Lance
W. Bauerlein and the Registrant dated
August 20, 1998. *
6.5 Assignment of Technology by and between
Pierre Jorgensen and Lanasco Holdings, a
subsidiary of the Registrant, dated January
6, 1999. *
6.6 Agreement by and between the Registrant *
and Eisenberg Communications effective
February 16, 1999.
6.7 Agreement of Purchase and Sale by and *
between Revival Resources Ltd., Stone
Canyon Resources, Inc. and the Registrant
dated March 22, 1999.
6.8 Option letter agreement between Laxarco *
Holding Ltd, Texas T Petroleum and the
Registrant dated June 25, 1999.
6.9 Amendment No. 1 to the Assignment of *
Technology Agreement by and between
Laxarco Holding Limited and Carbon
Resources Limited dated June 25, 1999. Filed herewith
6.10 Amendment No. 1 to the Share Exchange
Agreement by and between Laxarco Limited,
Carbon Resources Limited, the Registrant
and Stone Canyon Resources Ltd. dated
June 25, 1999. Filed herewith
6.11 Amended and Restated Escrow Agreement
by and among the Registrant and Laxarco
Holding Limited dated June 25, 1999. Filed herewith
6.12 Share Exchange Agreement by and between
Laxarco Holding Limited, Carbon Resources
Limited and the Registrant dated June
25, 1999. Filed herewith
6.13 Share Exchange Agreement between Texas T
Petroleum Ltd and the Registrant dated
June 25, 1999. Filed herewith
7.1 French Patent Application No. 97-10989: A *
CZERNICHOWSKI, P. CZERNICHOWSKI
"Assistance Electrique D'Oxydation Partelle
d'Hydrocarbures Legers Par L'Oxygene".
Filing Date: 01.09.97 ; accepted on October
20, 1997.
7.2 Notice of Recordation of Assignment Document, *
United States Patent and Trademark Office,
serial number 09144318, recordation dated
08/31/1998,with Assignement of Assinor's
Interest, assigning to Laxarco Holding
Limited all rights in French Patent
Application No. 97-10989.
7.3 French Patent Application No. 97-00364: A *
CZERNICHOWSKI, P. CZERNICHOWSKI,
"Conversion D'Hydrocarbures Assistee par
Les Arcs Electrirques Gissants En Presence
De La Vapeur D'Eau Et/ou De Gaz Carbonique".
Filing Date: 13.01.97; accepted on
7.4 Notice of Recordation of Assignment Document, *
United States Patent and Trademark Office,
serial number 09005647, recordation dated
10/19/1998, with Assignement of Assinor's
Interest, assigning to Laxarco Holding
Limited all rights in French Patent Application
No. 97-00364.
7.5 French Patent Application No. 981283: P *
JORGENSEN, "Conversion profonde jumelant la
demetallisation et la conversion de bruts,
residus ou huiles lourdes en liquides legers,
a l'aide de composes oxygens purs ou impurs
(H20, CO2, CO accompangnes de H2, N2 SH2 etc)".
Filing date 16.10.98.
10.1 Consent of Sarna & Company *
*Documents which fall under the Hardship Exemption rule for filing
electronically.
</TABLE>
SUPPLEMENTAL OIL AND GAS INFORMATION
Certain of the Registrant's undeveloped oil and gas properties are located
within the continental United States and the balance of undeveloped properties
are located in Alberta, Canada. No reserve studies have been done, nor is it
feasible to reliably estimate reserves on the small working interests of the
Registrant.
Present Value of Estimate Future Net Revenues From Proved Developed
Oil and Gas Reserves. None can be made due to the insubstantial, uncertain
nature of the working interests in non-producing wells owned by the Registrant.
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED: July 3, 1999.
SYNERGY TECHNOLOGIES CORPORATION
By: /S/ Cameron Haworth
Name:
Title: President
Directors:
/S/ Cameron Haworth
/S/ Jacqueline R. Danforth
<PAGE>
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
WITH
INDEPENDENT AUDITOR'S REPORT THEREON
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditor's Report. . . . . . . . . . . . . . 1-2
Consolidated Financial Statements:
Consolidated Balance Sheet. . . . . . . . . . . . . . 3
Consolidated Statement of Operations
and Accumulated Deficit. . . . . . . . . . . . . . .4
Consolidated Statement of Changes in
Stockholders' Equity. . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows. . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . 7-19
Supplemental Statement
Consolidated Statement of Operating
Expenses. . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Synergy Technologies Corporation
We have audited the accompanying consolidated balance sheet of Synergy
Technologies Corporation, and subsidiaries, a development stage company,
as of December 31, 1998 and the related consolidated statements of
operations and accumulated deficit, changes in stockholders' equity, and
statement of cash flows for the year then ended. These consolidated
financial statements are the responsibility of management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of
Carbon Resources Limited a subsidiary owned 75% by Synergy
Technologies Corporation which includes assets of $448,867 at December
31, 1998 and revenues of $370,929 for the year then ended. Those
statements were audited by other auditors whose report has been furnished
to us, and in our opinion, insofar as it relates to the amounts included for
Synergy Technologies Corporation, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 consolidated
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 Synergy
Technologies Corporation and subsidiaries as of December 31, 1998, and
the results of their operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental consolidated
statement of operating expenses is presented for the purposes of additional
analysis and is not a required part of the basic financial statements and, in
our opinion is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current Assets
Cash $ 14,406
Receivables (Note 3) 283,040
Receivable - Related Parties (Note 4) 10,058
Prepaid Expenses 1,749
Total Current Assets $ 309,253
Oil Lease Acquisition and
Development Costs - Unproven Reserves (Note 8) 377,487
Oil Technology Acquisition (Note 9) 1,067,889
Other Asset - Organization Costs, Net 909
TOTAL ASSETS $1,755,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $ 494,760
Loan Payable - Related Party (Note 5) 156,500
Loan Payable (Note 6) 116,396
Other Liabilities 67,309
Total Current Liabilities $ 834,965
Minority Interest 2,514
Stockholders' Equity
Common Stock, $0.002 par value
100,000,000 shares authorized,
20,332,526 shares issued 40,666
Additional paid in capital 1,650,247
Accumulated Deficit <772,854>
Total Stockholders' Equity 918,059
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,755,538
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
Revenues - Consulting $ 370,929
Operating Expenses <1,076,767>
Loss Before Provision for
Income Taxes <705,838>
Provision for
Income Taxes (Note 2) <0>
Net Loss <705,838>
Deficit, Beginning
of Period <67,016>
Accumulated Deficit,
End of Period $ <772,854>
Net Loss per Share <0.05>
Weighted Average
Shares Outstanding 15,903,359
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE YEAR ENDED DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C>
Common Stock Additional Accumulated Total
Par Value $.002 Paid in Deficit Stockholders'
Shares Amount Capital Equity (Deficit)
Balances 9,989,669 $19,979 $ 495,947 $<67,016> $448,910
December 31, 1997
Unexchanged
Certificate <7,143> <13> ---- ---- <13>
Common Stock Issued
Technology
Acquisition
$0.10 per share
June 1, 1998 10,000,000 20,000 980,000 1,000,000
Common Stock Issued
$0.50 per share
September 30, 1998 210,000 420 104,580 ---- 105,000
Common Stock Issued
$0.50 per share
September 30, 1998 10,000 20 4,980 ---- 5,000
Common Stock Issued
$0.50 per share
September 30, 1998 130,000 260 64,740 ---- 65,000
Net Loss
Year Ended
December 31, 1998 ---- ---- ---- (705,838) (705,838)
Balances
December 31,
1998 20,332,526 $40,666 $1,650,247 $ (772,854) $ 918,059
</TABLE>
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR
ENDED DECEMBER 31, 1998
Cash Flows from Operating Activities:
Net Loss $ <705,838>
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Amortization 280
<Increase> Decrease in:
Receivables <278,661>
Prepaid Expenses 8,254
Increase <Decrease> in:
Accounts Payable and
Accrued Expenses 457,023
Other Liabilities 69,820
Net Cash Used by Operating Activities <449,122>
Cash Flows from Investing Activities:
Oil Technology Acquisition $<1,067,889>
Oil Lease Acquisition and
Development Costs, Net 80,593
Net Cash Used by Investing Activities <987,296>
Cash Flows from Financing Activities:
Loan Proceeds 272,896
Net Proceeds from the Issuance of
Common Stock 1,175,000
Net Cash Provided by Financing Activities 1,447,896
Net Increase in Cash 11,478
Cash at Beginning of Year 2,928
Cash at End of Year $ 14,406
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Synergy Technologies Corporation (formerly Automated Transfer Systems
Corporation), was incorporated in Colorado on February 10, 1997. On
November 24, 1997 the Company merged with Stone Canyon Resources,
Inc., another Colorado corporation. Prior to the merger Automated
Transfer Systems Corporation had no operations. Prior to the merger Stone
Canyon had 2,901,007 shares of common stock outstanding and Automated
Transfer Systems had 2,549,500 shares of common stock outstanding. In
the merger Stone Canyon shareholders traded each of their 2,901,007
shares for one share in Automated Transfer Systems. Also in the merger
Automated Transfer Systems sold 4,539,162 new shares of its common
stock to extinguish $453,916 of the debt of Stone Canyon Resources, Inc.
At the end of the merger there were 9,989,669 shares outstanding. The
former creditor of Stone Canyon Resources, Inc. became the controlling
party in the Company, owning more than 60% of the Company's
outstanding stock. Synergy Technologies Corporation and its wholly
owned subsidiary, Stone Canyon Resources, Inc. acquire development lease
land with certain mineral rights and expend funds to exploit these oil and
gas resources. Synergy Technologies and its 75% owned subsidiary,
Carbon Resources Limited have acquired a patented and proprietary
technology for the conversion of gas to liquids. Synergy and Carbon
expend funds on the continuing research and development of this
proprietary technology to prove its commercial application, establish market
recognition and generate licensing and royalty revenues through
exploitation of the process.
Basis of Presentation
The consolidated financial statements include the accounts of Synergy
Technologies Corporation and it's wholly owned subsidiary Stone Canyon
Resources, Inc., a Colorado corporation, and its 75% owned subsidiary,
Carbon Resources Limited, a Cyprus corporation.
All material intercompany balances have been eliminated.
The Company reports revenue and expenses using the accrual method of
accounting for financial and tax reporting purposes. All reported amounts
are in US dollars.
Consolidation
These consolidated financial statements include the accounts of the
Company and its subsidiaries, as follows:
Stone Canyon Resources Inc., a Colorado corporation formed on
November 7, 1996, which completed a share exchange agreement with
Synergy Technologies Corporation (formerly Automated Transfer Systems
Corporation) effective November 24, 1997. Under the terms of this
agreement, Stone Canyon Resources Inc. became a wholly owned
subsidiary of the company.
Carbon Resources Limited, a Cyprus Corporation, formed on April
29, 1998, which completed a share exchange agreement with Synergy
Technologies Corporation (formerly Automated Transfer Systems
Corporation) effective June 5, 1998. Under the terms of the agreement,
Carbon Resources Limited became a 75% owned subsidiary of the
Company.
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses.
Development Stage Company
The Company meets the guidelines of SFAS No. 7 and as such is classified
as a development stage company.
Pro Forma Compensation Expense
The Company accounts for costs of stock-based compensation in
accordance with APB No. 25, "Accounting for Stock Based Compensation"
instead of the fair value based method in SFAS No. 123. No stock options
have been issued. Accordingly, no pro forma compensation expense is
reported in these financial statements.
Petroleum and Natural Gas Interests
The Company follows the full cost method of accounting for its petroleum
and natural gas interests whereby all costs in excess of recoveries related to
the exploration for and the development of petroleum and natural gas
reserves are capitalized until such time as the cost center to which they
relate has commercial production, is sold or abandoned. Under this method
of accounting, gain or loss on the sale of the property or group of properties
is only recognized when such sale significantly alters the relationship
between capitalized costs and proved reserves attributable to a cost center.
Management has determined each county to be a cost center. The total
costs capitalized within each cost center evaluated at year end prices, net of
accumulated depletion, is limited to the value of future net revenues, less
related administrative and financing costs, for the estimated production of
proved petroleum and natural gas reserves plus the cost of properties not
being amortized due to their stage of development plus the lower cost or
estimated fair market value of unproved properties which are included in the
pool of costs being depleted.
Depletion of costs capitalized on producing properties is calculated based
on the portion of proved reserves produced during the year. Reserves and
production of petroleum and natural gas are calculated after royalties and
are converted to equivalent units of energy as determined by engineering
studies.
Petroleum and Natural Gas Interests (cont'd)
All other costs other than those relating to properties with unproven
reserves are subject to depletion.
Foreign Currency Translation
The Company translates its assets and liabilities at the exchange rate
prevailing at the balance sheet date. Revenues and expenses are translated
at the average exchange rate for the year. Foreign exchange gains and
losses are deferred and shown separately in shareholder's equity. At
December 31, 1998 net gains and losses have been immaterial and are not
shown separately.
Property and Equipment
Property and equipment, when acquired, are stated at historical cost.
Depreciation, Amortization and Capitalization
The Company records depreciation and amortization, when appropriate,
using both straight-line and declining balance methods over the estimated
useful life of the assets (five to seven years).
Expenditures for maintenance and repairs are charged to expense as
incurred. Additions, major renewals and replacements that increase the
property's useful life are capitalized. Property sold or retired, together with
the related accumulated depreciation, is removed from the appropriate
accounts and the resultant gain or loss is included in net income.
Income Taxes
The company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Under Statement 109, a liability method is used whereby deferred tax assets
and liabilities are determined based on temporary differences between basis
used for financial reporting and income tax reporting purposes.
Income taxes are provided based on tax rates in effect at the time such
temporary differences are expected to reverse. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not, that the
Company will not realize the tax assets through future operations.
Fair Value of Financial Instruments
Financial accounting Standards Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires the Company to disclose, when
reasonably attainable, the fair market values of its assets and liabilities
which are deemed to be financial instruments. The Company's financial
instruments consist primarily of cash and certain investments.
Per Share Information
The Company computes per share information by dividing the net loss for
the period presented by the weighted average number of shares outstanding
during such period.
NOTE 2 - PROVISION FOR INCOME TAXES
The provision for income taxes for the year ended December 31, 1998
represents the minimum state income tax expense of the Company, which is
not considered significant.
NOTE 3 - RECEIVABLES
The receivables as stated on the consolidated Balance Sheet consist of the
following accounts:
Receivable from Stone Canyon Resources Ltd., a
company incorporated pursuant to the laws of the
Province of Alberta, and an affiliate of Synergy
Technologies Corporation. On September 30, 1998,
Synergy Technologies entered into an agreement with
Stone Canyon Resources Ltd. ("Stone-Canada"),
whereby Stone-Canada committed to fund the design
and construction of a 4 bbl per day demonstration
facility in the Province of Alberta in exchange for the
Canadian marketing and licensing rights to Synergy's
proprietary Gas to liquids technology. The amount
recorded as a receivable on the Balance Sheet includes
project development costs chargeable to the 4 bbl per
day demonstration facility. The account bears no
interest and is subject to no specific terms of repayment.
$282,351
GST receivable. Certain expenses for
services rendered and supplies acquired in
Canada are subject to a federal Goods and
Services Tax of 7% which is refundable to
the Company at fiscal year end. This amount
is refunded to the Company upon filing of a
GST return in Canada. 689
TOTAL RECEIVABLES $283,040
========
NOTE 4 - RECEIVABLE - RELATED PARTIES
This receivable is due from shareholders and bears no interest and is not
subject to any specific terms of repayment.
NOTE 5 - LOAN PAYABLE - RELATED PARTIES
CMJ Consulting Ltd., a company incorporated pursuant to the laws of
Province of Alberta, and having a director in common with Synergy
Technologies and its subsidiaries Stone Canyon Resources Inc. and Carbon
Resources Limited, advanced a total of $156,500 to the Company for the
period ended December 31, 1998 for general working capital. This amount
is an unsecured, related party loan with no specific terms of repayment and
bearing no interest.
NOTE 6 - LOANS PAYABLE
Loans payable of $116,396 as reported on the consolidated Balance Sheet
reflect amounts advanced to Synergy Technologies and its subsidiaries from
various arms length corporations for general working capital. These
amounts bear no interest and have no stated terms of repayment.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Leases
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies Corporation, is required to remit annual lease rentals in order
to keep its development oil and gas leases current. To date the Company is
current in its remittance of the requisite lease rentals.
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies Corporation, has been advised by the operator of certain oil
and gas leases located in Johnston Country, Wyoming that the leases must
be drilled by July 1, 1999 in order to fulfill the terms of an original
acquisition agreement surrounding the purchase of the leases or the leases
will revert to the original holder. The Company is in dispute with the
operator regarding representations it made in connection with the
acquisition of this project and does not intend to commence drilling of the
leases. (See Note 7 Litigation)
Minimum lease payments on annually renewable oil leases amount to $1,857
for each of the next five years.
NOTE 7 - COMMITMENTS AND CONTINGENCIES - CONTINUED
Litigation
The Company has recently been named a Defendant in a legal action
brought forth by a group of founding shareholders in respect of a stop
transfer the Company has placed on their shares and the Company's decision
not to drill certain leases acquired from these founding shareholders. The
action was commenced following Synergy's review of certain oil and gas
leases acquired by its wholly owned subsidiary, Stone Canyon Resources
Inc., which raised several issues of concern.
Upon completion of the review the Company determined that it may not
have received valid consideration for the amounts paid to and subsequently
the shares issued to certain founding shareholders in return for these
development leases. The Company placed a stop transfer on all shares
issued to the founding shareholders pending a legal determination as to valid
consideration. Bataa Oil Inc., its affiliated companies and employees as well
as Richard and Anita Knight (the "Plaintiffs") have commenced action
against Synergy Technologies, Stone Canyon Resources Inc. (a wholly
owned subsidiary) and Stone Canyon Resources Ltd. (an affiliated
corporation) for the release of their shares. The Plaintiffs have claimed
breach of contract and breach of fiduciary duty. The Company intends to
respond to this action and will vigorously defend the litigation. The
Company may commence legal action against those shareholders and certain
other founding shareholders to recover all costs of the lease acquisitions and
the return of any shares issued to the founders.
Licensing and Consulting Agreements
Synergy Technologies Corporation paid and/or accrued a total of
$60,000 in management fees to CMJ Consulting Ltd., an Alberta company
of which Ms. Danforth is a common director, secretary-treasurer and a
one-third shareholder, subject to a management contract.
Stone Canyon Resources Inc. (a wholly owned subsidiary of Synergy), paid
and/or accrued $18,000 in management fees to CMJ Consulting Ltd., an
Alberta company of which Ms. Danforth is a common director,
secretary-treasurer and a one-third shareholder, subject to a management
contract.
Stone Canyon Resources Inc. (a wholly owned subsidiary of Synergy), paid
and/or accrued to Ms. Jacqueline Danforth, director and secretary-treasurer,
$2,022 for services rendered subject to a consulting agreement over the
period from January 1, 1998 to December 31, 1998.
Carbon Resources Limited (a 75% owned subsidiary of Synergy) paid
and/or accrued to Mr. Thomas Cooley, President and a director of
Carbon Resources Limited, $88,503 (including payroll expenses), for
consulting services rendered over the period June 1, 1998 to December
31, 1998.
Carbon Resources Limited (a 75% owned subsidiary of Synergy) paid
and/or accrued to Dow's Port Technical Services Ltd., for the services
of Mr. John D. Bruce, an officer and director of Carbon Resources
Limited, $71,875 for consulting services rendered over the period May 1,
1998 to December 31, 1998.
Effective September 30, 1998, Synergy Technologies entered into an
agreement with Stone Canyon Resources Ltd. ("Stone-Canada"),
whereby Stone-Canada committed to fund the design and construction
of a 4 bbl per day demonstration facility in the Province of Alberta in
exchange for the Canadian marketing and licensing rights to Synergy's
proprietary Gas to Liquids technology. (See Note 3 Receivables)
NOTE 8 - OIL AND GAS LEASES
_______________________________________________________1998
U.S.A.
50% interest in Meadow Deep, Wyoming $287,060
and D-Sand, Colorado, prospects
15% interest in Rose Creek and Sage Creek prospects,
Wyoming (dry hole costs written off) -0-
5% interest in Hell's Canyon prospect, Wyoming
(dry hole costs written off) -0-
Canada
33.57% BPO interest in Wilson Creek prospect, Alberta,
drilling and casing expense to date 90,427
$377,487
Subsequent to year end Stone Canyon Resources Inc. and Synergy
Technologies Corporation executed an agreement with Revival Resources
Ltd. To acquire their 22.38% APO interest in the Wilson Creek Prospect as
well as their respective interest in certain other development leases located
in the Province of Alberta. Under the terms of the agreement, Synergy
Technologies Corporation will issue a total of 63,801 shares of common
stock at a deemed value of $33,895 in full and final payment for the leases.
As of the date of this report the shares had been allocated but not yet
issued.
NOTE 9 - TECHNOLOGY ACQUISITION
On May 5, 1998, Synergy Technologies Corporation (formerly Automated
Transfer Systems Corporation) entered into a share exchange agreement
with Laxarco Holding Limited whereby Synergy acquired 75% of the issued
and outstanding shares of Carbon Resources Limited, a company
incorporated pursuant to the laws of the Republic of Cyprus and holder of a
100% interest in and to a patented gas to liquids technology, in exchange
for the issuance of 10,000,000 shares of Synergy Technologies Corporation.
The shares were issued at a deemed value of $0.10 per share and pursuant
to the share exchange agreement have been placed in escrow to be released
upon the successful development of the gas to liquids technology. Under
the terms of the agreement Laxarco Holding Limited granted to Synergy
Technologies an irrevocable voting power of attorney until the 10,000,000
shares are released from escrow. The Share Exchange received shareholder
approval on June 5, 1998.
Technology
Issuance of 10,000,000 shares at $0.10 per share $ 1,000,000
Acquisition of 3,750 shares of Carbon Resources Limited (7,544)
Development of GTL process 75,433
$ 1,067,889
NOTE 10 - SUBSEQUENT EVENTS
Name Change
On February 12, 1999, Automated Transfer Systems Corporation filed a
Certificate of Amendment with the Department of State of the State of
Colorado changing its name to Synergy Technologies Corporation. The
name change was accepted by the State of Colorado on March 2, 1999.
Stock Offering
Effective November 30, 1998 the Board of Directors approved a stock
offering pursuant to Rule 504 to raise a total of $750,000 by the sale of a
total of 1,500,000 Units of Synergy at $0.50 per Unit. Each Unit consisted
of one share of common stock and one share purchase warrant entitling the
holder to acquire one additional share of common stock at $1.00 per share.
Effective April 6, 1999 the offering was fully subscribed.
Effective January 6, 1999, Synergy Technologies Corporation, through
Carbon, acquired the shares of Lanisco Holding Limited, a company
incorporated in the Republic of Cyprus, which holds the rights to
proprietary technology for the upgrading of heavy oil.
Effective January 8, 1999, Synergy Technologies Corporation reached a
verbal agreement with Texas T Petroleum, Ltd., a Colorado oil and gas
corporation, whereby Lanisco Holdings Limited would acquire 1,000,000
units of common shares of Texas T Petroleum, Ltd., each unit consisting of
one share and one share purchase warrant entitling Synergy to purchase one
additional share of Texas T Petroleum Ltd. at $0.50 per share within three
years from January 8, 1999. Texas T Petroleum Ltd. committed to expend
$100,000 towards the reconstruction of the 4 bbl per day heavy oil
upgrading pilot plant to be constructed in Orleans, France.
Effective June 25, 1999, Synergy Technologies Corporation negotiated the
acquisition of the remaining twenty five percent (25%) of the shares of
Carbon Resources Limited and Carbon Resources Limited became a wholly
owned subsidiary of Synergy Technologies Corporation.
