As filed with the Securities and Exchange Commission on March 23, 2000.
Registration No. ___-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SAVE ON ENERGY, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 336300 58-2267238
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Primary Standard (IRS Employer
of Incorporation or Classification Code Number) Identification Number)
Organization
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park Georgia 30050
(404) 765-0131
- --------------------------------------------------------------------------------
(Address and Telephone Number
of Registrant's Principal Executive Offices and Principal Place of Business)
Robby E. Davis
President and Chief Executive Officer
SAVE ON ENERGY, INC.
Ste. 211, 4851 Georgia Hwy 85
Forest Park Georgia 30050
---------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
with a copy to:
Edward C. Kramer, Esq.
Kramer & Kramer, LLP
708 Third Avenue
New York, NY 10017
(212) 983-0007
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Approximate date of commencement of proposed sale to the public: As soon as
practicable following the date on which this Registration Statement becomes
effective.
-----------------------------------
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. |_|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class Proposed maximum Proposed maximum Amount of
of securities Amount to be offering price per aggregate offering registration
to be registered registered (1) share (2) price (2) fee
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock 4,722,900(1) $1.75(2) $8,265,075 $2,182
====================================================================================================================================
</TABLE>
(1) This registration statement covers shares which may be offered from
time to time by selling stockholders, including (i) 3,386,000 shares of
common stock issued and outstanding, (ii) 399,400 shares of common
stock issuable upon exercise of warrants, (iii) 187,500 shares of
common stock issuable upon conversion of convertible promissory notes,
(iv) 500,000 shares of common stock reserved and available for
officers, directors and employees, and (v) 250,000 shares of common
stock reserved and available upon exercise of warrants which may be
issued with respect to a consulting agreement with MBO, Inc.
(2) Based on the highest sales price of the registrant's common stock as
quoted on the Nasdaq OTC Bulletin Board on March 17, 2000, as estimated
solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
SAVE ON ENERGY, INC.
Up to 4,722,900 Shares
of Common Stock
Save on Energy, Inc. is registering an aggregate of 4,722,900 shares of
our common stock under this prospectus. The number of shares being registered
includes shares of common stock that may received by warrant holders if they
exercise warrants for the purchase of shares of common stock, as well as common
stock to which certain promissory note holders may convert their promissory
notes and common stock reserved for officers, directors and employees and common
stock reserved for the exercise of warrants which may be issued under a
consulting agreement. The number also includes shares of common stock that are
currently issued and outstanding. Save's common stock is quoted on the Nasdaq
OTC Bulletin Board under the symbol "SAVEE." On March 17, 2000, the last
reported sale price of Save's common stock was $1.75 per share. We will not
receive any proceeds from the resale of any securities being registered. We have
agreed to pay the expenses of this offering.
-------------------------
See "Risk Factors" beginning on page 6 of this prospectus for a
discussion of certain factors that you should consider before investing.
-------------------------
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
This prospectus is dated March 22, 2000.
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TABLE OF CONTENTS
Page
SUMMARY......................................................................6
FORWARD LOOKING STATEMENTS...................................................7
RISK
FACTORS......................................................................7
USE OF
PROCEEDS.....................................................................13
MARKET FOR COMMON STOCK......................................................13
DIVIDEND
POLICY.......................................................................14
THE
COMPANY......................................................................14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................25
PRINCIPAL STOCKHOLDERS.......................................................28
MANAGEMENT...................................................................29
RELATED PARTY TRANSACTIONS...................................................31
DESCRIPTION OF SECURITIES....................................................32
PLAN OF
DISTRIBUTION.................................................................33
LEGAL
MATTERS......................................................................34
EXPERTS......................................................................34
WHERE YOU CAN GET MORE INFORMATION...........................................34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................................F-1
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SUMMARY
This summary highlights selected information from this prospectus and
may not contain all the information that is important to you. To understand the
stock offering fully, you should carefully read this entire prospectus.
References in this prospectus to "we," "us," and "our" refer to Save on Energy,
Inc., Electronic Fuel Control, a division of Save on Energy, Inc., Save or EFC.
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park Georgia 30050
(404) 765-0131
Save on Energy, Inc., formerly known as Electronic Fuel Control, Inc.
(the "Company"), was incorporated in the State of Georgia in 1996 to manufacture
and market retrofit systems for the conversion of gasoline and diesel engines,
stationary or vehicular, to non-petroleum based fuels such as compressed natural
gas and liquefied natural gas. The systems incorporate devices which were
developed and patented by Robby E. Davis, the President and Director of the
Company, and Frank Davis, a consultant to the Company, in response to United
States and international environmental and economic concerns, as gaseous fuels
burn cleaner than gasoline or diesel fuel. In addition to addressing these
issues, the devices permit vehicle operators to comply with federal and state
clean air regulations.
The Company markets alternative fuel retrofit conversion kits which
include a patented device by which a gasoline or diesel fuel engine is converted
to an engine powered by either gasoline or an alternative fuel in the case of a
gasoline engine or a mixture of diesel fuel and alternative fuel (approximately
80% natural gas, 20% diesel fuel) or diesel fuel exclusively in the case of a
diesel engine, which system permits the vehicle operator to switch from the
mixed fuel source to diesel fuel at the flip of a switch from the driver's seat
when the alternative fuel is depleted (the system is referred to as the "Save
Dual Fuel System").
The Company maintains its principal executive offices at 4851 Georgia
Hwy 85, Suite 211, Forest Park, Georgia, 30050. The Company's telephone number
is (404) 765-0131 and its facsimile number is (404) 765-0171.
The Offering
We will use any proceeds from the exercise of warrants for working capital and
general corporate purposes.
Dividends
We have never paid a cash dividend on our common stock and do not plan to pay
any cash dividends on our common stock in the foreseeable future.
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Market for the Common Stock
There is a limited market for the common stock, which is quoted on the Nasdaq
OTC Bulletin Board under the symbol "SAVEE." It is anticipated that in early
April 2000, our stock will be delisted from the Nasdaq OTC Bulletin Board and
will then be traded on the "Pink Sheets." It is intended that upon this filing
becoming effective, that application will be made to again have the stock quoted
on the Nasdaq OTC Bulletin Board.
Important Risks in Owning Save's Common Stock
Before you decide to purchase shares of common stock offered pursuant to this
prospectus, you should read the "Risk Factors" section of this prospectus
beginning on page 6.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future expectations,
contain projections of results of operations or financial condition or state
other "forward-looking" information. Those statements are subject to known and
unknown risks, uncertainties and other factors that could cause the actual
results to differ materially from those contemplated by the statements. The
forward-looking information is based on various factors and was derived using
numerous assumptions.
Important factors that may cause actual results to differ from projections
include, for example:
o general economic conditions, including their impact on capital
expenditures;
o business conditions in industries using diesel engines; o the
regulatory environment;
o rapidly changing technology and evolving industry standards;
o new products and services offered by competitors; and
o price pressures.
RISK FACTORS
The purchase of the securities offered involves a high degree of risk. You
should consider, in addition to the negative implications of all material in
this prospectus, the following specific risks, particularly in relation to your
own financial circumstances and your ability to suffer the loss of your entire
investment.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS
- -----------------------------------------------
You should carefully consider the following risk factors before making an
investment.
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1. Limited Operating History. The Company was organized on April 1,
1996 and has conducted only limited operations to date, consisting of
negotiating the license to use the Patents, further research and development and
limited sales efforts. The products that we will market, all of which
incorporate the technology covered by the Patents, have been beta tested and
sold on a limited basis by a former licensee of the Patents, as well as the
Company. No assurances can be given that we will develop a marketing and sales
program which will generate significant revenues from the sales of the products
we offer. Our success is predicated upon many factors, including but not limited
to, competition we may face as others seek to develop products similar to those
we offer, including the major automobile manufacturers, and our ability to
implement and effectuate a national marketing strategy. The likelihood of our
success must be viewed in light of the delays, expenses, problems and
difficulties frequently encountered by an enterprise in its development stage,
many of which are beyond our control. We are subject to all the risks inherent
in the development and marketing of new products.
2. No Assurance of Sales or Acceptance of Products. The engine
conversion kits we market and sell have been distributed only on a limited basis
during the last 14 years and no assurance can be given that we will be able to
market such products successfully on a wide-scale commercial basis or that
significant revenues will be generated from any such sales.
3. Dependence on License. Sales Quotas. Our right to manufacture and
market products based upon the Patents is dependent upon the continuing validity
of a license (the "License") granted by the Davis Family Trust, the assignee (or
holder) of the Patents, to us.
