Form 10-SB/A
Amendment No. 5
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Hydro Environmental Resources, Inc.
(Name of Small Business Issuer in its charter)
Oklahoma 73-1552304
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8908 South Yale Avenue, Suite 409
Tulsa, OK 74137
(918) 492-4125
(Address of principal executive Offices)
Securities to be registered under Section
12(b) of the Act:
NONE
Securities to be registered under Section
12(g) of the Act:
Common Stock, $0.001 par value
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PART I
Item 1. Description of Business
(a) Business Development. Hydro Environmental Resources, Inc. ("Company") is a
development stage corporation organized on November 10, 1998 under the laws
of the state of Oklahoma. There has been no bankruptcy, receivership, or
similar proceeding by or against the Company. In addition, there has been
no material reclassification, merger, consolidation, or purchase or sale of
a significant amount of assets not done in the ordinary course of business.
(b) Business of Issuer.
1. Principal products or services and their markets. The objective of the
Company is to design, build and manage inexpensive and environmentally
friendly fuel and power producing systems for remote areas of the world
that are without electricity, cooking fuel, fresh water or power of any
kind. On June 16,1999, the rights to the ElectroChem Hydrogen Fuel Reactor
(ECHFR), a prototype-stage technology that produces clean burning hydrogen
gas at low pressure from any water source, were assigned to the Company in
exchange for 15,000,000 shares of restricted common stock and a 5% royalty
to the inventor, Mr. James Pelto. Mr. Pelto built the prototype ECHFR and
will continue to be involved in its development and commercialization.
The ECHFR is designed to be used where there is no energy readily
available. All that is required for the ECHFR to work is water and a
proprietary mixture of dry chemicals that are readily available, light in
weight, and easily transported. The Company is not aware of another power
generation system that is similar to the ECHFR. The ECHFR is a
sophisticated mechanical reactor that creates an electrical current that
splits the water molecule, separating the two hydrogen atoms from the
oxygen atom. The ECHFR activates a formula that removes hydrogen from water
on a stand-by or as needed basis using equipment that can be portable or
stationery. The result is clean burning hydrogen gas that can be used for
cooking, heating or refrigeration.
The present prototype ECHFR unit is a portable 3-gallon system capable of
producing enough hydrogen gas to power a 2-kW electric generator for 16
hours or to power a gas stove for 8-10 days. The next stage is to develop a
larger system (50-100 gallons) capable of producing enough hydrogen power
to supply electricity, cooking fuel and purified water for a community of
100 people. Management estimates R&D for the larger ECHFR unit to be from
12-18 months. Because the ECHFR technology is still in development,
management has not yet determined production costs, therefore, the
cost-effectiveness of the ECHFR technology has yet to be determined.
Ultimately, the Company intends to build, market and operate a stationary
power site using a 3,000 gallon ECHFR system capable of supplying power for
a city of approximately 3,000 people. The Company plans to market the ECHFR
technology in places that are currently underserved by convention power
companies, including Indonesia, China, Philippines, Malaysia, Middle East
and parts of Central and South America. In addition to providing fuel,
other potential markets for the ECHFR are industrial mining and wastewater
cleansing and property restoration.
2. Distribution methods of the products or services. The Company plans to hire
approximately five employees during the next twelve months to market the
ECHFR. To date the Company has received no orders for its product and there
is no assurance that the Company will ever receive any orders for its
product.
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3. Competitive business conditions and the small business issuer's competitive
position in the industry and methods of competition. The Company believes
that its ECHFR technology is unique. There is no ECHFR or its equivalent
used to produce energy anywhere else at this time. The ECHFR uses water and
a proprietary mixture of chemicals to produce hydrogen gas for cooking,
heating and refrigeration.
A potential competing technology to the ECHFR is the hydrogen fuel cell.
Fuel cells are electro-chemical devices, similar to a battery, in which
hydrogen (either pure hydrogen gas or hydrogen extracted from a fuel that
contains the element) and oxygen from the air are combined to produce
electricity, water and a modest amount of waste heat. The conversion
efficiency can be as high as 80%, but actual values vary with fuel cell
types. Each cell produces on 0.5-0.9 volts, so a large number of cells must
be stacked together and electrically connected in a series and parallel to
achieve the desired output. Like a battery, a fuel cell stack has no moving
parts (except for small fans and pumps to remove or recover waste heat) has
near-zero emissions except for water, and is ultra-quiet. These
characteristics make the fuel cell a highly attractive power source for
automobiles and other vehicles, and for stationary power plants.
Fuel cell power systems can be classified in three groups by type of
application: 1) those intended to replace the internal combustion engine in
automobiles, trucks and buses, 2) those intended to serve as distributed
generation power plant that are at or close to homes, buildings, and
manufacturing plants; and 3) those that are intended to replace batteries
in everything from cellular telephones, flashlights, computers, radios,
golf carts, powered wheelchairs, to portable outdoor signs.
The hydrogen fuel cell industry is still in its development stage and has
yet to develop mass production capabilities. According to a report
documenting perspectives, insights and discussions presented by industry
leaders at a recent conference on The Business Case for Fuel Cells (July
15-16, 1999), total worldwide R&D spending on fuel cell technology is
nearly $1 billion per year with funding provided by vehicle manufacturers,
equipment manufacturers, utilities, and government agencies in the U.S.,
Europe and Japan. About 80% of the funding is directed toward the
development of fuel cell systems for electric vehicles such as automobiles,
trucks, buses and golf carts.
Companies such as Daimler Chrysler and Ford have recognized the future
commercial potential of hydrogen fuel cells for the automotive industry and
have developed strategic alliances with and have invested over $500 million
in Ballard Power Systems, the recognized leader in the hydrogen fuel cell
industry. Ballard, together with its alliance partners and associated
companies, plans to bring to market their first portable power products in
2001; their first transit bus engines in 2002; their first stationary power
products between 2002 and 2003; and their first automotive engines between
2003 and 2005. Other industries for which hydrogen fuel cell technology is
being developed include mass transportation, telecommunications, and power
industries.
Manufacturers and marketers of hydrogen fuel cells include Ballard Power
Systems, DCH Technology, Inc., ONSI, Ergenics, H Power Corp.,and Powerball
Technologies. These companies produce fuel cells on a made-to-order basis,
as mass production is not yet available. Competitors may be able to develop
technologies that are as effective as, or more effective, easier or cheaper
to use, than those offered by the Company. The Company's existing and
potential competitors have substantially greater financial, marketing,
sales, manufacturing, distribution and technological resources than the
Company. There is no assurance that the Company will be able to
successfully compete.
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4. Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts. The ECHFR and the chemical formula for producing
hydrogen are both covered by pending patents. The pending patents were
filed in Australia and cover 96 international jurisdictions, including the
United States. There is no assurance that the patents will issue and there
is no assurance that if the patents issue that they will not infringe on
other patents. Management does not have an estimated time frame for the
patents to be issued. If the patents issue, their duration will be from 17
to 20 years from the date of issuance.
5. Government approval of principal product or service. Although the Company
is not aware of any government approvals required prior to or in
conjunction with its marketing of the ECHFR in Indonesia, China,
Philippines, Malaysia, Middle East and parts of Central and South America,
there is no assurance that such government approvals will not be required
in the future. In addition, compliance with government or regulatory
requirements, if any, could have a material adverse affect on the
operations of the Company.
6. Employees. The Company presently has one officer and director and no
full-time employees. The officer and director is engaged in other business
activities and devotes no more than 50% of his time to the business of the
Company. The Company has no other full-time or part-time employees. The
Company plans to hire approximately five employees during the next twelve
months to market the ECHFR and plans to retain consulting engineers on a
project-by-project basis. There is no assurance that any employees will be
hired or any consultants will be retained.
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operations. During the next twelve months, the Company plans to
raise approximately $2.5 million in additional capital to fund its operating
activities, which include hiring approximately five additional employees to
market the product, finding a third-party manufacturer to build the ECHFR, and
building three ECHFR units of varying sizes for demonstration. Management has
not yet determined whether the additional capital will be raised through debt
financing, the sale of common stock in a private or public offering, or a
combination of both. There is no assurance that the Company will be successful
in raising additional capital to fund its operating activities or that such
capital, if raised, will be on favorable terms.
The Company's strategic business plan and business model is subject to
many risks, including, but not necessarily limited to, the following:
1. No Operating History. The Company was organized on November 10, 1998 and
has no operating history. The Company has no products, operating revenues,
and minimal assets at this time. There is no assurance that the Company
will be able to develop, manufacture or market any products successfully,
generate net revenue from the sale of any products, or achieve or maintain
profitable operations.
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2. Product Not Developed. The Company has no products and limited assets at
this time. The business of the Company depends upon the development of the
ECHFR technology. There is no assurance that the Company's activities will
be successful or profitable.
3. Patent Position. The ECHFR is protected by pending patents in Australia and
96 international jurisdictions. There is no assurance that patents do not
infringe the rights of others, and there is no assurance that the pending
patent applications will be issued.
4. Filing, Prosecution and Maintenance of Patents. The filing, prosecution and
maintenance of all patent rights are within the sole discretion of the
Company. The Company intends to seek, obtain and maintain such patent and
other protections to the extent that it is lawfully entitled to do so, at
the Company's sole expense. There is no assurance that the Company will
have sufficient working capital to fund its efforts in those activities.
5. Need for Additional Capital. Additional capital will be required to fund
further development, file and process applications for governmental
approval, if required, develop models, identify manufacturers to build the
ECHFR, and to advertise, ship and collect for products sold and any other
costs. The Company intends to pursue additional financing. However, there
is no assurance that any additional capital will be available to the
Company on acceptable terms when needed, if at all.
6. Acceptance of ECHFR by Market. Inherent to the successful marketing of the
Company's ECHFR is the acceptance of the product by the market. There is no
assurance that the ECHFR will be accepted.