Effective June 25, 1999, Synergy Technologies Corporation incorporated
SynGen Technologies Limited, a Cyprus corporation, and transferred its
100% interest in the gas-to-liquids technology from Carbon Resources
Limited to SynGen Technologies Limited.
Effective June 26, 1999, Synergy Technologies Corporation executed a
share exchange agreement with Texas T Petroleum Ltd., a Colorado
corporation, whereby Texas T Petroleum Ltd. acquired fifty percent (50%)
of the issued and organized shares of Carbon Resources Limited in
exchange for the issuance of 2,000,000 Units of Texas T Petroleum, each
Unit consisting of one share and one share purchase warrant entitling
Synergy to purchase one additional share of Texas T Petroleum Ltd. at
$1.00 per share within two years from June 26, 1999, and the payment of
$900,000 to Carbon Resources Limited for the development of the heavy
oil technology.
SUPPLEMENTAL STATEMENT
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
(A DEVELOPEMNT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
Operating Expenses
Accounting $ 9,500
Advertising and Promotion 156,739
Amortization 280
Bank Charges and Interest 2,517
Consulting Fees 299,351
Dry Hole Expenses 171,020
Dues and Subscriptions 382
Filing Fees 2,335
Investor Relations 200,861
Lease Rentals 1,857
Legal 40,487
Management Fees 78,000
Office Supplies and Expense 24,019
Rent 6,897
Repairs and Maintenance 705
Secretarial 3,594
Telecommunications 9,512
Transfer Agent Fees 2,169
Travel and Promotion 66,342
Utilities 200
Total Operating Expenses $ 1,076,767
==========
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
WITH
INDEPENDENT AUDITOR'S REPORT THEREON
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditor's Report. . . . . . . . . . . . . . 1-2
Consolidated Financial Statements:
Consolidated Balance Sheet. . . . . . . . . . . . . . 3
Consolidated Statement of Operations
and Accumulated Deficit. . . . . . . . . . . . . . .4
Consolidated Statement of Changes in
Stockholders' Equity. . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows. . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . 7-18
Supplemental Statement
Consolidated Statement of Operating
Expenses . . . . . . . . . . . . . . . . . . . . .20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Synergy Technologies Corporation
We have audited the accompanying consolidated balance sheet of Synergy
Technologies Corporation, and subsidiaries, a development stage company,
as of March 31, 1999 and the related consolidated statements of operations
and accumulated deficit, changes in stockholders' equity, and statement of
cash flows for the three months then ended. These consolidated financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We did not audit the financial statements of Carbon Resources
Limited a subsidiary owned 75% by Synergy Technologies Corporation
which includes assets of $493,752 at March 31, 1999 and revenues of $0
for the period then ended. Those statements were audited by other auditors
whose report has been furnished to us, and in our opinion, insofar as it
relates to the amounts included for Synergy Technologies Corporation, is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 consolidated
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 Synergy
Technologies Corporation and subsidiaries as of March 31, 1999, and the
results of their operations, changes in stockholders' equity and cash flows
for the three months period ended March 31, 1999, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental consolidated
statement of operating expenses is presented for the purposes of additional
analysis and is not a required part of the basic financial statements and, in
our opinion is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Sarna & Company
Westlake Village, California
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
ASSETS
Current Assets
Cash $ 14,409
Receivables (Note 3) 315,188
Receivable - Related Parties (Note 4) 3,771
Prepaid Expenses 5,239
Total Current Assets $ 338,607
Oil Lease Acquisition and
Development Costs - Unproven Reserves (Note 7) 512,602
Oil Technology Acquisition (Note 8) 1,072,715
Other Asset - Organization Costs, Net 839
TOTAL ASSETS $1,924,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $424,653
Loan Payable - Related Party (Note 5) 32,543
Other Liabilities 91,715
Total Current Liabilities $ 548,911
Minority Interest 2,514
Stockholders' Equity
Common Stock, $0.002 par value
100,000,000 shares authorized,
21,522,840 shares issued 41,942
Additional paid in capital 2,244,128
Accumulated Deficit <912,732>
Total Stockholders' Equity 1,373,338
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,924,763
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND
ACCUMULATED DEFICIT FOR THE THREE MONTHS ENDED
MARCH 31, 1999
Revenues $ 454
Operating Expenses <140,332>
Loss Before Provision for
Income Taxes <139,878>
Provision for Income Taxes <0>
Net Loss <139,878>
Deficit, Beginning
of Period <772,854>
Accumulated Deficit, End of Period $ <912,732>
Net Loss per Share $ <.01>
Weighted Average Shares Outstanding 20,905,183
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 1999
<S> <C> <C> <C> <C> <C>
Common Stock Additional Accumulated Total
Par Value $.002 Paid in Deficit Stockholders'
Shares Amount Capital Equity (Deficit)
Balances
December
31, 1998 20,332,526 $40,666 $1,650,247 $<772,854> $918,059
Common Stock Issued
$0.50 per share
February 10, 1999 86,000 172 42,828 ---- 43,000
Common Stock Issued
$0.50 per share
February 17, 1999 1,059,314 1,059 528,598 ---- 529,657
Common Stock Issued
$0.50 per share
March 31, 1999 45,000 45 22,455 ---- 22,500
Net Loss
Period Ended
March 31, 1999 ---- ---- ---- (139,878) (139,878)
Balances
March 31, 1999 21,522,840 $41,942 $2,244,128 $(912,732) $1,373,338
</TABLE>
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 1999
Cash Flows from Operating Activities:
Net Loss $ <139,878>
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Amortization 70
<Increase> Decrease in:
Receivables <25,861>
Prepaid Expenses <3,490>
Increase <Decrease> in:
Accounts Payable and
Accrued Expenses <70,107>
Other Liabilities 24,406
Net Cash Used by Operating Activities <214,860>
Cash Flows from Investing Activities:
Oil Technology Acquisition $<4,826>
Oil Lease Acquisition and
Development Costs <135,115>
Net Cash Used by Investing Activities <139,941>
Cash Flows from Financing Activities:
Loan Proceeds (Repayments) <240,353>
Net Proceeds from the Issuance of
Common Stock 595,157
Net Cash Provided by Financing Activities 354,804
Net Increase in Cash 3
Cash at Beginning of Period 14,406
Cash at End of Period $ 14,409
See Notes to Consolidated Financial Statements
SYNERGY TECHNOLOGIES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Synergy Technologies Corporation (formerly Automated Transfer Systems
Corporation), was incorporated in Colorado on February 10, 1997. On
November 24, 1997 the Company merged with Stone Canyon Resources,
Inc., another Colorado corporation. Prior to the merger Automated
Transfer Systems Corporation had no operations. Prior to the merger Stone
Canyon had 2,901,007 shares of common stock outstanding and Automated
Transfer Systems had 2,549,500 shares of common stock outstanding. In
the merger Stone Canyon shareholders traded each of their 2,901,007
shares for one share in Automated Transfer Systems. Also in the merger
Automated Transfer Systems sold 4,539,162 new shares of its common
stock to extinguish $453,916 of the debt of Stone Canyon Resources, Inc.
At the end of the merger there were 9,989,669 shares outstanding. The
former creditor of Stone Canyon Resources, Inc. became the controlling
party in the Company, owning more than 60% of the Company's
outstanding stock. Synergy Technologies Corporation and its wholly
owned subsidiary, Stone Canyon Resources, Inc. acquire development lease
land with certain mineral rights and expend funds to exploit these oil and
gas resources. Synergy Technologies and its 75% owned subsidiary,
Carbon Resources Limited have acquired a patented and proprietary
technology for the conversion of gas to liquids. Synergy and Carbon
expend funds on the continuing research and development of this
proprietary technology to prove its commercial application, establish market
recognition and generate licensing and royalty revenues through
exploitation of the process.
Basis of Presentation
The consolidated financial statements include the accounts of Synergy
Technologies Corporation and it's wholly owned subsidiary Stone Canyon
Resources, Inc., a Colorado corporation, and its 75% owned subsidiary,
Carbon Resources Limited, a Cyprus corporation.
All material intercompany balances have been eliminated.
The Company reports revenue and expenses using the accrual method of
accounting for financial and tax reporting purposes. All reported amounts
are in US dollars.
Consolidation
These consolidated financial statements include the accounts of the
Company and its subsidiaries, as follows:
Stone Canyon Resources Inc., a Colorado corporation
formed on November 7, 1996, which completed a share
exchange agreement with Synergy Technologies Corporation
(formerly Automated Transfer Systems Corporation) effective
November 24, 1997. Under the terms of this agreement, Stone
Canyon Resources Inc. became a wholly owned subsidiary of the
company. Carbon Resources Limited, a Cyprus Corporation,
formed on April 29, 1998, which completed a share exchange
agreement with Synergy Technologies Corporation
(formerly Automated Transfer Systems Corporation)
effective June 5, 1998. Under the terms of the agreement,
Carbon Resources Limited became a 75% owned subsidiary of the Company.
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses.
Development Stage Company
The Company meets the guidelines of SFAS No. 7 and as such is classified
as a development stage company.
Pro Forma Compensation Expense
The Company accounts for costs of stock-based compensation in
accordance with APB No. 25, "Accounting for Stock Based Compensation"
instead of the fair value based method in SFAS No. 123. No stock options
have been issued. Accordingly, no pro forma compensation expense is
reported in these financial statements.
Petroleum and Natural Gas Interests
The Company follows the full cost method of accounting for its petroleum
and natural gas interests whereby all costs in excess of recoveries related to
the exploration for and the development of petroleum and natural gas
reserves are capitalized until such time as the cost center to which they
relate has commercial production, is sold or abandoned. Under this method
of accounting, gain or loss on the sale of the property or group of properties
is only recognized when such sale significantly alters the relationship
between capitalized costs and proved reserves attributable to a cost center.
Management has determined each county to be a cost center. The total
costs capitalized within each cost center evaluated at year end prices, net of
accumulated depletion, is limited to the value of future net revenues, less
related administrative and financing costs, for the estimated production of
proved petroleum and natural gas reserves plus the cost of properties not
being amortized due to their stage of development plus the lower cost or
estimated fair market value of unproved properties which are included in the
pool of costs being depleted.
Depletion of costs capitalized on producing properties is calculated based
on the portion of proved reserves produced during the year. Reserves and
production of petroleum and natural gas are calculated after royalties and
are converted to equivalent units of energy as determined by engineering
studies.
All other costs other than those relating to properties with unproven
reserves are subject to depletion.
Foreign Currency Translation
The Company translates its assets and liabilities at the exchange rate
prevailing at the balance sheet date. Revenues and expenses are translated
at the average exchange rate for the year. Foreign exchange gains and
losses are deferred and shown separately in shareholder's equity. At March
31, 1999 net gains and losses have been immaterial and are not shown
separately.
Property and Equipment
Property and equipment, when acquired, are stated at historical cost.
Depreciation, Amortization and Capitalization
The Company records depreciation and amortization, when appropriate,
using both straight-line and declining balance methods over the estimated
useful life of the assets (five to seven years).
Expenditures for maintenance and repairs are charged to expense as
incurred. Additions, major renewals and replacements that increase the
property's useful life are capitalized. Property sold or retired, together with
the related accumulated depreciation, is removed from the appropriate
accounts and the resultant gain or loss is included in net income.
Income Taxes
The company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Under Statement 109, a liability method is used whereby deferred tax assets
and liabilities are determined based on temporary differences between basis
used for financial reporting and income tax reporting purposes.
Income taxes are provided based on tax rates in effect at the time such
temporary differences are expected to reverse. A valuation allowance is
provided for certain deferred tax assets if it is more likely than not, that the
Company will not realize the tax assets through future operations.
Fair Value of Financial Instruments
Financial accounting Standards Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires the Company to disclose, when
reasonably attainable, the fair market values of its assets and liabilities
which are deemed to be financial instruments. The Company's financial
instruments consist primarily of cash and certain investments.
Per Share Information
The Company computes per share information by dividing the net loss for
the period presented by the weighted average number of shares outstanding
during such period.
NOTE 2 - PROVISION FOR INCOME TAXES
The provision for income taxes for the period ended March 31, 1999
represents the minimum state income tax expense of the Company, which is
not considered significant.
NOTE 3 - RECEIVABLES
The receivables as stated on the consolidated Balance Sheet consist of the
following accounts:
NOTE 3 - RECEIVABLES - CONTINUED
Receivable from Stone Canyon Resources Ltd.,
a company incorporated pursuant to the laws
of the Province of Alberta, and an affiliate
of Synergy Technologies Corporation. On
September 30, 1998, Synergy Technologies
entered into an agreement with Stone Canyon
Resources Ltd. ("Stone-Canada"), whereby
Stone-Canada committed to fund the design
and construction of a 4 bbl per day
demonstration facility in the Province of
Alberta in exchange for the Canadian
marketing and licensing rights to Synergy's
proprietary Gas to Liquids technology.
The amount recorded as a receivable on the
Balance Sheet includes project development
costs chargeable to the 4 bbl per day demonstration
facility. The account bears
no interest and is subject to no specific
terms of repayment. $ 298,501
GST receivable. Certain expenses for
services rendered and supplies acquired in
Canada are subject to a federal Goods and
Services Tax of 7% which is refundable to
the Company at fiscal year end. This amount
is refunded to the Company upon filing of a
GST return in Canada. 16,687
TOTAL RECEIVABLES $ 315,188
=========
NOTE 4 - RECEIVABLES - RELATED PARTIES
This receivable is due from shareholders and bears no interest and is not
subject to any specific terms of repayment.
NOTE 5 - LOAN PAYABLE - RELATED PARTY
Loans payable of $32,543 as reported on the consolidated Balance Sheet
reflect amounts advanced to Synergy Technologies and its subsidiaries from
various arms length corporations for general working capital. These
amounts bear no interest and have no stated terms of repayment.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Operating Leases
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies Corporation, is required to remit annual lease rentals in order
to keep its development oil and gas leases current. To date the Company is
current in its remittance of the requisite lease rentals.
Stone Canyon Resources Inc., a wholly owned subsidiary of Synergy
Technologies Corporation, has been advised by the operator of certain oil
and gas leases located in Johnston Country, Wyoming that the leases must
be drilled by July 1, 1999 in order to fulfill the terms of an original
acquisition agreement surrounding the purchase of the leases or the leases
will revert to the original holder. The Company is in dispute with the
operator regarding representations it made in connection with the
acquisition of this project and does not intend to commence drilling of the
leases. (See Note 6 Litigation)
Minimum lease payments on annually renewable oil leases amount to $1,857
for each of the five next years.
Litigation
The Company has recently been named a Defendant in a legal action
brought forth by a group of founding shareholders in respect of a stop
transfer the Company has placed on their shares and the Company's decision
not to drill certain leases acquired from these founding shareholders. The
action was commenced following Synergy's review of certain oil and gas
leases acquired by its wholly owned subsidiary, Stone Canyon Resources
Inc., which raised several issues of concern.
Upon completion of the review the Company determined that it may not
have received valid consideration for the amounts paid to and subsequently
the shares issued to certain founding shareholders in return for these
development leases. The Company placed a stop transfer on all shares
issued to the founding shareholders pending a legal determination as to valid
consideration. Bataa Oil Inc., its affiliated companies and employees as well
as Richard and Anita Knight (the "Plaintiffs") have commenced action
against Synergy Technologies, Stone Canyon Resources Inc. (a wholly
owned subsidiary) and Stone Canyon Resources Ltd. (an affiliated
corporation) for the release of their shares. The Plaintiffs have claimed
breach of contract and breach of fiduciary duty. The Company intends to
respond to this action and will vigorously defend the litigation. The
Company may commence legal action against those shareholders and certain
other founding shareholders to recover all costs of the lease acquisitions and
the return of any shares issued to the founders.
Licensing and Consulting Agreements
Synergy Technologies Corporation paid and/or accrued a total of
$15,000 in management fees to CMJ Consulting Ltd., an Alberta
company of which Ms. Danforth is a common director,
secretary-treasurer and a one-third shareholder, subject
to a management contract.
Stone Canyon Resources Inc. (a wholly owned subsidiary of Synergy),
paid and/or accrued to Ms. Jacqueline Danforth, director and
secretary-treasurer, $496 for services rendered subject to a consulting
agreement over the period from January 1, 1999 to March 31, 1999.
Stone Canyon Resources Inc. (a wholly owned subsidiary of Synergy
Technologies Corporation), paid and/or accrued to CMJ Consulting Ltd.,
an Alberta company of which Ms. Danforth is a common director,
secretary-treasurer and a one-third share holder, $4,500 in management fees
pursuant to a management contract.
Effective September 30, 1998, Synergy Technologies entered into an
agreement with Stone Canyon Resources Ltd. ("Stone-Canada"),
whereby Stone-Canada committed to fund the design and construction
of a 4 bbl per day demonstration facility in the Province of Alberta in
exchange for the Canadian marketing and licensing rights to Synergy's
proprietary Gas to Liquids technology. (See Note 3 Receivables)
NOTE 7 - OIL AND GAS LEASES
1999
U.S.A.
50% interest in Meadow Deep, Wyoming $287,060
and D-Sand, Colorado, prospects
15% interest in Rose Creek and Sage Creek prospects, -0-
Wyoming (dry hole costs written off)
5% interest in Hell's Canyon prospect, Wyoming -0-
(dry hole costs written off)
Canada
33.57% BPO interest in Wilson Creek prospect, Alberta,
drilling and casing expense to date 225,542
$512,602
Subsequent to year end Stone Canyon Resources Inc. and Synergy
Technologies Corporation executed an agreement with Revival Resources
Ltd. To acquire their 22.38% APO interest in the Wilson Creek Prospect as
well as their respective interest in certain other development leases located
in the Province of Alberta. Under the terms of the agreement, Synergy
Technologies Corporation will issue a total of 63,801 shares of common
stock at a deemed value of $33,895 in full and final payment for the leases.
As of the date of this report the shares had been allocated but not yet
issued.
NOTE 8 - TECHNOLOGY ACQUISITION
On May 5, 1998, Synergy Technologies Corporation (formerly Automated
Transfer Systems Corporation) entered into a share exchange agreement
with Laxarco Holdings Limited whereby Synergy acquired 75% if the issued
and outstanding shares of Carbon Resources Limited, a company
incorporated pursuant to the laws of the Republic of Cyprus and holder of a
100% interest in and to a gas to liquids technology, in exchange for the
issuance of 10,000,000 shares of Synergy Technologies Corporation. The
shares were issued at a deemed value of $0.10 per share and pursuant to the
share exchange agreement have been placed in escrow to be released upon
the successful development of the gas to liquids technology. Under the
terms of the agreement Laxarco Holding Limited granted to Synergy
Technologies an irrevocable voting power of attorney until the 10,000,000
shares are released from escrow. The Share Exchange received shareholder
approval on June 5, 1998.
Technology
Issuance of 10,000,000 shares at $0.10 per share $ 1,000,000
Acquisition of 3,750 shares of Carbon Resources Limited (7,544)
Investment in Lanisco 2,011
Development of GTL process 78,248
$ 1,072,715
NOTE 9 - NAME CHANGE
On February 12, 1999, Automated Transfer Systems Corporation filed a
Certificate of Amendment with the Department of State of the State of
Colorado changing its name to Synergy Technologies Corporation. The
name change was accepted by the State of Colorado on March 2, 1999.
NOTE 10 - SUBSEQUENT EVENTS
Effective November 30, 1998 the Board of Directors approved a stock
offering pursuant to Rule 504 to raise a total of $750,000 by the sale of a
total of 1,500,000 Units of Synergy at $0.50 per Unit. Each Unit consisted
of one share of common stock and one share purchase warrant entitling the
holder to acquire one additional share of common stock at $1.00 per share.
Effective April 6, 1999 the offering was fully subscribed.
Effective January 6, 1999, Synergy Technologies Corporation, through
Carbon, acquired the shares of Lanisco Holding Limited, a company
incorporated in the Republic of Cyprus, which holds the rights to
proprietary technology for the upgrading of heavy oil.
Effective January 8, 1999, Synergy Technologies Corporation reached a
verbal agreement with Texas T Petroleum, Ltd., a Colorado oil and gas
corporation, whereby Lanisco Holdings Limited would acquire 1,000,000
units of common shares of Texas T Petroleum, Ltd., each unit consisting of
one share and one share purchase warrant entitling Synergy to purchase one
additional share of Texas T Petroleum Ltd. at $0.50 per share within three
years from January 8, 1999. Texas T Petroleum Ltd. committed to expend
$100,000 towards the reconstruction of the 1/2 bbl per day heavy oil
upgrading pilot plant to be constructed in Orleans, France.
Effective June 25, 1999, Synergy Technologies Corporation negotiated the
acquisition of the remaining twenty five percent (25%) of the shares of
Carbon Resources Limited and Carbon Resources Limited became a wholly
owned subsidiary of Synergy Technologies Corporation.
Effective June 25, 1999, Synergy Technologies Corporation incorporated
SynGen Technologies Limited, a Cyprus corporation, and transferred its
100% interest in the gas-to-liquids technology from Carbon Resources
Limited to SynGen Technologies Limited.
Effective June 26, 1999, Synergy Technologies Corporation executed a
share exchange agreement with Texas T Petroleum Ltd., a Colorado
corporation, whereby Texas T Petroleum Ltd. acquired fifty percent (50%)
of the issued and organized shares of Carbon Resource Limited in exchange
for the issuance of 2,000,000 Units of Texas T Petroleum, each Unit
consisting of one share and one share purchase warrant entitling Synergy to
purchase one additional share of Texas T Petroleum Ltd. at $1.00 per share
within two years from June 26, 1999, and the payment of $900,000 to
Carbon Resources for the development of the heavy oil technology.
SUPPLEMENTAL STATEMENT
SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATING EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Operating Expenses
Accounting $ 756
Amortization 70
Bank Charges and Interest 649
Consulting Fees 6,257
Filing Fees 212
Insurance 3,336
Investor Relations 53,661
Lease Rentals 121
Legal 41,066
Management Fees 19,500
Office Supplies and Expense 6,031
Rent 1,996
Secretarial 1,389
Telecommunications 2,808
Transfer Agent Fees 1,125
Travel and Promotion 1,055
Total Operating Expenses $ 140,032
========
AMENDMENT NO. 1 TO THE
SHARE EXCHANGE AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") is hereby entered into this 25th
day of May 1999, as an Amendment to that certain Share Exchange Agreement dated
the 5th day of May 1998, (the "Agreement"), by and among LAXARCO HOLDING
LIMITED, a company incorporated under the laws of the Republic of Cyprus
("Laxarco"), CARBON RESOURCES LIMITED, a company incorporated pursuant to the
laws of the Republic of Cyprus, ("Carbon"), SYNERGY TECHNOLOGIES CORPORATION,
previously known as AUTOMATED TRANSFER SYSTEMS CORPORATION, a Colorado
corporation ("Synergy") and STONE CANYON RESOURCES, LTD. a company organized
under the laws of the Province of Alberta, Canada ("Stone Canyon").
WHEREAS, the parties, having entered into the Agreement, now wish to
amend certain provisions of the Agreement and mutually agree to certain waivers
of possible breaches thereunder.
1. Paragraph C on page 2 of the Agreement is hereby amended in its
entirety to read as follows:
"C. Carbon holds a 100% interest in a Heads of Agreement executed
by and between Laxarco and the Novocherkassk Plant of Synthetic
Products appended hereto as Schedule B; and"
2. (a) Section 1.1(h) of the Agreement is hereby amended so that the
first line thereof reads as follows: "'Successful Completion' means the
successful completion of the 4 bbl per day pilot..."
3. Section 1.3-K is hereby deleted in its entirety without any
renumbering any of subsequent subsections.