4. Government Regulation. Federal, state and local governments are
endeavoring to find ways to decrease pollution caused by petroleum burning
products and simultaneously reduce the use of petroleum products in general. To
that end, the federal government has enacted the National Energy Strategy
(1992), the Clean Air Act of 1970, as amended in 1990, and the Energy
Conservation Act, among many other regulations, which provide a major impetus
for our business. In order to be successful, our products will have to operate
at levels which allow compliance with the myriad government regulations now
existing or which may be implemented in the future. The implementation of many
of the provisions of these regulations relating to the phase-in of alternative
fuels have been deferred indefinitely which could diminish or dampen any impetus
for success of our products. Hence, these regulations and the timing of the
activation of their key provisions, as they relate to us, will have a
significant bearing on our operations and may, in some instances, materially
adversely effect our business. A number of states and alternative fuel industry
associations have adopted safety standards relating to the integrity of fuel
systems in vehicles and equipment which burn alternative fuels. Standards have
been adopted for fueling connection devices, fuel containers, natural gas
compressors, and conversion kits such as those we manufacture and market. In
order to be certified by the American Gas Association ("AGA"), each aspect of a
conversion kit must be in compliance with AGA standards. We believe that the
products we design and manufacture meet current AGA safety standards, but there
is no guarantee that our belief will be accepted by a government entity,
regulator or court. However, as the industry is relatively new, standards and
regulations governing the use of alternative fuels and conversion kits are being
revised frequently. In the event that the regulations governing the manner of
use of alternative fuels are amended or laws specifically affecting alternative
fuel conversion kits are adopted by the federal government or in the event that
our products are not within AGA standards, such laws, regulations, and new
standards could have a material adverse effect on our business, as we may have
to redesign our products to be in compliance with these standards which would
require time and expense and which may cause us to scrap its inventory.
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5. Regulatory Changes. Changes in existing regulatory requirements or
the adoption of new requirements could have a material adverse effect on our
business, financial condition and results of operations. For instance, the
government may extend time-tables decelerating the time within which certain
industries must comply with existing regulations mandating the use of
alternative fuels so that the industry will grow at a much slower pace. Further,
there can be no assurance that we will not be required to incur significant
costs to comply with laws and regulations in the future or that laws and
regulations adopted in the future will not have a material adverse effect on our
business, financial condition and results of operations. State and local laws
and regulations vary significantly from state to state; therefore, any changes
in the regulatory framework in any one or more states could cause delays in our
operation in such states, or make continued operation unprofitable.
6. Technological Change. Modern technology is characterized by
extensive research and rapid technological change. Newer technologies may be
developed which perform more efficiently than the equipment we manufacture and
market. Major automobile and truck companies, academic and research institutions
and others could develop new fuels or new devices which could be installed at
the OEM (original equipment manufacturer) level and which could potentially
render the Save Dual Fuel System obsolete. In addition, competitors may develop
technology and systems which can be sold and installed at a lower per unit cost.
Moreover, into this equation must be factored new and changing government
regulations which could have a bearing on our business and products. There can
be no assurance that we will have the capital resources available to undertake
the research which may be necessary to upgrade our equipment or develop new
devices to meet the efficiencies of changing technologies. Our inability to
adapt to technological change could have a materially adverse effect on our
results of operations.
7. Limited Availability of Alternative Fuels. Alternative fuel engines
have been commercially available in the past; however, the most significant
impediment to the growth in the market for alternative fuel vehicles
traditionally has been the limited availability of alternative fuel sources,
such as natural gas and propane. The success of engines based on alternative
fuels will probably be directly effected by the development of the
infrastructure of the natural gas industry and the widespread availability of
such fuel sources. To some degree, this problem will remain at the forefront of,
and be an impediment to, the success of alternative fuel power sources. However,
we believe that with the development of the dual fuel conversion system kit,
vehicles will not be tied exclusively to alternative fuels, but will have the
option and ability to operate on standard diesel fuel alone. In all events, our
business and the market for alternative fuel vehicles would benefit
substantially from the growth of the infrastructure of the natural gas industry
and the more widespread availability of alternative fuels. Conversely, our
business and the market for alternative fuel vehicles would be substantially
hurt by a diminished or lack of growth of the infrastructure of the natural gas
industry and the less widespread availability of alternative fuels.
8. Lack of Distributorships. As of the date hereof, we are distributing
our products exclusively through our offices in Forest Park, Georgia. We intend
to establish regional master distributorships through which we will offer and
sell our products. However, there is no assurance that we will be able to
negotiate or conclude satisfactory distributor agreements or, if negotiated and
concluded, that such distributors will employ qualified or competent personnel
or that they can obtain satisfactory locations from which to distribute our
products. Until such time as we can establish distributorships, if ever, we must
continue to rely on our offices in Forest Park to develop a sales base for our
products.
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9. Competition. As the time to comply with federal and state
regulations relating to emissions and fuel efficiency approaches, so too does
the universe of entities seeking to develop and market products such as those we
sell. Other companies presently are marketing diesel fuel and dual fuel
conversion kits. In addition, automobile and truck manufacturers may develop and
install similar proprietary devices as original equipment. The current
regulatory emphasis on lowering engine emissions is an economic incentive for
developing non-petroleum based or decreased hydro-carbon emitting power sources,
some of which may be superior to ours or may well be selected by converters,
states or federal agencies, regardless of superiority. In this regard, we are
also competing against manufacturers of electric vehicles and against vehicles
which rely on other fuel sources such as solar power or hydrogen. Electric cars
have been in development for many years and have been tested extensively and
some manufacturers are selling such vehicles on a commercial basis. Most of the
entities against which we compete and may compete in the future may posses
greater financial, technical, human and marketing resources than we do and there
can be no assurance that we will be able to compete successfully against these
entities.
10. Resistance to Our Products by Major Oil Companies. As federal and
state legislators continue to mandate the use of petroleum alternatives to power
engines, the major oil companies remain a powerful and formidable lobby. Our
products directly contest the continued use of large quantities of petroleum
based products (gasoline and diesel fuel) and we and others in the industry may
face obstacles to our success imposed by the major oil companies. We are unable
to predict at this time whether or not the oil companies will present any
significant impediments to the continued growth and overall success of the
industry in which we are engaged.
11. Safety Concerns in Connection with Alternative Fuels and Our
Devices. Liquefied natural gas ("LNG") is highly flammable and may present risk
in the event of a collision involving the storage tanks. We have obtained
liability insurance from a "Best" A rated insurance carrier in the gross amount
of $2 million. The policy provides insurance of $2 million in the aggregate
during any one year and $1 million per event to cover accidents or other
liability incurred as a result of a malfunction of the Company's products. There
is no assurance that coverage in this amount will be sufficient to meet all
claims which we may face in respect of our products in the event of serious
bodily harm or property damage as a result of defects or flaws in the products.
In the event the amount of any claim or claims in the aggregate exceed the
amount of our liability insurance, we may be required, among other possible
scenarios, to remit all revenues to claimants which may force us to cease
operations.
12. Dependence Upon Key Employee and Consultant. Our future success
will be largely dependent on the personal efforts of Robby Davis, an officer and
director of the Company, and Frank Davis, a consultant to the Company and the
Technical Advisor to the Board of Directors. The loss of either of such persons
would have a material adverse effect on our business and prospects. We have no
key man life insurance on either individual.
13. No Cumulative Voting: Retention of Control by Current Shareholders.
Our certificate of incorporation, as amended, does not provide for cumulative
voting in the election of directors. Therefore, the holders of a majority of the
outstanding shares of Common Stock immediately after the sale of the Shares
offered in this prospectus will be in a position to elect the directors of the
Company and otherwise control the Company.
14. No Anticipated Dividends. We have not previously paid any dividends
and do not anticipate paying cash dividends in the foreseeable future. We intend
to follow a policy of retaining our earnings, if any, to finance the development
and expansion of our business.
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15. International Regulatory Changes. We intend to sell our products
and do business abroad and are relying to a great extent on foreign sales.
Changes in existing regulatory requirements outside of the United States or the
adoption of new requirements in foreign countries could have a material adverse
effect on our business, financial condition and results of operations. For
instance, foreign governments may extend time-tables decelerating the time
within which certain industries must comply with existing regulations mandating
the use of alternative fuels so that the industry will grow at a much slower
pace. Further, there can be no assurance that we will not be required to incur
significant costs to comply with foreign laws and regulations in the future or
that other countries' laws and regulations adopted in the future will not have a
material adverse effect on our business, financial condition and results of
operations. Regulations vary significantly from country to country; therefore,
any changes in the regulatory framework in any one or more countries could cause
delays in our operation or sales in such countries, or make continued operation
or sales unprofitable.