7. Competition. The alternative fuels industry is intensely competitive and
composed of large and well financed firms that are constantly developing or
acquiring rights to new products. Some competitors have established
distribution networks and sufficient marketing resources to resist attempts
to dislodge use of their products. In addition, there is no assurance that
one or more competitors will not develop or manufacture products that are
more effective or better accepted than those that the Company seeks to
commercialize. There is no assurance that the Company will be able to
compete successfully or profitably.
8. Dependence Upon Key Personnel. The Company is dependent upon the services
of Jack Wynn, sole officer and director, and of Mr. James Pelto, inventor
of the ECHFR. The loss of the services of Mr. Wynn or Mr. Pelto and the
inability to retain an acceptable substitute will have a material adverse
effect on the Company. There is no assurance that replacement of key
personnel will be possible. There is no written employment agreement with
Mr. Wynn. There is no written consulting services agreement with Mr. Pelto.
Mr. Pelto owns 47.92% of the outstanding common stock of the Company.
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9. Limited Experience of Management. Mr. Wynn, the sole officer of the
Company, has limited experience in the fuel and power producing industry.
Mr. Wynn and Mr. Pelto, inventor of the ECHFR technology, have other
business interests outside of their involvement with the Company. however,
they anticipate devoting 100% of their time to the Company's activities.
10. No Trading Market for Common Stock. There is no established liquid market
for the Company's Common Stock. The Company intends to pursue developing a
liquid market for the Common Stock as soon as practicable, with the filing
of its SEC Form 10 and its application for approval for trading its shares
on the OTC Bulletin Board. Recent changes in NASD and SEC rules will
require the Company to file with the SEC and comply with interim, quarterly
and annual reporting requirements in order for the Common Stock to be
quoted in the OTC Bulletin Board market. The Company intends to comply, but
there is no assurance it will be able to do so. There is no assurance that
a liquid market for the Common Stock will develop or, if such a market
develops, that it will be maintained. Holders of Shares of Common Stock
may, therefore, have difficulty in selling their Shares should they desire
to do so. Investors must be able to lose their entire investment in Shares
of Common Stock.
11. No Dividends. The Company has not paid any cash or other dividends on its
Common Stock and does not expect to declare or pay any such cash dividends
in the foreseeable future.
12. International Economic Conditions. Local, national, and international
economic conditions may have a substantial adverse affect on the efforts of
the Company. The Company cannot guarantee against the possible eventuality
of any potential adverse economic conditions.
13. Impact of Year 2000 on operations of the Company. The Year 2000 issue (Y2K)
is the result of computer programs written using two digits rather than
four to define the applicable year. Any of the Company's computer and
telecommunications programs that have date sensitive software may recognize
a date using "00" as the year 1900 instead of 2000. This could result in
system failure or miscalculations causing disruptions in operations,
including the ability to process transactions, send invoices, or engage in
similar normal business activities.As of December 31, 1999, the Company did
not own any software; however, the Company cannot determine the extent to
which the Company is vulnerable to third parties' failure to remediate
their own Y2K problems. As a result, there can be no guarantee that the
systems of other companies on which the Company's business relies will be
timely converted, or that failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would have a
material adverse effect on the Company. In view of the foregoing, there can
be no assurance that the Y2K issue will not have a material adverse effect
on the Company's business.
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To date the costs to the Company to address Y2K issues has been immaterial.
The Company believes the most likely worst case scenario related to Y2K is
a significant delay in the development of its product. Such an interruption
could occur due to a breakdown in the systems of third parties. The Company
currently does not have a contingency plan in the event a particular system
or vendor is not Y2K ready. There can be no assurance that unexpected Y2K
readiness problems of third parties will not materially adversely affect
the Company's business, operating results and financial condition. The
foregoing assessment represents managements best estimates at the present
time, which could change signficantly in the future.
Results of Operations. The Company has no revenues from sales and does not
expect to have revenues until it has raised sufficient capital to fund its
operations. There is no assurance that the Company will be successful in raising
additional capital.
Liquidity and Capital Resources. As of December 31, 1999, the Company had
$9,665 in cash. During the next twelve months, management intends to raise
additional capital to fund its business plan, as operating revenues will not be
generated until such time as sales of the ECHFR commence. Management has not yet
determined whether the additional capital will be raised through debt financing,
the sale of common stock in a private or public offering, or a combination of
both. There is no assurance that the Company will be successful in raising
additional capital to fund its operating activities or that such capital, if
raised, will be on favorable terms.
The Company faces considerable risks at each step in its strategic business
plan. Such things as technology, societal and economic changes, cost overruns, a
lack of interest in and/or inability to market the ECHFR, and shortfalls in
funding due to the Company's inability to raise additional capital through debt
or in the equity securities market all may have an impact on the Company. If no
additional funding is raised over the next twelve months, the Company's sole
officer and director may loan or contribute to the Company funds to cover
minimal operating expenses, however, he has no legal obligation to do so.
Although the Company's sole officer and director has made loans or contributions
of funds to the Company in the past, there is no assurance that he will do so in
the future. In such a restricted scenario, the Company would not be able to
complete all of the steps of its strategic business plan, and would therefore be
forced to delay all capital-intensive activities. It is possible that, without
necessary and sufficient cash flow during the next twelve months, the Company
would have to severely restrict its plans and abilities to move forward with its
strategic business plan.
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Item 3. Description of Property
The Company owns no property. The principal executive office of the
Company is provided free of charge by the Company's President.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The table below details the beneficial owners of more than 5% of the
Company's Common Stock as of December 31, 1999:
Amount and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
----------------------------------------------------------------------------
Common Stock Quantum Development Corp
34/30 St. Kevins
Benowa, Queensland 4217
Australia 3,055,000 9.76%
Common Stock John Wheeler
14 Kel Nagle Crt
Parkwood, Queensland 4214
Australia 2,500,000 7.99%
Common Stock James Pelto
17/30 St. Kevins Ave.
Benowa, Queensland 4217
Australia 15,000,000 47.92%
---------------------------------
Total Ownership of
Beneficial Owners 20,555,000 65.67%
---------------------------------
The table below details the ownership of the Company's Common Stock by
its sole director and officer:
Amount and Nature
Name and Address of Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
----------------------------------------------------------------------------
Common Stock Jack Wynn
2006 Oak Creek Place
Hayward, CA 94541 650,000 2.08%
---------------------------------
Item 5. Directors, Executive Officers, Promoters and Control Persons
Jack Wynn is the sole officer and director of the Company. Prior to
founding the Company, he was Chairman of the Board of Scanner Energy, an
Oklahoma Corporation. While in Oklahoma, he formed the Oklahoma Transfer and
Registrar Corporation, which was later transferred to San Francisco, California
as Securities Transfer Pacifica Corp. Prior to Scanner Energy, he was a partner
with Scholen, Wynn & Associates, a securities and insurance brokerage business.
Mr. Wynn has over twenty years in the life insurance industry, including ten
years with Occidental Life Insurance.
Item 6. Executive Compensation
The Company's sole officer and director does not receive compensation
for his services. There are no written employment agreements.
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Item 7. Certain Relationships and Related Transactions
The Company had no transactions with related parties in excess of
$60,000.
Item 8. Description of Securities
The Company is authorized to issue 50,000,000 Shares of Common Stock, par
value $0.001 per share, of which 31,300,000 shares were outstanding at December
31, 1999. The Company is also authorized to issue 5,000,000 Shares of Preferred
Stock, par value $0.001 per share, of which there are no shares presently
outstanding. There is no present intent to issue any Preferred Stock.
Voting Rights. Holders of shares of Common Stock are entitled to one
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are
entitled to receive dividends when and if declared by the Board of Directors. To
date, the Company has not paid cash dividends on its Common Stock. Holders of
Common Stock are entitled to receive such dividends as may be declared and paid
from time to time by the Board of Directors out of funds legally available
therefor. The Company intends to retain any earnings for the operation and
expansion of its business and does not anticipate paying cash dividends in the
foreseeable future. Any future determination as to the payment of cash dividends
will depend upon future earnings, results of operations, capital requirements,
The Company 's financial condition and such other factors as the Board of
Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Company, holders of shares of Common Stock are entitled to receive pro rata
all of the assets of the Company available for distribution to shareholders
after liabilities are paid and distributions are made to the holders of The
Company 's Preferred Stock.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Market Information. There is no established public trading market. The
Company plans to apply for listing on the OTC Bulletin Board at the earliest
practicable date.
Outstanding Options or Warrants. There are no outstanding options or
warrants.
Shares that could be sold pursuant to Rule 144. Approximately 11,845,000
shares of the Company's 30,300,000 common shares outstanding at December 31,
1999 are eligibile for trading under Rule 144.
Holders. The Company has approximately 77 holders of record of its Common
Stock.
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Dividends. The Registrant intends to retain any earnings for the operation
and expansion of its business and does not anticipate paying cash dividends in
the foreseeable future.
Transfer Agent. The Company's transfer agent is Nevada Agency & Trust
Company, 50 West Liberty Street, Suite 880, Reno, NV 89501.
Penny Stock Rules. The Securities and Exchange Commission has adopted Rule
15g-9 which established the definition of a "penny stock" as any equity security
that has a market price of less than $5.00 per share, or with an exercise price
of less than $5.00 per share, subject to certain exceptions. The Company's
common stock would be considered a penny stock under the regulations, which
makes it more difficult for investors to resell their common stock. For any
transaction involving a penny stock, unless exempt, the rules require: (i) that
broker or dealer approve a person's account for transactions in penny stocks;
and, (ii) the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny stock to
be purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience objectives of the person; and (ii) make a reasonable
determination that the transaction(s) in penny stocks are suitable for that
person and the person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlighted form, (i) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker or
dealer received a signed, written agreement from the investors prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and registered representative,
current quotations for the securities and the rights and remedies available to
an investor in case of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stocks held in the account and information on the limited market in penny
stocks.