4. The parties hereto hereby understand, agree and acknowledge that the
shares of Carbon to be delivered to Synergy pursuant to subsection (d) of
Section 12.1 of the Agreement have not been delivered as required thereby;
and (b) the approvals required by Sections 6.1 (a) and (b) have not been
delivered; however each such failure can and will be cured by the delivery
thereof at the time of the execution of this Amendment
5. The portion of Subsection (d) of Section 8.1 that begins with "save
for the interest of Laxarco" and ends with "Schedule
7. The first clause of subsection (v) of Section 8.1 of the Agreement is
hereby amended to read as follows:
"(v) since the Effective Date;"
8. Concurrent with the execution hereof, Synergy shall deliver the
documents required by Subsections (c) and (f) of Section 13.1 of the Agreement
and thereby satisfy the requirements
thereof.
9. Section 20.1 is hereby amended to include the following subsections:
"(d) To Stone Canyon:
Stone Canyon Resources, Ltd.
1800 First Canadian Centre
350 7th Avenue S.W.
Calgary, Alberta
(e) To Carbon Resources:
Carbon Resources Limited
Office 302 Sotoun 2
P.O. Box 2545
Nicosta, Cyprus
10. The following Section is hereby added in its entirety to the Agreement:
"23.01 Any dispute which may arise between the parties hereto under this
Agreement other than disputes relating to third party claims, shall be settled
by an equitable rather than a strictly legal interpretation. In such cases, the
parties will submit their differences to five arbiters: each party is to select
one arbiter and the fifth to be selected by the arbiters named by the parties
hereto. In the event of a disagreement among the arbiters,the decision will
rest with the majority. The decision of the majority of the arbiters shall be
binding upon the parties hereto without appeal and may be entered as a judgment
in any court of competent jurisdiction. The arbiters will be relieved of all
judicial formality and may abstain from the strict rules of law except that the
parties shall have the right to engage in discovery as if the dispute were
proceeding in a court of general jurisdiction in the State of Colorado.
23.02 Arbitration may be initiated by any of the parties (the
"Petitioner") by written notice to the other parties demanding arbitration
and naming its arbiter. The other parties (the "Respondents") shall have ten
business days after receipt of said notice within which to designate each of
their respective arbiters. The fifth arbiter shall be chosen by the four
arbiters named by the parties within ten business days thereafter
and the arbitration shall be held at the place hereinafter set forth ten
business days after the appointment of the fifth arbiter. Should the four
arbiters not be able to agree on the choice of the fifth, then the third
arbiter shall be chosen by the American Arbitration Association. If
any the of Respondents does not name its arbiter within ten business days, the
Petitioner may designate such party's arbiter. Arbitration shall take place in
Denver, Colorado. The Petitioner and the Respondents each shall pay its own
expenses in connection with the Arbitration. The expense of the arbiters shall
be shared equally between the parties.
Except to the extent set forth in this Agreement, the Commercial Arbitration
Rules of the American Arbitration Association shall govern any arbitration
procedure hereunder."
IN WITNESS WHEREOF the parties hereto have set their hand and seal as of the
day and year
first above written.
SIGNED, SEALED and DELIVERED
BY LAXARCO HOLDING LIMITED
in the presence of:
/s/ Panyaiota Pifani
LAXARCO HOLDING LIMITED
SIGNED, SEALED and DELIVERED
by CARBON RESOURCES LIMITED
in the presence of:
/s/ Janet Leslie /s/ Jacqueline Danforth
CARBON RESOURCES LIMITED
SIGNED, SEALED and DELIVERED
BY SYNERGY TECHNOLOGIES CORPORATION
in the presence of:
/s/ Janet Leslie /s/ Camerson Haworth
SYNERGY TECHNOLOGIES
CORPORATION
SIGNED, SEALED and DELIVERED
BY STONE CANYON RESOURCES, LTD.
in the presence of:
/s/ Janet Leslie /s/ Jacqueline Danforth
STONE CANYON
RESOURCES, LTD.
AMENDED AND RESTATED
ESCROW AGREEMENT
THIS AMENDED AND RESTATED ESCROW AGREEMENT (this
"Amended Escrow Agreement") is made and entered into this 25th day of
June 1999, to amend and restate that certain Escrow Agreement dated May
16, 1999, (the "Original Escrow Agreement") by and among SYNERGY
TECHNOLOGIES CORPORATION, a Colorado corporation ("Synergy")
previously known as "Automated Transfer Systems Corporation"; LAXARCO
HOLDING LIMITED, a Company incorporated pursuant to the laws of the
Republic of Cyprus ("Laxarco"); and LAWLER & ASSOCIATES, a
professional law corporation, (the "Escrow Agent") located at 2820
Townsgate Road, Suite 200, Westlake Village, California 91361.
WHEREAS, Synergy, Laxarco and certain other parties entered into
a Share Exchange Agreement dated May 5, 1998, and amended as of June
, 1999, (the "First Share Exchange Agreement") whereby 10 million shares
of common stock of Synergy were issued in the name of Laxarco in
exchange for the rights to a certain "gas to liquid" technology, as more
accurately described in the Application for French Patent, Nat'l Reg. No.
9700364, filed January 13, 1997, entitled "CONVERSION OF
HYDROCARBONS ASSISTED BY GLIDING ELECTRIC ARCS IN THE
PRESENCE OF WATER VAPOR AND/OR CARBON DIOXIDE", plus all
other patents which have been or shall be issued in the United States and
all foreign countries on such technology, including but not limited to U.S.
Patent Application Ser. No. 09/005,647, filed January12,1998 and PCT
Patent Application Ser. No. PCT/US98/00393 (the "GTL").
WHEREAS, pursuant to the Original Escrow Agreement the
aforementioned 10 million shares of Synergy (the "Original Synergy Shares")
are held in escrow by the Escrow Agent pending the "successful completion"
of the GTL (as such term is defined in paragraph 1.1(h) in the First Share
Exchange Agreement);
WHEREAS, pursuant to the First Share Exchange the GTL is to be
held in escrow pending the release of the Original Synergy Shares;
WHEREAS, Synergy and Laxarco, concurrent herewith, are entering
into a second Share Exchange Agreement (the "Second Share Exchange
Agreement") whereby 3,000,000 shares of common stock of Synergy are to
be issued to Laxarco (the "Second Synergy Shares" and collectively with the
Original Synergy Shares referred to as the "Synergy Shares"), in exchange
for the Laxarco rights to certain "heavy oil technology" as described therein
(the "CPJ Technology") (the GTL and CPJ Technologies collectively are
referred to herein as the "Technologies").
WHEREAS, the Second Share Exchange Agreement provides that the
Second Synergy Shares are to be held in escrow;
WHEREAS, all of the shareholders of Laxarco have agreed that the
Original Shares are to be released from Escrow upon the occurrence of the
first of the particular events regarding the Technologies as described
hereafter; and
WHEREAS, the parties to this Agreement wish to (a) add the Second
Synergy Shares to the Escrow; (b) confirm the transfer of the Original
Synergy Shares into the Escrow; (c) establish terms, conditions and order
by which the Synergy Shares are to be held and released; and (d) add the
assignment of the GTL from Laxarco to Carbon into the Escrow pending its
release as set forth below.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Upon execution hereof, Synergy shall deliver, or cause
to be delivered, the Second Synergy Shares, in the name of Laxarco, to
the Escrow Agent. Escrow Agent shall keep the Synergy Shares in
escrow, except as provided herein, until the terms and conditions set forth
herein are satisfied and then shall be released pursuant hereto. Laxarco
shall provide Escrow Agent with an irrevocable voting power of attorney in
favor of the Board of Directors of Synergy to vote the Second Synergy
Shares until such time as the Second Synergy Shares are released from
escrow at which time Escrow Agent shall return to Laxarco the voting
power of attorney.
(b) Upon execution hereof, Laxarco shall deliver, or cause to
be delivered, the assignment of the GTL into the name of Synergy, to the
Escrow Agent. The Escrow Agent shall keep the GTL in escrow until the
terms and conditions set forth herein are satisfied and then shall be
released pursuant hereto.
2. It is hereby agreed by and among Laxarco, Synergy and the
Escrow Agent that the GTL and the Synergy Shares, upon execution
hereof, are to be held in Escrow as well as the voting powers of attorney
and the GTL shares shall be, and hereby are, subject to the terms and
conditions set forth herein.
3. (a) None of the Synergy Shares shall be released from
this escrow, notwithstanding the provisions set forth in paragraphs 4 and
5 below, if at the time during the term hereof: (i) any of the contracts
and/or agreements pursuant to which either of the Technologies have
been transferred to Synergy's subsidiaries in connection with the First
Share Exchange Agreement and/or the Second Share Exchange
Agreement are not in good standing or have been breached by Laxarco,
or any of its subsidiaries; (ii) such breaches have not been cured or
waived; or (iii) if the transfer of legal and equitable title to the
Technologies is not perfected in the name of Synergy or one of its
subsidiaries.
(b) The GTL shall not be released from this escrow,
notwithstanding the provisions set forth in paragraphs 4 and 5 below, if, at
the time during the term hereof, either the First Share Agreement or
Second Share Agreement is not in good standing Synergy or any of its
subsidiaries, is in breach thereof and such breaches have not been cured
or revived, or if the transfer of legal and equitable title to the Synergy
Shares is not perfected in the name of Laxarco at the time of release
hereunder.
4. It is hereby understood and agreed to by and between all
parties to this Agreement that the Original Synergy Shares shall be the
first shares released from Escrow. The Original Synergy Shares shall be
released from Escrow, upon the earliest occurrence of either of the
following events:
(a) The GTL is deemed to have reached "successful
completion" as that term is defined in Section 1.1(h) of the First Share
Exchange Agreement; or
(b) (i) The parties receive a written report from Purvin &
Gertz affirming that the CPJ Technology is a competitive process in the
heavy oil industry; AND
(ii) Synergy, or it's assigned subsidiary, has received
legal, equitable and marketable title to the CPJ Technology under the
agreement dated January 6, 1999 by and between Laxarco and Pierre
Jorgensen.
5. The Second Synergy Shares shall continue to be held in
escrow until the occurrence in time of the second of the events described
in paragraph 4 above. At such time, the Second Synergy Shares shall be
released to Laxarco and the GTL shall be released to Synergy. In order
to complete the release and transfer of Synergy Shares, as contemplated
herein, each party shall deliver to the Escrow Agent medallion, signature
guarantees, and any other documents necessary to affect the transfer of
any of such shares to the appropriate party.
6. The Synergy Shares and the GTL deposited into Escrow
shall remain the property of the named holder and shall not be subject to
any lien or charges by the Escrow Agent, or judgments or creditors' claims
against either respective party until released in the manner provided
herein.
7. It is understood and agreed that the duties of the Escrow
Agent are entirely ministerial being limited to receiving the Synergy and
the GTL, and holding and disbursing such items in accordance with this
Amended Escrow Agreement.
8. The Escrow Agent is not a party to, and is not bound by, any
agreement between Synergy and Laxarco except as may be evidenced by
or arise out of the foregoing instructions.
9. The Escrow Agent acts hereunder as a depository only, and
is not responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness, or validity of any instrument deposited with it,
or with respect to the form or execution of the same, or the identity,
authority, or rights of any person executing or depositing the same.
10. The Escrow Agent shall not be required to take or be bound
by notice of any default of any person or to take any action with respect to
such default involving any expense or liability, unless notice in writing is
given to an officer of the Escrow Agent of such default by the undersigned
or any of them, and unless it is indemnified in a manner satisfactory to it
against any expense or liability arising therefrom.
11. The Escrow Agent shall not be liable for acting on any
notice, request, waiver, consent, receipt, or other paper or document
believed by the Escrow Agent to be genuine and to have been signed by
the proper party or parties.
12. The Escrow Agent shall not be liable for any error of
judgment or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or refrain
from doing in connection herewith, except its own willful misconduct.
13. The Escrow Agent shall not be answerable for default or
misconduct of any agent, attorney, or employee appointed by it if such
agent, attorney, or employee shall have been selected with reasonable
care.
14. The Escrow Agent may consult with legal counsel in the
event of any dispute or question as to the construction of the foregoing
instructions or the Escrow Agent's duties hereunder, and the Escrow
Agent shall incur no liability and shall be fully protected in acting in
accordance with the opinion and instructions of such counsel.
15. In the event of any disagreement between the undersigned
or any of them, the person or persons named in the foregoing
instructions, and/or any other person, resulting in adverse claims and/or
demands being made in connection with or for any papers, money, or
property involved herein or affected hereby, the Escrow Agent shall be
entitled at its option to refuse to comply with any such claim, or demand
so long as such disagreement shall continue and, in so refusing, the
Escrow Agent shall not be or become liable to the undersigned or any of
them or to any person named in the foregoing instructions for the failure
or refusal to comply with such conflicting or adverse demands, and the
Escrow Agent shall be entitled to continue to so refrain and refuse to so
act until:
(a) The rights of adverse claimants have been
finally adjudicated in a court assuming and having jurisdiction of the
parties and the money, papers, and property involved herein or affected
hereby; and/or
(b) All differences shall have been adjusted by
agreement and the Escrow Agent shall have been notified thereof in
writing signed by all of the persons interested.
16. The fee of the Escrow Agent is $1,000.00, which shall be
paid by agreement among the parties prior to the earlier of completion or
cancellation of this Escrow. The fee is for services rendered hereunder
and is intended as full compensation for the Escrow Agent's services as
contemplated by this Agreement; however, in the event that the conditions
of this Agreement are not fulfilled, the Escrow Agent renders any material
service not contemplated by this Agreement, there is any assignment of
interest in the subject matter of this Agreement, there is any material
modification hereof, any material controversy arises hereunder, or the
Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Agreement or the subject matter hereof, the Escrow
Agent shall be reasonably compensated for such extraordinary expenses,
including reasonable attorneys' fees, occasioned by any such delay,
controversy, litigation, or event and the same may be recoverable from
the parties jointly and severally.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers, as
of the date first above written.
LAWLER & ASSOCIATES, a professional LAXARCO HOLDING LIMITED
law corporation a corporation organized
under the laws
of the Republic of Cyprus
By: /s/ W. Scott Lawler By: /s/ Panyaiota Pifani
Duly Authorized Officer Name/Title
SYNERGY TECHNOLOGIES
CORPORATION, a Colorado
corporation
By: /s/ Jacqueline Danforth
Name/Title:
THIS AGREEMENT dated for reference the 25th day of June 1999
BETWEEN:
LAXARCO HOLDING LIMITED, a Company
incorporated pursuant to the laws of the Republic of Cyprus
and having a mailing address at Office 302, Sofouli 2, P.O.
Box 2545, Nicosia, Cyprus
OF THE FIRST PART
(herein referred to as "Laxarco")
AND:
CARBON RESOURCES LIMITED, a Company
incorporated pursuant to the laws of the Republic of Cyprus
and having a mailing address at Office 302, Sofouli 2, P.O.
Box 2545, Nicosia, Cyprus
OF THE SECOND PART
(herein referred to as "Carbon")
AND:
SYNERGY TECHNOLOGIES CORPORATION,
(formerly Automated Transfer Systems Corporation), a
Company incorporated pursuant to the laws of the State of
Colorado and having its registered and records office at
Suite 101, 5801 West 11th Street, Greeley, Colorado
80634.
OF THE THIRD PART
(herein referred to as the "Synergy")
WHEREAS:
A. Laxarco, Synergy, Carbon and Stone Canyon Resources, Ltd., a corporation
organized under the laws of Alberta, Canada ("Stone Canyon"), entered into a
Share Exchange Agreement dated May 5, 1998 and amended on June 25, 1999 (the
"First Share Exchange Agreement");
B. Laxarco is the registered and beneficial owner of 25% (twenty-five percent),
being a total of 1,250 shares, of the organized shares of common stock of Carbon
(the "Carbon Shares"); and Synergy is the registered and beneficial owner of 75%
(seventy-five percent) being a total of 3,750 shares of the organized shares of
common stock of Carbon; and
C. Laxarco and Synergy wish to affect an exchange of the Carbon Shares for
3,000,000 restricted shares of the common stock of Synergy, and the parties to
this Agreements have agreed to the share exchange subject to the terms and
conditions set out below; and
D. Synergy has agreed to be bound by all agreements between Laxarco and
Carbon as properly disclosed to Synergy by such parties; and
E. The parties wish to agree to the transfer of the entire right, title and
interest held by Carbon in and to any and all improvements which are disclosed
in the application for French Patent, Nat'l Reg. No. 9700364, filed January 13,
1997, entitled "CONVERSION OF HYDROCARBONS ASSISTED BY GLIDING
ELECTRIC ARCS IN THE PRESENCE OF WATER VAPOR AND/OR CARBON DIOXIDE," plus all
other patents which have been or shall be issued in the United States and all
foreign countries on such improvements, including but not limited to U.S. Patent
Application Ser. No. 09/005,647, filed January 12, 1998 and PCT Patent
Application Ser. No. PCT/US98/00393 (the "Business Assets"),to a company
which shall be a wholly-owned subsidiary of Synergy under the same terms and
conditions of the First Share Exchange Agreement.
NOW THEREFOR THIS AGREEMENT WITNESSES that for and in
consideration of the mutual premises and the mutual covenants and agreements
contained herein, the parties covenant and agree each with the other as follows:
1.0 DEFINITIONS
1.1 For all purposes of the Agreement:
(a) "Effective Date" means the date that each party receives Shareholder
Approval (as such term is defined herein) of this Agreement.
(b) "Shareholder Approval" means the requisite shareholder approvals
required by each of the parties to this Agreement;
(c) "Escrow Agreement' means that Escrow Agreement dated May 16,
1998 by and between Synergy, Laxarco and Lawler & Associates as amended and
restated as provided in Section 2.2 hereof and in the form of that Amended and
Restated Escrow Agreement attached hereto as Schedule A.
(d) "Escrow Holder" means Lawler & Associates, a professional law
corporation;
(e) "Contracts" means all of the commitments, agreements, contracts,
instruments, leases and other documents entered into by the parties to this
Agreement by which the parties to this Agreement are bound or to which the
parties to this Agreement or the Business Assets of the parties are subject;
(f) "Synergy Shares" means the fully paid and non-assessable 3,000,000
shares of common stock of Synergy to be issued to Laxarco pursuant to Article 2
hereof and which will be held in escrow as provided herein;
(g) "Shareholders Meeting" means the general meeting of the shareholders
of Synergy to be called pursuant to Section 9.2(b), if required;
(h) "Termination Date" means the day that is thirty (30) days after the
last day of the month in which all of Synergy's Approvals as defined in section
6.1 (a)hereof are received;
(i) "Share Exchange" shall mean the exchange of Synergy's Shares for the
Carbon Shares at the Closing pursuant to Article 2.0 hereof; and
(j) "Closing" shall have the meaning ascribed thereto in Section 4.1.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this agreement, including the preamble and the
schedules hereto, as it may from time to time be supplemented or amended in
effect;
(b) All references in this Agreement, to a designated "Section" or other
subdivision or to a schedule is to the designated Section or other subdivision
of or Schedule to, this Agreement;
(c) The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision or Schedule;
(d) The headings are for convenience only and do not form a part of this
agreement and are not intended to interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof;
(e) The singular of any term includes the plural, and vice versa, the use
of any terms equally applicable to any gender and where applicable a body
corporate; the word "or" is not excessive and the word "including" is not
limiting, whether or not non-limiting language, such as "without limitation" or
"but not limited" to or words of similar import, is used with reference thereto;
(f) Any accounting term not otherwise defined has the meanings assigned
to it in accordance with generally accepted accounting principals applicable
to the United States of America;
(g) Any reference to a statute includes and is a reference to that
statute and to the regulations made pursuant thereto, with all amendments made
thereto and in force from time to time, and to any statute or regulations that
may be passed which has the effect of supplementing or superceding that statute
or regulations;
(h) Where any representation or warranty is made to the knowledge of any
Person, such Person will not be liable for a misrepresentation or breach of
warranty by reason of the fact, state of facts, or circumstances in respect of
which the representation or warranty is given being untrue if such Person
proves:
i. that such Person conducted a reasonable investigation so as to
provide reasonable grounds for a belief that there had been no
misrepresentation or breach of warranty; and
ii. that fact, state of facts, or circumstances could not
reasonably be expected to have been determined as a result of that reasonable
investigation, irrespective of the actual investigation conducted by such
Person.
(i) Except as otherwise provided, any dollar amount referred to in this
Agreement is in U.S. funds; and
(j) Any other term defined within the text of this Agreement has the
meanings so ascribed.
1.3 The following are the Schedules to this Agreement:
SCHEDULE DESCRIPTION
A Amended and Restated
Escrow Agreement
B Closing Warranty and
Certificate of Synergy
C Authorized and Issued
Capital of Carbon
D Closing Warranty and
Certificate of Laxarco
E Closing Warranty and
Certificate of Carbon
2.0 SHARE EXCHANGE
2.1 Subject to the terms and conditions hereof and the requisite
Shareholder Approvals, as at the Effective Date, the parties shall
exchange the Synergy Shares for the Carbon Shares.
2.2 The Synergy Shares shall be held in escrow in the manner required
by the Escrow Agreement, which shall simultaneously herewith be
amended, and restated in the form provided in Schedule "A" hereto,
to provide for the inclusion of the Synergy Shares and the Business
Assets.
3.0 TRANSFER OF ASSETS
3.1 The parties hereto acknowledge that Carbon acquired the Business
Assets by way of the First Share Exchange Agreement and wish to
agree that the rights in and to the Business Assets be transferred to
a company ("NewCo") to be organized by Synergy as its wholly-
owned subsidiary.
3.2 Upon the execution of this Agreement and the incorporation of
NewCo, the rights to the Business Assets shall be transferred into
the name of NewCo subject only to NewCo's agreement to be
bound by the portions of the prior written and executed agreements
of Synergy, Laxarco and Carbon that relate to or effect the
Business Assets, and the provisions of the Escrow Agreement.
4.0 CLOSING
4.1 The completion of the Share Exchange will take place at the
Effective Date at such place as each of the parties to this
Agreement may agree to (the "Closing").
4.2 The Effective Date shall occur no later than ninety (90) days from
the date of execution of this Agreement, and this Agreement shall
be voidable thereafter at the option of Synergy or Laxarco upon
thirty (30) days notice in writing to the parties hereto, such
election not to be unreasonably exercised.
4.3 In the event that this Agreement is terminated pursuant to Section
4.2 above, and either Laxarco or Synergy has not used its best
efforts to complete the transactions contemplated by this
Agreement, then notwithstanding any other provision of this
Agreement:
(a) if Synergy failed to use its best efforts, Synergy shall be
liable for and shall pay all costs and expenses incurred by Laxarco
and Synergy in connection with this Agreement; and
(b) if Laxarco failed to use its best efforts, Laxarco will be
liable for and shall pay all costs and expenses.
5.0 TRANSACTION EXPENSES
5.1 Except as provided in Section 4.3, each party to this Agreement
shall bear all costs and expenses incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. Unless otherwise
expressly provided herein, all costs and expenses related to
satisfying any condition or fulfilling any covenant contained in this
Agreement shall be borne by the party whose responsibility it is to
satisfy the condition or fulfil the covenant in question.
6.0 APPROVALS
6.1 The obligations of the parties to complete the Share Exchange shall
be subject to the following:
(a) the passing of the required resolutions by the shareholders of
Synergy contemplated by Section 9.2 (b) at the Shareholders
Meeting (the "Synergy Approvals");
(b) the passing of the resolutions by the shareholders of Laxarco
authorizing Laxarco to enter into this Agreement and complete the
transactions contemplated hereby (the "Laxarco Resolutions");
6.2 Synergy, Laxarco, and Carbon shall use their best and reasonable
efforts to obtain the approvals required pursuant to Section 6.1
prior to the Closing.