16. Suppliers. Currently, the control boxes and other key elements used
for our conversion kits are received from a single source. Accordingly, should
anything happen to our supplier, or for some reason we are no longer able to
obtain the control boxes or other key elements from our supplier, we will not be
able to produce or will be delayed in producing conversion kits for sale or
distribution, which could cause delays in our operation or sales or make
continued operation or sales unprofitable.
17. Technological Advances. If we do not adapt to technological
advances in our industry as quicky as our competitors, our operating results and
financial condition could be adversely affected. We compete in markets and
industries that require sophisticated manufacturing systems and other advanced
technology to deliver state-of-the-art products. These systems and technologies
will have to be refined and updated as the underlying technologies advance. We
cannot assure you that, as systems and technologies become outdated, we will be
able to replace them, to replace them as quickly as our competitors or to
develop and market new and better products in the future. Higher overhead and
manufacturing costs due to a failure to update and improve processes could limit
our competitive position. In addition, failure to make technological advances
could adversely affect our ability to successfully market our products.
18. Concentration of Orders. Concentration of order backlog in a single
project could expose us to operating losses and cash flow problems. From time to
time we have a significant percentage of our order backlog concentrated in a
single project. If manufacture or payment for shipped materials is delayed on
such a significant project, we could be exposed to operating losses and
restrictive cash flow problems. This could also hamper our ability to pursue new
business opportunities or result in credit shortages.
19. General Risks in International Operations. We are subject to risks
related to our international operations. We anticipate that international sales
will increasingly account for a significant portion of our net sales and
revenue. We intend to widen the scope of our license from the Davis Family Trust
and to expand our export sales to markets in Asia, Europe, South America, Africa
and the Middle East and to enter additional countries in these international
markets which may require significant management attention and financial
resources. Our operating results will be increasingly subject to risks related
to international sales, including:
o regulatory requirements;
o political and economic changes and disruptions;
o transportation delays;
o national preferences for locally manufactured products; and
o import duties or other taxes which may affect the prices of
our products in other countries relative to competitors.
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GENERAL RISKS RELATING TO INVESTMENT
- ------------------------------------
No Underwriter
--------------
We have not engaged the services of an underwriter with respect to this
registration and, as a result, the due diligence review of us and our affairs
which would customarily be performed by an underwriter and its legal counsel has
not been performed with respect to us or this offering. In addition, the
management of the registration by us rather than by an underwriter is likely to
increase the risk that no market or a minimum market for the stock will develop
following the registration.
We have financed our working capital requirements and capital expenditures
primarily through debt, sales of shares and cash flow generated from operations.
In order to satisfy our existing obligations and support our future growth
strategy, we may require additional capital. There can be no assurance that
additional capital will be available or that, if available, we can obtain such
capital on satisfactory terms. Any additional equity financing may dilute the
holdings of stockholders, and debt financing may impose substantial restrictions
on our ability to operate and raise additional funds.
o Our ability to obtain additional financing, if necessary, for working
capital, capital expenditures, acquisitions or other purposes may be
impaired or such financing may not be available on favorable terms;
o We may be more generally vulnerable to a downturn in our business or
the economy generally.
If we are unable to obtain additional financing, as needed, our business and
financial condition would be materially, adversely affected.
We are controlled by a small group of stockholders. Our common stock is held by
a small group of stockholders. Therefore, our public stockholders may not have
the power to elect our directors and direct our policies.
There is a limited public market for our common stock.
There is no established active public trading market for our common stock. Our
common stock is traded in the over-the-counter market and "bid" and "asked"
quotations regularly appear on the Nasdaq OTC Bulletin Board under the symbol
"SAVEE". As of March 6, 2000, the last reported sale price of our common stock
was $2.875, and there were 11 firms listed as market makers for our common
stock. There can be no assurance that our common stock will trade at prices at
or about its present level, and an inactive or illiquid trading market may have
an adverse impact on the market price. Moreover, price fluctuations and the
trading volume in our common stock may not necessarily be dependent upon or
reflective of our financial performance. In early April, it is expected that our
stock will be delisted from the Nasdaq OTC Bulletin Board and will only be
traded on the "Pink Sheets." This will make it more difficult to trade our
shares. Although, upon this filing becoming effective, it is expected that we
will reapply to be listed on the Nasdaq OTC Bulletin Board.
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Holders of our common stock may experience substantial difficulty in selling
their securities. The trading price of our common stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, changes in the analysts' estimates, announcements of technological
innovations, general industry conditions. Furthermore, our stock is very thinly
traded, meaning that very few shares are sold in a day and that there are very
few actual trades. Thus, although the public sale price of our stock has
increased over 400% in the past several months, this increase is based upon few
and low volume trades and may not be representative of the value of the stock or
a particular selling price on any given day. Before purchasing our stock, you
should become aware of the stock's volume and number of trades, as well as the
history of the price of the stock over, at least, the last year.
The public sale of shares eligible for future sale may adversely affect the
price of our common stock.
USE OF PROCEEDS
If the holders of warrants to purchase common stock exercise the warrants, the
holders will pay an exercise price to us. We will use any proceeds from the
exercise of warrants for working capital and general corporate purposes.
MARKET FOR COMMON STOCK
The common stock of Save is quoted on the Nasdaq OTC Bulletin Board under the
symbol "SAVEE" and began trading December 17, 1996. The following table taken
from America Online shows quarterly low and high bid information for the common
stock from January 1, 1998 through March 6, 2000:
2000 Low Bid High Ask
---- ------- --------
First Quarter (1) $0.875 $3.875
1999
----
Fourth Quarter $0.25 $1.125
Third Quarter $0.48 $1.125
Second Quarter $0.375 $0.9375
First Quarter $0.75 $1.375
1998
----
Fourth Quarter $0.625 $1.125
Third Quarter $0.25 $2.00
Second Quarter $1.50 $3.375
First Quarter $1.00 $3.125
- ------------
(1) Through and including March 6, 2000.
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Market quotations reflect inter-dealer prices, without retail markups, markdown
or commissions and may not necessarily reflect actual transactions. As of March
6, 2000, there were 3,386,000 shares of common stock outstanding.
DIVIDEND POLICY
We have never paid a cash dividend on our common stock and do not plan to pay
any cash dividends on our common stock in the foreseeable future.
THE COMPANY
Save On Energy, Inc. ("SAVE") was originally incorporated as Electronic Fuel
Control, Inc. on April 1, 1996 for the purpose of developing and marketing
after-market conversion systems to permit diesel engines to run in a "dual-fuel"
mode with natural gas added to the fuel mixture. Although the technology is
equally applicable to gasoline and diesel engines, we subsequently decided to
concentrate our energy and assets on building a business serving only
diesel-powered vehicles, a market determined to have a larger revenue potential
per customer.
We became a publicly traded company in 1996 as a result of the sale of 195,000
shares at $5.00 per share under Section 504 of the Securities Act of 1934. This
placement raised $975,000 for us, less commissions and costs of the offering. It
was from these funds as well as other monies previously and subsequently raised
that we developed commercial versions of our technology to fit many older,
naturally aspirated, diesel engine types and placed more than 1,200 conversion
units into engines all around the world. In addition, we completed preliminary
work to apply our technology to the newer Drive-by-Wire engine types. As a
result of these activities we believe we are poised to begin a much more
extensive sales and revenue creation phase.
During the first quarter of 1999, we acquired we entered into an agreement with
International Fuel Systems, Inc. ("IFS"), a Tennessee corporation, and Lanier
Davenport in memorializing the prior purchase of 600,000 shares and, in
addition, for 600,000 additional shares to be issued upon certain contingencies.
As of March 6, 2000, 200,000 of the reserve shares have been issued. IFS
established several business relationships for the SAVE Dual Fuel System with
organizations outside the US. In particular, IFS initiated a development program
with a diesel engine manufacturer in Hungary and established a joint venture
with NUI/CARITRADE INTERNATIONAL with respect to certain countries of Eastern
and Western Europe. Should this program materialize, we will seek to include
such additional territories as may be relevant to our License from The Davis
Family Trust. At this time it cannot be determined if such program and venture
will eventually realize revenue.