Item 2. Legal Proceedings
None
Item 3. Changes in and Disagreements with Accountants
None
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Item 4. Recent Sales of Unregistered Securities
(a) Securities Sold
During February, 1999, the Company offered for sale 11,300,000 shares of
its $.001 par value common stock for $.001 per share pursuant to an exemption
from registration under Rule 504 of Regulation D of the Securities Act of 1933,
as amended (the "Act"). An additional 4,250,000 shares of common stock were sold
to an officer and affiliates of the Company for $4,250 ($0.001 per share). These
shares are "restricted securities" and may be sold only in compliance with Rule
144 of the Act.The Company sold all 11,300,000 shares for net proceeds of
$9,375, after deducting offering costs totaling $1,925. There were no
underwriters or commissions paid
On June, 16, 1999, the Company issued 15,000,000 shares of restricted
common stock to Mr. James Pelto, inventor, to purchase the patent rights to the
ElectroChem Hydrogen Fuel Reactor.
On July 10, 1999, the Company issued 750,000 shares of its $.001 par value
common stock in accordance with the terms of a financial advisory agreement
b. Underwriters and Other Purchasers
There was no public offering of the shares. There was no underwriter used
in connection with the offer or sale of the securities.
c. Consideration
There was no consideration paid by the Company in connection with the offer
or sale of the its securities.
d. Section under which exemption from registration was claimed.
The offering of 15,550,000 shares of the Company's common stock was exempt
from registration pursuant to Regulation D, Rule 504. Rule 504 permits a
non-reporting issuer to offer and sell securities to an unlimited number of
persons without regard to their sophistication and experience and without
delivery of any specified information. The aggregate offering price of this
exemption is limited to $1 million in any 12-month period; and certain other
offerings must be aggregated with the Rule 504 offering in determining the
available sales amount. Prior to April 7, 1999, general advertising and
solicitation were permitted for all Rule 504 offerings. Prior to April 7, 1999,
securities sold under this exemption may be resold freely by non-affiliates of
the issuer who are not otherwise acting as an underwriter.
For the issuance of 15,000,000 shares of restricted common stock to Mr.
Pelto, the Company relied upon exemptions from registration pursuant to Section
4(2) of the Securities Act of 1933. Appropriate legends were affixed to the
shares issued to Mr. Pelto.
Item 5. Indemnification of Directors and Officers
Article XI of the Company's Charter specifically provides that to the
full extent not prohibited by the law as in effect from time to time, the
Corporation shall indemnify any person (and the heirs, executors and
representatives of such person) who is or was a director, officer, employee or
agent of the Corporation, or who, at the request of this Corporation, is or was
a director, officer, employee, agent, partner, or trustee, as the case may be,
of any other corporation, partnership, proprietorship, trust, association or
other entity in which this Corporation owns an interest, against any and all
liabilities and reasonable expenses incurred by such person in connection with
or resulting from any claim, action, suit or proceeding, whether brought by or
in the right of the Corporation or otherwise and whether civil, criminal,
administrative or investigative in nature, and in connection with an appeal
relating thereto, in which such person is a party or is threatened to be made a
party by reason of serving or having served in any such capacity.
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PART F/S
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
Page
Report of independent accountants..................................... F-2
Balance sheets, December 31, 1999 and December 31, 1998............... F-3
Statements of operations, for the year ended December 31, 1999,
from November 10, 1998 (inception) through December 31, 1998,
and from November 10, 1998 (inception through December 31, 1999.... F-4
Statement of shareholders' deficit, from November 10, 1998
(inception) through December 31, 1999.............................. F-5
Statements of cash flows, for the year ended December 31, 1999,
from November 10, 1998 (inception) through December 31, 1998,
and from November 10, 1998 (inception) through
December 31, 1999)................................................. F-7
Summary of significant accounting policies............................ F-9
Notes to financial statements......................................... F-12
F-1
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To the Board of Directors and Shareholders
of Hydro Environmental Resources, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the balance sheets of Hydro Environmental Resources, Inc. (a
development stage company) as of December 31, 1999 and December 31, 1998, and
the related statements of operations, shareholders' equity (deficit), and cash
flows for the year ended December 31, 1999, from November 10, 1998 (inception)
through December 31, 1998 and from November 10, 1998 (inception) through
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit 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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Hydro Environmental Resources,
Inc. as of December 31, 1999 and December 31, 1998, and the results of its
operations and its cash flows for the year ended December 31, 1999, from
November 10, 1998 (inception) through December 31, 1998, and from November 10,
1998 (inception) through December 31, 1999, in conformity with generally
accepted accounting principles.
As explained in Note B to the financial statements, Hydro Environmental
Resources, Inc. conducted significant transactions with its president during the
periods presented.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in the Summary of Significant
Accounting Policies, the Company has no revenues, a limited history of
operations and significant operating losses since inception, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in the Summary of
Significant Accounting Policies. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ CORDOVANO AND HARVEY, P.C.
Cordovano and Harvey, P.C.
Denver, Colorado
February 19, 2000
F-2
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HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 1999
ASSETS
CASH ............................................. $ 9,665
PATENT RIGHTS AND INTERESTS, less $1,500 of
accumulated amortization (Note B)............... 13,500
------------
$23,165
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
Accounts payable ................................. $ 3,937
Due to officer (Note B) .......................... 49,470
Other current liabilities......................... 2,000
------------
TOTAL LIABILITIES $55,407
------------
SHAREHOLDERS' DEFICIT (Note D)
Preferred Stock, $.001 par value;
5,000,000 shares authorized;
-0- and -0- shares issued and
outstanding, respectively......................... $ 0
Common Stock, $.001 par value;
50,000,000 shares authorized;
31,300,000 and -0- shares issued and
outstanding, respectively......................... 31,300
Additional paid in capital ............................. 15,985
Deficit accumulated during development stage............ (79,527)
------------
TOTAL SHAREHOLDERS' DEFICIT (32,242)
------------
$23,165
============
See accompanying summary of significant accounting policies and
notes to the financial statements
F-3
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
November 10, November 10,
1998 1998
For the (Inception) (Inception)
Year Ended through through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
OPERATING EXPENSES
Research and development............ $ 43,400 $ - $ 43,400
General and administrative.......... 21,397 10 21,407
Rent (Note B) ...................... 6,000 1,000 7,000
Office (Note B)..................... 6,000 - 6,000
Stock-based compensation,
financial advisory services....... 750 - 750
------------ ------------ ------------
LOSS FROM OPERATIONS (77,547) (1,010) (78,557)
INTEREST EXPENSE.................... (970) - (970)
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (78,517) (1,010) (79,527)
INCOME TAXES (Note C) .............. - - -
------------ ------------ ------------
NET LOSS $ (78,517) $ (1,010) $ (79,527)
============ ============ ============
Basic loss per common share ........ $ * $ *
============ ============
Basic weighted average common shares
outstanding ........................ 22,075,000 -
============ ============
* Less than $.01 per share
See accompanying summary of significant accounting policies
and notes to the financial statements
F-4
<PAGE>
<TABLE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT
From November 10, 1998 (inception) through December 31, 1999
<CAPTION>
Deficit
Accumulated Total
Additional During the Shareholders'
Preferred Stock Common Stock Paid-In Development Equity
Shares Par Value Shares Par Value Capital Stage (Deficit)
------ ---------- ------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office space contributed by the
president (Note B) ................ - - - - $ 1,000 $ 0 $ 1,000
Net loss for the period ended
December 31, 1998 ................. - - - - 0 (1,010) (1,010)
----- --------- ------- --------- -------- ---------- -----------
BALANCE, DECEMBER 31, 1998 - - - - 1,000 (1,010) (10)
February 25, 1999, sale of common
stock to officer and affiliates
for cash($.001/share)
(Note D) .......................... - - 4,250,000 4,250 - - 4,250
February 25, 1999, sale of common
stock, net of $1,925 of offering
costs ($.001/share) (Note D)....... - - 11,300,000 11,300 (1,925) - 9,375
March 1, 1999 capital contribution
by the president (Note B) ........ - - - - 3,210 - 3,210
May 31, 1999, expenses paid by
the president on behalf of the
Company (Note B).................. - - - - 1,700 - 1,700
June 16, 1999, shares issued in
exchange for patent interests and
rights ($.001/share) (Note B)..... - - 15,000,000 15,000 - - 15,000
July 10, 1999, shares issued in
exchange for financial advisory
agreement ($.001/share)(Note B)... - - 750,000 750 - - 750
See accompanying summary of significant accounting policies and
notes to the financial statements
F-5
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT
From November 10, 1998 (inception) through December 31, 1999
<CAPTION>
Deficit
Accumulated Total
Additional During the Shareholders'
Preferred Stock Common Stock Paid-In Development Equity
Shares Par Value Shares Par Value Capital Stage (Deficit)
------ ---------- ------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Services and use of equipment
contributed by the president
(Note B).......................... - - - - 6,000 - 6,000
Office space contributed by
the president (Note B)............ - - - - 6,000 - 6,000
Net loss for the six months ended
December 31, 1999 ................. - - - - - (78,517) (78,517)
----- --------- ----------- --------- -------- ---------- -----------
BALANCE, December 31, 1999......... - $- 31,300,000 $ 31,300 $15,985 $(79,527) $(32,242)
===== ========= =========== ========= ======== ========== ===========
</TABLE>
See accompanying summary of significant accounting policies and
notes to the financial statements
F-6
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
November 10, November 10,
1998 1998
For The (Inception) (Inception)
Year Ended through through
December 31, December 31, December 31,
1999 1998 1999
----------- ------------ ------------
OPERATING ACTIVITIES
Net Loss............................$(78,517) $(1,010) $(79,527)
Transactions not requiring cash:
Amortization...................... 1,500 - 1,500
Office space contributed by
the President (Note B) ......... 6,000 1,000 7,000
Services and use of equipment
contributed by the President
(Note B)........................ 6,000 - 6,000
Common stock issued in exchange
for financial advisory
agreement (Note E).............. 750 - 750
Changes in operating assets and
operating liabilities:
Accounts payable and accrued
expenses........................ 6,807 100 6,907
----------- ------------ ------------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (57,460) 90 (57,370)
----------- ------------ ------------
FINANCING ACTIVITIES
Capital contributions by
the president (Note B)........... 4,910 - 4,910
Proceeds from loans and advances
from the president (Note B)...... 53,600 - 53,600
Repayment of loans from the
president (Note B)............... (5,100) - (5,100)
Proceeds from issuance of
common stock .................... 15,550 - 15,550
Payment of offering costs .......... (1,925) - (1,925)
----------- ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 67,035 - 67,035
----------- ------------ ------------
NET INCREASE IN CASH 9,575 90 9,665
Cash, beginning of period ............... 90 - -
----------- ------------ ------------
CASH, END OF PERIOD $ 9,665 $ 90 $ 9,665
=========== ============ ============
See accompanying summary of significant accounting policies and
notes to the financial statements
F-7
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
November 10, November 10,
1998 1998
For The (Inception) (Inception)
Year Ended through through
December 31, December 31, December 31,
1999 1998 1999
----------- ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .........................$ - $ - $ -
=========== ============ ============
Income Taxes......................$ - $ - $ -
=========== ============ ============
Non-cash investing and financing
transactions:
Common stock issued in exchange for
patent interests and rights
(Note B).......................$ 15,000 $ - $ 15,000
=========== ============ ============
See accompanying summary of significant accounting policies and
notes to the financial statements
F-8
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company
Hydro Environmental Resources, Inc. (the Company) is in the development stage in
accordance with Statements of Financial Accounting Standard (SFAS) No. 7.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Earnings /(loss) per share
The Company reports earnings per share using a dual presentation of basic and
diluted earnings per share. Basic earnings per share excludes the impact of
common stock equivalents. Diluted earnings per share utilizes the average market
price per share when applying the treasury stock method in determining common
stock equivalents. However, the Company has a simple capital structure for the
period presented and, therefore, there is no variance between the basic and
diluted earnings per share.