7.0 SYNERGY WARRANTIES AND REPRESENTATIONS
7.1 Synergy warrants and represents to the parties to this Agreement,
with the intent that the parties to this Agreement will rely thereon
in entering into this Agreement and in concluding the Share Exchange
contemplated herein that:
(a) the Synergy Shares, at Closing, shall be free and clear of all
liens and encumbrances;
(b) Synergy is a company duly incorporated, validly existing and
presently in good standing under the laws Synergy is the registered
holder and beneficial owner of the State of Colorado and has the
power, authority and capacity to enter into this Agreement and to
carry out its terms;
(c) the execution and delivery of this Agreement and the completion
of the transactions contemplated hereby has been duly and validly
authorized by all necessary corporate action on the part of
Synergy, and this Agreement constitutes a legal, valid and binding
obligation of Synergy in accordance with its terms except as
limited by laws of general application affecting the rights of
creditors;
(d) upon completion of the Share Exchange, Laxarco shall be the
beneficial and registered holder of Synergy's Shares as fully paid
and non-assessable, free and clear of all liens, charges and
encumbrances and restrictions on transfer save and except those
prescribed in the Escrow Agreement and those which may be
imposed by the regulatory authorities or under applicable securities
law;
(e) Synergy has all corporate power and authority to carry on its
business as presently carried on;
(f) the minute books and corporate records of Synergy contain a
true and complete record of all resolutions of the directors and
shareholders and all records required to be maintained under the
Colorado Revised Statutes;
(g) all alterations to the Articles of Incorporation of Synergy since
its incorporation have been duly approved by the shareholders of
Synergy and registered with the Registrar of Companies for the
State of Colorado;
(h) Synergy is not in breach of any statute, regulation or bylaw
applicable to Synergy or its operations;
(i) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof, does not conflict with or result
in the breach of or the acceleration of any indebtedness under, any
terms, provisions or conditions of, or constitute default under the
Articles of Incorporation of Synergy or any indenture, mortgage,
deed of trust, agreement, lease, franchise, certificate, consent,
permit, licence, authority or other instrument to which Synergy is a
party or is bound or any judgement, decree, order, rule or
regulation of any court or administrative body by which Synergy is
bound, or, of any statute or regulation applicable to Synergy.
8.0 LAXARCO'S WARRANTIES AND REPRESENTATIONS
8.1 Laxarco warrants and represents to Synergy, with the intent that
Synergy will rely thereon in entering into this Agreement and in
concluding the Share Exchange that:
(a) Laxarco is the registered holder arid beneficial owner of the
Carbon Shares, free and clear of all liens, and Laxarco has no other
interest, legal or beneficial, direct or indirect, in any other
shares in the capital of Carbon, or in the business or the business
assets.
(b) Laxarco has the power and capacity and good and sufficient
right and authority to enter into this Agreement on the terms and
conditions herein set forth and to transfer the legal and beneficial
title and ownership of Carbon Shares to Synergy;
(c) Laxarco is a corporation duly incorporated, validly existing and
in good standing under the laws of the Republic of Cyprus;
(d) All alterations, if any, to the Articles and Bylaws of Laxarco
since its incorporation have been duly approved by the shareholders
of Laxarco and registered with the governmental authority having
jurisdiction;
(e) Laxarco has the power, authority and capacity to carry on the
business as presently conducted by it;
(f) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof does not conflict with or result in
the breach of or the acceleration of any indebtedness under, any
terms, provisions or conditions Oft or constitute default under the
Articles or By-Laws of Laxarco or any indenture, mortgage, deed
of trust, agreement, lease, franchise, certificate, consent, permit,
licence, authority or other instrument to which Laxarco is a party or
is bound or any judgement, decree, order, rule, or regulation of any
court of administrative body by which Laxarco is bound, or, to the
knowledge of any statute or regulation applicable to Laxarco;
(G) all material transactions of Laxarco have been promptly and
properly recorded or filed in or with its respective books and
records, and the minute book of Laxarco contains all records
required to be kept pursuant to applicable legislation pertaining to
corporations in Laxarco' s jurisdiction of incorporation;
8.2 Carbon represents and warrants to Synergy, with intent that Synergy will
rely thereon in entering into this Agreement and concluding the Share
Exchange, that:
(a) Carbon has the power, authority and capacity to own and use
all of the Business Assets;
(b) Carbon owns and possesses and has good and marketable title
to and possession of all the business assets free and clear of liens
free and clear of liens, encumbrances, adversarial claims, litigation,
threatened litigation, violations of patents or other intellectual
property claims;
(c) Carbon has no contract, agreement, undertaking, or
arrangement, whether oral, written or implied, and does not have
any outstanding agreement, contract or commitment (whether
written or oral) whatsoever relating to or affecting the conduct of
the business or any of the Business Assets or for the purchase, sale
or lease of any of the Business Assets;
(d) Carbon:
(i) is not in breach of any of the terms, covenants,
conditions, or provisions of, is not in default under, or has
done or omitted to do anything which, with the giving of
notice or lapse of time or both, would constitute a breach of
or a default under, any contract;
(ii) is not in breach or default under any judgement
injunction, or other order or aware of any judicial,
administration, governmental, or other authority or
arbitrator by which Laxarco is bound or to which Laxarco
or any business assets are subject;
(iii) has conducted the business in the usual and normal
manner and has maintained the business assets in good
standing; and
(iv) has not waived or surrendered any right of material
value.
9.0 COVENANTS OF THE PARTIES
9.1 Between the date of this Agreement and the Effective Date,
Laxarco:
(a) will cause Laxarco to afford to Synergy and its authorized
representatives access during normal business hours to all books,
contracts, commitments, records of Carbon and will furnish such
copies (certified if requested) thereof and other information as
Synergy may reasonably request and will take such steps as may be
necessary to permit Synergy and its authorized representatives to
make such audit of the books of account of Carbon and such
physical verification of the Business Assets as Synergy may
reasonably see fit;
(b) will diligently take all reasonable steps to obtain prior to the
Effective Date, all consents and approvals required to complete the
transactions contemplated herein in accordance with the terms and
conditions hereof including any consents, waivers, and approvals as
requested by Synergy or Synergy's solicitor;
(c) will do any and all things reasonably necessary and use their best
efforts assist and fully cooperate with Synergy in its effort to
obtain the approvals within the time limited hereunder;
(d) will not take any action nor inaction that could or will cause
Carbon to be unable to conduct its business and affairs diligently
and in the ordinary course, and preserve and maintain the goodwill
of Carbon, the Business Assets and the business of Carbon; and
9.2 Between the date of this Agreement and the Effective Date,
Synergy will:
(a) afford to Laxarco and its authorized representatives access
during normal business hours to all books contracts, commitments,
records of Synergy and will furnish such copies (certified if
requested) thereof and other information as Laxarco may
reasonably request, and will take such steps as may be necessary to
permit Synergy and its authorized representatives to make such
audit of the books of account of Synergy and such physical
verification of the assets of Synergy as Laxarco may reasonably see
fit;
(b) if required, call a general meeting of its shareholders to be held
as soon as practicable after execution hereof to consider and, if
thought fit, approve resolutions respecting the following matters
together with such amendments as Laxarco may specify prior to the
date notice of such meeting is mailed to Synergy's shareholders:
(i) approval of the Share exchange; and
(ii) such other matters pertaining to the transactions
contemplated herein as may be reasonably requested by
Synergy or Laxarco, the form of proxy materials for the
meeting to be completed to the satisfaction of Laxarco, as
advised by Synergy;
(c) deliver written confirmation of each of the foregoing, if any, to
Laxarco; and
(d) attend to all corporate matters to carry out and implement this
Agreement as soon as possible.
9.3 Synergy and Laxarco shall each complete their own due diligence
investigations contemplated by subparagraphs 9.1(a) and 9.2(a)
herein respectively in order to satisfy themselves of the accuracy of
each other's representations and warranties hereunder, within thirty
(30) days of the date of this Agreement, and shall each deliver to
the other written confirmation of their satisfactory completion of
such investigations. Notwithstanding any such investigations, the
representations and warranties of any party hereto shall survive the
Closing Date and the Closing, and shall continue in full force and
effect.
10.0 NON-MERGER
10.1 The representations, warranties, covenants and agreements of
Laxarco contained herein and those contained in the documents and
instruments delivered pursuant hereto will be true at and as of
the Effective Date as though made at the Effective Date and will
survive the Effective Date, and notwithstanding the completion of
the transactions herein contemplated, the waiver of any condition
contained herein (unless such waiver expressly releases Laxarco
of such representation, warranty, covenant or agreement), or any
investigation by Synergy, the same will remain in full force and
effect.
10.2 The representations, warranties, covenants and agreement of
Synergy contained herein and those contained in the documents and
instruments delivered pursuant hereto will be true at and as of
the Effective Date as though made at the Effective Date and will
survive the Effective Date, and notwithstanding the completion of
the transactions herein contemplated, the waiver of any condition
contained herein (unless such waiver expressly releases Synergy
of such representation, warranty, covenant or agreement), or any
investigation by Laxarco, the same will remain in full force and
effect.
11.0 CONDITIONS PRECEDENT
11.1 The obligations of Synergy to consummate the transactions herein
contemplated are subject to the fulfillment of each of the
following conditions at the times stipulated:
(a) the representations and warranties of Laxarco contained herein
are true and correct in all respects at and as of the Effective Date
except as may be in writing disclosed to and approved by Synergy;
and
(b) all covenants, agreements and obligations hereunder on the part
of Laxarco to be performed or complied with at or prior to the
Closing, including Laxarco's obligation to deliver the documents
and instruments herein provided for, have been performed and
complied with at and as of the Effective Date.
11.2 The conditions set forth in Section 11.1 are for the exclusive
benefit of Synergy and may be waived by Synergy in writing in
whole or in part at any time.
11.3 The obligations of Laxarco to consummate the transactions herein
contemplated are subject to the fulfilment of each of the
following conditions at the times stipulated, that:
(a) the representations and warranties of Synergy contained herein
are true and correct in all material respects at and as of the
Closing except as may be in writing disclosed to and approved by
Laxarco; and
(b) all covenants, agreements and obligations hereunder on the part
of Synergy to be performed or complied with at or prior to the
Effective Date, including in particular Synergy's obligations to
deliver the documents and instruments herein provided for, have
been performed and complied with as at the Closing.
11.4 The conditions set forth in Section 11.3 are for the exclusive
benefit of Laxarco and may be waived by Laxarco in whole or in
part at any time.
12.0 TRANSACTIONS OF LAXARCO AND CARBON AT THE CLOSING
12.1 At the Closing, Laxarco shall execute and deliver or cause to be
executed and delivered to Synergy, all documents, instruments,
resolutions and share certificates as are necessary to
effectively transfer and assign the Carbon Shares to Synergy free
and clear of all liens, claims and encumbrances (other than
pursuant to applicable United States securities laws) including:
(a) share certificates representing the Laxarco Shares registered in
the name of Laxarco, duly endorsed for transfer to Synergy;
(b) the Escrow Agreement, duly executed by the Board of
Directors of Laxarco;
(c) certified copies of resolutions of the shareholders of Laxarco
authorizing the transfer of the Laxarco shares and the registration
of the Laxarco Shares in the name of Synergy and authorizing the
issue of new share certificates in the name of Synergy;
(d) duly issued share certificates registered in the name of Synergy
representing 1,250 organized shares in the capital of Carbon, the
total organized shares in the capital of Carbon being 5,000
organized shares;
(e) a Closing Warranty and Certificate of Laxarco confirming that
the conditions to be satisfied by Synergy, unless waived, set out in
Section 11.1 have been satisfied at the Closing and that all
representations and warranties of Laxarco contained in this
Agreement are true and correct at and as of the Closing in the form
attached as Schedule "D".
12.2 At the Closing, Carbon shall execute and deliver to Synergy a
Closing Warranty and Certificate of Carbon confirming that all
representations and warranties of Carbon set forth herein are
true as of the Closing, in the form attached hereto as Schedule
"E".
13.0 TRANSACTIONS OF SYNERGY AT THE CLOSING
13.1 Synergy will deliver or cause to be delivered the following at the
Closing.
(a) copies of all written Synergy Approvals;
(b) share certificates to the Escrow Agent representing the Synergy
Shares duly registered in the name of Laxarco;
(c) written confirmation of the escrow agent that the Synergy
Shares have been issued to Laxarco, and are being held by the
Escrow Agent pursuant to the terms of the Escrow Agreement.
(d) a Closing Warranty and Certificate from the Board of Directors
of Synergy confirming that the conditions to be satisfied by
Synergy, unless waived, set out in Section 11.3 have been satisfied
at the Closing and that all representations and warranties of
Synergy contained in this Agreement are true at and as of the
Closing in the form attached as Schedule "B".
(e) the Escrow Agreement duly executed by Synergy and the
Escrow Agent;
(f) copies, certified if requested, of all minutes and consent
resolutions of the Directors of Synergy authorizing Synergy to:
i. Enter into and fulfil the terms of this Agreement;
ii. Issue such number of common shares in the capital stock
of Synergy to complete the Share Exchange Agreement; and
iii. Execute and deliver the Escrow Agreement.
14.0 POST CLOSING AGREEMENTS, COVENANTS AND
OBLIGATIONS
14.1 Laxarco will indemnify and hold harmless Synergy from and
against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any
covenant on the part of Laxarco under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Synergy hereunder; and
(b) any and all actions, suits, proceedings, demands, assessments,
judgements, costs and legal and other expenses incidental to any of
the foregoing.
14.2 Synergy will indemnify and hold harmless Laxarco and Laxarco
from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any
covenant on the part of Synergy under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Laxarco and Laxarco
hereunder; and
(b) any and all actions, suits, proceedings, demands, assessments,
judgements, costs and legal and other expenses incidental to any of
the foregoing.
15.0 TIME OF THE ESSENCE
15.1 Time is of the essence of this Agreement.
16.0 FURTHER ASSURANCES
16.1 The parties will execute and deliver such further documents and
instruments and do all such acts and things as may be reasonably
necessary or requisite to carry out the full intent and meaning
of this Agreement and to effect the transactions contemplated by
this Agreement.
17.0 SUCCESSORS AND ASSIGNS
17.1 This Agreement will enure to the benefit and be binding upon the
parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns. This Agreement
may not be assigned by any party hereto without the prior written
consent of all parties to this Agreement.
18.0 COUNTERPARTS
18.1 This Agreement may be executed in several counterparts, each of
which will be deemed to be an original and all of which will
together constitute one and the same instrument.
19.0 NOTICES
19.1 All notices, requests, demands and other communications required
or permitted hereunder, or desired to be given with respect to
their rights or interest herein, assigned or reserved, shall be
deemed to have been properly given or delivered, when delivered
personally or sent by registered mail or sent by electronic
communication with all postage or other charges fully prepaid,
and addressed to the parties respective as follows:
To Laxarco:
Laxarco Holding Limited
Office 302, Sofouli 2,
P.O. Box 2545
Nicosia, Cyprus
To Synergy:
Synergy Technologies Corporation
#2l0-2l4 11th Ave SB.
Calgary, Alberta T2G 0X8
To the Escrow Agent:
Lawler & Associates
2820 Townsgate Road, Suite 200
Westlake Village, CA 91361
Or such other address as any Person may specify by notice in writing to the
other.
19.2 Any notice delivered on a business day, or sent by electronic
communication on a business day, wilt be deemed conclusively to
have been effectively given on the date notice was delivered or
transmitted.
19.3 Any notice sent by prepaid registered mail will be deemed
conclusively to have been effectively given on the tenth business
day after posting; but if at the time of posting or between the
time of posting and the tenth business day thereafter there is a
strike, lockout or other labor disturbance affecting postal
service, then the notice will not be effectively given until
actually delivered.
20.0 AGENTS
20.1 Laxarco warrants to Synergy that no agent or other intermediary
has been engaged by Laxarco in connection with the share
exchange herein contemplated; and Synergy warrants to Laxarco
that no agent or other intermediary has been engaged by Synergy
in connection with the share exchange herein contemplated.
21.0 PROPER LAW
21.1 This Agreement will be governed by and construed in accordance
with the laws of the State of Colorado and the parties will
attorn to
jurisdiction of the Courts thereof
22.0 ARBITRATION
22.1 Any dispute which may arise between the parties hereto under this
Agreement other than disputes relating to third party claims,
shall be solved by an equitable rather than a strictly legal
interpretation. In such cases. he parties will submit their
differences to three arbiters: one to be selected by Assignor,
one to be selected by Assignee, and the third to be selected by
the arbiters named by the parties hereto. In the event of a
disagreement among the arbiters, the decision will rest with
the majority. The decision of the majority
of the arbiters shall be binding upon the parties hereto without
appeal and may be entered as a judgement in any court of
competent jurisdiction. The arbiters will be relieved of all
judicial formality and may abstain from the strict rules of law
except that the panics shall have the right to engage in
discovery as if the dispute were proceeding in a court of general
jurisdiction in the State of Colorado.
22.2 Arbitration may be initiated by either Assignee or Assignor (the
"Petitioner") by written notice to the other party demanding
arbitration and naming its arbiter. The other party (the
"Respondent") shall have ten business days after receipt of said
notice within which to designate its arbiter. The third arbiter
shall be chosen by the two arbiters named by the parties within
ten business days thereafter and the arbitration shall be held at
the place hereinafter set forth ten business days after the
appointment of the third arbiter. Should the two arbiters not be
able to agree on the choice of the third, then the third arbiter
shall be chosen by the American Arbitration Association. If
Respondent does not name its arbiter within ten business days,
the Petitioner may designate the second arbiter. Arbitration
shall take place in Denver, Colorado. The Petitioner and the
Respondent each shall pay its own expenses in connection with the
Arbitration. The expense of the arbiters shall be shared
equally between the parties. Except to the extent set forth
in this Agreement, the Commercial Arbitration Rules of the
American Arbitration Association shall govern any arbitration
procedure hereunder.
IN WITNESS WHEREOF the parties hereto have set their hand and seal as of the
day and year first above written.
SIGNED, SEALED and DELIVERED
by SYNERGY TECHNOLOGIES
CORPORATION in the presence of:
SYNERGY
TECHNOLOGIES
CORPORATION
SIGNED, SEALED and DELIVERED
by LAXARCO HOLDING LIMITED
in the presence of:
LAXARCO HOLDING
LIMITED
SIGNED, SEALED and DELIVERED
by CARBON RESOURCES LIMITED
in the presence of:
/S/ Jacqueline R. Danforth
CARBON RESOURCES
LIMITED
AMENDMENT NO. 1 TO THE
ASSIGNMENT OF TECHNOLOGY AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") is entered into this 25th day
of June, 1999, as an amendment to that certain Assignment of Technology
Agreement (the "Agreement") dated 1st day of May 1998 entered into by and
between LAXARCO HOLDING LIMITED, a company incorporated under the laws of the
Republic of Cyprus ("Laxarco"), and CARBON RESOURCES LIMITED, a company
incorporated under the laws of the Republic of Cyprus ("Carbon").
WHEREAS, the parties, having entered into the Agreement, now wish to
amend certain provisions of the Agreement and mutually agree to certain waivers
of possible breaches thereunder.
NOW THEREFORE BE IT RESOLVED that the Agreement hereby is amended as set
forth below by this Amendment and shall remain in full force and effect,
except only to the extent provided herein.
1. Paragraph B on page 1 of the Agreement is hereby amended to read in
its entirety as follows:
"B. Assignor has executed a Heads of Agreement (the "Heads of
Agreement") between the Novochercassk Plant of Synthetic Products ("NPSP")
whereby the Assignor has been granted an exclusive license to proprietary
Fischer-Tropsch technology including chain limiting catalysis appended hereto
as Schedule B; and"
2. Subsection (a) of Section 2.1 of the Agreement is hereby amended to
read in its entirety as follows:
"Assignee will complete construction of a pilot unit as described in
subsection (c) of Section 2.1 of the Agreement (as amended) no later than the
1st day of November 2000."
3. Subsection (c) of Section 2.1 of the Agreement is hereby amended to
read in its entirety as follows:
"Assignee will pursue the commercialization of the Technology, upon
successful completion of the technology; for purposes hereof, 'successful
completion' shall mean the successful completion of a 4 bbl per day pilot unit
that incorporates the SYNGEN technology and the Fischer-Tropsch technology,
that will operate on natural gas feedstock which may be in whole or in
part gas from a city gas main to produce a synthesis gas which the
Fischer-Tropsch unit will then convert into a hydrocarbon product, other gases
and water vapor. The hydrocarbon product shall have a preponderance of the
carbon chain distribution in the gasoline fraction (e.g. Hexanes and higher) and
heavier. Such distribution will be determined by a mole balance based on a
chromatographic analysis. It is mutually recognized that the 4 bbl per day
unit described herein."
4. Subsection (e) of Section 2.1 of the Agreement is hereby deleted in its
entirety without the renumbering of any subsequent subsections.
5. Subsections (h) and (i) of Section 2.1 and Subsection (i) of Section 6.2
of the Agreement are each hereby deleted in their entirety without the
renumbering of any subsequent subsections.
6. It is hereby understood, acknowledged and agreed by and between the
parties hereto that Laxarco's negotiating the Heads of Agreement with NPSP
in place of the N.D. Zelinsky Institute shall not be deemed a breach of the
Agreement subjectd to the condition that concurrent herewith Laxarco enters
into the Heads of Agreement with NPSP and delivers to Carbon a fully executed
copy thereof.
7. Assignor hereby waives, as of thedate hereof, any rights it may have
to terminate the Agreement pursuant to Section 5.2 thereof as a result of any
uncured default by Assignee.
8. Subsection (b) of Section 20.1 of the Agreement is hereby amended to
read in its entirety as follows:
(b) To Assignee:
Carbon Resources Limited
c/o Mr. Thomas Cooley
5215 Spanish Oak
Houston, Texas 77066
With copies to:
Synergy Technologies Corporation
210 - 214 11th Avenue S.E.
Calgary, Alberta Canada
T2G 0X8
and
W.Scott Lawler, Esq.
Lawler & Associates
2820 Townsgate Road Suite 200
Westlake Village, CA 91361
9. The words in line 2 of Section 21.1 of the Agreement stating "the
share exchange herein contemplated" shall be amended to read "the transactions
contemplated herein".
10. The following Section is hereby added in its entirety to the
Agreement:
"20.1 Any dispute which may arise between the parties hereto under this
Agreement other than disputes relating to third party claims, shall be settled
by an equitable rather than a strictly legal interpretation. In such cases,
the parties will submit their differences to three arbiters: one to be selected
by Assignor one to be selected by Assignee, and the third to be selected by
the arbiters named by the parties hereto. In the event of a disagreement among
the arbiters, the decision will rest with the majority. The decision of the
majority of the arbiters shall be binding upon the parties hereto without appeal
and may be entered as a judgment in any court of competent jurisdiction. The
arbiters will be relieved of all judicial formality and may abstain from the
strict rules of law except that the parties shall have the right to engage in
discovery as if the dispute were proceeding in a court of general
jurisdiction in the State of Colorado
23.2 Arbitration may be initiated by either Assignee or Assignor (the
"Petitioner") by written notice to the other party demanding arbitration and
naming its arbiter. The other party (the "Respondent") shall have ten business
days after receipt of said notice within which to designate its arbiter. The
third arbiter shall be chosen by the two arbiters named by the parties within
ten business days thereafter and the arbitration shall be held at the place
hereinafter set forth ten business days after the appointment of the
third arbiter. Should the two arbiters not be able to agree on the choice of
the third, then the third arbiter shall be chosen by the American Arbitration
Association. If the Respondent does not name its arbiter within ten business
days, the Petitioner may designate the second arbiter. Arbitration shall
take place in Denver, Colorado. The Petitioner and the Respondent each
shall pay its own expenses in connection with the Arbitration. The
expense of the arbiters shall be shared equally between the parties. Except to
the extent set forth in this Agreement, the Commercial Arbitration Rules of the
American Arbitration Association shall govern any arbitration procedure
hereunder."
IN WITNESS WHEREOF the parties hereto have set their hand and seal as of
the day
and year first above written.