LEASES
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We lease 6,000 square feet of combination office and warehouse space in an
established industrial park in Forest Park, Georgia located near the
intersections of Interstates 285 and 75, and close to the Atlanta airport. The
lease for this location expires at the end of February 2001. There are 8 full
time employees in this facility, with adequate space to add several more as the
business grows.
PRODUCTS and TECHNOLOGY
German engineer Rudolf Diesel invented the diesel engine in the late 1890's. A
diesel engine looks and works very much like a gasoline engine. However, unlike
the gas engine, diesel engines have no spark plugs. Diesel fuel has a very low
flash point, meaning that it self ignites at a low pressure/temperature
condition. Within the diesel engine, when the piston is at the top of the
cylinder (at the conclusion of the compression stroke) and the mixture of fuel
and air within the cylinder is at the maximum pressure, the air has been heated
by being compressed, and the diesel fuel vapors spontaneously combust. With no
spark (and no spark plugs or distributor) needed to ignite the fuel, diesel
engines are much simpler and more reliable than gasoline engines. In addition,
diesel fuel contains unrefined hydrocarbons that act as a lubricant to internal
engine components while the engine is running. This contributed to a
significantly longer engine life than can be expected from other fuels.
The main disadvantage of a diesel engine is that it emits far more pollutants
than its gasoline-fueled counterpart. Diesel exhaust contains particulate
matter, visible as soot that contains unburned and partially burned fuel. These
hydrocarbon emissions are a significant contributor to air pollution and to
human respiratory system difficulties. This is particularly true when
hydrocarbons become suspended in the atmosphere (as opposed to settling to
earth) or when they come to exist in great quantity in the air at a particular
location (such as is the case Los Angeles, Mexico City, and Cairo). Of even
greater significance is the fact that diesel fuel combustion produces Nitrous
Oxide ("NOx"), a toxin that is universally acknowledged as harmful to humans and
the environment.
Engines. There are different diesel engines. Many of the differences are in how
the fuel/air mixing operation is performed. However, all diesel engine are
sparkless, using the increased temperature of the compressed air to ignite the
fuel.
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<PAGE>
Naturally Aspirated Engine. Unlike gasoline engines that mix the fuel with the
air outside the cylinder, diesel engines mix the fuel with the air inside the
cylinder. In all diesel engines, the fuel is directly injected into the
cylinder. Because they are able to operate on a wider range of fuel quality than
gasoline engines and because they could be built in much larger and more
powerful configurations, diesel engines quickly adapted to many commercial
applications.
Turbocharged Engine. Turbocharged engines force compressed air into the
cylinder. These are more efficient than the naturally aspirated engines and
consume less fuel.
Drive-by-Wire Engines. As a further extension of automobile engine technology to
diesels, in 1993/94, engine manufacturers began producing turbocharged engines
that use an electronically timed fuel injection system. In this engine,
injection of the fuel into the engine cylinder is controlled more precisely than
is possible using the mechanical system. Because the fuel injection process is
more precisely timed and measured, Drive-By-Wire engines have lower emissions
and better fuel economy than other engines.
The improved fuel efficiency and reduced emissions that resulted from the
Drive-by-Wire engines is only a small step. These engines, like other diesel
engines continue to emit substantial quantities of unburned fuel, particulate
hydrocarbons and NOx that exceed the levels permitted under the guidelines of
the Clean Air Act.
BARRIERS TO GROWTH OF ALTERNATIVELY FUELED VEHICLES
Few Fueling Stations. Gas companies are reluctant to install fueling stations
against a market with a limited vehicle count. Recent estimates indicate that
there are about 1,200 compressed natural gas vehicle refueling stations in the
USA, certainly far less than one on every corner, as is the case with gasoline.
Despite this, suppliers of CNG and LNG have developed trailer mounted fueling
stations to provide an option for fleet vehicle fueling without the great
expense for a fixed installation.
Few Vehicles. Even though the base legislation has now been in force for nearly
10 years, and the conversion requirements are clearly set, particularly for
state, municipal and federal vehicle fleets, estimates place the number of
Natural Gas powered medium and heavy duty vehicles in service in the USA at less
than 50,000. This compares disproportionately to the more than 1 million natural
gas or dual fuel vehicles in service outside the US.
High Cost of Dedicated Engine Conversions. To convert an existing and running
diesel engine to run exclusively on natural gas (a "dedicated" engine),
regardless of whether the gas is liquefied or compressed, requires that an
electronic ignition system be installed in the vehicle. This requires new
cylinder heads, the spark plug electronics, and a whole lot more. The end result
is a conversion cost for a typical heavy-duty truck in excess of $50,000.
Similarly, the cost of a new vehicle equipped with a full time natural gas
engine is as much as $50,000 more than the same vehicle with its standard diesel
engine.
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<PAGE>
Large Inventory of Diesel Powered Vehicles. One of the main advantages of diesel
engines is their long life. With millions of perfectly good vehicles in service,
private sector fleet operators have little incentive to discard them and replace
them with dedicated alternative fuel vehicles.
SAVE CONVERSION KITS.
The SAVE Dual Fuel System permits existing vehicles to be converted to dual fuel
capability at a cost, including the fuel tank, of less than $10,000 in most
cases. Importantly, we believe that significant engine performance is not lost
as a result.
LEGISLATIVE INCENTIVE and ASSISTANCE PROGRAMS
Some of the Federal laws that apply directly to increased use of alternative
fuels and conversion of vehicles to for the use of alternative fuels are
described below:
The Clean Air Act of 1970, together with the Clean Air Act Amendments of 1990.
The Clean Air Act (CAA) was passed in 1970 to improve air quality nationwide.
Congress amended that law in 1990, passing the Clean Air Act Amendments of 1990
(CAAA) creating several initiatives to reduce vehicle pollutants. The CAAA sets
emissions standards for stationary and mobile pollutant sources. The Act
establishes targets, sets standards and creates procedures for reducing human
and environmental exposure to a range of pollutants generated by industry in
general and transportation most specifically. Importantly for SAVE, the1990
Amendments to the Clean Air Act requires businesses that maintain centrally
fueled fleets of 10 or more vehicles in certain heavy smog locations to convert,
either through new vehicle purchases or by converting existing vehicles, a
portion of their fleet to clean burning alternative fuels. The Act specifically
includes the diesel and natural gas duel-fuel system as an "alternative fuel."
The Act goes on to specify actions that fleet operators must take and timetables
for their completion.
The Energy Policy Act of 1992 (EPAct) was created to accelerate the use of
alternative fuels in the transportation sector. With the EPAct in place, the
primary goal of the Department of Energy (DOE) became to decrease the nation's
dependence on foreign oil and increase our energy security through the use of
domestically produced alternative fuels.
EPAct mandates the schedule by which Federal, State and Municipal vehicle fleets
must incorporate alternative fueled vehicles into their overall vehicle mix. As
we enter the 21st Century, this aspect of the EPAct has significant
ramifications for the military, which operates thousands of diesel vehicles, and
for the state departments of transportation, which operate tens of thousands of
diesel powered dump trucks and related highway service and repair vehicles, plus
the tens of thousands of vehicles operated by the private contractors who
support these agencies.
Other Federal and State Incentives and Alternative Fuel Vehicle Programs. There
are a number of other Federal and State programs that have been created and
which provide funding or other incentives for the conversion from diesel engines
to alternative fuels.
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Clean Cities Program. Created by the DOE, the Clean Cities Program coordinates
voluntary efforts between locally based government and industry to accelerate
the use of alternative fuels and expand the alternative fuel vehicle ("AFV")
refueling infrastructure.
State and Alternative Fuel Provider Fleets AFV Credits Program. Congress created
the "Credits Program" to encourage fleets to increase the number of AFVs in
their fleets early and aggressively. Credits are allocated to state fleet
operators and covered Alternative Fuel Provider fleet operators when AFVs are
acquired over and above the amount required, or earlier than expected. Since
credits can be traded and sold, fleets have the flexibility to acquire AFVs on
the most cost- effective schedule without impeding the achievement of EPAct
national oil displacement goals.
State Energy Program. States will promote the conservation of energy, reduce the
rate of growth of energy consumption, and reduce dependence on imported oil
through the development and implementation of a comprehensive State Energy
Program. The State Energy Program is the result of the consolidation of two
Federal formula-based grant programs - the State Energy Conservation Program and
the Institutional Conservation Program. The State Energy Program includes
provisions for financial assistance for a number of state-oriented special
project activities. These activities specifically include programs to accelerate
the use of alternative transportation fuels for government vehicles, fleet
vehicles, taxis, mass transit, and individuals' privately owned vehicles.