Fair value of financial instruments
The Company has determined, based on available market information and
appropriate valuation methodologies, that the fair value of its financial
instruments approximates carrying value. The carrying amounts of cash,
receivables, payables, and other current liabilities approximate fair value due
to the short-term maturity of the instruments.
F-9
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock-based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October,
1995. This accounting standard permits the use of either a "fair value based
method" or the "intrinsic value method" defined in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) to account for
stock-based compensation arrangements with employees. Stock-based compensation
arrangements with non-employees are accounted for under the fair value method.
The Company had no stock-based compensation arrangements with employees and one
arrangement with an unrelated third party during the period from November 10,
1998 (inception) through December 31, 1999.
New Accounting Pronouncement
The Company adopted the following new accounting pronouncements during the
period ended December 31, 1998. There was no effect on the financial statements
presented from the adoption of the new pronouncements. SFAS No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehesive
income and its components in a full set of general purpose financial statements.
The Company did not have comprehensive income for the periods presented;
therefore, comprehensive income and net income are equal. SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," is based
on the "management" approach for reporting segments. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. SFAS No. 131 also requires disclosure about the Company's
products, the geographic areas in which it earns revenue and holds long-lived
assets, and its major customers. SFAS 131 is not applicable, as the Company had
no segment reporting for the periods presented. SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits," which requires
additional disclosures about pension and other post-retirement benefit plans,
but does not change the measurement or recognition of those plans. SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" requires an
entity to recognize all derivatives on a balance sheet, measured at fair value.
The Company had no derivatives at December 31, 1999. Statement of Position
("SOP") 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" requires that entities capitalize certain
internal-use software costs once certain criteria are met. SOP 98-5, "Reporting
on the Costs of Start-Up Activities" provides, among other things, guidance on
the reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
Company will continue to review these new accounting pronouncements over time to
determine if any additional disclosures are necessary based on evolving
circumstances.
F-10
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company is a development stage company with no
revenues, a limited history of operations, and a loss of $79,527 for the period
from November 10, 1998 (inception) through December 31, 1999. This factor, among
others, may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company's management intends to seek additional funding
through equity offerings and debt financings during 2000 to help fund the
Company's operations as it expands
F-11
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
NOTE A: BACKGROUND
The Company was incorporated under the laws of Oklahoma on November 10, 1998.
The principal activities since inception have been organizational matters and
the sale and issuance of shares of its $.001 par value common stock. The Company
was formed to design, build and manage inexpensive and environmentally friendly
fuel and power producing systems for remote areas of the world that are without
electricity or other sources of power.
NOTE B: RELATED PARTY TRANSACTIONS
The president provided office space to the Company at no charge for all periods
presented. The office space was valued at $500 per month and is included in the
accompanying financial statements as rent expense with a corresponding credit to
additional paid-in capital.
During the year ended December 31, 1999, the president contributed services and
the use of office equipment to the Company. The services and use of equipment
was valued at $500 per month and is included in the accompanying financial
statements as office expense with a corresponding credit to additional paid-in
capital.
During the year ended December 31, 1999, the president contributed $3,210 to the
Company for working capital and paid a $1,700 expense on behalf of the Company.
These amounts are included in the accompanying financial statements as
additional paid-in capital.
During the year ended December 31, 1999, the president loaned the Company
$53,600 for working capital, of which $5,100 was repaid as of December 31, 1999.
The loans bear interest at eight percent and are due on demand. The $48,500 in
outstanding advances and $970 in related accrued interest are included in the
accompanying financial statements as due to officer.
On June 16, 1999, the Company issued 15 million shares of its $.001 par value
common stock in exchange for an assignment of the interest and rights in a
patent pending in Australia for an Electro-Chem Hydrogen Fuel Reactor. The
transaction has been valued at predecessor cost in the accompanying financial
statements.
On November 17, 1998, an affiliate advanced the Company $100 to open its bank
account. The Company repaid the $100 on February 24, 1999.
F-12
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
NOTE C: INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the effective
rate is as follows:
December 31,
------------------------------
1999 1998
---------- ----------
U.S. federal statutory graduated rate........... 18.23% 15.00%
State income tax rate,
net of federal benefit...................... 4.91% 5.10%
Net operating loss for which no tax
benefit is currently available.............. -23.14% -20.10%
---------- ----------
0.00% 0.00%
========== ==========
At December 31, 1999, deferred taxes consisted of a net tax asset of $18,366,
due to operating loss carryforwards of $79,527, which was fully allowed for, in
the valuation allowance of $18,366. The valuation allowance offsets the net
deferred tax asset for which there is no assurance of recovery. The change in
the valuation allowance from December 31, 1998 through December 31, 1999 was
$18,163. Net operating loss carryforwards will expire through 2019.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
NOTE D: COMMON STOCK ISSUANCES
During February, 1999, the Company offered for sale 11,300,000 shares of its
$.001 par value common stock for $.001 per share pursuant to an exemption from
registration under Rule 504 of Regulation D of the Securities Act of 1933, as
amended (the "Act"). The Company sold all 11,300,000 shares for net proceeds of
$9,375, after deducting offering costs totaling $1,925.
An additional 4,250,000 shares of common stock were sold to an officer and
affiliates of the Company for $4,250 ($0.001 per share). These shares are
"restricted securities" and may be sold only in compliance with Rule 144 of the
Act.
On July 10, 1999, the Company issued 750,000 shares of its $.001 par value
common stock in accordance with the terms of a financial advisory agreement (see
Note E).
F-13
<PAGE>
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
NOTE E: STOCK-BASED COMPENSATION
On July 10, 1999, the Company entered into a consulting agreement with an
unrelated third party to provide financial advisory services to the Company.
Upon signing the agreement, the Company agreed to issue the consultant 750,000
shares of its $.001 par value common stock. The transaction was valued at the
estimated fair value of the common stock on the date of issuance as determined
by the Board of Directors based on contemporaneous equity transactions and other
analysis. The Company recorded stock- based compensation in the accompanying
financial statements totaling $750.
F-14
<PAGE>
PART III
Item 1. Index to Exhibits and Description of Exhibits
2.1 Articles of Incorporation filed November 10, 1998
2.2 Bylaws
3.1 Form of Common Stock Certificate
6.1 Assignment of Patent and Intellectual Property Rights related to the
ElectroChem Hydrogen Fuel Reactor
27.0 Financial Data Schedule at December 31, 1999 (for electronic filing only)
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
HYDRO ENVIRONMENTAL RESOURCES, INC.
/s/ JACK WYNN
-----------------------------------
By: Jack Wynn, President
March 15, 2000
12
CERTIFICATE OF INCORPORATION
OF
HYDRO ENVIRONMENTAL RESOURCES, INC.
ARTICLE I
NAME
The name of the Corporation is Hydro Environmental Resources, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Oklahoma, is
located at 8908 South Yale Avenue, Suite 410, Tulsa, Oklahoma 74137. The
Corporation's registered agent at that office is Frederick K. Slicker.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Oklahoma General
Corporation Act.
ARTICLE IV
CAPITALIZATION
The total number of shares which this Corporation is authorized to issue is
50,000,000 shares of Common Stock, par value $.001 per share and 5,000,000
shares of Preferred stock, par value $.001 per share.
The Board of Directors shall have the power and authority to issue
without shareholder approval debentures or other securities convertible into, or
warrants or options to subscribe for or purchase, authorized shares of Common
Stock of the Corporation upon such terms and conditions as shall be determined
by action of the Board of Directors.
Preferred Stock Generally
The Preferred Stock may be issued in one or more series. The Board of
Directors is hereby expressly authorized to issue shares of Preferred Stock in
such series and to fix from time to time before issuance thereof the number of
shares to be included in any series and the designation, relative rights,
powers, preferences, restrictions and limitations of all shares of such series.