SIGNED, SEALED and DELIVERED
BY LAXARCO HOLDING LIMITED
in the presence of:
LAXARCO HOLDING LIMITED
SIGNED, SEALED and DELIVERED
by CARBON RESOURCES LIMITED
in the presence of:
CARBON RESOURCES
LIMITED
THIS AGREEMENT dated for reference the 1st day of May, 1998
BETWEEN:
LAXARCO HOLDING LIMITED, a Company incorporated pursuant to
the laws of the Republic of Cyprus and having a mailing address at Office
302, Sofouli 2, P.O. Box 2545, Nicosia, Cyprus
OF THE FIRST PART
(herein referred to as "Assignor")
AND:
CARBON RESOURCES LIMITED, a Company incorporated pursuant to
the laws of the Republic of Cyprus and having a mailing address at Office
302, Soufouli 2, P.O. Box 2545, Nicosia Cyprus
OF THE SECOND
PART
(herein referred to as "Assignee")
WHEREAS:
Assignor is the holder of certain patents (the "patents") for the conversion
of Hydrocarbons assisted by gliding electric arcs in the presence of water
vapor and/or carbon dioxide which is found in the French patent
application, National Registration No. 9700364 filed January 13, 1997 and
further filed in the U.S. and omnibus international PCT application
appended hereto as Schedule A; and
Assignor has executed a Heads of Agreement (the "Heads of Agreement")
between the N.D. Zelinsky Institute whereby Assignor has been granted an
exclusive license to proprietary Fischer-Tropsch technology including chain
limiting catalysts appended hereto as Schedule B; and
Assignor wishes to assign to Carbon the rights to the Patents and the Heads
of Agreement subject to the fulfilment by Carbon of the terms and
conditions as defined in this Agreement.
NOW THEREFOR THIS AGREEMENT WITNESSES that for and in
consideration of the mutual premises and the mutual covenants and
agreements contained herein, the parties covenant and agree each with the
other as follows:
1.0 DEFINITIONS
For all purposes of the Agreement:
"Assignor" means Laxarco Holding Limited
"Assignee" means Carbon Resources Limited
"Shareholder Approval" means the requisite shareholder approvals required
by each of the parties to this agreement.
"Patents" means the entire right, title and interest and in all foreign
countries, including all rights to claim priority, in and to any and all
improvements which are disclosed in the invention entitled:
"CONVERSION OF HYDROCARBONS ASSISTED BY GLIDING
ELECTRIC ARCS IN THE PRESENCE OF WATER VAPOR AND/OR
CARBON DIOXIDE" and which is found in the French patent application,
National Registration No. 9700364, filed January 13, 1997 appended hereto
as Schedule A, and any legal equivalent thereof in the U.S. or any other
country, including the right to claim priority in and to, all Letters of Patent
to be obtained for said invention by the above application or any
continuation, division, renewal, or substitute thereof, and as to letters patent
any reissue or re-examination thereof.
"Heads of Agreement" means that particular agreement executed by and
between Assignor and N.D Zelinsky Institute, as appended hereto in
Schedule B, granting Assignor the exclusive license to the proprietary
Fischer-Tropsch technology including chain limiting catalysts and any
continuation, division, renewal or substitute thereof, and as to any reissued
or re-examination thereof.
"Technology" means the technology as defined by the Patents and Heads of
Agreement.
"Closing" means the date that this agreement is approved by the
shareholders of the parties and is executed by the parties hereto.
In this Agreement, except as otherwise expressly provided:
"Agreement" means this agreement, including the preamble and the
schedules hereto, as it may from time to time be supplemented or amended
in effect.
all references in this Agreement to a designated "Section" or other
subdivision or to a schedule is to the designated Section or other
subdivision of, or Schedule to, this Agreement.
the words "herein", "hereof and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section
or other subdivision or Schedule.
the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof.
the singular of any term includes the plural, and vice versa, the use of any
term is equally applicable to any gender and, where applicable, a body
corporate, the word "or" is not exclusive and the word "including" is not
limiting, whether or not non-limiting language, such as "without limitation"
or "but not limited" to words of similar import, is used with reference
thereto.
any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principals applicable to
Cyprus.
any reference to a statute includes and is a reference to that statute and to
the regulations made pursuant thereto, with all amendments made thereto
and in force from time to time, and to any statute or regulations that may be
passed which has the effect of supplementing or superceding that statute or
regulations.
where any representation or warranty is made "to the knowledge of" any
Person, such Person will not be liable for a misrepresentation or breach of
warranty by reason of the fact, state of facts, or circumstances in respect of
which the representation or warranty is given being untrue if such Person
proves:
that such Person conducted a reasonable investigation so as to provide
reasonable grounds for a belief that there had been no misrepresentation or
breach of warranty; and
that fact, state of facts, or circumstances could not reasonably be expected
to have been determined as a result of that reasonable investigation,
irrespective of the actual investigation conducted by such Person.
except as otherwise provided, any dollar amount referred to in this
Agreement is
in U.S. funds; and
any other term defined within the text of this Agreement has the meanings
so ascribed.
The following are the Schedules to this Agreement:
Schedule Description
A Patents
B Heads of Agreement
2.0 UNDERTAKING OF ASSIGNEE:
Subject to the terms and conditions hereof and the requisite shareholder
approvals, Assignee undertakes the following in order for the assignment of
the Technology, Patents, and Heads of Agreement from Assignor as
provided in Article 4.1, and to maintain its interest in and to the
Technology, Patents, and Heads of Agreement:
Assignee will raise a total of $6,000,000. (Six Million) dollars for the
purposes of development of the Technology to be funded as follows:
(i) $1,000,000 within 90 days of the Closing Date of this Agreement;
(ii) $1,000,000 within 180 days of the Closing Date of this
Agreement;
(iii) $4,000,000 within 360 days of the Closing Date of this
Agreement or as required for operating capital;
Assignee will allocate funds as defined in Article 2.1(a) to develop, prove
up and market the Technology to generate license and running royalty fees
based on pre-approved budgets by the Board of Directors of Assignee and
Assignor; and
Assignee will pursue the commercialization of the Technology, such
commercialization to be as defined by the Board of Directors of Assignor,
acting reasonably in conjunction with an independent consultant in the
industry acceptable to the Assignee and the Assignor; and
Assignee will remain in good standing as a Cyprus Corporation; and
Assignee will not sublicense or attempt to circumvent the technology
without the written approval of Assignor, such approvals not to be
unreasonably withheld; and
Assignee will not transfer the rights to the Technology to resolve litigation,
nor can any judgement against Assignee result in such transfer, save that the
transfer of the rights would be to the Assignor; and
Assignee must maintain all Patents and licenses current in all jurisdictions at
the expense of Assignee; and
Assignee agrees to promptly pay to Assignor 25% of the gross proceeds of
any license fees, royalties, or any such other revenues less any costs or
expenses of development associated with such license fee, royalty, or other
revenues, derived from the use of the Technology or any such other
consideration as may be paid to Assignee by any party whatsoever for any
matter related to the use of the Technology, the Patents, or the Heads of
Agreement; and
the improvements in the Technology and any Patents filed in relation to the
improvements will be subject to the payment of 25% of the gross proceeds
of any and all revenues, less any costs or expenses of development
associated with such license fee, royalty or other revenues, derived from the
use of the Technology or any such other consideration, as may be paid to
Assignee by any part whatsoever for any matter related to the use of the
Technology or any further Patents filed in relation to the Technology or the
Heads of Agreement; and
Assignee agrees to process, in a timely and professional manner, at the sole
expense of Assignee, any new patent applications for new technology
offered to Assignee by Assignor pursuant to Article 3.1 (d); and
Assignee agrees to employ the following individuals as employees or as
third party contractors on an oil industry reimbursable cost basis for a
minimum of three years or until such time as the development of the
technology as related to the Patents and the Heads of Agreement is
discontinued, whichever comes first, these individual being deemed essential
to the development of the technology:
Jack Bruce
Tom Cooley
Albin Czernichowski
3.0 UNDERTAKINGS OF ASSIGNOR:
3.1 Assignor shall undertake:
to deliver to Assignee all documents duly executed required to effect the
assignment of the Technology, Patents and the Heads of Agreement in trust,
to the offices of legal counsel for Assignor in conjunction with an
irrevocable letter of direction to effect the assignment of the patents and
heads of Agreement immediately upon written notice from Assignor that
Assignee has fulfilled its obligations under this Agreement, such notice not
to be unreasonably withheld; and
not to enter into negotiations with any other parties in relation to the
Patents or Heads of Agreement until such time as Assignee has agreed to
termination of this Agreement pursuant to Article 5 of this Agreement; and
that the improvements in the Technology and any patents filed in relation to
the improvements will become the property of Assignee; and
that new patents or technology not associated with the Technology, Patents
and Heads of Agreement which may be developed by Assignor will be
offered to the Assignee on terms to be negotiated for each new patent
standing alone.
4.0 ASSIGNMENT: CLOSING
4.1 In consideration of the mutual covenants and agreements contained
herein, including but not limited to the undertakings set forth in Articles 2
and 3 hereof, Assignor hereby irrevocably assigns and transfers to Assignee
all rights, title and interests that it owns and/or holds in the Technology,
Patents, and Heads of Agreement, except as may be limited or conditioned
herein and further grants Assignee all of the rights, duties and obligations of
Assignor as set forth in the Heads of Agreement.
4.2 Closing shall take place upon the execution of this Agreement and
the approval
of the shareholders of Assignee and Assignor.
5.0 TERM AND TERMINATION
This agreement shall be in effect for a term beginning on the date hereof and
shall continue until terminated in accordance with the provisions of this
Agreement.
This agreement shall be terminated only upon default of Assignee of any of
the terms of Section 2.1 of this Agreement and then only after Assignee
shall fail to cure the default as noticed and provided for in Section 6.1 of
this Agreement; and
In the event that this Agreement is terminated then all rights and interests in
and to the Technology, Patents, and the Heads of Agreement will revert to
Assignor and Assignee will have no further right or interest therein.
6.0 EVENTS OF DEFAULT AND REMEDIES
In the event that Assignee shall fail to observe and perform any of the
obligations imposed on it by Article 2.1 of this Agreement (a "Default") the
Assignor may give notice of such Default in writing to the Assignee
specifying the nature of such default. In the event that a Default, as
specified in the said notice, shall continue after a period of ninety (90) days
from the receipt or deemed receipt of such said notice by the Assignee, the
Assignor may issue a Notice of Termination.
Without restricting the generality of Section 6.1, the term "Default" in this
Agreement will include the occurrence of any of the following events:
the failure of Assignee to make, punctually and fully, the payments required
to fund or finance the development of the Technology;
the failure of Assignee to allocate the required funds to develop, prove up
and market the Technology to generate license and running royalty fees;
the failure of Assignee to pursue the commercialization of the Technology;
the failure of Assignee to remain in good standing as a Cyprus Corporation;
the attempt by Assignee to sublicense or to circumvent the Technology
without the written approval of Assignor;
the transfer by Assignee of the rights to the Technology to resolve litigation,
save for the transfer of the rights to Assignor;
the Assignee filing for bankruptcy;
the failure of Assignee to maintain all Patents and Licenses current in all
jurisdictions at the expense of Assignee;
the failure of Assignee to pay promptly to Assignor 25% of the gross
proceeds derived from any license fee, royalties, or any such other revenues
derived from the use of the Technology or any such other consideration as
may be paid to Assignee by any party whatsoever for any matter related to
the use of the Technology, the Patents, or the Heads of Agreement more
particularly as define in Section 2.1 (h) (i) of this Agreement; and
the failure of Assignee to abide by any of the terms as represented under
section 2.1 of this Agreement.
7.0 TRANSACTION EXPENSES
7.1 Except as provided in Section 3.3, each party to this Agreement
shall bear all costs and expenses incurred by him or it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. Unless otherwise expressly provided
herein, all costs and expenses related to satisfying any condition or fulfilling
any covenant contained in this Agreement shall be borne by the party whose
responsibility it is to satisfy the condition or fulfil the covenant in
question.
8.0 APPROVALS
The obligations of the parties to complete this Agreement shall be subject
to, in addition to conditions set forth in Section 12.1, the following:
the passing of the resolutions by the shareholders of the parties to this
Agreement authorizing and directing each respective party to consummate
the transactions contemplated herein.
9.0 ASSIGNOR WARRANTIES AND REPRESENTATIONS
9.1 Assignor warrants and represents to Assignee, with the intent that
Assignee will rely thereon in entering into this Agreement and in fulfilling
the terms of this Agreement as contemplated herein that:
Assignor is a company duly incorporated, validly existing and presently in
good standing under the laws of Cyprus and has the power, authority and
capacity to enter into this Agreement and to carry out its terms;
the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby has been duly and validly authorised by all
necessary corporate action on the part of Assignor and this Agreement
constitutes a legal, valid and binding obligation of Assignor in accordance
with its terms except as limited by laws of general application affecting the
rights of creditors;
to the knowledge of Assignor, Assignor has filed all reports and documents
required to be filed with the Registrar of Companies for Cyprus, and is not
in default of any requirements of the Company Act of Cyprus;
Assignor holds the rights to the Technology, Patents and Heads of
Agreement and has the full power and authority to enter into this
Agreement and to assign all rights, title and interests it has in the
Technology, Patents and Heads of Agreement, as contemplated by this
Agreement to Assignee, free and clear of all liens and encumbrances, save
for those defined in the Heads of Agreement appended hereto as Schedule
B;
Assignor acknowledges and agrees that if the Technology, the Patent or any
claim thereof, or the Heads of Agreement shall be found invalid by a court
of competent jurisdiction from which decision no appeal may be taken,
Assignee's obligation to pay Assignor the percentage of gross license fees,
royalties or any other revenues described in Article 2.1(i) hereof shall cease
as of the date of such decision.
Assignor acknowledges and agrees that if either party learns of a claim of
infringement of or by the Technology or any part thereof, that party shall
give immediate notice of such claim to the other party. Assignor shall then
use all reasonable efforts to terminate such infringement. In the event
Assignor fails to abate the infringing activity within ninety (90) days after
such written notice or to bring legal action against the third party, Assignee
may bring suit for patent infringement, naming Assignor as nominal party
plaintiff.
there are no existing agreements or contemplated agreements, written or
oral, of any nature or kind whatsoever to which Assignor is a party, except
those disclosed as set out in Schedule A and Schedule B attached hereto,
and true copies of all such agreements set out in Schedule A and Schedule
B have been delivered to Assignee;
Assignor has all corporate power and authority to carry on its business as
presently carried on;
Assignor is not in breach of any statute, regulation or by-law applicable to
the Company or its operations.
10.0 ASSIGNEE WARRANTIES AND REPRESENTATIONS
Assignee warrants and represents to Assignor, with the intent that Assignor
will rely thereon in entering into this Agreement and in concluding the
agreements as contemplated herein that:
Assignee has the power and capacity and good and sufficient right and
authority to enter into this Agreement on the terms and conditions herein
set forth;
Assignee is a corporation duly incorporated, validly existing and in good
standing under the laws of the Republic of Cyprus;
Assignee has the power, authority and capacity to carry on the Business as
presently conducted by it;
all material transactions of Assignee have been promptly and properly
recorded or filed in or with its respective books and records, and the minute
book of Assignee contains all records required to be kept pursuant to
applicable legislation pertaining to corporations in Assignee's jurisdiction of
incorporation;
there is no basis for and there are no actions, suits, judgements,
investigations or proceedings outstanding or pending or to the knowledge
of Assignee threatened against or affecting Assignee at law or in equity or
before or by any court or federal, provincial, state, municipal or other
governmental authority, department, commission, board, tribunal, bureau or
agency and neither is Assignee a party to or threatened with any litigation;
11.0 COVENANTS OF THE PARTIES:
11.1 The parties agree that they:
will diligently take all reasonable steps to obtain prior to the Closing Date,
all consents and approvals required to complete the transactions
contemplated herein in accordance with the terms and conditions hereof
including any consents, waivers, and approvals as required;
attend to all corporate matters to carry out and implement this Agreement
as soon as possible.
The representation and warranties of the parties hereto will survive the
Closing Date and the Closing, and shall continue in full force and effect.
Not withstanding the completion of the transactions herein contemplated,
the waiver of any condition contained herein (unless such waiver expressly
releases Assignor or Assignee of such representation, warranty, covenant or
agreement), the same will remain in full force and effect.
The representations, warranties, covenants and agreement of the parties
contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Closing Date as
though made at the Closing Date and will survive the Closing Date, and
notwithstanding the completion of the transactions herein contemplated, the
waiver of any condition contained herein (unless such waiver expressly
releases the Company of such representation, warranty, covenant or
agreement), or any investigation by the parties, the same will remain in full
force and effect.
12.0 CONDITIONS PRECEDENT
The obligations of the parties to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following
conditions at the times stipulated:
the representations and warranties of the parties contained herein are true
and correct in all respects at and as of the Closing Date except as may be in
writing disclosed to and approved by the parties; and
all covenants, agreements and obligations hereunder on the part of the
parties to be performed or complied with at or prior to the Closing,
including the parties obligation to deliver the documents and instruments
herein provided for, have been performed and complied with at and as of
the Closing Date.
13.0 TRANSACTIONS OF ASSIGNOR AT THE CLOSING DATE
At the closing, Assignor will execute and deliver or cause to be executed
and delivered, in trust to Assignee's legal counsel all documents,
instruments, and resolutions as are necessary to effectively transfer and
assign a 100% interest in and to the Technology, Patents and the Heads of
Agreement to Assignee; including
certified copies of resolutions of directors of Assignor authorizing the
transfer of a 100% interest in and to the patents and the heads of agreement
to Assignee;
14.0 TRANSACTIONS OF ASSIGNEE AT THE CLOSING DATE
Assignee will deliver or cause to be delivered the following at the Closing
Date:
Certified copies of resolutions of directors of Assignee approving the
execution of this agreement and the terms thereto;
15.0 POST CLOSING AGREEMENTS
15.1 Assignor will indemnify and hold harmless Assignee from and
against:
any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant on
the part of Assignor under this Agreement or from any misrepresentation in
or omission from any certificate or other instrument furnished or to be
furnished to the Assignee hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
Assignee will indemnify and hold harmless Assignor from and against:
any and all losses, damages or deficiencies resulting from any
misrepresentation , breach of warranty or non-fulfilment of any covenant on
the part of the Company under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to Assignor hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
16.0 TIME OF THE ESSENCE
Time is of the essence of this Agreement
17.0 FURTHER ASSURANCES
The parties will execute and deliver such further documents and instruments
and do all such acts and things as may be reasonably necessary or requisite
to carry out the full intent and meaning of this Agreement and to effect the
transactions contemplated by this Agreement.
18.0 SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
This Agreement may not be assigned by any party hereto with the prior
written consent the parties to this Agreement.
19.0 COUNTERPARTS
19.1 This Agreement may be executed in several counterparts, each of
which will be deemed to be an original and all of which will together
constitute one and the same instrument.
20.0 NOTICE
All notices, requests, demands and other communications required or
permitted hereunder, or desired to be given with respect to their rights or
interest herein, assigned or reserved, shall be deemed to have been properly
given or delivered, when delivered personally or sent by registered mail or
sent by electronic communication with all postage or other charges fully
prepaid, and addressed to the parties respectively as follows:
To Assignor:
Laxarco Holding Limited
Office 302, Sofouli 2, P.O. Box 2545
Nicosia, Cyprus
To Assignee:
Carbon Resources Limited
c/o Thomas Cooley
5215 Spanish Oak
Houston, Texas 77066
or such other address as any Party may specify by notice in writing to the
other.
Any notice delivered on a business day, or sent by electronic communication
on a business day, will be deemed conclusively to have been effectively
given on the date notice was delivered or transmitted.
Any notice sent by prepaid registered mail will be deemed conclusively to
have been effectively given on the tenth business day after posting; but if at
the time of posting or between the time of posting and the tenth business
day thereafter if there is a strike, lockout or other labour disturbance
affecting postal service, then the notice will not be effectively given until
actually delivered.
21.0 AGENTS
Assignor warrants to Assignee that no agent or other intermediary has been
engaged by Assignor in connection with the share exchange herein
contemplated; and Assignee warrants to Assignor that no agent or other
intermediary has been engaged by Assignee in connection with the
Agreement herein contemplated.
22.0 PROPER LAW
22.1 This Agreement will be governed by and construed in accordance
with the laws of the State of Colorado and the parties will attorn to
jurisdiction of the Courts thereof.
IN WITNESS WHEREOF the parties hereto have set their hand and seal as
of the day and year first above written.
SIGNED, SEALED and DELIVERED
by LAXARCO HOLDING LIMITED
in the presence of:
/S/ ANDREAS PIFANIS
LAXARCO HOLDING
LIMITED
/S/ PANYAIOTA PIFANI
SIGNED, SEALED and DELIVERED
by CARBON RESOURCES LIMITED
in the presence of:
/S/ ROBERT COOLEY
CARBON RESOURCES
LIMITED
/S/ THOMAS COOLEY
THIS AGREEMENT dated for reference the 5th day of May, 1998
BETWEEN:
LAXARCO HOLDING LIMITED, a Company incorporated pursuant to
the laws of the Republic of Cyprus and having a mailing address at Office
302, Sofouli 2, P.O. Box 2545, Nicosia, Cyprus
OF THE FIRST PART
(herein referred to as "Laxarco")
AND:
CARBON RESOURCES LIMITED, a Company incorporated pursuant to
the laws of the Republic of Cyprus and having a mailing address at Office
302, Sofouli 2, P.O. Box 2545, Nicosia, Cyprus
OF THE SECOND
PART
(herein referred to as "Carbon")
AND:
AUTOMATED TRANSFER SYSTEMS CORPORATION, a Company
incorporated pursuant to the laws of the State of Colorado and having its
registered and records office at 1812 56th Avenue, Greeley, Colorado
OF THE THIRD
PART
(herein referred to as the "Company")
AND:
STONE CANYON RESOURCES LTD., a Company incorporated pursuant
to the laws of the Province of Alberta and having its registered and records
office at 1800 First Canadian Centre, 350-7th Avenue S.W., Calgary,
Alberta
OF THE FOURTH
PART
(herein referred to as "Stone Canyon")
WHEREAS:
Laxarco is the registered and beneficial owner of all of the issued and
outstanding shares in the capital stock of Carbon (the "Carbon Shares");
and
Carbon holds the rights in and to certain patents for the development of the
SYNGEN technology as appended hereto as Schedule "A"; and
Carbon holds a 100% interest in a Heads of Agreement executed by and
between Laxarco and the N.D. Zelinsky Institute and appended hereto as
Schedule "B"; and
Laxarco and the Company wish to effect an exchange of 75%
(Seventy-Five Percent) of the organised shares of common stock of Carbon,
being a total of 3,750 shares, for 10,000,000 restricted shares of the
common stock of the Company and the parties to this Agreement have
agreed to the share exchange subject to the terms and conditions set out
below; and
The Company has agreed to be bound by all agreements between Laxarco
and Carbon as properly disclosed to the Company by such parties; and
The parties to this Agreement wish to make provisions for the advancement
of funds from the Company prior to the Effective Date and to make
arrangements for the repayment of those funds; and
Stone Canyon is the controlling shareholder of the Company and in order to
enduce certain of the shareholders of Laxarco to conclude the transactions
as anticipated by this Agreement, Stone Canyon has entered into an option
agreement with said shareholders to option certain shares of the Company
presently held by Stone Canyon; and
As consideration for Stone Canyon completing the option agreement, the
Company wishes to grant to Stone Canyon, upon the fulfilment of the
transactions contemplated by this Agreement, the right to cause the
Company to transfer to Stone Canyon all of the issued and outstanding
common shares of Stone Canyon Resources Inc. which is the wholly owned
subsidiary of the Company, holding certain oil and gas assets.