DOE/Urban Consortium Funds. DOE's Municipal Energy Management Program has funded
about 300 projects that demonstrate innovative energy technologies and
management tools in cities and counties through the Urban Consortium Energy Task
Force (UCETF). Each year the task force requests proposals from urban
jurisdictions including cities, counties and recognized tribal governments. It
funds those projects that best define and demonstrate innovative and realistic
technologies, strategies, and methods that can facilitate urban America's
efforts to become more energy efficient and environmentally responsible. In the
past, a number of AFV projects have received funding from UCETF.
Petroleum Violation Escrow (PVE) Account. Oil overcharge funds, also known as
petroleum violation escrow (PVE) funds were created by fines or settlements that
became available as a result of oil company violations of the federal oil
pricing controls. These monies have been made available to the states for use in
one or more of three federal energy-related grant programs: the State Energy
Program (as discussed above) and the Weatherization Assistance Program
(administered by DOE), and the Low-Income Home Energy Assistance Program, which
is administered by the Department of Health and Human Services.
Congestion Mitigation and Air Quality (CMAQ) Improvement Program. The CMAQ
program was re-authorized in the recently enacted Transportation Equity Act for
the 21st Century (TEA-21). The primary purpose of the CMAQ program remains to
fund projects and programs in non-attainment and maintenance areas that reduce
transportation related emissions.
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Section 3 Discretionary and Formula Capital Program. This program provides
funding for the establishment of new rail projects, improvement and maintenance
of existing rail projects, and the rehabilitation of bus systems. Funding is not
specifically designated for AFVs, but the funds provided by this program could
be used to purchase alternative fuel buses. For most projects funded through
Section 3, FHWA will pay 80% of the total project costs.
The Clean Fuel Fleet Program (CFFP). This is an initiative implemented by the
EPA in response to the CAAA. The CFFP requires fleets in cities with significant
air quality problems to incorporate vehicles that will meet clean fuel emissions
standards.
National Low Emission Vehicle (NLEV) Program. The NLEV program, effective March
2, 1998, is a voluntary program between the EPA, nine of the Ozone Transport
Commission (OTC) states, and the automobile manufacturers. The program is
designed to reduce unhealthy levels of smog and other toxic air pollutants
formed from vehicle tailpipe emissions. Automobile manufacturers will provide
cars and light-duty trucks that are cleaner burning than currently required by
law.
Pollution Prevention Grants Program. This Federal program supports the
establishment and expansion of state pollution prevention programs and addresses
various sectors of concern such as energy, transportation, industrial toxins,
and agriculture. Funds available under this grant/cooperative agreement are
awarded to support innovative pollution prevention programs that address the
transfer of potentially harmful pollutants across air, land, and water. State
agencies are required to contribute at least 50% of the total cost of their
project.
State Legislation and Alternative Fuel Vehicles Support Programs. In addition,
many states also offer incentives for converting and operating alternative
fueled vehicles. These incentives take many forms, including income tax
deductions and credits, vehicle fuel tax reductions, access to HOV lanes, and
grants to cover some of the costs of acquiring or converting vehicles and
installing fueling infrastructure.
Impact of Legislative Initiatives on SAVE. We consider that the dual fuel system
we have developed and marketed is an "alternative fuel" as defined by these
laws. Subject to completing EPA certifications for reduced emissions, engines
converted to the SAVE Dual Fuel Operating System may qualify for available tax
incentives.
Global Initiatives. In addition to the many Federal and State programs, the
United Nations has a long-standing program to improve the air quality,
worldwide. The program is administered through the UN's Economic and Social
Development Division. The UN does not provide funding, but they do work
extensively to facilitate the flow of technical information into member nations
that have need to address local or regional pollution problems.
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PATENTS ISSUED AND APPLIED
On October 30, 1984, United States Patent # 4,479,466 was issued to SAVE founder
Frank Davis for:
"A natural gas and air mixing device for allowing the combustion of a
mixture of natural gas and air in a conventional internal combustion
engine."
Although this device was designed specifically for the purpose of using natural
gas to power a gasoline engine, it set the stage for future work to develop
conversion kits that would permit diesel engines to operate on a mixture of
diesel and natural gas.
From the knowledge gained in subsequent years, Frank Davis and his son, Robby
Davis, were granted three additional patents for mixing devices. Two were issued
in 1991 and the third in 1994. All three described apparatuses for introducing a
mixture of air and gaseous fuel into internal combustion engines and the method
or process for doing that.
Further, in December 6, 1994, Frank Davis and Robby Davis were issued United
States Patent # 5,370,097 for a "Combined Diesel and Natural Gas Engine Fuel
Control System and Method of Using Such" for an internal combustion engine. This
patent describes using a control means to insert the gaseous fuel in response to
engine speed and load. This is the base patent upon which the Company relies.
Foreign applications have been filed in Germany and the United Kingdom. Frank
Davis and Robby Davis have assigned their interests in these patents to the
Davis family Trust. The Trust has granted us a license to use the patents. (See
License)
THE SAVE DUAL FUEL SYSTEM
There are two types of dual fuel systems in use. The SAVE Dual Fuel system is a
"Closed Loop" system. The fuel flow Controller monitors engine operating
parameters. Based on the input it receives, it adjusts the gas/air and diesel
fuel mixtures as necessary to create the optimum engine performance for the load
at the time. The system makes continuous changes to the percentages of natural
gas and diesel entering the cylinder during the intake cycle.
In an "Open Loop" system, as used by two competitors, the natural gas to diesel
fuel mixture is pre-set, usually to around 40% gas and 60% diesel. The engine
receives this mixture at all times, without regard to engine speed or load.
We believe that SAVE's Closed Loop system generally provides better fuel economy
than an Open Loop system, better vehicle performance under the variety of load
requirements engines face, a greater emissions reduction (particularly unburned
fuel, hydrocarbon particulate and NOx) and reduced engine maintenance costs.
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The SAVE Dual Fuel System has three main components.
The Controller. This electronic unit is the brain of the system. From sensors
that monitor key parameters of engine performance (speed, temperature and
several others) and what it is being asked to do (throttle position and fuel
demand), the Controller determines how much natural gas to place into the air
intake stream. In general, the controller places the least amount of gas into
the engine at idle engine speed without load. At this resting state, a typical
dual-fuel engine would be running on 80% diesel and 20% natural gas. Conversely,
the greatest amount of gas is inserted when the vehicle is cruising at speed. In
this state, a typical engine would be consuming a mixture of 20% diesel and 80%
gas. Experience gathered over hundreds of installations has indicated that a
typical engine, after conversion to SAVE's Dual Fuel System will normally run on
a mixture of 70% gas and 30% diesel.
The Gas Air Mixing Device. The natural gas vapor must be administered into the
air fuel flow in a manner that permits thorough mixing. To accomplish this, we
hold patents on three different and unique devices that are placed into an
engine air intake system This device, called the Gas Air Mixing Device, together
with the fuel flow regulator and hoses is the second major component of the SAVE
Dual Fuel System.
The Measuring, Monitoring and Reporting Devices and Their Connections. To
optimize engine and vehicle performance, the Controller needs to know the
current status of a number of engine operating parameters ranging from throttle
position to exhaust temperature. The sensors and wiring that gather and report
this information to the Controller make this the third component of the SAVE
Dual Fuel system.
SWITCHING FROM DUAL FUEL TO FULL DIESEL OPERATION
The Controller is programmed to automatically switch from dual-fuel operation to
diesel when the natural gas fuel supply reaches a low level. As an option, a
vehicle can be equipped with a manual switch. This switch permits 100% diesel
operation on the drivers command.
COMPRESSED VS. LIQUEFIED NATURAL GAS.
The SAVE Dual Fuel system is indifferent to the two gas types. In general,
compressed and liquefied natural gas differ only in their method of storage.
Once they leave their storage vessels and are presented for insertion into the
engine's fuel flow, both are in a gaseous state.
We do not include gas storage vessels in our "conversion kit". The customer
purchases these separately from a number of companies who manufacture them, or
from us at the customer's request.
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At the moment, Liquefied Natural Gas (LNG) is the preferred form of fuel. In
liquid form, the gas requires less space to hold and its tanks put less weight
onto the vehicle than does Compressed Natural Gas (CNG). Because the LNG dealer
brings the gas to the fleet site as frequently as needed, there is no supply
constraint.