The authority of the Board of Directors with respect to each series shall
include, without limitation, the determination of any or all of the following,
and the shares of each series may vary from the shares of any other series in
the following respects:
<PAGE>
(a) The number of shares constituting such series and the
designation thereof to distinguish the shares of such series
from the shares of all other series;
(b) The annual dividend rate on the shares of that series, if any,
and whether such dividends shall be cumulative and, if
cumulative, the date from which dividends shall accumulate;
(c) The voting rights, if any, in addition to the voting rights
prescribed by law and the terms of exercise of such voting
rights;
(d) The right, if any, of shares of such series to be converted
into shares of any other series or class and the terms and
conditions of such conversion; and
(e) The redemption price for the shares in each particular series,
if redeemable, and the terms and conditions of such
redemption;
(f) The preference, if any, of shares of such series in the event
of any liquidation, dissolution or winding up on the
Corporation; and
(g) Any other relative rights, preferences, limitations and
restrictions applicable to that series.
ARTICLE V
NO CUMULATIVE VOTING
The holders of record of the Common Stock shall have one vote for each
share held of record. Cumulative voting for the election of directors or
otherwise is not permitted.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No holder of record of Common Stock shall have a preemptive right or be
entitled as a matter of right to subscribe for or purchase any: (i) shares of
capital stock of the Corporation of any class whatsoever; (ii) warrants, options
or rights of the Corporation; or (iii) securities convertible into, or carrying
warrants, options or rights to subscribe for or purchase, capital stock of the
Corporation of any class whatsoever, whether now or hereafter authorized.
ARTICLE VII
INCORPORATOR
The name and address of the incorporator is Frederick K. Slicker, 8908
South Yale Avenue, Suite 410, Tulsa, Oklahoma 74137. The powers of the
incorporator shall terminate upon the election of initial directors effective
immediately after filing of this Certificate of Incorporation with the Secretary
of State of Oklahoma.
<PAGE>
ARTICLE VIII
BOARD OF DIRECTORS
The initial Board of Directors shall consist of directors who shall be
elected by the incorporator effective immediately after the filing of this
Certificate of Incorporation with the Secretary of State, State of Oklahoma, and
who shall serve as directors until the first annual meeting of shareholders or
until their respective successor is duly elected and qualified. The number of
directors may be changed from time to time in accordance with the bylaws of the
Corporation then in effect. Election of directors at a meeting of shareholders
need not be by written ballot.
ARTICLE IX
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter, amend or repeal the bylaws of the Corporation and to
adopt new bylaws.
ARTICLE X
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other
corporation, partnership, proprietorship, trust, association or other entity in
which the Corporation owns an interest or in which a director or officer of the
Corporation has a financial interest shall be void or voidable solely for this
reason or solely because any such director or officer is present at or
participates in the approval of such agreement or transaction.
ARTICLE XI
INDEMNIFICATION
To the full extent not prohibited by the law as in effect from time to
time, the Corporation shall indemnify any person (and the heirs, executors and
representatives of such person) who is or was a director, officer, employee or
agent of the Corporation, or who, at the request of this Corporation, is or was
a director, officer, employee, agent, partner, or trustee, as the case may be,
of any other corporation, partnership, proprietorship, trust, association or
other entity in which this Corporation owns an interest, against any and all
liabilities and reasonable expenses incurred by such person in connection with
or resulting from any claim, action, suit or proceeding, whether brought by or
in the right of the Corporation or otherwise and whether civil, criminal,
administrative or investigative in nature, and in connection with an appeal
relating thereto, in which such person is a party or is threatened to be made a
party by reason of serving or having served in any such capacity.
<PAGE>
ARTICLE XII
NO DIRECTOR LIABILITY IN CERTAIN CASES
To the maximum extent permitted by law as in effect from time to time,
no director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of any fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director for: (i) any breach of the director's duty of loyalty to
the Corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
unlawful payment of dividends or stock redemptions; or (iv) any transaction from
which the director derived an improper personal benefit.
ARTICLE XIII
CERTAIN COMPROMISES
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 1106 of Title 18 of the Oklahoma Statutes as in effect
from time to time or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 1100 of Title 18 of the Oklahoma Statutes as in effect from time to
time, may order a meeting of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
to be summoned in such manner as the court directs. If a majority in number
representing three-fourths (3/4ths) in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, and/or on all the shareholders or class of
shareholders, of this Corporation, as the case may be, and also on this
Corporation.
SIGNATURES
For the purpose of forming a corporation under the Oklahoma General
Corporation Act, the undersigned incorporator affirms, declares, certifies and
acknowledges that the foregoing Certificate of Incorporation is my free and
voluntary act and deed and that the facts stated therein are true and correct to
my best knowledge and belief as of this 9th day of November, 1998.
--------------------------------------------
FREDERICK K. SLICKER, Incorporator
BYLAWS
OF
HYDRO ENVIRONMENTAL RESOURCES, INC.
ADOPTED EFFECTIVE
NOVEMBER 10, 1998
<PAGE>
TABLE OF CONTENTS
TO
BYLAWS
OF
HYDRO ENVIRONMENTAL RESOURCES, INC.
ARTICLE I - OFFICES............................................................1
SECTION 1.01. Registered Office and Registered Agent..............1
SECTION 1.02. Other Offices.......................................1
ARTICLE II - SHAREHOLDERS......................................................1
SECTION 2.01. Place of Meeting....................................1
SECTION 2.02. Annual Meeting......................................1
SECTION 2.03. Special Meetings....................................1
SECTION 2.04. Notice of Meetings..................................2
SECTION 2.05. Quorum and Adjourned Meetings.......................2
SECTION 2.06. Conduct of Meetings.................................3
SECTION 2.07. Voting..............................................3
SECTION 2.08. Consent of Shareholders in Lieu of a Meeting........3
SECTION 2.09. Voting Lists........................................3
ARTICLE III - BOARD OF DIRECTORS...............................................4
SECTION 3.01. Powers..............................................4
SECTION 3.02. Number, Qualifications and Term of Office...........4
SECTION 3.03. Vacancies...........................................4
SECTION 3.04. Resignations........................................4
SECTION 3.05. Organization........................................5
SECTION 3.06. Place of Meetings...................................5
SECTION 3.07. Organizational Meeting..............................5
SECTION 3.08. Regular Meetings....................................5
SECTION 3.09. Special Meetings....................................5
SECTION 3.10 Quorum and Adjourned Meetings.......................5
SECTION 3.11. Unanimous Consent of Directors in Lieu of Meeting...5
SECTION 3.12. Executive and Other Committees......................6
SECTION 3.13. Compensation of Directors...........................6
ARTICLE IV - NOTICE OF MEETINGS................................................6
SECTION 4.01. Notice..............................................6
SECTION 4.02. Waiver of Notice....................................7
SECTION 4.03. Teleconference Meetings.............................7
ARTICLE V - OFFICERS...........................................................7
SECTION 5.01 Number, Qualifications and Designation..............7
SECTION 5.02 Election, Term of Office and Resignation............7
SECTION 5.03 Removal of Officers.................................7
SECTION 5.04 Chairman of the Board...............................8
SECTION 5.05 President...........................................8
SECTION 5.06 Vice Presidents.....................................8
SECTION 5.07 Secretary...........................................8
SECTION 5.08 Treasurer...........................................9
SECTION 5.09 Controller..........................................9
SECTION 5.10 Assistant Officers..................................9
SECTION 5.11 Bonds...............................................9
SECTION 5.12 Compensation of Officers............................9
ARTICLE VI - CERTIFICATES OF STOCK............................................10
SECTION 6.01 Issuance...........................................10
SECTION 6.02 Transfer...........................................10
SECTION 6.03 Stock Certificates.................................10
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated
Certificates....................................10
SECTION 6.05. Record Holder of Shares............................10
SECTION 6.06. Determination of Record Date.......................11
ARTICLE VII - INDEMNIFICATION OF DIRECTORS, OFFICERS ANDOTHER
AUTHORIZED REPRESENTATIVES.....................................11
SECTION 7.01. Indemnification of Authorized Representatives in
Third Party Proceedings........................11
SECTION 7.02. Indemnification of Authorized Representatives in
SECTION 7.03. Mandatory Indemnification of Authorized
Representatives.................................12
SECTION 7.04. Determination of Entitlement to Indemnification....12
SECTION 7.05. Advancing Expenses.................................13
SECTION 7.06. Employee Benefit Plans.............................13
SECTION 7.07. Scope..............................................13
SECTION 7.08. Reliance...........................................13
SECTION 7.09. Insurance..........................................14
ARTICLE VIII - GENERAL PROVISIONS.............................................14
SECTION 8.01. Dividends..........................................14
SECTION 8.02. Annual Statements..................................14
SECTION 8.03. Contracts..........................................14
SECTION 8.04. Checks.............................................14
SECTION 8.05. Corporate Seal.....................................14
SECTION 8.06. Deposits...........................................15
SECTION 8.07. Amendment of Bylaws................................15
SECTION 8.08. Fiscal Year........................................15
SECTION 8.09. Interested Directors...............................15
SECTION 8.10. Form of Records....................................15
<PAGE>
5
B Y L A W S
OF
HYDRO ENVIRONMENTAL RESOURCES, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office and Registered Agent. The registered
office and registered agent shall be designated in duly adopted actions of the
Board of Directors. Each registered office and registered agent may be changed
from time to time by a duly adopted action of the Board of Directors, and the
Corporation shall file an appropriate statement of change of registered office
or registered agent promptly after the taking of such action in accordance with
applicable law.
SECTION 1.02. Other Offices. The Corporation may also have offices at
such other places within or without the state of incorporation of the
Corporation as the Board of Directors may from time to time determine or the
business of the Corporation requires.
ARTICLE II
SHAREHOLDERS
SECTION 2.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the principal executive office of the Corporation
unless otherwise determined by the Board of Directors and specified in the
notice of meeting, in which event the meeting shall be held at the place within
or without the state of incorporation as shall be designated in the notice of
such meeting.
SECTION 2.02. Annual Meeting. The Board of Directors may fix the date
and time of the annual meeting of the shareholders, but if no such date and time
is fixed by the Board, the annual meeting shall be held on a third Tuesday in
May, if not a legal holiday, and if a legal holiday, then on the next succeeding
business day, at 10:00 a.m. local time. Failure to hold an annual meeting shall
not invalidate, alter or otherwise affect the validity of subsequent actions. At
the annual meeting, the shareholders then entitled to vote shall elect Directors
and shall transact such other business as may properly be brought before the
meeting.