NOW THEREFOR THIS AGREEMENT WITNESSES that for and in
consideration of the mutual premises and the mutual covenants and
agreements contained herein, the parties covenant and agree each with the
other as follows:
DEFINITIONS
For all purposes of the Agreement:
"Effective Date" means the date that this Agreement is approved by the
shareholders of the Company and the articles of exchange are filed with the
State of Colorado;
"Shareholder Approval" means the requisite shareholder approvals required
by each of the parties to this Agreement;
"Escrow Agreement" means that Agreement dated of even date herewith
between the Company, Laxarco and Lawler & Associates to be substantially
in the form attached hereto as Schedule "C";
"Escrow Holder" means Lawler & Associates, a professional law
corporation;
"Contracts" means all of the commitments, agreements, contracts,
instruments, leases and other documents entered into by the parties to this
Agreement by which the parties to this Agreement are bound or to which
the parties to this Agreement or the Business Assets of the parties are
subject (other than the Permitted Liens) and which are enumerated and
described in Schedule's "E" and "M";
"Company's Shares" means the fully paid and non-assessable shares of
common stock of the Company to be allotted and issued to Laxarco
pursuant to Article 2 hereof, and which will be held in escrow pursuant to
the terms of the Escrow Agreement;
"Shareholders Meeting" means the general meeting of the shareholders of
the Company to be called pursuant to Article 9.2(b);
"Successful Completion" means the successful completion of the 2 bbl per
day pilot unit that incorporated the SYNGEN technology and the
Fischer-Tropsch technology, as further described in the Heads of
Agreement appended as Schedule "B" hereto. "Successful Completion" in
this case is taken to mean that the SYNGEN pilot unit will operate on
natural gas feedstock which may be in whole or in part gas from a city gas
main to produce a synthesis gas which the Fischer-Tropsch unit will then
convert into a hydrocarbon product, other gases, and water vapor. The
hydrocarbon product shall have a preponderance of the carbon chain
distribution in the gasoline fraction (eg. Hexanes and higher) and heavier.
Such distribution will be determined by a mole balance based on
chromatographic analysis. It is mutually recognised that the 2 bbl per day
unit is a "Proof of Concept" unit and the results of its operation will be used
to optimise the operating parameters for the larger Demonstration unit. The
parties agree to verification of results by an Independent Valuator to be
appointed by the parties.
"Independent Valuator" means that person agreed to by the parties to this
Agreement whose qualifications and business experience are of such a
standard so as to qualify that person to examine and prepare an evaluation
of the technology to be developed pursuant to this Agreement, and render
an opinion as to whether the "Proof of Concept" has been fulfilled and the
Independent Valuator will recommend the construction of the Larger
Demonstration Unit.
"Larger Demonstration Unit" means a skid mounted mini plant having both
a SYNGEN and Fischer-Tropsch conversion system to produce nominally
100 bbl a day stream of unseparated hydrocarbon liquids. The plant will not
include any product fractionation or treating processes. Its function is to
demonstrate to prospective clients the efficiencies and operating parameters
to be expected in a commercial sized unit. The plant may or may not
include provision for generation of requirements such as power, enriched
air, etc.
"Termination Date" means the day that is thirty (30) days after the last day
of the month in which all of the Company's Approvals as defined in Section
6.1 (b) hereof, are received;
"Carbon Shares" means a total of 3,750 shares of the organised shares in the
capital of Carbon, to be exchanged by Laxarco with the Company, and
being 75% (Seventy-Five) of the organised shares of Carbon, 5,000 shares
being all of the issued and outstanding organised shares of Carbon;
"Share Exchange" shall mean the exchange of the Company's Shares for the
Carbon Shares as contemplated herein.
In this Agreement, except as otherwise expressly provided:
"Agreement" means this agreement, including the preamble and the
schedules hereto, as it may from time to time be supplemented or amended
in effect;
all references in this Agreement, to a designated "Section" or other
subdivision or to a schedule is to the designated Section or other
subdivision of, or Schedule to, this Agreement;
the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section
or other subdivision or Schedule;
the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof;
the singular of any term includes the plural, and vice versa, the use of any
term is equally applicable to any gender and where applicable a body
corporate; the word "or" is not exclusive and the word "including" is not
limiting, whether or not non-limiting language, such as "without limitation"
or "but not limited" to or words of similar import, is used with reference
thereto;
any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principals applicable to
the United States of America;
any reference to a statute includes and is a reference to that statute and to
the regulations made pursuant thereto, with all amendments made thereto
and in force from time to time, and to any statute or regulations that may be
passed which has the effect of supplementing or superceding that statute or
regulations;
where any representation or warranty is made "to the knowledge of" any
Person, such Person will not be liable for a misrepresentation or breach of
warranty by reason of the fact, state of facts, or circumstances in respect of
which the representation or warranty is given being untrue if such Person
proves:
that such Person conducted a reasonable investigation so as to provide
reasonable grounds for a belief that there had been no misrepresentation or
breach of warranty; and
that fact, state of facts, or circumstances could not reasonably be expected
to have been determined as a result of that reasonable investigation,
irrespective of the actual investigation conducted by such Person;
except as otherwise provided, any dollar amount referred to in this
Agreement is
in U.S. funds; and
any other term defined within the text of this Agreement has the meanings
so ascribed.
The following are the Schedules to this Agreement:
Schedule Description
A. Patents
Heads of Agreement
Escrow Agreement
Authorised and Issued Capital of the Company
Liabilities and Permitted Liens of the Company
Outstanding Stock Options and Warrants of the Company
Audited Financial Statements of the Company
Contracts of the Company
Closing Warranty and Certificate of the Company
Agreements of Carbon
Unaudited, Prepared by Management Financial Statements of Carbon
Authorised and Issued Capital of Carbon
Permitted Liens of Carbon
Closing Warranty and Certificate of Laxarco
Bank Information for the Company
SHARE EXCHANGE
Subject to the terms and conditions hereof and the requisite shareholder
approvals, as at the Effective Date, the Company shall exchange the
Company's Shares for the Carbon Shares.
The Company' Shares shall be held in escrow in the manner required by the
Escrow Agreement and shall be released in the manner provided therein.
ADVANCEMENT AND REPAYMENT OF FUNDS
The parties hereto acknowledge that funds for the ongoing business of
Carbon will be required prior to the Effective Date and the Company has
agreed to advance funds prior to closing by way of loans to Carbon.
Upon the advancement of funds, by the Company to Carbon, Carbon and
Laxarco will execute promissory notes in favor of the Company for the
funds advanced, on the following terms:
Interest rate of 2% per annum calculated annually and repayable, on
demand, 12 months from the date of the advance of funds;
Upon closing the Company and Carbon will re-execute loan agreements for
the aggregate amount advanced by the Company pursuant to Section 3.1 on
terms to be negotiated between the Company and Carbon.
CLOSING
The completion of the Share Exchange will take place at the Effective Date
at such place as each of the parties to this Agreement may agree to;
The Effective Date shall occur no later than 90 days from the date of
execution of this Agreement, and this Agreement shall be voidable
thereafter at the option of the Company or Laxarco upon thirty (30) days
notice in writing to the parties hereto, such election not to be unreasonably
exercised. This Agreement will terminate on the effective date of such
notice of termination and except for the provisions of Sections 3.2 and 3.3 ,
shall thereafter be null and void;
In the event that this Agreement is terminated pursuant to Section 4.2
above, and either Laxarco or the Company has not used its best efforts to
complete the transactions contemplated by this Agreement, then
notwithstanding any other provision of this Agreement
if the Company failed to use its best efforts, the Company shall be liable for
and shall pay all costs and expenses incurred by Laxarco and the Company
in connection with this Agreement; and
if Laxarco failed to used its best efforts, Laxarco will be liable for and shall
pay all costs and expenses incurred by the Company and Laxarco in
connection with this Agreement.
5.0 TRANSACTION EXPENSES
Except as provided in Section 4.3, each party to this Agreement shall bear
all costs and expenses incurred by him or it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by
this Agreement. Unless otherwise expressly provided herein, all costs and
expenses related to satisfying any condition or fulfilling any covenant
contained in this Agreement shall be borne by the party whose responsibility
it is to satisfy the condition or fulfil the covenant in question.
APPROVALS
The obligations of the parties to complete the exchange of shares shall be
subject to the following:
the passing of the resolutions by the shareholders of the Company
contemplated by Article 9.2 (b) at the Shareholders Meeting ( the
"Company's Approvals");
the passing of the resolutions by the shareholders of Laxarco authorizing
Laxarco to enter into and conclude this Agreement ( the "Laxarco
Resolutions");
6.2 The Company, Laxarco, and Carbon shall use their best and
reasonable efforts to obtain the required Approvals prior to the Closing.
7.0 THE COMPANY WARRANTIES AND REPRESENTATIONS
7.1 The Company warrants and represents to the parties to this
Agreement, with the intent that the parties to this Agreement will rely
thereon in entering into this Agreement and in concluding the Share
Exchange contemplated herein that:
the Company is a company duly incorporated, validly existing and presently
in good standing under the laws of the State of Colorado and has the
power, authority and capacity to enter into this Agreement and to carry out
its terms;
the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby has been duly and validly authorised by all
necessary corporate action on the part of the Company, and this Agreement
constitutes a legal, valid and binding obligation of the Company in
accordance with its terms except as limited by laws of general application
affecting the rights of creditors;
To the knowledge of the Company, the Company has filed all reports and
documents required to be filed with the Registrar of Companies for the
State of Colorado, and is not in default of any requirements of the Company
Act of the State of Colorado;
The directors and officers of the Company as of the date of execution of
this Agreement are:
Directors:
Cameron Haworth
James Shone
Jacqueline Danforth
Officers:
Cameron Haworth - President
Jacqueline Danforth - Secretary/Treasurer
the authorised capital of the Company consists of 50,000,000 common
shares with a par value of $0.002 per share of which 9,989,669 common
shares are issued and outstanding as fully paid and non-assessable as of the
date of this Agreement;
upon completion of the Share Exchange Laxarco shall be the beneficial and
registered holder of the Company's Shares as fully paid and non-assessable,
free and clear of all liens, charges and encumbrances and restrictions on
transfer save and except those prescribed in the Escrow Agreement and
those which may be imposed by the regulatory authorities or under
applicable securities law;
there are no options, warrants, rights or agreements outstanding with
respect to the issued or unissued shares of the Company except as disclosed
in Schedule "F";
there are no existing agreements of any nature or kind whatsoever to which
the Company is a party, except those disclosed by the Company, true copies
of which have been delivered to Carbon and Laxarco;
as at the date of this Agreement, there are no liabilities, contingent or
otherwise, including assessed or unassessed income tax liabilities nor is
there any undisclosed litigation, proceeding or investigation pending or
threatened against the Company, its property or business, nor does the
Company know or have ground to know of any basis for any litigation,
proceeding or investigation against the Company, its properties or business;
the Company has all corporate power and authority to carry on its business
as presently carried on;
the Company's financial statements as set out in Schedule "G" were
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior years, are true and correct in every
material respect and present fairly and accurately the financial condition of
the Company as at the Company's Statement Date and the results of its
operations for the year ended on the Company's Statement Date; no
material changes have occurred since the Company's statement date;
there is no indebtedness of the Company which is not disclosed or reflected
in the Company's Financial Statements, other than indebtedness incurred in
the ordinary course of business since the statement date;
the Company has not guaranteed, or agreed to guarantee, any Indebtedness
or other obligation of any person or entity except as described in Schedule
"E" attached hereto;
there are not any shareholders of the Company indebted to the Company
and the Company is not indebted to any of its shareholders except as set out
in Schedule "E" attached hereto;
the Company is not subject to any collective bargaining agreement, pension
or retirement plan, bonus or profit sharing scheme or other employee benefit
plan, agreement or arrangement affecting employees;
the Company has no bank, trust, savings, checking or other accounts or
deposits, safety deposit boxes of other depositories except as set out in
Schedule "O" which Schedule is a true and complete list showing the name
of each bank, trust company or other financial institution in which the
Company has accounts, deposits or safety deposit boxes and the names of
all persons authorised to draw thereon or have access thereto;
all taxes and other assessments which the Company is required by law to
withhold or to collect have been duly recorded, withheld and collected and
have been paid over to the proper governmental authorities or held by them
for such payment;
the Company is not subject to any mortgage, lien, lease, agreement,
instrument or any other restriction of any kind or character which would
prevent the consummation of the transactions contemplated by this
Agreement, or would result in the breach of any term or provision of, or
constitute a default under any obligation binding on the Company;
the minute books and corporate records of the Company contain a true and
complete record of all resolutions of the directors and shareholders and all
records required to be maintained under the Colorado Revised Statutes;
all alterations to the Articles of the Company since its incorporation have
been duly approved by the shareholders of the Company and registered with
the Registrar of Companies for the State of Colorado;
the Company is not in breach of any statute, regulation or by-law applicable
to the Company or its operations;
the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms
hereof, does not conflict with or result in the breach of or the acceleration
of any indebtedness under, any terms, provisions or conditions of, or
constitute default under the Articles of the Company or any indenture,
mortgage, deed of trust, agreement, lease, franchise, certificate, consent,
permit, licence, authority or other instrument to which the Purchaser is a
party or is bound or any judgement, decree, order, rule or regulation of any
court or administrative body by which the Company is bound, or, of any
statute or regulation applicable to the Company;
the Company has been assessed for federal and state income tax for all years
to and including the fiscal year of the Company ended on the Statement
Date, and the Company has withheld and remitted to the Internal Revenue
Service, or other applicable tax collecting authority all amounts required to
be remitted to the Internal Revenue Service or other tax collecting authority
respecting payment to employees or to non-residents, or otherwise and has
paid all instalments of corporate taxes due and payable;
all tax returns, filings and reports of the Company required by law to be
filed prior to the date hereof including all state and federal income tax
returns, all returns and filings pertaining to compensation of employees of
the Company for job related injuries required pursuant to any state or
federal law and any other tax returns applicable to the Company have been
filed and are true, complete and correct, and all taxes and other government
charges including all income, excise, sales, business and property taxes and
other rates, charges, assessment, levies, duties, taxes, contributions, fees
and licences required to be paid have been paid, and if not required to be
paid as at the date hereof, have been accrued in the Financial Statements;
adequate provision has been made for taxes payable by the Company for
which tax returns are not yet required to be filed and there are no
agreements, waivers or other arrangements providing for an extension of
time with respect to the filing of any tax return by or payment of any tax,
governmental charge or deficiency by the Company, and to the knowledge
of the Company and its officers, directors or employees, there are no
contingent tax liabilities or any grounds which would prompt a
re-assessment;
the Company has made all elections required to be made under applicable
income tax legislation in the United States of America, Canada or other tax
legislation in connection with any distributions by the Company and all such
elections were true and correct and in the prescribed forms and were made
within the prescribed time periods; and
the Company has no employment, consulting or management contract or
commitment with any Person, including those with any director or officer of
the Company, whether oral, written, or implied, except as disclosed in
Schedule "H" .
LAXARCO'S WARRANTIES AND REPRESENTATIONS
Laxarco warrants and represents to the Company, with the intent that the
Company will rely thereon in entering into this Agreement and in
concluding the Share Exchange contemplated herein that:
Laxarco is the registered holder and beneficial owner of the Carbon Shares,
free and clear of all Liens, and Laxarco has no other interest, legal or
beneficial, direct or indirect, in any other shares in the capital of Carbon, or
in the business or the business assets save for those disclosed in Schedule
"J" hereto;
Laxarco has the power and capacity and good and sufficient right and
authority to enter into this Agreement on the terms and conditions herein
set forth and to transfer the legal and beneficial title and ownership of
Carbon Shares to the Company;
the authorised and issued capital of Carbon is as described in Schedule
"L", Carbon Shares are validly issued and outstanding as fully paid and
non-assessable;
Save for the interest of Laxarco, in and to 25% of the income derived from
the Patents and Heads of Agreement, more particularly described in
Schedule "J" hereto, no Person has any agreement, right or option,
consensual or arising by law, present or future, contingent or absolute, or
capable of becoming an agreement, right or option:
to require Carbon to issue any further or other shares in its capital or any
other security convertible or exchangeable into shares in its capital or to
convert or exchange any securities into or for shares in the capital of
Carbon;
for the issue or allotment of any of the authorised but unissued shares in the
capital of Carbon;
to require Carbon to purchase, redeem or otherwise acquire any of the
issued and outstanding shares in the capital of Carbon; or
to purchase or otherwise acquire any shares in the capital of Carbon;
Carbon is a corporation duly incorporated, validly existing and in good
standing under the laws of the Republic of Cyprus;
The President of Carbon is Thomas E. Cooley;
All alterations, if any, to the Articles and By-laws of Carbon since its
incorporation have been duly approved by the shareholders of Carbon and
registered with the governmental authority having jurisdiction;
Carbon has the power, authority and capacity to carry on the business as
presently conducted by it;
Carbon has the power, authority and capacity to own and use all of the
business assets;
Carbon owns and possesses and has good and marketable title to and
possession of all the business assets free and clear of all liens, except the
Permitted Liens as per Schedule "M" appended hereto;
Carbon does not own or possess any asset other than those of the business
assets owned by Carbon and does not have any interest in the assets or
business of any other person;
the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms
hereof, does not conflict with or result in the breach of or the acceleration
of any indebtedness under, any terms, provisions or conditions of, or
constitute default under the Articles or By-Laws of Carbon or any
indenture, mortgage, deed of trust, agreement, lease, franchise, certificate,
consent, permit, licence, authority or other instrument to which Carbon is a
party or is bound or any judgement, decree, order, rule, or regulation of any
court of administrative body by which Carbon is bound, or, to the
knowledge of any statute or regulation applicable to Carbon;
the Financial Statements were prepared in accordance with generally
accepted accounting principles applicable in Cyprus, are true and correct in
every material respect and present fairly and accurately the financial
condition and position of Carbon as at the Statement Date and the results of
their operations to that date;
there is no indebtedness of Carbon which is not disclosed or reflected in the
Financial statements, other than Indebtedness incurred in the ordinary
course of business since the Statement Date;
all material transactions of Carbon have been promptly and properly
recorded or filed in or with its respective books and records, and the minute
book of Carbon contains all records required to be kept pursuant to
applicable legislation pertaining to corporations in Carbon's jurisdiction of
incorporation;
the name of each present employee of Carbon, the duration of the
employment of each such employee with Carbon and the remuneration and
benefit obligations of Carbon in respect of each such employee has been
disclosed to the Company, and the full amounts of salaries, pensions,
bonuses, commissions and other remuneration of any nature, including
accrued vacation pay, severance pay and unpaid earned wages of the
present or former officers, directors, employees, salesmen, consultants and
agents of Carbon, as at the Effective Date, will have been paid up to the
Effective Date;
There are no pension, profit sharing, incentive, bonus or similar plans or
other compensation plans affecting Carbon and Carbon has no unfunded or
unpaid liability in respect of any such plans;
Carbon has no contract, agreement, undertaking, or arrangement, whether
oral, written or implied, and does not have any outstanding agreement,
contract or commitment (whether written or oral) whatsoever relating to or
affecting the conduct of the business or any of the business assets or for the
purchase, sale or lease of any of the business assets other than the contracts
and the permitted liens;
there is no basis for and there are no actions, suits, judgements,
investigations or proceedings outstanding or pending or to the knowledge
of Laxarco threatened against or affecting Carbon at law or in equity or
before or by any court or federal, provincial, state, municipal or other
governmental authority, department, commission, board, tribunal, bureau or
agency and neither is Carbon a party to or threatened with any litigation;
Carbon:
is not in breach of any of the terms, covenants, conditions, or provisions of,
is not in default under, or has done or omitted to do anything which, with
the giving of notice or lapse of time or both, would constitute a breach of or
a default under any contract;
is not in breach or default under any judgement injunction, or other order
or aware of any judicial, administration, governmental, or other authority or
arbitrator by which Carbon is bound or to which Carbon or any business
assets are subject;
and Carbon has not received notice that any default, breach, or violation is
being alleged;
Carbon has not guaranteed, or agreed to guarantee any indebtedness or
other obligation of any Person; and
since the Statement Date:
no dividends of any kind or other distribution on any shares of Carbon have
been declared or paid by Carbon;
there has been no material adverse change in the financial condition or
position of Carbon, and no damage, loss or destruction materially affecting
the business assets or the right, capacity or ability of Carbon to carry on the
business;
Carbon has conducted the business in the usual and normal manner and has
maintained the business assets in good standing; and
Carbon has not waived or surrendered any right of material value.
COVENANTS OF THE PARTIES
Between the date of this Agreement and the Effective Date, Laxarco:
will cause Carbon to afford to the Company and its authorised
representatives access during normal business hours to all books, contracts,
commitments, records of Carbon and will furnish such copies (certified if
requested) thereof and other information as the Company may reasonably
request and will take such steps as may be necessary to permit the Company
and its authorised representatives to make such audit of the books of
account of Carbon and such physical verification of the Business Assets as
the Company may reasonably see fit;
will diligently take all reasonable steps to obtain prior to the Effective Date,
all consents and approvals required to complete the transactions
contemplated herein in accordance with the terms and conditions hereof
including any consents, waivers, and approvals as requested by the
Company or the Company's solicitor;
will do any and all things reasonably necessary and use their best efforts
assist and fully co-operate with the Company in its effort to obtain the
approvals within the time limited hereunder;
will cause Carbon to conduct its business and affairs diligently and only in
the ordinary course, and preserve and maintain the goodwill of the
Company, the business assets and the business; and
will not permit Carbon to make or agree to make any payment to any
director, officer, employee or agent of Carbon except in the ordinary course
of business and at the regular rate of salary and commission for such person
or as reasonable reimbursement for expenses incurred by such person in
connection with the business of Carbon.
Between the date of this Agreement and the Effective Date, the Company
will:
afford to Laxarco and its authorised representatives access during normal
business hours to all books contracts, commitments, records of the
Company and will furnish such copies (certified if requested) thereof and
other information as Laxarco may reasonably request, and will take such
steps as may be necessary to permit the Company and its authorised
representatives to make such audit of the books of account of the Company
and such physical verification of the assets of the Company as Laxarco may
reasonably see fit;
call a general meeting of its shareholders to be held as soon as practicable
after execution hereof to consider and, if thought fit, approve resolutions
respecting the following matters together with such amendments as Laxarco
may specify prior to the date notice of such meeting is mailed to the
Company's shareholders:
approval of the exchange of the Company's Shares for the Carbon Shares,
the total organized shares of Carbon being 5,000 organized shares; and
such other matters pertaining to the transactions contemplated herein as
may be reasonably requested by the Company or Carbon, the form of proxy
materials for the meeting to be completed to the satisfaction of Carbon, as
advised by the Company;
deliver written confirmation of each of the foregoing, if any, to Carbon; and
attend to all corporate matters to carry out and implement this Agreement
as soon as possible.
9.3 The Company and Laxarco shall each complete their own due
diligence investigations contemplated by subparagraphs 9.1 (a) and 9.2(a)
herein respectively in order to satisfy themselves of the accuracy of each
other's representations and warranties hereunder, within thirty (30) days of
the date of this Agreement, and shall each deliver to the other written
confirmation of their satisfactory completion of such investigations.
Notwithstanding any such investigations, the representations and warranties
of any party hereto shall survive the Closing Date and the Closing, and shall
continue in full force and effect.
9.4 The parties agree to make or cause the Company to make such joint
elections under the Income Tax Act with respect to the exchange of the
Company's shares or any other matters as may be reasonably requested by
Laxarco and to execute and file such documents as may be necessary to
give effect thereto.
NON-MERGER
The representations, warranties, covenants and agreements of Laxarco and
Carbon contained herein and those contained in the documents and
instruments delivered pursuant hereto will be true at and as of the Effective
Date as though made at the Effective Date and will survive the Effective
Date, and notwithstanding the completion of the transactions herein
contemplated, the waiver of any condition contained herein (unless such
waiver expressly releases Laxarco or Carbon of such representation,
warranty, covenant or agreement), or any investigation by the Company, the
same will remain in full force and effect.