However, as the future unfolds, CNG filling stations might proliferate making
these more easily accessible than is presently the case. Regardless, our dual
fuel engine does not care which type is on the vehicle. The fleet's service
technicians can make whatever minor adjustments the Controller may require for
optimum engine performance.
CERTIFICATION OF POLLUTION REDUCTIONS
In order to qualify for Federal and State grants and tax benefits, the reduction
in polluting emissions that result from our engine modifications must be
certified by independent outside agencies.
Environmental Protection Agency (EPA). The Federal Income Tax deductions
available as a result of the Energy Policy Act of 1992 require that the engine
"satisfy any federal and state emissions certification, testing, and warranty
requirements that apply." We will attempt to qualify the SAVE Dual Fuel System
on several of the most common diesel engine families in the first two quarters
of 2000. An engine family is generally one manufacturer/displacement/or
horsepower type, even though numerous models of that type may have been
manufactured over the years. The cost to certify an engine is generally between
$50,000 and $75,000. Testing requires about 30 days, including set up and tear
down. The EPA typically issues reports of the results and certifications within
60 days following the testing.
New York State Energy Research and Development Authority (NYSERDA). The State of
New York provides funding for alternative fuel projects through NYSERDA. We are
currently taking steps to formalize our relationship with N.Y.S. Electric and
Gas, with which we intend to jointly develop a project under a NYSERDA grant,
which may be as high as 50% of the cost of the project.
MARKET SIZE
The Company believes that the market for after-market vehicle conversion kits is
large, assuming the actual conversion of only a very small portion of the more
than 12 million medium and heavy-duty diesel powered vehicles, 3 million of
which are in the US, and 9 million are outside the US. The assumed average cost
of the component kit to convert one vehicle is a conservative $5,000. This
market estimate does not include the tanks to contain the gas or any costs born
by the fleet operator to create the refueling facility.
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USA Market Potential. To determine the market potential for SAVE Dual Fuel
System, the US vehicle inventory can be divided into several segments, all
consisting of heavy-duty vehicles with large numbers of the same type of engine.
Transit Buses. The Department of Transportation reports more than 128,000
transit buses in use nationwide. Of these, less than 5,000 are believed to be
operating on alternative fuel.
School Buses. The transit bus figures do not include buses operated by public
school districts or by private schools or churches. According to Department of
Transportation statistics, there are 580,000 school, church, institutional and
industrial buses registered in the US. The federal government, excluding the
military, operates an additional 5,000 buses.
Trucks. Motor Vehicle Census data from 1992 indicate that "Heavy- Heavy" trucks
(gvw exceeding 26,000 pounds) numbered over 2 million then. The data does not
indicate the number that were diesel powered, however, it is believed that most
were. This census included detailed information about types of trucks. Some of
the highlights were:
Sanitation Trucks. The total number of sanitation vehicles was over 72,000.
Dump Trucks. Cities, counties and states own dump trucks for highway
maintenance. In addition, there are countless fleets operated by private
construction companies. The total number of dump trucks was reported to be
611,900, nationwide.
Wreckers. In 1992, there were 104,000 wrecker body trucks and an additional
58,800 trucks with a winch or crane.
Concrete Mixers. There were 61,000 concrete mixers in 1992.
Interstate Freight Trucks. According to Department of Transportation statistics,
there were 1,741,800 "Combination" trucks, another way of describing the truck
end of a "semi."
Local Delivery Trucks. United Parcel Service, the largest local delivery
operation with over 50,000 trucks in service, is already the largest operator of
dedicated CNG vehicles. Beverage delivery trucks, which frequently appear at
local convenience stores, numbered 73,000 in 1992.
Retail Delivery Trucks. This category will includes a number of smaller trucks,
and the beverage trucks will be double counted, but for companies like Wal-Mart,
the retail grocery industry, department stores, and the building supply
retailers, and others, there were over 1.1 million vehicles.
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Working Boats. Certain highly active port cities have large numbers of
ferryboats and tugboats. Although these have highly specialized marine engines,
there is no doubt that their air pollution is receiving attention from various
government programs. The Department of Transportation reports that there were
8,300 vessels licensed to transport things or people in the US.
Locomotives. Because of the loads they pull, and particularly in urban areas
where they move slowly and engine load is heavy, diesel locomotives are serious
polluters. These engines will require a hybrid system to be converted to dual
fuel, similar to vehicle engines, but controlling a much larger engine.
Department of Transportation statistics indicated there were 19,600 locomotive
engines.
Foreign Markets.
In addition to the US market, there are many nations with large and antiquated
diesel-engine vehicle fleets. Various estimates place the number of
diesel-engine transportation and freight vehicles outside the US at more than 10
million. Significant numbers are located in the nations referred to as the
Eastern Block (Czechoslovakia, Hungary, Romania, etc.), Mexico, Egypt, Chile,
Philippines, China, India and Japan. These nations each have a serious air
pollution problem. Importantly, each has excellent access to natural gas in
their urban centers.
FUEL SUPPLY
It must be noted as a significant strategic influence on the fuel supply side
that vast quantities of natural gas are being burned at the wellhead or simply
expelled into the atmosphere every day because there is no market for it. This
represents an undetermined incentive for the oil industry to increase demand for
natural gas.
COMPETITIVE ANALYSIS
OEM Dedicated Fuel Systems. Diesel engine manufacturers offer an engine
alternative that runs only on Natural Gas. These single-fuel (natural gas)
engines often cost at least $50,000 more than the same engine in diesel-only
form. The major reason for this cost difference is that to convert a diesel
engine to operate only on natural gas, a complete spark plug and ignition system
must be incorporated. In addition, because the all gas mixture explodes much
more violently upon ignition, the pistons have to be extensively modified to
reduce the compression ratio. Experience has demonstrated that these engines
have higher maintenance costs and shorter lives. This phenomenon is partially
explained by the fact that diesel fuel acts as an engine lubricant.
Caterpillar. Caterpillar offers two OEM Dual Fuel engines. Both are "Open Loop"
systems that operate on one, pre-set mixture of diesel and natural gas. The cost
of this option is often more than $25,000 higher than the same engine in Diesel
only form.
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Alternative Fuel Systems, Inc. AFS, headquartered in Calgary, Alberta, Canada is
a company that manufactures an after-market "Open Loop" kit to convert an
existing vehicle engine to dual fuel. Installed in the customer's vehicle, the
AFS and the SAVE systems are believed to cost approximately the same. AFS is a
publicly traded company on the Canadian Stock Exchange under the symbol "ATF".
Additional information on the AFS system is available at their website,
www.altfuelsys.com.
OEM Bi-Fuel Systems. Some engine manufacturers also manufacture an engine that
will run on natural gas or diesel, but not on both at the same time. We call
these bi-fuel engines. These engines suffer the same up to $50,000+ cost
disadvantage as the dedicated, single-fuel engine. In order to convert a bi-fuel
engine from one fuel to another, the vehicle must be returned to the service
facility and have its operating parameters re-set. By comparison, the SAVE dual
fuel system can be set to change to full diesel operation either manually or
automatically.
Bio-Diesel Fuel. In addition to natural gas/diesel, bio-diesel is another "clean
burning" dual-fuel. This fuel is a mixture of diesel and a vegetable oil.
Several such oils are available. Bio-diesel requires no engine conversion for
use. At about $3.00 per gallon, the cost is prohibitive to most operators. A
further disadvantage is the odor emitted, which depends on the specific oil that
is being used. For example, corn/diesel emits a popcorn odor from the exhaust.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis of the financial
condition and results of operations should be read in conjunction with our
financial statements and the accompanying notes appearing elsewhere in this
prospectus. In addition to historical information, this management discussion
and analysis of financial condition and results of operations contain
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of factors,
including those set forth under "Risk Factors" and in other parts of this
prospectus.
Overview
We primarily market alternative fuel retrofit conversion kits which
include a patented device by which a diesel fuel engine is converted to an
engine powered by either a mixture of diesel fuel and alternative fuel
(approximately 80% natural gas, 20% diesel fuel) or diesel fuel exclusively,
which system permits the vehicle operator to switch from the mixed fuel source
to diesel fuel at the flip of a switch from the driver's seat when the
alternative fuel is depleted (the system is referred to as the "Save Dual Fuel
System"). We also market conversion kits which convert a gasoline fuel engine to
a bi-fuel engine which can be powered by either gasoline or natural gas.