SECTION 2.03. Special Meetings. Special meetings of the shareholders of
the Corporation as a whole, and meetings of a particular class or series of
shareholders of the Corporation may be called for any purpose or purposes for
which meetings may lawfully be called at any time by the Chief Executive Officer
of the Corporation or by a majority of the Board of Directors, and shall be
called after the Corporation's receipt of the request in writing from
shareholders owning of record one-fourth of the amount of each class or series
of stock of the Corporation issued and outstanding and entitled to vote. Every
request for a special meeting shall state the specific purposes of the meeting.
The date of the meeting shall be held at such date and time as the Chief
Executive Officer of the Corporation shall fix, not less than 10 days nor more
than 60 days after the receipt of the request, and the Secretary shall give due
notice thereof. If the Chief Executive Officer of the Corporation shall neglect
or refuse to fix the time and date of such meeting or shall fail to cause the
Secretary to give notice thereof, the person or persons calling the meeting may
do so.
SECTION 2.04. Notice of Meetings. Written notice of the place, date and
hour of every meeting of the shareholders, whether annual or special, shall be
given to each shareholder of record entitled to vote at the meeting not less
than 10 nor more than 60 days before the date of the meeting. Every notice of a
special meeting shall state the purposes thereof.
SECTION 2.05. Quorum and Adjourned Meetings. The record holders in the
aggregate of a majority of stock issued and outstanding (excluding treasury
stock) and entitled to vote at a shareholders meeting and who are present in
person or represented by proxy shall constitute a quorum for the transaction of
business, except as otherwise provided by law, by the Corporation's Certificate
of Incorporation or by these Bylaws. If the matter presented for action at any
meeting of shareholders is one which requires voting by class or series of
stock, then holders of a majority of each class or series effected who are
present in person or by proxy shall constitute a quorum for such class or
series. If a quorum of one or more classes or series of stock is present, in
person or by proxy, shareholders holding that class or series of stock may act
for that class or series, even if a quorum is not present for other classes or
series. If such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat who are present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting until a quorum
shall be present or represented. At any such adjourned meeting at which a quorum
shall be present in person or by proxy, any business may be transacted which
might have been transacted at the meeting as originally called. When a quorum is
present at any meeting, the vote of the record owners holding a majority of the
stock having voting power, present in person or represented by proxy, shall
decide all questions brought before such meeting, unless the question is one
upon which, by expressed provision of applicable law, the Corporation's
Certificate of Incorporation or these Bylaws, a different vote is required, in
which case such expressed provision shall govern and control the decision of
such question.
The affirmative vote or consent of the holders of a majority of a class
or series of stock, voting as a class, shall constitute action by that class or
series, unless applicable law, the Corporation's Certificate of Incorporation or
these Bylaws expressly provides a different vote, in which case such expressed
provision shall control. Once a meeting is duly organized and a quorum is
present, the shareholders who are present in person or represented by proxy may
continue to conduct business until adjournment, even after withdrawal of enough
shareholders to leave less than a quorum present.
SECTION 2.06. Conduct of Meetings. All annual and special meetings of
shareholders shall be conducted in accordance with such rules and procedures as
the Board of Directors may determine, subject to the requirements of applicable
law, and as to matters not governed by such rules and procedures, the chairman
of the meeting shall determine in good faith the procedures to be followed. The
chairman of any annual or special meeting of shareholders shall be the Chief
Executive Officer of the Corporation, unless the Board of Directors or
shareholders entitled to vote thereat select a different person to be chairman
of the meeting. The Secretary or other person designated by the chairman of the
meeting, shall act as secretary of the meeting.
SECTION 2.07. Voting. Unless the Certificate of Incorporation provides
otherwise, each shareholder of record shall be entitled to one vote in person or
by proxy for each share of stock having voting power and held of record by such
shareholder. No cumulative voting for the election of Directors shall be
permitted unless expressly permitted by the Certificate of Incorporation. No
proxy shall be voted more than three years after its date, unless the proxy
specifically provides for a longer period and the law permits.
SECTION 2.08. Consent of Shareholders in Lieu of a Meeting. Any action
required or permitted to be taken at a meeting of shareholders of the
Corporation may be taken without a meeting, without prior notice and without a
vote, if a consent in writing setting forth the action so taken shall be signed
by the holders of record of stock (by class or series of stock where voting by
class or series of stock is required) having not less than the minimum number of
votes that would be necessary to authorize the taking of such action. Prompt
notice of the taking of action by the shareholders without a meeting by less
than unanimous written consent shall be given to those shareholders entitled to
vote on the action who did not consent in writing to such action.
SECTION 2.09. Voting Lists. At least ten (10) days before every meeting
of shareholders, the Secretary shall cause the Corporation to prepare a complete
list of the shareholders of record entitled to vote at the meeting. The list
shall be arranged in alphabetical order showing the address of each shareholder,
the number of shares registered in the name of each shareholder and the class or
series of stock held. Such list shall be open to the examination of any
shareholder of record for any lawful purpose during ordinary business hours for
a period of at least ten (10) days prior to the meeting either at the principal
executive office of the Corporation or at the place where the meeting is to be
held. The list shall also be available and open for inspection during the whole
time of the meeting and may be inspected by any shareholder of record or
authorized representative who is present.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Powers. The Board of Directors shall have full power to
manage the business and affairs of the Corporation. All powers of the
Corporation, except those specifically reserved to the shareholders by law, the
Certificate of Incorporation or these Bylaws, are hereby granted to and vested
in the Board of Directors.
SECTION 3.02. Number, Qualifications and Term of Office. The Board of
Directors shall consist of such number of directors as may be determined from
time to time by resolution of the Board of Directors. No director need be an
officer or shareholder of the Corporation, but each Director shall be a natural
person 21 years of age or older. Each Director shall serve until the next annual
meeting of the shareholders or until the Director's successor shall have been
duly elected and qualified, except in the event of the Director's death,
resignation or removal.
SECTION 3.03. Vacancies. Except as provided by law or the Certificate
of Incorporation of the Corporation, any Director may be removed, either for or
without cause, at any meeting of shareholders by the affirmative vote of a
majority in number of shares of the shareholders present in person or by proxy
at such meeting and entitled to vote for the election of such director; provided
notice of the intention to act upon such matter shall have been given in the
notice calling such meeting and further provided, if a Director is elected by a
class or series of shareholders, the Director may not be removed without the
action of a majority of the shareholders of that class or series, except as
provided by law, except as provided by law or the Certificate of Incorporation
of the corporation. Vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and any Director so chosen shall hold office until the next annual
election or until his successor is duly elected and qualified. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law. If, at the time of filling any vacancy or any newly created
directorship, the Directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), a
court of competent jurisdiction may, upon application of shareholders holding of
record at least 10 percent of the total number of the shares at the time
outstanding having the right to vote for such Directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the Directors chosen by the Directors then in office.
SECTION 3.04. Resignations. Any Director of the Corporation may resign
at any time by giving written notice to the Board of Directors, the Chief
Executive Officer or the Secretary of the Corporation. Such resignation shall
take effect upon receipt by the Corporation of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
<PAGE>
SECTION 3.05. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if there be one, or, in the case of a vacancy or
incapacity in the office or absence of the Chairman of the Board, the Director
chosen by a majority of the Directors present, shall be the chairman of the
meeting and shall preside, and the person appointed by the chairman of the
meeting shall act as secretary of the meeting.
SECTION 3.06. Place of Meetings. The Board of Directors may hold its
meetings, both regular and special, at such place or places within or without
the state of incorporation as the Board of Directors may from time to time
select, as designated in the notice calling the meeting.
SECTION 3.07. Organizational Meeting. The first meeting of each newly
elected Board of Directors shall be held without notice immediately following
the annual meeting of Common shareholders, unless the shareholders shall
determine otherwise.
SECTION 3.08. Regular Meetings. Regular meetings of the Board of
Directors may be held without further notice after the regular schedule of
meetings has been determined and approved at such time and place as shall be
designated from time to time by a duly adopted action of the Board of Directors.
SECTION 3.09. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or by two
or more of the Directors. Notice of each special meeting shall be given to each
director by telephone, telegram, telecopy, in writing or in person at least 24
hours (in the case of notice by telephone, in person or actual notice however
received) or 48 hours (in the case of notice by telegram, or telecopy or similar
wire communication) or five (5) days (in the case of notice by mail or
otherwise) before the time at which the meeting is to be held. Each such notice
shall state the date, time and place of the meeting to be so held.
SECTION 3.10 Quorum and Adjourned Meetings. At all meetings of the
Board, a majority of the Directors shall constitute a quorum for the transaction
of business; and the act of a majority of the Directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the Certificate of
Incorporation. Proxies of Directors shall not be counted to determine a quorum
for meetings of the Board of Directors, or for any other purpose, and a Director
may not vote by proxy at a meeting of the Board of Directors. If a quorum is not
be present at any meeting of the Board of Directors, a majority of the Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
<PAGE>
SECTION 3.11. Unanimous Consent of Directors in Lieu of a Meeting.
Unless otherwise restricted by law, the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any Committee thereof may be taken without a meeting, without
prior notice and without a vote if all members of the Board or such Committee,
as the case may be, consent thereto in writing either before or after the taking
of action with respect thereto. The written consent shall be filed with the
minutes of proceedings of the Board or that Committee.