The representations, warranties, covenants and agreement of the Company
contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Effective Date as
though made at the Effective Date and will survive the Effective Date, and
notwithstanding the completion of the transactions herein contemplated, the
waiver of any condition contained herein (unless such waiver expressly
releases the Company of such representation, warranty, covenant or
agreement), or any investigation by Laxarco, the same will remain in full
force and effect.
CONDITIONS PRECEDENT
The obligations of the Company to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following
conditions at the times stipulated:
the representations and warranties of Laxarco and Carbon contained herein
are true and correct in all respect at and as of the Effective Date except as
may be in writing disclosed to and approved by the Company; and
all covenants, agreements and obligations hereunder on the part of Laxarco
to be performed or complied with at or prior to the Closing, including
Laxarco's obligation to deliver the documents and instruments herein
provided for, have been performed and complied with at and as of the
Effective Date.
The conditions set forth in Section 11.1 are for the exclusive benefit of the
Company and may be waived by the Company in writing in whole or in part
at any time.
The obligations of Laxarco to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following
conditions at the times stipulated, that:
the representations and warranties of the Company contained herein are true
and correct in all material respects at and as of the Closing except as may be
in writing disclosed to and approved by Laxarco; and
all covenants, agreements and obligations hereunder on the part of the
Company to be performed or complied with at or prior to the Effective
Date, including in particular the Company's obligations to deliver the
documents and instruments herein provided for, have been performed and
complied with as at the Closing.
The conditions set forth in Section 11.3 are for the exclusive benefit of
Laxarco and may be waived by Laxarco in whole or in part at any time.
12.0 TRANSACTIONS OF LAXARCO AT THE EFFECTIVE DATE
At the Effective Date, Laxarco will execute and deliver or cause to be
executed and delivered all documents, instruments, resolutions and share
certificates as are necessary to effectively transfer and assign the Carbon
Shares to the Company free and clear of all Liens, including;
share certificates representing the Carbon Shares registered in the name of
Laxarco, duly endorsed for transfer to the Company;
the Escrow Agreement, duly executed by the Board of Directors of
Laxarco;
certified copies of resolutions of directors of Laxarco authorizing the
transfer of the Carbon shares and the registration of the Carbon Shares in
the name of the Company and authorizing the issue of new share certificates
in the name of the Company;
duly issued share certificates registered in the name of the Company
representing 3,750 organized shares in the capital of Carbon, the total
organized shares in the capital of Carbon being 5,000 organized shares;
a Closing Warranty and Certificate of Laxarco confirming that the
conditions to be satisfied by the Company, unless waived, set out in Section
11.1 have been satisfied at the Effective Date and that all representations
and warranties of Laxarco and Carbon contained in this Agreement are true
at and as of the Effective Date in the form attached as Schedule "N".
13.0 TRANSACTIONS OF THE COMPANY AT THE EFFECTIVE
DATE
The Company will deliver or cause to be delivered the following at the
Effective Date:
copies of all written Approvals;
share certificates to the escrow agent representing the Company's Shares
duly registered in the name of Laxarco;
written confirmation of the escrow agent that the Company's Shares have
been issued to Laxarco, and are being held by the escrow agent pursuant to
the terms of the Escrow Agreement;
a Closing Warrant and Certificate from the Board of Directors of the
Company confirming that the conditions to be satisfied by the Company,
unless waived, set out in Section 11.3 have been satisfied at the Effective
Date and that all representations and warranties of the Company contained
in this Agreement are true at and as of the Effective Date in the form
attached as Schedule "I";
the Escrow agreement duly executed by the Company and the Escrow
Agent;
copies, certified if requested, of all minutes and consent resolutions of the
directors of the Company authorising the Company to:
enter into and fulfil the terms of this Agreement;
issue such number of common shares in the capital stock of the Company to
complete the Share Exchange Agreement;
execute and deliver the Escrow Agreement;
appoint such persons as directors and officers of the Company as at the date
at which the shares are released from the escrow agreement to Laxarco as
Laxarco may direct, save for one director from the present board of
directors of the Company to remain on the newly constituted board of
directors;
TRANSFER OF STONE CANYON SHARES
The Company, upon written notice from Stone Canyon and pursuant to the
fulfilment of the conditions of this Agreement including but not limited to
the release of the Company's Shares to Laxarco, will deliver to Stone
Canyon all of the issued and outstanding shares of Stone Canyon Resources
Inc. owned by the Company, that being 2,901,007 shares for $1.00 and
other good and valuable consideration.
POST CLOSING AGREEMENTS, COVENANTS AND OBLIGATIONS
Laxarco will indemnify and hold harmless the Company from and against:
any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant on
the part of Laxarco under this Agreement or from any misrepresentation in
or omission from any certificate or other instrument furnished or to be
furnished to the Company hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
The Company will indemnify and hold harmless Laxarco and Carbon from
and
against:
any and all losses, damages or deficiencies resulting from any
misrepresentation , breach of warranty or non-fulfilment of any covenant on
the part of the Company under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to Laxarco and Carbon hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
Laxarco hereby agrees and covenants to conduct all further investigations,
development and research to reach the Successful Completion of the
technology as defined in this Agreement.
Upon Successful Completion of the technology as verified by the
Independent Valuator the Company will direct the release of the ATNY
Shares to Laxarco on terms as provided in the Escrow Agreement.
16.0 TIME OF THE ESSENCE
Time is of the essence of this Agreement.
17.0 FURTHER ASSURANCES
17.1 The parties will execute and deliver such further documents and
instruments and do all such acts and things as may be reasonably necessary
or requisite to carry out the full intent and meaning of this Agreement and
to effect the transactions contemplated by this Agreement.
18.0 SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns. This Agreement may not be assigned by any party hereto
without the prior written consent of all parties to this Agreement.
COUNTERPARTS
19.1 This Agreement may be executed in several counterparts, each of
which will be deemed to be an original and all of which will together
constitute one and the same instrument.
20.0 NOTICE
20.1 All notices, requests, demands and other communications required
or permitted hereunder, or desired to be given with respect to their rights or
interest herein, assigned or reserved, shall be deemed to have been properly
given or delivered, when delivered personally or sent by registered mail or
sent by electronic communication with all postage or other charges fully
prepaid, and addressed to the parties respectively as follows:
To Laxarco:
Laxarco Holding Limited
Office 302, Sofouli 2,
P.O. Box 2545
Nicosia, Cyprus
To the Company:
Automated Transfer Systems Corporation
#210-214-11th Ave S.E.
Calgary, Alberta T2G 0X8
To the Escrow Agent:
Lawler & Associates
2820 Townsgate Road, Suite 200
Westlake Village, CA 91361
Or such other address as any Person may specify by notice in writing to the
other.
Any notice delivered on a business day, or sent by electronic communication
on a business day, will be deemed conclusively to have been effectively
given on the date notice was delivered or transmitted.
Any notice sent by prepaid registered mail will be deemed conclusively to
have been effectively given on the tenth business day after posting; but if at
the time of posting or between the time of posting and the tenth business
day thereafter there is a strike, lockout or other labour disturbance affecting
postal service, then the notice will not be effectively given until actually
delivered.
AGENTS
21.1 Laxarco warrants to the Company that no agent or other
intermediary has been engaged by Laxarco in connection with the share
exchange herein contemplated; and the Company warrrants to Laxarco that
no agent or other intermediary has been engaged by the Company in
connection with the share exchange herein contemplated.
22.0 PROPER LAW
22.1 This Agreement will be governed by and construed in accordance
with the laws of the State of Colorado and the parties will attorn to
jurisdiction of the Courts thereof.
IN WITNESS WHEREOF the parties hereto have set their hand and seal as
of the day and year first above written.
SIGNED, SEALED and DELIVERED
by AUTOMATED TRANSFER SYSTEMS
CORPORATION in the presence of:
/S/ MERISSA KOSOWAN
AUTOMATED TRANSFER SYSTEMS CORPORATION
/S/ CAMERON HAWORTH
SIGNED, SEALED and DELIVERED
by LAXARCO HOLDING LIMITED
in the presence of:
//S/ ANDREAS PIFANIS
LAXARCO HOLDING LIMITED
/S/ PANAYIOTA PIFANI
SIGNED, SEALED and DELIVERED
by CARBON RESOURCES LIMITED
in the presence of:
/S/ ROBERT COOLEY
CARBON RESOURCES LIMITED
/S/ THOMAS COOLEY
SIGNED, SEALED and DELIVERED
by STONE CANYON RESOURCES LTD.
in the presence of:
/S/ MERISSA KOSOWAN
STONE CANYON RESOURCES LTD.
/S/ JACQUELINE DANFORTH
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into this
16th day of May, 1998, by and between, Automated Transfer Systems Corporation
("ATNY"), a Company incorporated pursuant to the laws of the State of Colorado
and having its registered and records office at , and Laxarco Holdings Limited
a Company incorporated pursuant to the laws of Cyprus and having its registered
and records office at ("Laxarco"), and Lawler & Associates, a Professional Law
Corporation, (the "Escrow Agent") located at 2820 Townsgate Road, Suite 200,
Westlake Village, California 91361.
Premises
ATNY has entered into a share exchange agreement with Laxarco whereby ATNY
will exchange 10,000,000 shares of common stock with a par value of $0.002 per
share ("ATNY Shares") subject to restrictions applicable pursuant to U.S.
federal securities laws,for 3,750 shares of Carbon Resources Ltd. ("Carbon
Shares")a Cyprus corporation. The parties to this Agreement wish to set up
an escrow for the ATNY Shares and the Carbon Shares until certain conditions
are fulfilled pursuant to the share exchange agreement between the parties
appended hereto as Schedule "A" .
Agreement
NOW, THEREFORE, the parties hereto agree as follows:
1. Upon the "Effective Date" as referenced in the Share Exchange
Agreement appended hereto as Schedule "A", ATNY shall deliver the ATNY
Shares to the Escrow Agent. Escrow Agent shall keep the ATNY Shares in
escrow, except as provided herein, until the fulfillment of Articles 15.3 and
15.4 of the Share Purchase Agreement.
2. Laxarco shall provide Escrow Agent with an irrevocable voting power of
attorney in favor of the Board of Directors of ATNY to vote the shares until
such time as the shares are released from escrow at which time Escrow Agent
will return to Laxarco the voting power of attorney.
3. This Agreement shall continue until ATNY's written confirmation that
Carbon and Laxarco have fulfilled the terms of article 15.3 and 15.4 of the
Share Exchange Agreement, whereupon the ATNY Shares shall be released as soon
as practicable to Laxarco.
4. This Agreement will terminate and the ATNY shares will be returned to
ATNY for cancellation upon written notification from the parties to this
Agreement, duly executed by both parties, that Laxarco and Carbon have
failed to fulfil the terms of Articles 15.3 and 15.4 of the share exchange
agreement.
5. The ATNY Shares deposited shall remain the property of Laxarco and
shall not be subject to any lien or charges by the Escrow Agent, or judgments
or creditors' claims against Laxarco until released to it in the manner
hereinafter provided.
6. It is understood and agreed that the duties of the Escrow Agent are
entirely ministerial being limited to receiving shares from ATNY and holding
and disbursing such shares in accordance with this Agreement.
7. The Escrow Agent is not a party to, and is not bound by, any agreement
between ATNY and Laxarco except as may be evidenced by or arise out of the
foregoing instructions.
8. The Escrow Agent acts hereunder as a depository only, and is not
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness, or validity of any instrument deposited with it, or with respect
to the form or execution of the same, or the identity, authority, or rights of
any person executing or depositing the same.
9. The Escrow Agent shall not be required to take or be bound by notice
of any default of any person or to take any action with respect to such default
involving any expense or liability, unless notice in writing is given to an
officer of the Escrow Agent of such default by the undersigned or any of
them, and unless it is indemnified in a manner satisfactory to it against
any expense or liability arising therefrom.
10. The Escrow Agent shall not be liable for acting on any notice,
request, waiver, consent, receipt, or other paper or document believed by
the Escrow Agent to be genuine and to have been signed by the proper party or
parties.
11. The Escrow Agent shall not be liable for any error of judgment or for
any act done or step taken or omitted by it in good faith, or for any mistake of
fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own willful misconduct.
12. The Escrow Agent shall not be answerable for default or misconduct of
any agent, attorney, or employee appointed by it if such agent, attorney, or
employee shall have been selected with reasonable care.
13. The Escrow Agent may consult with legal counsel in the event of any
dispute or question as to the construction of the foregoing instructions or
the Escrow Agent's duties hereunder, and the Escrow Agent shall incur no
liability and shall be fully protected in acting in accordance with the
opinion and instructions of such counsel.
14. In the event of any disagreement between the undersigned or any of
them, the person or persons named in the foregoing instructions, and/or any
other person, resulting in adverse claims and/or demands being made in
connection with or for any papers, money, or property involved herein or
affected hereby, the Escrow Agent shall be entitled at its option to refuse
to comply with any such claim, or demand so long as such disagreement shall
continue and, in so refusing, the Escrow Agent shall not be or become
liable to the undersigned or any of them or to any person named in the foregoing
instructions for the failure or refusal to comply with such conflicting or
adverse demands, and the Escrow Agent shall be entitled to continue to so
refrain and refuse to so act until:
(a) The rights of adverse claimants have been finally
adjudicated in a court assuming and having jurisdiction of the parties and
the money, papers, and property involved herein or affected hereby; and/or
(b) All differences shall have been adjusted by agreement and
the Escrow Agent shall have been notified thereof in writing signed by all of
the persons interested.
15. The fee of the Escrow Agent is $250, which shall be paid by agreement
among the parties prior to the earlier of completion or cancellation of this
escrow. The fee is for services rendered hereunder and is intended as full
compensation for the Escrow Agent's services as contemplated by this
Agreement; however, in the event that the conditions of this Agreement are
not fulfilled, the Escrow Agent renders any material service not contemplated
by this Agreement, there is any assignment of interest in the subject matter
of this Agreement, there is any material modification hereof, any material
controversy arises hereunder, or the Escrow Agent is made a party to or
justifiably intervene in any litigation pertaining to this Agreement or the
subject matter hereof, the Escrow Agent shall be reasonably compensated for
such extraordinary expenses, including reasonable attorneys' fees, occasioned
by any delay, controversy, litigation, or event and the same may be
recoverable only from Purchaser.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers, as of the date first
above written.
LAWLER & ASSOCIATES, a Professional AUTOMATED TRANSFER SYSTEMS
Law Corporation CORPORATION
By: /S/ W. SCOTT LAWLER By: /S/ CAMERON HAWORTH
Duly Authorized Officer Name: Cameron Haworth
Title: Director
LAXARCO HOLDING LIMITED
By: /S/ PANYAIOTA PIFANI
SYNERGY TECHNOLOGIES CORPORATION
Suite 210, 214 - 11th Avenue SE
Calgary, Alberta
T2G 0X8
June 25, 1999
Laxarco Holding Ltd.
Texas T Petroleum, Ltd.
Re: Option to Purchase CPJ Technology
Dear Sirs:
This letter agreement is being sent to you confirm and detail the agreement
reached between Laxarco Holding Ltd., a corporation organized under the laws
of the Republic of Cyprus ("Laxarco"), Synergy Technologies Corporation, a
Colorado corporation ("Synergy") and Texas T Petroleum, Ltd, a Colorado
corporation ("Texas T"). All undefined terms herein shall have the
respective meanings ascribed thereto in the Share Exchange Agreement by and
among Laxarco, Synergy and others dated May 5, 1998 and as amended June 25th,
1999.
In connection with the various agreements between the parties whereby Synergy
and Texas T each own or each shall own fifty percent (50%) of the outstanding
shares of common stock of Carbon Resources Limited ("Carbon"), which owns the
patent rights to a technology the parties refer to as the CPJ Technology, the
parties have discussed and agreed to grant to Laxarco an option to purchase
the Technology upon the conditions set forth herein.
Synergy and Texas T hereby agree that upon a decision by both Synergy and
Texas T to abandon the Technology, Laxarco shall have the right to purchase
the Technology (the AOption@). The Option shall be exercised, if at all,
within seven (7) days of Laxarco=s receipt of notice from Synergy and Texas
T of their intent to abandon the Technology. Such exercise shall occur by
Laxarco informing Synergy in writing of its intent to purchase the
Technology. The parties shall then have thirty (30) days to negotiate the terms
and ninety (90) days from the date of notice to complete such sale, with the
express understanding that the purchase price of the Technology shall not be
less than the amount invested into the Technology up to that point in time.
In the event that within thirty (30) days of Synergy's notice to abandon, the
parties do not reach an agreement whereby Laxarco will purchase the Technology
then this Option shall immediately expire and Synergy shall have the right to
offer the Technology to other interested purchasers. However, the expiration
of the Option will not preclude Laxarco from continuing to negotiate the
purchase of the Technology on a non-exclusive basis.
If the foregoing is agreeable, please so indicate by obtaining an officer's
signature on the space provided below.
SYNERGY TECHNOLOGIES CORPORATION
By: /S/ JACQUELINE DANFORTH
Name: Jacqueline Danforth
Title: Director
AGREED AND ACCEPTED:
LAXARCO HOLDING LIMITED
By: /S/ PANYAIOTA PIFANI
Name: Panayaiota Pifani
AGREED AND ACCEPTED:
TEXAS T PETROLEUM LTD.
By: /S/ GARETT GREENE
Name: Garett Greene
Title: Director
THIS AGREEMENT dated for reference the 26TH day of June, 1999
BETWEEN:
TEXAS T PETROLEUM LTD., a company incorporated pursuant to the
laws of the State of Colorado and having its registered and records office at
1812 -56th Ave., Greeley, Colorado
OF THE FIRST PART
(herein referred to as "Texas T")
AND:
SYNERGY TECHNOLOGIES CORPORATION, a company incorporated
pursuant to the laws of the State of Colorado and having its registered and
records office at Suite 800-303 East 17th Avenue, Denver, Colorado
80203-1260
(herein referred to as "Synergy')
OF THE SECOND
PART
WHEREAS:
Synergy is the registered and beneficial owner of all of the issued and
outstanding shares in the capital stock of Carbon Resources Limited (the
"Carbon shares"); and
Carbon Resources Limited ("Carbon") is the registered and beneficial owner
of all of the issued and outstanding shares in the capital stock of Lanisco
Holdings Limited ("Lanisco"); and
Lanisco holds the rights in and to certain patents applications for the
development of the heavy oil upgrading technology (the "CPJ technology
agreement") as appended hereto as Schedule "A"; and
Texas T has fulfilled its obligations under the terms of a verbal option
agreement whereby Texas T is granted the right to negotiate to acquire a
50% interest in and to the technology; and
The parties to this Agreement have determined that Texas T will acquire its
interest in and to the technology by way of a Share Exchange for 50% of
the organised shares of Carbon; and
Texas T wishes to effect an exchange of 50% of the organised shares of
common stock of Carbon, being a total of 2,500 common shares, for
2,000,000 restricted units of Texas T, each unit consisting of one share and
one share purchase warrant entitling the holder to acquire one additional
share at the exercise price of $1.00 per share within three years from the
date of issue, and the parties to this Agreement have agreed to the Share
Exchange subject to the terms and conditions set out below; and
Texas T has agreed to pay to Carbon the sum of $900,000. on or before
January 1, 2001, subject to the terms and conditions set out below; and
Texas T has agreed to be bound by all agreements of Lanisco and Carbon
as properly disclosed to Texas T by the parties to this Agreement.
NOW THEREFOR THIS AGREEMENT WITNESSES that for and in
consideration of the mutual premises and the mutual covenants and
agreements contained herein, the parties covenant and agree each with the
other as follows:
DEFINITIONS
For all purposes of the Agreement:
"Effective Date" means the date that this Agreement is approved by the
shareholders of Synergy and Texas T, if required, and the requisite articles
of exchange are filed with the State of Colorado.
"Board Approval" means the requisite Board of Directors approvals
required by each of the parties to this Agreement;
"Shareholder Approval" means the requisite shareholder approvals, if
required, by each of the parties to this Agreement;
"Regulatory Approval" means the requisite regulatory approvals, if
required, by each of the parties to this Agreement;
"Escrow Agreement" means that Agreement dated of even date herewith
between Synergy, Texas T, and Lawler & Associates to be substantially in
the form attached hereto as Schedule "B";
"Escrow Holder" means Lawler & Associates, a professional law
corporation;
"CPJ Agreement" means that agreement by and between Lanisco and Pierre
Jorgensen dated January 6, 1999 and appended hereto as Schedule A;
"Contracts" means all of the commitments, agreements, contracts,
instruments, leases and other documents entered into by the parties to this
Agreement by which the parties to this Agreement are bound;
"Texas T Units" means 2,000,000 fully paid and non-assessable units of
common stock of Texas T, each unit consisting of one share and one share
purchase warrant entitling the holder to acquire one additional share at the
exercise price of $1.00 per share within three years from the date of issue,
to be allotted and issued pursuant to Article 3 hereof, and which will be
held in escrow pursuant to the terms of the Escrow Agreement;
"Carbon Shares" means a total of 2,500 shares of the organised shares in the
capital of Carbon, to be exchanged by Synergy with Texas T, and being
50% of the organised shares of Carbon;
"Termination Date" means the day that is thirty (30) days after the last day
of the month in which all of the parties Approvals as defined in Section 5.1
(b) hereof, are received;
"Share Exchange" shall mean the exchange of the Texas T's Units for the
Carbon Shares as contemplated herein.
In this Agreement, except as otherwise expressly provided:
"Agreement" means this agreement, including the preamble and the
schedules hereto, as it may from time to time be supplemented or amended
in effect;
all references in this Agreement, to a designated "Section" or other
subdivision or to a schedule is to the designated Section or other
subdivision of, or Schedule to, this Agreement;
the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section
or other subdivision or Schedule;
the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof;
the singular of any term includes the plural, and vice versa, the use of any
term is equally applicable to any gender and where applicable a body
corporate; the word "or" is not exclusive and the word "including" is not
limiting, whether or not non-limiting language, such as "without limitation"
or "but not limited" to or words of similar import, is used with reference
thereto;
any accounting term not otherwise defined has the meanings assigned to it
in accordance with generally accepted accounting principals applicable to
the United States of America;
any reference to a statute includes and is a reference to that statute and to
the regulations made pursuant thereto, with all amendments made thereto
and in force from time to time, and to any statute or regulations that may be
passed which has the effect of supplementing or superseding that statute or
regulations;
where any representation or warranty is made "to the knowledge of" any
Person, such Person will not be liable for a misrepresentation or breach of
warranty by reason of the fact, state of facts, or circumstances in respect of
which the representation or warranty is given being untrue if such Person
proves:
that such Person conducted a reasonable investigation so as to provide
reasonable grounds for a belief that there had been no misrepresentation or
breach of warranty; and
that fact, state of facts, or circumstances could not reasonably be expected
to have been determined as a result of that reasonable investigation,
irrespective of the actual investigation conducted by such Person;
except as otherwise provided, any dollar amount referred to in this
Agreement is
in U.S. funds; and
any other term defined within the text of this Agreement has the meanings
so ascribed.
The following are the Schedules to this Agreement:
Schedule Description
A. CPJ Technology Agreement
B. Escrow Agreement
C. Authorised and Issued Capital of Carbon
D. Liabilities and Permitted Liens of Carbon
E. Closing Warranty and Certificate of Carbon
F. Closing Warranty and Certificate of Texas T
G. Closing Warranty and Certificate of Synergy
SHARE EXCHANGE AND FUNDING REQUIREMENTS
Subject to the terms and conditions hereof and the requisite Board of
Director, Shareholder Approvals and Regulatory Approvals as required, as
at the Effective Date, Texas T shall exchange the Texas T Units for the
Carbon Shares and shall provide funding in the amount of $900,000.USD
on or before January 1, 2001, such funds to be expended to fulfil the terms
of the Lanisco agreement with Pierre Jorgensen, appended hereto as
Schedule A;
The Texas T Units and the Carbon Shares shall be held in escrow in the
manner required by the Escrow Agreement and shall be released in the
manner provided therein.