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The primary marketing focus of the Save Dual Fuel System is the diesel
truck and bus market segments. Although we have completed development of the
Save Dual Fuel System for normally aspirated engines and turbocharged engines,
we are still in the process of developing the Save Dual Fuel System for
Drive-by-Wire engines. For a description of these engines, see Products and
Technology, above.
Results of Operations
Comparison of Twelve Month Periods Ended December 31, 1999 and December 31, 1998
The following table sets forth certain statement of operation items as a
percentage of net sales for the period indicated:
<TABLE>
<CAPTION>
Twelve Months Ended December 31
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ................................... 100.0% 100.0% 560,124 539,443
Cost of Goods Sold .......................... 58.9 36.1 329,791
194,701
Gross Profit ................................ 41.1 63.9 230,333
344,742
Selling and Administrative .................. 123.8 127.4 693,379 687,420
Interest Expense ............................ 5.9 2.7 33,013 14,483
Other Expense ............................... 22.3 -- 125,000 --
Income Tax .................................. -- -- -- --
------- ----- ------- ---------
Income (Loss) ............................... (110.9) (66.2) (621,059) (357,161)
======= ====== ========= =========
</TABLE>
Our revenues resulted mostly from sales of the Save Dual System Fuel
kits. About 60 Dual Fuel System Fuel kits, at prices ranging from about $4,000
to over $5,000 (depending on customers' needs and configurations) were sold in
each of 1998 and 1999. The remaining revenues stemmed from the sale of gasoline
bi-fuel conversion kits, part kits for dedicated diesel fuel vehicles,
installations of conversion kits and sales of fuel tanks.
However, while Net Sales increased 3% from 1998 to 1999, Cost of Goods
Sold increased by 69% in the same period. The increase in the Cost of Goods Sold
was primarily due to increased use of inventory during development, as well as
the greater consulting income we generated in 1998 than in 1999. Since our
consulting income is generated with less total associated costs than that of
product sales, the mix of consulting sales and product sales in each year helped
produce a lower Cost of Goods Sold in 1998 than in 1999. These were the primary
reasons that the Loss for 1999 (excluding Losses for Litigation) increased by
$138,898 or 39% over 1998.
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Including Losses for Litigation (see, Other Expense, above), the Loss
for 1999 increased by $263,898 or 74% over 1998. The Losses for Litigation for
1999 comprise an accrual of $125,000 with respect to a lawsuit brought against
us by an independent contractor in connection with a project in Uzbekistan in
1997 and 1998. See Note 4 to the accompanying financial statements.
Selling and Administrative expense, which primarily included salaries,
employee benefits, consulting fees, transportation, rent, utilities,
professional fees, insurance and provision for doubtful accounts, changed little
from 1998 to 1999, from $687,420 to $693,379. However, the Provision for
Doubtful Accounts portion of the Selling and Administrative expense increased by
$73,338 from 1998 to 1999. At the same time, Interest Expense increased from
$14,483 in 1998 to $33,013 in 1999, a change of $18,530.
Our losses in 1998 were funded by loans totaling $153,500, represented
by promissory notes payable in 18 months which bear interest at 9% and are
convertible to common stock at $4.00 per share. These lenders also received
57,400 warrants to purchase our common shares at $1.50 per share. Forty thousand
of such warrants expire on June 17, 2000 and 17,400 of such warrants expire on
December 15, 2000. As of the date of this filing, the principal of all such
loans have been paid in full. The losses were also funded by $105,000 paid in
capital from the sale of shares of common stock. In addition, in 1998, we
borrowed $50,000 as a revolving loan from Peachtree National Bank at an interest
rate of 8.75%. See Note 4 to the accompanying financial statements.
Our losses in 1999 were funded by loans totaling $150,000, represented
by promissory notes payable in 1 year, which bear interest at 12% and are
convertible to common stock at $0.75 per share, and by $133,000 paid in capital
from the sale of shares of common stock. In addition, we increased the revolving
loan from Peachtree National Bank by an additional $90,000 to a total of
$140,000 and the interest rate on the entire balance increased to 10.5% and is
payable on May 5, 2000. See Note 4 to the accompanying financial statements.
Since we are not liquid, if we are unable to raise additional funds by
either loans or the sale of securities this year or have a substantial increase
in sales, we may not be able to continue operations or may have to decrease
development and testing efforts.
On November 23, 1999, we entered into a Consulting Agreement with MBO,
Inc., a South Carolina Corporation, principally for the following purposes, to
raise up to $750,000 and to assist in marketing our products, provide financial
advice and help form strategic alliances.
27
<PAGE>
During the first quarter of 1999, we acquired we entered into an
agreement with International Fuel Systems, Inc. ("IFS"), a Tennessee
corporation, and Lanier Davenport in memorializing the prior purchase of 600,000
shares and, in addition, for 600,000 additional shares to be issued upon certain
contingencies. As of March 6, 2000, 200,000 of the reserve shares have been
issued in exchange for payment of $155,000, one of such contingencies.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of December 31, 1999,
by (i) each of the Company's officers and directors; (ii) each person who is
known by the Company to own beneficially 5% or more of the Company's outstanding
Common Stock; and (iii) all officers and directors of the Company as a group:
Name and Address of 5% Number of
Shareholders, Officers Shares
and Directors Owned(1) Percent
- ------------- -------- -------
Robby E. Davis/1 357,000 10.6%
Director, President and
Chief Executive Officer
4851 Ga. Hwy #85
Forest Park, GA 30297
Jeffrey Davis/1 357,000 10.5%
Director, Vice President
and Secretary
4851 Ga. Hwy #85
Forest Park, GA 30297
Ricky Davis/1 357,000 10.5%
Treasurer and Chief
Financial Officer
4851 Ga. Hwy #85
Forest Park, GA 30297
28
<PAGE>
Kerry Davis/1 357,000 10.5%
4851 Ga. Hwy #85
Forest Park, GA 30297
Davis Family Trust/2 358,000 10.6%
C/0 Mark Crouch - Trustee
PO BOX 502287
Atlanta, GA 31150
Lanier M. Davenport 300,000 8.9%
PO BOX 178
Lookout Mountain, TN 37350
Edward C. Kramer - 0.0%
Director
Kramer & Kramer, LLP
708 Third Ave.
New York, NY 10017
All Officers and Directors 1,071,000 31.5%
1. Robby F. Davis, Jeffrey Davis, Ricky Davis and Kerry Davis are
siblings and children of Frank Davis (see Significant Consultant) and each
disavows beneficial ownership of, or control over, the shares of Common Stock
owned by the other siblings.
2. All members of the Davis family associated with Save disclaim
beneficial ownership or control over this trust.
MANAGEMENT
OFFICERS AND DIRECTORS
- ----------------------
The following table sets forth the names, age, and position of each
director and executive officer of the Company.
29
<PAGE>
Name Age Position and Office Held
- ---- --- ------------------------
Robby E. Davis 31 President, Chief Executive Officer and Director
Jeffrey F. Davis 36 Vice President, Secretary and Director
Ricky Davis 38 Treasurer and Chief Financial Officer
Edward C. Kramer 48 Director
Each of the above individuals, became an officer and director of the
Company in connection with its organization, except Edward C. Kramer who became
a director in 1998. The term of office of each officer and director is one year
and until his successor is elected and qualified.
BIOGRAPHICAL INFORMATION
- ------------------------
Set forth below is biographical information for each of the Company's
officers and directors.
Robby E. Davis. President, Chief Executive Officer and Director since 1996.
Prior to the formation of SAVE, Mr. Davis was employed by Combustion Labs, Inc.
for 10 years as a senior technician installing natural gas and dual fuel
conversion kits in diesel and gasoline vehicles. He is an ASSE Certified Natural
Gas Technician and has attended numerous business and technical seminars. Davis
studied Business Administration at Clayton State College.
Jeffrey F. Davis. Vice President, Secretary and Director since 1996. Prior to
joining SAVE, Mr. Davis was employed by Clayton (Georgia) County, working
primarily in the Transportation and Development group. He holds an AA degree in
Business Administration from Clayton State College where he was named to the
Deans List.
Ricky Davis. Treasurer and Chief Financial Officer since 1996. Prior to joining
SAVE, Mr. Davis was employed by Combustion Labs, Inc. for three years as a
technician working with gasoline to natural gas conversions, for four years as
the Office Manager of a large mechanical contractor and ran his own
mechanical/electrical contracting business for 6 years. He studied Business
Management and Marketing at Griffin Area Tech, and has attended many seminars on
computer operations and accounting.