SECTION 3.12. Executive and Other Committees. The Board of Directors
may, by resolution adopted by a majority of the whole Board, designate an
Executive Committee and one or more other committees. Each Committee shall
consist of one or more Directors. Only to the extent expressly provided in the
resolution establishing any Committee and only to the extent such Committee is
not otherwise restricted or limited by applicable law or the Certificate of
Incorporation or these Bylaws, any Committee of the Board shall have and may
exercise all the power and authority of the Board of Directors in the management
of the business and affairs of the Corporation, including the power or authority
to declare a dividend, to authorize the issuance of stock, to adopt a
certificate of ownership and merger and to authorize the seal of the Corporation
to be affixed to all papers which may require it; but no such Committee shall
have the power or authority to (1) amend the Certificate of Incorporation
(except that a Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of the stock adopted by the
Board of Directors, as permitted by applicable law, fix any of the preferences
or rights of such shares relating to voting, dividends, redemption, dissolution,
any distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation not
issued and outstanding), (2) adopt an agreement of merger or consolidation, (3)
recommend to the shareholders the sale, lease or exchange, of all or
substantially all of the Corporation's property and assets, (4) recommend to the
shareholders the dissolution of the Corporation or a revocation of a
dissolution, or (5) amend the Bylaws of the Corporation. Each Committee shall
have such name as may be determined from time to time by resolution adopted by
the Board of Directors. Each Committee shall keep regular minutes of its
meetings and file the same with the minutes of the Board of Directors.
SECTION 3.13. Compensation of Directors. Unless otherwise restricted by
law, the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of Directors. The Directors
shall be reimbursed their actual reasonable expenses, if any, of attendance at
any meeting of the Board of Directors and any Committee thereof and may be paid
a fixed sum for attendance at each such meeting or a fixed salary as determined
by the Board of Directors. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
<PAGE>
ARTICLE IV
NOTICE OF MEETINGS
<PAGE>
SECTION 4.01. Notice. Whenever notice is required to be given to any
Director or shareholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such Director or
shareholder, at the person's address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to shareholders may also be given in accordance with Section 2.04 of
Article II hereof, and notice to Directors may also be given in accordance with
Section 3.09 of Article III hereof.
SECTION 4.02. Waiver of Notice. Whenever any notice is required to be
given, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Presence in person at any meeting of
the shareholders, the Board of Directors or any Committee of the Board shall
constitute a waiver of notice of that meeting, unless the person in attendance
expressly states at the outset of the meeting that the person's presence is for
the purpose of objecting to notice. Except in the case of a special meeting of
shareholders and as otherwise required by law, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, Directors, or Committee of Directors need be specified in any
written waiver of notice of such meeting.
SECTION 4.03. Teleconference Meetings. One or more shareholders,
Directors or members of a Committee of Directors may participate in a meeting of
the shareholders, the Board, or of a Committee of the Board, by means of
conference communications or similar communications equipment; provided that all
persons participating in the meeting can hear each other and participate in
discussions thereof. Participation by conference communication equipment at a
meeting shall have the same effect as being present in person at such meeting.
ARTICLE V
OFFICERS
SECTION 5.01 Number, Qualifications and Designation. The officers of
the Corporation shall be chosen by the Board of Directors and shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as may be elected in accordance with the provisions of Section 5.02 of
this Article. Any person may hold more than one office. Officers may be, but
need not be, Directors or shareholders of the Corporation. The Board of
Directors may from time to time elect such other officers as it deems necessary
or appropriate, who shall exercise such powers and perform such duties as are
provided in these Bylaws and as the Board of Directors may from time to time
determine.
SECTION 5.02 Election, Term of Office and Resignation. The officers of
the Corporation shall be elected annually by the Board of Directors, and each
such officer shall hold office until a successor shall have been elected and
qualified, or until the officer's death, resignation, or removal. Any officer
may resign at any time upon written notice to the Corporation. Such resignation
shall take effect upon receipt by the Corporation of such notice, or such other
date as specified in such notice.
<PAGE>
SECTION 5.03 Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the whole Board of Directors. If
any office becomes vacant for any reason, the vacancy may be filled by the Board
of Directors.
SECTION 5.04 Chairman of the Board. If the Board of Directors elects a
Chairman of the Board, the Chairman of the Board shall be the Chief Executive
Officer of the Corporation. The Chairman of the Board shall preside at all
meetings of the shareholders (unless the shareholders entitled to vote thereat
select a different person to so act) and the Board of Directors and shall assist
the Board of Directors in the formulation of policies to be pursued by the
executive management of the Corporation. It shall be the responsibility of the
Chairman of the Board to see that the policies established by the Board of
Directors are carried into effect. The Chairman of the Board may sign and
deliver on behalf of the Corporation any deeds, mortgages, bonds, contracts,
powers of attorney, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation; and the Chairman of
the Board shall perform all duties incident to the office of Chief Executive
Officer of the Corporation and such other duties as may be prescribed by the
Board of Directors from time to time.
SECTION 5.05 President. The President shall be the Chief Operating
Officer of the Corporation, shall report to the Chairman of the Board, if one is
elected, and shall have general supervisory responsibility over all operations
of the Corporation, subject to the control of the Board of Directors. If a
Chairman of the Board is not elected and in the absence or incapacity of the
Chairman of the Board, the President shall perform all the duties of the
Chairman of the Board, including all duties as Chief Executive Officer of the
Corporation. The President shall execute and deliver, in the name of the
Corporation, deeds, mortgages, bonds, contracts or other instruments, authorized
by the Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation; and, in general,
subject to supervision by the Chairman of the Board, if one is elected, the
President shall perform all duties incident to the office of Chief Operating
Officer of the Corporation, and such other duties as from time to time may be
assigned to him by the Chairman of the Board or the Board of Directors.
SECTION 5.06 Vice Presidents. The Vice Presidents, in the order of the
designation by the Board of Directors, shall perform the duties of the President
in the President's absence or incapacity and such other duties as may from time
to time be assigned to them by the Board of Directors, the Chairman of the Board
or by the President.
<PAGE>
SECTION 5.07 Secretary. Unless the chairman of the meeting provides
otherwise, the Secretary shall attend all meetings of the shareholders, the
Board of Directors and Committees thereof, shall record the minutes of the
proceedings thereat and shall keep a current and complete record thereof. The
Secretary shall publish, keep and maintain records and reports of the
Corporation as required by law; shall be the custodian of the seal of the
Corporation and see that it is affixed to all documents to be executed on behalf
of the Corporation under its seal; and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may from time to
time be assigned to the Secretary by the Board of Directors, the Chairman of the
Board or the President. Each Assistant Secretary shall have such powers and
perform such duties as the Board of Directors, the Chairman of the Board, or the
President may from time to time delegate to that Assistant Secretary.
SECTION 5.08 Treasurer. The Treasurer shall be the Chief Financial
Officer of the Corporation; shall have responsibility for the proper care and
custody of all corporate funds and securities; shall keep full, accurate and
complete records, receipts and disbursements of the Corporation; and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements; shall render a report to the Board of Directors, whenever
requested, of the financial condition of the Corporation; and shall perform such
other duties as the Board of Directors may prescribe. In the absence or
incapacity of a Corporate Controller, the Treasurer shall also be responsible
for the performance of all the duties of the Controller. Each Assistant
Treasurer shall have such powers and perform such duties as the Board of
Directors, the Chairman of the Board or the President may from time to time
delegate to that Assistant Treasurer.
SECTION 5.09 Controller. The Controller, if one is elected, shall be
the Chief Accounting Officer of the Corporation and shall cause to be kept full
and accurate books and accounts of all assets, liabilities and transactions of
the Corporation. The Controller shall establish and administer an adequate plan
for the control of operations, including systems and procedures required to
properly maintain internal controls on all financial transactions of the
Corporation. The Controller shall cause to be prepared statements of the
financial condition of the Corporation and proper profit and loss statements
covering the operations of the Corporation and such other and additional
financial statements, if any, as the Chairman of the Board, the President, the
Treasurer or the Board of Directors from time to time shall require. The
Controller shall work under the direct supervision of the Treasurer and also
shall perform such other duties as may be assigned to the Controller by the
Board of Directors, the Chairman of the Board or the President.
SECTION 5.10 Assistant Officers. The Board of Directors may appoint one
or more assistant officers. Each assistant officer shall, at the request of or
in the absence or incapacity of the officer to whom the person is an assistant,
perform the duties of such officer and shall have such other authority and
perform such other duties as the Board of Directors may prescribe.
<PAGE>
SECTION 5.11 Bonds. If required by the Board of Directors, any officer
shall give the Corporation a bond in such form, in such sum, and with such
surety or sureties as shall be satisfactory to the Board, for the faithful
performance of the duties of the officer's office and for the restoration to the
Corporation, in case of the officer's death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
SECTION 5.12 Compensation of Officers. The compensation of the officers
of the Corporation shall be determined from time to time by the Board of
Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.01 Issuance. Each shareholder shall be entitled to a
certificate or certificates representing shares of stock of the Corporation
owned of record. The stock certificates of the Corporation shall be numbered and
registered in the stock ledger and transfer books of the Corporation as issued.
Certificates shall be signed by the Chairman, President or a Vice President and
by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer, and shall bear the corporate seal. Any or all of the signatures and
the corporate seal upon such certificate may be a facsimile, engraved or
printed. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer, transfer agent or registrar, the certificate shall be
valid and of the same force and effect as if the person continued to be such
officer, transfer agent or registrar.
SECTION 6.02 Transfer. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, and subject to compliance with applicable law, it shall be the duty of
the Corporation to issue a new certificate of like form to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
No transfer shall be made which would be inconsistent with applicable law.
SECTION 6.03 Stock Certificates. Stock certificates for each class and
series of stock of the Corporation shall be in such form as provided by statute
and approved by the Board of Directors. The stock transfer books for each class
and series of stock and the blank stock certificates shall be kept by the
Secretary or by any officer or agency designated by the Board of Directors for
that purpose.
<PAGE>
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated Certificates. The
Board of Directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen, destroyed or mutilated upon the receipt by
the Corporation of an affidavit of that fact by the record owner claiming the
certificate of stock to be lost, stolen, destroyed or mutilated. When
authorizing issuance of a replacement certificate, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof, require
the record owner of such lost, stolen, destroyed or mutilated certificate, or
the person's legal representative to give the Corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
destroyed or mutilated.
SECTION 6.05. Record Holder of Shares. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the record and beneficial owner of shares to receive notices, to receive
dividends, to exercise voting rights and for all other purposes; and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, even if the Corporation
shall have notice thereof.