3.0 CLOSING
The completion of the Share Exchange will take place at the Effective Date
at such place as each of the parties to this Agreement may agree to;
The Effective Date shall occur no later than 60 days from the date of
execution of this Agreement, and this Agreement shall be voidable
thereafter at the option of either party upon thirty (30) days notice in
writing to the parties hereto, such election not to be unreasonably exercised.
This Agreement will terminate on the effective date of such notice of
termination and except for the provisions of Sections 3.2 and 3.3, shall
thereafter by null and void;
In the event that this Agreement is terminated pursuant to Section 3.2
above, and any of the parties to this Agreement have not used its best
efforts to complete the transactions contemplated by this Agreement, then
notwithstanding any other provision of this Agreement:
if Synergy failed to use its best efforts, Synergy shall be liable for and shall
pay all costs and expenses incurred by the parties to this Agreement in
connection with this Agreement; and
if Texas T failed to use its best efforts, Texas T shall be liable for and shall
pay all costs and expenses incurred by the parties to this Agreement in
connection with this Agreement.
4.0 TRANSACTION EXPENSES
4.1 Except as provided in Section 3.3, each party to this Agreement
shall bear all costs and expenses incurred by him or it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. Unless otherwise expressly provided
herein, all costs and expenses related to satisfying any condition or fulfilling
any covenant contained in this Agreement shall be borne by the party whose
responsibility it is to satisfy the condition or fulfil the covenant in
question.
5.0 APPROVALS
5.1 The obligations of the parties to complete the exchange of shares
shall be subject to the following:
the passing of the resolutions by the Board of Directors of Carbon, and the
shareholders of Carbon, if required, (the "Carbon Approvals");
the passing of the resolutions by the Board of Directors of Texas T, and the
shareholders of Texas T, if required, authorising Texas T to enter into and
conclude this Agreement ( the "Texas T Approvals");
the passing of the resolutions by the Board of Directors of Synergy, and the
shareholders of Synergy, if required, authorising Synergy to enter into and
conclude this Agreement (the "Synergy Approvals");
the requisite Regulatory Approvals, as required.
5.2 Synergy and Texas T shall use their best and reasonable efforts to
obtain the required Approvals prior to the Closing.
6.0 TEXAS T WARRANTIES AND REPRESENTATIONS
6.1 Texas T warrants and represents to the parties to this Agreement,
with the intent that the parties to this Agreement will rely thereon in
entering into this Agreement and in concluding the Share Exchange
contemplated herein that:
Texas T is a company duly incorporated, validly existing and presently in
good standing under the laws of the State of Colorado and has the power,
authority and capacity to enter into this Agreement and to carry out its
terms;
the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby have been duly and validly authorised by
all necessary corporate action on the part of Texas T, and this Agreement
constitutes a legal, valid and binding obligation of Texas T in accordance
with its terms except as limited by laws of general application affecting the
rights of creditors;
To the knowledge of Texas T, Texas T has filed all reports and documents
required to be filed with the Registrar of Companies for the State of
Colorado, and is not in default of any requirements of the Company Act of
the State of Colorado;
upon completion of the Share Exchange, Synergy shall be the beneficial and
registered holders of the Texas T Units as fully paid and non-assessable,
free and clear of all liens, charges and encumbrances and restrictions on
transfer save and except those prescribed in the Escrow Agreement and
those which may be imposed by the regulatory authorities or under
applicable securities law;
Texas T has all corporate power and authority to carry on its business as
presently carried on;
Texas T is not in breach of any statute, regulation or by-law applicable to
Texas T or its operations;
the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms
hereof, does not conflict with or result in the breach of or the acceleration
of any indebtedness under, any terms, provisions or conditions of, or
constitute default under the Articles of Texas T or any indenture, mortgage,
deed of trust, agreement, lease, franchise, certificate, consent, permit,
licence, authority or other instrument to which Texas T is a party or is
bound or any judgement, decree, order, rule or regulation of any court or
administrative body by which Texas T is bound, or, of any statute or
regulation applicable to Texas T.
7.0 SYNERGY WARRANTIES AND REPRESENTATIONS
7.1 Synergy warrants and represents to Texas T, with the intent that
Texas T will rely thereon in entering into this Agreement and in concluding
the Share Exchange contemplated herein that:
Synergy is the registered holder and beneficial owner of the Carbon Shares,
free and clear of all Liens, and Synergy has no other interest, legal or
beneficial, direct or indirect, in any other shares in the capital of Carbon or
in the business or the business assets;
Synergy has the power and capacity and good and sufficient right and
authority to enter into this Agreement on the terms and conditions herein
set forth and to transfer the legal and beneficial title and ownership of the
Carbon Shares to Texas T;
the authorised and issued capital of Carbon is 5,000 organised shares and
the
Carbon Shares are validly issued and outstanding as fully paid and
non-assessable;
Carbon is a corporation duly incorporated, validly existing and in good
standing under the laws of the Republic of Cyprus;
All alterations, if any, to the Articles and By-laws of Carbon since its
incorporation have been duly approved by the shareholders of Carbon and
registered with the governmental authority having jurisdiction;
Carbon has the power, authority and capacity to carry on the business as
presently conducted by it;
Carbon has the power, authority and capacity to own and use all of the
business assets;
Carbon owns and possesses and has good and marketable title to and
possession of all the business assets free and clear of all liens;
the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms
hereof, does not conflict with or result in the breach of or the acceleration
of any indebtedness under, any terms, provisions or conditions of, or
constitute default under the Articles or By-Laws of Carbon or any
indenture, mortgage, deed of trust, agreement, lease, franchise, certificate,
consent, permit, licence, authority or other instrument to which Carbon is a
party or is bound or any judgement, decree, order, rule, or regulation of any
court of administrative body by which Carbon is bound, or, to the
knowledge of any statute or regulation applicable to Carbon;
all material transactions of Carbon have been promptly and properly
recorded or filed in or with its respective books and records, and the minute
book of Carbon contains all records required to be kept pursuant to
applicable legislation pertaining to corporations in Carbon's jurisdiction of
incorporation;
Carbon has no contract, agreement, undertaking, or arrangement, whether
oral, written or implied, and does not have any outstanding agreement,
contract or commitment (whether written or oral) whatsoever relating to or
affecting the conduct of the business or any of the business assets or for the
purchase, sale or lease of any of the business assets other than the contracts;
No Person has any agreement, right or option, consensual or arising by law,
present or future, contingent or absolute, or capable of becoming an
agreement, right or option:
to require Carbon to issue any further or other shares in its capital or any
other security convertible or exchangeable into shares in its capital or to
convert or exchange any securities into or for shares in the capital of
Carbon;
for the issue or allotment of any of the authorised but unissued shares in the
capital of Carbon;
to require Carbon to purchase, redeem or otherwise acquire any of the
issued and outstanding shares in the capital of Carbon; or
to purchase or otherwise acquire any shares in the capital of Carbon;
Lanisco:
Save for the interest of Jorgensen, in and to 35% of the income derived
from the CPJ technology, more particularly described in Schedule "A"
hereto, no Person has any agreement, right or option, consensual or arising
by law, present or future, contingent or absolute, or capable of becoming an
agreement, right or option:
to require Lanisco to issue any further or other shares in its capital or any
other security convertible or exchangeable into shares in its capital or to
convert or exchange any securities into or for shares in the capital of
Lanisco;
for the issue or allotment of any of the authorised but unissued shares in the
capital of Lanisco;
to require Lanisco to purchase, redeem or otherwise acquire any of the
issued and outstanding shares in the capital of Lanisco; or
to purchase or otherwise acquire any shares in the capital of Lanisco;
Lanisco is not in breach of any of the terms, covenants, conditions, or
provisions of, is not in default under, or has done or omitted to do anything
which, with the giving of notice or lapse of time or both, would constitute a
breach of or a default under any contract;
is not in breach or default under any judgement injunction, or other order
or aware of any judicial, administration, governmental, or other authority or
arbitrator by which Lanisco is bound or to which Lanisco or any business
assets are subject;
and Lanisco has not received notice that any default, breach, or violation is
being alleged;
COVENANTS OF THE PARTIES
8.1 Between the date of this Agreement and the Effective Date, Synergy
will cause Carbon and Lanisco to afford to Texas T and its authorised
representatives access during normal business hours to all books, contracts,
commitments, records of Carbon and Lanisco and will furnish such copies
(certified if requested) thereof and other information as Texas T may
reasonably request and will take such steps as may be necessary to permit
Texas T and its authorised representatives to make such audit of the books
of account of Carbon and Lanisco and such physical verification of the
Business Assets as Texas T may reasonably see fit;
will diligently take all reasonable steps to obtain prior to the Effective Date,
all consents and approvals required to complete the transactions
contemplated herein in accordance with the terms and conditions hereof
including any consents, waivers, and approvals as requested by Texas T or
Texas T's solicitor;
will do any and all things reasonably necessary and use their best efforts
assist and fully co-operate with Texas T in its effort to obtain the approvals
within the time limited hereunder;
will cause Carbon and Lanisco to conduct its business and affairs diligently
and only in the ordinary course, and preserve and maintain the goodwill of
Carbon and Lanisco, the business assets and the business; and
will not permit Carbon and Lanisco to make or agree to make any payment
to any director, officer, employee or agent of Carbon and Lanisco except in
the ordinary course of business and at the regular rate of salary and
commission for such person or as reasonable reimbursement for expenses
incurred by such person in connection with the business of Carbon and
Lanisco.
8.2 Between the date of this Agreement and the Effective Date, Texas T
will:
afford to Synergy and its authorised representatives access during normal
business hours to all books contracts, commitments, records of Texas T and
will furnish such copies (certified if requested) thereof and other information
as Synergy may reasonably request, and will take such steps as may be
necessary to permit Synergy and its authorised representatives to make such
audit of the books of account of Texas T and such physical verification of
the assets of the Texas T as Synergy may reasonably see fit;
if required, call a general meeting of its shareholders to be held as soon as
practicable after execution hereof to consider and, if thought fit, approve
resolutions respecting the following matters together with such amendments
as Synergy may specify prior to the date notice of such meeting is mailed to
Texas T's shareholders:
approval of the exchange of the Texas T Shares for the Carbon Shares, the
total organised shares of Carbon being 5,000 organised shares; and
such other matters pertaining to the transactions contemplated herein as
may be reasonably requested by the Synergy, the form of proxy materials
for the meeting to be completed to the satisfaction of the Synergy;
deliver written confirmation of each of the foregoing, if any, to the Synergy;
and
attend to all corporate matters to carry out and implement this Agreement
as soon as possible.
8.3 Synergy and Texas T shall each complete their own due diligence
investigations contemplated by subparagraphs 8.1 (a) and 8.2(a) herein
respectively in order to satisfy themselves of the accuracy of each other's
representations and warranties hereunder, within thirty (30) days of the date
of this Agreement, and shall each deliver to the other written confirmation
of their satisfactory completion of such investigations. Notwithstanding any
such investigations, the representations and warranties of any party hereto
shall survive the Closing Date and the Closing, and shall continue in full
force and effect.
8.4 The parties agree to make or cause Carbon to make such joint
elections under the Income Tax Act with respect to the exchange of the
Carbon Shares or any other matters as may be reasonably requested by
Texas T and to execute and file such documents as may be necessary to give
effect thereto.
NON-MERGER
The representations, warranties, covenants and agreements of Synergy
contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Effective Date as
though made at the Effective Date and will survive the Effective Date, and
notwithstanding the completion of the transactions herein contemplated, the
waiver of any condition contained herein (unless such waiver expressly
releases Synergy of such representation, warranty, covenant or agreement),
or any investigation by Texas T, the same will remain in full force and
effect.
The representations, warranties, covenants and agreement of Texas T
contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Effective Date as
though made at the Effective Date and will survive the Effective Date, and
notwithstanding the completion of the transactions herein contemplated, the
waiver of any condition contained herein (unless such waiver expressly
releases Texas T of such representation, warranty, covenant or agreement),
or any investigation by Synergy , the same will remain in full force and
effect.
CONDITIONS PRECEDENT
The obligations of Synergy to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following
conditions at the times stipulated:
the representations and warranties of Texas T contained herein are true and
correct in all respect at and as of the Effective Date except as may be in
writing disclosed to and approved by the Synergy; and
all covenants, agreements and obligations hereunder on the part of Texas T
to be performed or complied with at or prior to the Closing, including Texas
T's obligation to deliver the documents and instruments herein provided for,
have been performed and complied with at and as of the Effective Date.
The conditions set forth in Section 10.1 are for the exclusive benefit of
Synergy and may be waived by Synergy in writing in whole or in part at any
time.
The obligations of Texas T to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following
conditions at the times stipulated, that:
the representations and warranties of Synergy contained herein are true and
correct in all material respects at and as of the Closing except as may be in
writing disclosed to and approved by Texas T; and
all covenants, agreements and obligations hereunder on the part of the
Synergy to be performed or complied with at or prior to the Effective Date,
including in particular the Synergy's obligations to deliver the documents
and instruments herein provided for, have been performed and complied
with as at the Closing.
The conditions set forth in Section 10.3 are for the exclusive benefit of
Texas T and may be waived by Texas T in whole or in part at any time.
11.0 TRANSACTIONS OF SYNERGY AT THE EFFECTIVE DATE
11.1 At the Effective Date, Synergy will execute and deliver or cause to
be executed and delivered all documents, instruments, resolutions and share
certificates as are necessary to effectively transfer and assign the Carbon
Shares Texas T free and clear of all Liens, including;
share certificates representing the Carbon Shares registered in the name of
Texas T, duly endorsed for transfer to Texas T;
the Escrow Agreement, duly executed by Synergy;
certified copies of resolutions of directors of Synergy and Carbon
authorising the transfer of the Carbon Shares and the registration of the
Carbon Shares in the name of Texas T and authorising the issue of new
share certificates in the name of Texas T;
duly issued share certificates registered in the name of Texas T representing
2,500 organised shares in the capital of Carbon, the total organised shares in
the capital of Carbon being 5,000 organised shares;
a Closing Warranty and Certificate of Synergy and Carbon confirming that
the conditions to be satisfied by Texas T, unless waived, set out in Section
10.1 have been satisfied at the Effective Date and that all representations
and warranties of Texas T contained in this Agreement are true at and as of
the Effective Date in the form attached as Schedule "".
12.0 TRANSACTIONS OF TEXAS T AT THE EFFECTIVE DATE
12.1 Texas T will deliver or cause to be delivered the following at the
Effective Date:
copies of all written Approvals;
share certificates to the escrow agent representing the Texas T Shares duly
registered in the name of Synergy;
written confirmation of the escrow agent that the Texas T Shares have been
issued to Synergy, and are being held by the escrow agent pursuant to the
terms of the Escrow Agreement;
a Closing Warrant and Certificate from the Board of Directors of Texas T
confirming that the conditions to be satisfied by the Synergy, unless waived,
set out in Section 10.3 have been satisfied at the Effective Date and that all
representations and warranties of Synergy contained in this Agreement are
true at and as of the Effective Date in the form attached as Schedule " ";
the Escrow agreement duly executed by Texas T;
copies, certified if requested, of all minutes and consent resolutions of the
directors of Texas T authorising Texas T to:
enter into and fulfil the terms of this Agreement;
issue such number of common shares in the capital stock of the Texas T to
complete the Share Exchange Agreement;
execute and deliver the Escrow Agreement.
POST CLOSING AGREEMENTS, COVENANTS AND OBLIGATIONS
Synergy will indemnify and hold harmless Texas T from and against:
any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant on
the part of Synergy under this Agreement or from any misrepresentation in
or omission from any certificate or other instrument furnished or to be
furnished to Texas T hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
Texas T will indemnify and hold harmless Synergy from and against:
any and all losses, damages or deficiencies resulting from any
misrepresentation , breach of warranty or non-fulfilment of any covenant on
the part of Texas T under this Agreement or from any misrepresentation in
or omission from any certificate or other instrument furnished or to be
furnished to Synergy hereunder; and
any and all actions, suits, proceedings, demands, assessments, judgements,
costs and legal and other expenses incidental to any of the foregoing.
14.0 TIME OF THE ESSENCE
14.1 Time is of the essence of this Agreement.
15.0 FURTHER ASSURANCES
15.1 The parties will execute and deliver such further documents and
instruments and do all such acts and things as may be reasonably necessary
or requisite to carry out the full intent and meaning of this Agreement and
to effect the transactions contemplated by this Agreement.
16.0 SUCCESSORS AND ASSIGNS
This Agreement will enure to the benefit and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
This Agreement may not be assigned by any party hereto without the prior
written consent of all parties to this Agreement.
17.0 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which will
be deemed to be an original and all of which will together constitute one
and the same instrument.
18.0 NOTICE
18.1 All notices, requests, demands and other communications required
or permitted hereunder, or desired to be given with respect to their rights or
interest herein, assigned or reserved, shall be deemed to have been properly
given or delivered, when delivered personally or sent by registered mail or
sent by electronic communication with all postage or other charges fully
prepaid, and addressed to the parties respectively as follows:
To Synergy:
Synergy Technologies Corporation
#210-214-11th Ave S.E.
Calgary, Alberta T2G 0X8
To Texas T:
Texas T Petroleum Ltd
#430-580 Hornby St.,
Vancouver, B.C.
(c) To the Escrow Agent:
Lawler & Associates
2820 Townsgate Road, Suite 200
Westlake Village, CA 91361
Or such other address as any Person may specify by notice in writing to the
other.
Any notice delivered on a business day, or sent by electronic communication
on a business day, will be deemed conclusively to have been effectively
given on the date notice was delivered or transmitted.
Any notice sent by prepaid registered mail will be deemed conclusively to
have been effectively given on the tenth business day after posting; but if at
the time of posting or between the time of posting and the tenth business
day thereafter there is a strike, lockout or other labour disturbance affecting
postal service, then the notice will not be effectively given until actually
delivered.
19.0 AGENTS
19.1 Synergy warrants to Texas T that no agent or other intermediary has
been engaged by Synergy in connection with the Share Exchange herein
contemplated; Texas T warrants to Synergy that no agent or other
intermediary has been engaged by the Texas T in connection with the Share
Exchange herein contemplated.
20.0 PROPER LAW
This Agreement will be governed by and construed in accordance with the
laws of the State of Colorado and the parties will attorn to jurisdiction of
the Courts thereof.
RIGHT OF FIRST REFUSAL
(a) the parties to this Agreement shall grant each to the other the right of
first refusal to acquire any shares of Carbon which either party may wish to
sell or otherwise dispose of on terms to be negotiated. The party wishing to
sell or dispose of its shares of Carbon any portion thereof (the "Offeror")
shall immediately send a notice of intent to sell (the "Offering Notice") to
the other party. The other party (the "Accepting Other") shall have Thirty
(30) days from the date the Offering Notice is given:
(i) to conclude an agreement to purchase (the "Purchase Agreement") the
shares of Carbon;
(ii) to agree by notice to the Offeror that the Offer may sell the shares of
Carbon PROVIDED THAT, prior to the completion of such sale, the
purchaser of the shares of Carbon and any parties controlling the purchaser
shall agree to become subject to all of the obligations and such purchaser
becomes entitled to all rights of the Offeror under this Agreement by means
of an agreement in writing satisfactory in form and substance to the
Accepting Other, acting reasonably.
(b) if the Accepting Other agrees to purchase the shares of Carbon in
accordance with section 21.1(a) (i) of this Agreement, the Accepting Other
must, within 3 business days (not including weekends and holidays) of
executing a Purchase Agreement, pay to the Offeror an amount equal to
Ten (10%) of the agreed to purchase price as a non-refundable deposit.
The purchase price and the Purchase Agreement shall be completed within
90 days after the date upon which the Purchase Agreement was executed, at
which time the purchase price for such shares of Carbon shall be paid by the
Accepting Other (by certified cheque to the extent that a cash payment is
called for) on the terms specified in the Purchase Agreement against
delivery of the shares of Carbon duly endorsed with authorised signatories
of the Offeror and director's resolutions as may be necessary to complete
the transaction and transfer good title to the shares of Carbon to the
Accepting Other.
If no agreement is reached in accordance with section 21.1 (a) (i) of this
Agreement and no notice is given by the Accepting Other in accordance
with section 21.1 (ii) of this Agreement within such 30 day period, the
Accepting Other shall be deemed to have given notice in accordance with
section 21.1 (a) (ii) of this Agreement.
(c) if the Other agrees or is deemed to have agreed that the Offeror may
sell the Carbon shares in accordance with section 21.1 (a) (ii) of this
Agreement, then for a period of 120 days following the date upon which the
Offering Notice was given, the Offeror shall have the right to sell the
Carbon shares to any third party subject to the terms and conditions set
forth in section 21.1 (a) (ii) of this Agreement.
If the shares of Carbon are not sold pursuant to section 21.1 ( c) of this
Agreement, during the 120 day period, the Offeror may not sell the shares
of Carbon without first offering them again to the other party pursuant to
this paragraph 12.1 and so on from time to time.
ARBITRATION
22.1 Any dispute, difference or question which may arise at any time
hereinafter between the Parties touching on the true construction of this
Agreement and the respective rights and obligations of each Party to the
other shall, unless otherwise herein expressly provided, be referred to and
settled by binding arbitration under the International Arbitration Act. No
arbitration shall be commenced until the aggrieved Party shall send to the
other Party a written notice describing the problem and stating a proposed
solution ("Settlement Notice"). For Thirty (30) days after the sending of
the Settlement Notice, the parties shall try to settle the dispute in good
faith. The contents of the Settlement Notice and of all discussions and writings
during the Thirty (30) day settlement period shall be without prejudice and
shall be privileged as settlement discussion and may not be used in any legal
proceedings or arbitration. Upon the Parties being unable to reach a
solution, the matter shall be settled by binding arbitration. The place of
arbitration shall be Denver, Colorado or such other jurisdiction as may be
acceptable to the Parties and the jurisdiction. One impartial arbitrator shall
be appointed under the International Arbitration Act. Judgement of the
Arbitral award may be entered in any court in Colorado or in any court
having jurisdiction. The Parties hereby waive all defences as to personal
jurisdiction, venue and sovereign immunity from attachment, exception and
jurisdiction in any proceeding to confirm or enforce the award. The Party
who brings any proceeding to enforce the award and prevails shall be paid
its full costs and attorney fees by the other Party. The laws of the State of
Colorado shall govern all issues during the arbitration. The decision of the
arbitrator shall be final and binding on the Parties herein.
IN WITNESS WHEREOF the parties hereto have set their hand and seal as
of the day and year first above written.
SIGNED, SEALED and DELIVERED
by SYNERGY TECHNOLOGIES
CORPORATION in the presence of:
/S/ JANET LESLIE
SYNERGY TECHNOLOGIES CORPORATION
/S/ JACQUELINE DANFORTH
SIGNED, SEALED and DELIVERED
by TEXAS T PETROLEUM LIMITED
in the presence of:
/S/ JANET LESLIE
TEXAS T PETROLEUM LIMITED
/S/ GARETT GREENE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 1999
INCLUDED IN ITS FORM 10-SB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 14,406
<SECURITIES> 0
<RECEIVABLES> 283,040
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 309,253
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,755,538
<CURRENT-LIABILITIES> 834,965
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0
0
<COMMON> 40,666
<OTHER-SE> 1,650,247
<TOTAL-LIABILITY-AND-EQUITY> 1,755,538
<SALES> 0
<TOTAL-REVENUES> 370,929
<CGS> 0
<TOTAL-COSTS> 1,076,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (705,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (705,838)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
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