SECTION 6.06. Determination of Record Date. In order that the
Corporation may determine the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of stock or for any
other lawful action or purpose, the Board of Directors may fix a record date,
which shall not be more than 60 nor less than 10 days before the date of such
meeting or any other action.
If no record date is fixed:
(1) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held; and
(2) The record date for determining shareholders entitled
to express consent to actions in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed; and
(3) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
SECTION 7.01. Indemnification of Authorized Representatives in Third
Party Proceedings. To the maximum extent not prohibited by law, the Corporation
shall indemnify any person who was or is an authorized representative of the
Corporation (which shall mean for purposes of this Article a Director or officer
of the Corporation or another person serving at the request of the Corporation
as a director, officer, partner or trustee of another corporation, partnership,
joint venture, trust or other business enterprise) and who was or is a party
(which shall include for purposes of this Article the giving of testimony or
similar involvement) or is threatened to be made a party to any third party
proceeding (which shall mean for purposes of this Article, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitration, administrative or investigative other than an action by or in the
right of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (which shall
include for purposes of this Article attorneys' fees and expenses), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such third party proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding (which could or does lead to a criminal third
party proceeding) had no reasonable cause to believe such conduct was unlawful.
The termination of any third party proceeding by judgment, order, settlement,
indictment, conviction or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the authorized representative did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding, had reasonable cause to believe that such
conduct was unlawful.
<PAGE>
SECTION 7.02. Indemnification of Authorized Representatives in
Corporate Proceedings. The Corporation shall indemnify any person who was or is
an authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding (which shall mean for
purposes of this Article any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor or
investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action, if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation, unless and only to the extent that a
court of competent jurisdiction shall determine that, despite the adjudication
of liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to be indemnified to the extent
such court shall order.
SECTION 7.03. Mandatory Indemnification of Authorized Representatives.
To the extent that an authorized representative of the Corporation has been
successful on the merits or otherwise in defense of any third party proceeding
or corporate proceeding or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses actually and reasonably
incurred by such person in connection therewith.
SECTION 7.04. Determination of Entitlement to Indemnification. Any
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
is proper in the circumstances, because such person has either met the
applicable standards of conduct set forth in Section 7.01 or 7.02 or has been
successful on the merits or otherwise as set forth in Section 7.03 and that the
amount requested has been actually and reasonably incurred. Such determination
shall be made:
(1) By the Board of Directors by a majority of a quorum
consisting of Directors who were not parties to such third party or
corporate proceeding; or
(2) If such a quorum of the Board of Directors is not
obtainable, or, even if obtainable, a majority vote of such a
quorum so directs, by independent legal counsel in a written
opinion; or
(3) By the shareholders voting in the aggregate and not by
class or series.
SECTION 7.05. Advancing Expenses. Expenses actually and reasonably
incurred in defending a third party or corporate proceeding shall be paid on
behalf of an authorized representative by the Corporation in advance of the
final disposition of such third party or corporate proceeding as authorized in
the manner provided in Section 7.04 of this Article upon receipt of an
undertaking by or on behalf of the authorized representative to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Corporation as authorized in this Article. The financial
ability of such authorized representative to make such repayment shall not be a
prerequisite to the making of an advance.
<PAGE>
SECTION 7.06. Employee Benefit Plans. For purposes of this Article, the
Corporation shall be deemed to have requested an authorized representative to
serve an employee benefit plan where the performance by such person of duties to
the Corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an authorized representative with respect to an employee benefit
plan pursuant to applicable law shall be deemed fines; and action taken or
omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Corporation.
SECTION 7.07. Scope. The indemnification of and advancement of expenses
to authorized representatives, as authorized by this Article, shall (1) not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in an
official capacity and as to action in another capacity, (2) continue as to a
person who has ceased to be an authorized representative, and (3) inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 7.08. Reliance. Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon rights of indemnification provided by this Article.
SECTION 7.09. Insurance. The Corporation may but shall not be obligated
to purchase and maintain insurance at its expense on behalf of any person who is
or was an authorized representative against any liability asserted against such
person in such capacity or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Dividends. Subject to the provisions of the Certificate
of Incorporation, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting only out of
funds or property lawfully available therefor under applicable law. Dividends
may be paid in cash, in property, or in shares of the capital stock or held by
the Corporation, subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Directors from time
to time, in its absolute discretion, determines to be proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
Board of Directors shall determine to be in the interests of the Corporation,
and the Board of Directors may modify or abolish any such reserve in the manner
and at the time the Board of Directors thereof so determines.
SECTION 8.02. Annual Statements. The Board of Directors, through the
officers of the Corporation, shall present at each annual shareholders meeting,
and at any special meeting of the shareholders when called for by vote of the
shareholders, a full and clear statement of the business and condition of the
Corporation.
<PAGE>
SECTION 8.03. Contracts. Except as otherwise provided in these Bylaws,
the Board of Directors may authorize any officer or officers or any agent or
agents to enter into any contract or to execute and deliver any instrument on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 8.04. Checks. All checks, notes, bills of exchange
or other orders in writing shall be signed by such person or persons as the
Board of Directors may from time to time designate.
SECTION 8.05. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal", and the state of incorporation of the Corporation. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 8.06. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies, or other depositories as the Board of Directors may approve or
designate; and all such funds may be withdrawn only upon checks or withdrawal
requests signed by such one or more officers or employees as the Board of
Directors shall from time to time determine.
SECTION 8.07. Amendment of Bylaws. These Bylaws may be altered,
amended, restated or repealed or new bylaws may be adopted by the shareholders
or by the Board of Directors at any regular meeting of the shareholders or of
the Board of Directors or at any special meeting of the shareholders or of the
Board of Directors if notice of such alteration, amendment, repeal, restatement
or adoption of new bylaws is contained in the notice of such special meeting.
SECTION 8.08. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January and end on the 31st day of December, unless
otherwise provided by resolution of the Board of Directors.
SECTION 8.09. Interested Directors. No contract or transaction between
the Corporation and one or more of its Directors or officers, or between the
Corporation and any other company, partnership, association or other
organization in which one or more of its Directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the Director or officer is present at or participates
in the meeting of the Board of Directors or Committee thereof which authorizes
the contract or transaction, or solely because the Director's or officer's vote
is counted for such purpose, if: (1) the material facts as to the relationship
or interest are disclosed to the Board or the Committee, and the Board or
Committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or (2) the material facts as to
the relationship or interest are disclosed to the shareholders or Directors
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders or Board of Directors; or (3)
the contract or transaction is determined to be fair as to the Corporation as of
the time it is authorized, approved, adopted or ratified by the Board of
Directors or a Committee thereof or by the shareholders. Interested Directors
may be counted in determining the presence of a quorum at a meeting of the Board
or of a Committee of the Board which authorizes the contract or transaction.
SECTION 8.10. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall convert any records
so kept upon the request of any person entitled to inspect the same.
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA
CUSIP NO. 448794 10 7
Number Shares
xxxxxxxxxx xxxxxxxxxxx
HYDRO ENVIRONMENTAL RESOURCES, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT xxxxxxxxxxxxxxxxxxxxx
IS THE RECORD HOLDER OF xxxxxxxxxxxxxxxxxxxxx
Shares of HYDRO ENVIRONMENTAL RESOURCES, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
Dated: xxxxxxxxxxxx
/s/ Jack H. Wynn
- ------------------------------------- HYDRO ENVIRONMENTAL RESOURCES, INC.
President CORPORATE
SEAL
OKLAHOMA
/s/ Jack H. Wynn
- ------------------------------
Secretary
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
Countersigned Registered:
NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA 89501
By:_________________________
Authorized Signature
ASSIGNMENT
Whereas, James Pelto ("Inventor") is the Owner of certain new proprietary
technology and processes involving an ElectroChem Hydrogen Fuel Reactor
("Invention") and certain Australian and International Patent Applications
covering the Invention and all modifications and improvements related thereto
("Patent Application"); and
Whereas, Inventor has agreed to sell and assign all rights, titles and
interests in the Patent Applications and the Invention and all related good will
associated thereto to Hydro Environmental Resources, Inc., 8908 South Yale,
Suite 409, Tulsa, OK 74137-3545 ("Hydro"); and
Whereas, the parties desire to evidence the assignment (Assignment) by
filing this instrument with the Australian and International Patent and
Trademark Offices.
Now, therefore, for $10.00 and other good and valuable consideration, the
receipt, adequacy and sufficiency of which is hereby agreed, accepted and
acknowledged:
1. Inventor hereby sell, assigns, transfers, conveys and delivers unto Hydro
and its successors and assigns ALL rights, titles, and interests in the
Invention and the Patent Application and all improvements, modifications,
and revisions related thereto, together with all extensions, reissues,
reexaminations and all good will associated with any of the foregoing
rights, and ALL such other rights, at law or in equity, including the right
to sue for and recover damages in connection with any past and continuing
infringement thereof.
2. Inventor hereby appoints Hydro and its successors and assigns as its agent
in fact to execute on Inventor's behalf any and all other document,
instruments, assignments, and conveyance documents necessary or advisable
in order to secure, record and enforce the Assignment of the Invention and
the Patent Applications herein made. Inventor hereby agrees to cooperate
and assist Hydro to further evidence the Assignment in the Patents in any
manner reasonably requested by Hydro.
3. It is the agreed and expressed intent of the parties that Hydro and its
successors and assigns shall own, hold and enjoy, as fully and entirely as
the same would have been owned, held and enjoyed by Inventor, all rights,
titles, interests and entitlements of Inventor in the Invention and the
Patent Application as if no sale or assignment had been made hereunder.
IN WITNESS WHEREOF, the parties have executed and acknowledged this
instrument with all requisite power and authority, intending to be legally bound
hereby for all purposes effective this 16th day of June, 1999.
Hydro Environmental Resources, Inc.
By /s/ JAMES PELTO By /s/ JACK WYNN
_______________________________ ________________________________________
James Pelto Jack Wynn, President
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