Edward C. Kramer. Director since 1998. Mr. Kramer is a partner of the New York
law firm of Kramer & Kramer. He received an A.B. degree from the University of
Pennsylvania in 1973 and a J.D. degree from the Columbia University School of
Law in 1996. He first became admitted to the New York Bar in 1997 and is
admitted to practice in the Southern and Eastern Districts of New York, the
Second Circuit Court of Appeals and the Supreme Court. Since 1991, Mr. Kramer
has practiced law as a partner of Kramer & Kramer.
30
<PAGE>
REMUNERATION OF OFFICERS AND DIRECTORS
- ----------------------------------------
Robby E. Davis/1 $40,000/yr
Jeffrey Davis/1 $40,000/yr
Ricky Davis/1 $40,000/yr
1. These officers' remuneration has been the same for the past 3 fiscal years,
except that each of these officers received $2,000 bonuses in 1999. No officers
receive any benefits and have not received any benefits for the past 3 fiscal
years. For the past 3 fiscal years, there have not been, and currently there are
no, remuneration plans, deferred benefits plans, employment contracts, deferred
compensation plans, retirement plans, active stock option plans or other
compensation related plans in effect for the officers.
SIGNIFICANT CONSULTANT
- ----------------------
Frank Davis. Director of Product Research and Development since 1996. Mr. Davis
presently serves the Company in a consulting capacity responsible for
development of the Drive-By-Wire engine conversion kits and also providing
assistance in other business matters as necessary. In 1980, he founded and until
1996 served as Chief Executive Officer of Combustion Labs, Inc., where he
conducted research and development related to converting gasoline and diesel
engines to run on natural gas or bifuel. Frank Davis is the father of Robby F.
Davis, Jeffrey Davis and Ricky Davis. In the first quarter of 2000, Frank Davis
received 100,000 shares of common stock in satisfaction of over $100,000 in
consulting fees we owed him.
RELATED PARTY TRANSACTIONS
All of the technology, know-how, devices and apparatus embodied in the
Patents and incorporated into the various products sold by us were developed and
patented by Frank Davis or Frank Davis and Robby E. Davis and assigned to the
Davis Family Trust (the "Trust"), an irrevocable trust established by Mr. Davis
for the benefit of his family and which is administered by an independent third
party. The Patents thereafter were assigned to the Trust, which such assignments
were recorded with the United States Patent and Trademark Office. Pursuant to an
agreement dated May 13, 1996 (the "License"), the Trust granted a license to us
to exploit the Patents for the life thereof (each Patent has a life of seventeen
years from the date of issue) plus any extension thereof, including the right to
market and sell any and all products developed therefrom or to grant, licenses
to others to manufacture and sell any such products, subject to the approval of
the trustee of the Trust. Our territory, though, was limited by the License to
the Continental United States, Mexico and Canada. In consideration of the
license, we are required to pay the Trust a license fee equal to $150,000 and a
royalty equal to $21 per unit sold during the life of the Patents, adjusted
annually to reflect increases in the consumer price index for the prior twelve
month period, except as hereinafter provided. Under the terms of the License,
the royalty shall be increased by an amount equal to $79. Said additional sum
shall be payable until such time as the amount generated from the sale of units
shall aggregate $150,000 plus accrued interest calculated at the rate of 12% per
annum. When said sum is paid, the royalty shall revert to the original royalty
as adjusted to reflect increases in the consumer price index.
31
<PAGE>
On June 18, 1998, the License was amended to provide that the $150,000
promissory note would be satisfied by the payment of $42,576.10 on July 31, 1998
and the delivery to the Trust of 108,000 shares of our common stock.
On January 3, 2000, the License was amended, among other things, to
extend our licensed territory to include the continental United States of
America, Mexico, Canada, Egypt as of its borders on January 3, 2000, and South
America in exchange for 250,000 shares.
- --------------------------------------------------------------------------------
Indemnification of Officers and Directors
Our certificate of incorporation provides that to the fullest extent permitted
by law, no director or officer personally liable to SAVE or its stockholders for
damages for breach of any duty owed to SAVE or its stockholders and that SAVE
may, in its by-laws or in any resolution of its stockholders or directors,
undertake to indemnify the officers and directors of SAVE against any
contingency or peril as may be determined to be in the best interests of SAVE,
and in conjunction therewith, to procure, at SAVE's expense, policies of
insurance. Georgia law, under which SAVE is incorporated, allows a corporation
to indemnify its directors and officers if such director or officer acted in
good faith and in a manner such director or officer reasonably believed to be in
, or not opposed to, the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. We intend to obtain a director and officer liability
insurance policy covering each of our directors and executive officers.
DESCRIPTION OF SECURITIES
General
Authorized Capital Stock.
We are authorized to issue an aggregate of 25,000,000 shares of capital
stock, consisting of 20,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. As of
the date hereof, 3,386,000 shares of Common Stock are outstanding and no shares
of Preferred Stock are outstanding.
32
<PAGE>
Common Stock.
The shares of Common Stock outstanding are, and the Shares issued
hereby will be, legally issued, fully paid and non-assessable. Holders of the
Common Stock are entitled to one vote per share with respect to all matters that
are required by law to be submitted to a vote of stockholders. Holders of the
Common Stock are not entitled to cumulative voting. The Common Stock has no
preemptive, or sinking fund rights.
We have not paid any dividends on its Common Stock and do not intend to
pay dividends in the foreseeable future. Any earnings will be retained by us for
working capital. Future dividend policy will be determined by the Board of
Directors in light of financial need and earnings, if any, and other relevant
factors.
In the event of our liquidation, dissolution or winding up, holders of
Common Stock, subject to the rights of any series of Preferred Stock which may
be designated and issue in the future, are entitled to share ratably all our
remaining assets, after satisfaction of our liabilities.
Preferred Stock.
As of yet, the Preferred Stock has not been designated and no shares of
Preferred Stock have been issued. We have reserved the right for the Board of
Directors to designate the Preferred Stock into such classes or series as it
deems necessary. Any such series or classes of Preferred Stock which may be
designated by the Board of Directors in the future may effect the rights of the
class of Common Stock.
Transfer Agent
The Transfer Agent for our Common Stock is Interwest Transfer Company,
located at 1981 East Murray, Holladay Road, Suite 100, Salt Lake City, Utah
84117.
Reports to Stockholders.
We intend to furnish to our stockholders, after the close of each
fiscal year, an annual report containing audited financial statements. In
addition, we will furnish our stockholders with quarterly reports for the first
three quarters of each fiscal year containing unaudited financial information.
PLAN OF DISTRIBUTION
We are required to pay all fees and expenses incident to the registration of the
shares.
33
<PAGE>
LEGAL MATTERS
On November 24, 1999 a lawsuit was served against us in the State Court
of Clayton County, State of Georgia, File No.99-CV-04454-E, entitled Roger
Shugart v. Save On Energy, Inc. f/k/a Electronic Fuel Control, Inc.. The
Plaintiff seeks $120,000 plus interest stemming from a personal services
agreement between Plaintiff and us for certain services to be rendered in
connection with a fuel conversion project in Uzbekistan in 1997 and 1998. We
intend to bring into the lawsuit or arbitration, as the case may be, as a
third-party defendant, American Engineering Corporation, on a claim for
indemnification. See, Management's Discussion and Analysis and Footnote 10 to
the attached financial statements for 1998 and 1999.
EXPERTS
The financial statements for the fiscal years ended December 31, 1999 and
December 31, 1998 included in this prospectus have been so included in reliance
on the report of Jack Kane & Company, P.C., independent accountants, given on
the authority of such firm as experts in auditing and accounting.
WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement filed with the Securities
and Exchange Commission. At your request, we will provide you, without charge, a
copy of any exhibits to the registration statement. If you would like more
information, write or call us at:
SAVE ON ENERGY, INC.
Ste. 211 4851 Georgia Hwy 85
Forest Park Georgia 30050
(404) 765-0131
We intend to provide to our stockholders annual reports containing audited
financial statements and other appropriate reports. In addition, we file annual,
quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information we file at the Securities and Exchange
Commission's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the Securities
and Exchange Commission. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our Securities and Exchange Commission filings are also available to the
public free of charge on the Securities and Exchange Commission's Internet site
at http:\\www.sec.gov.
34
<PAGE>
Save On Energy, Inc.
Index to Consolidated Financial Statements
Audited Page
- ------- ----
Report of Independent Certified Public Accounts.............................F-1
Balance Sheets as of December 31, 1999 and December 31, 1998................F-5
Statement of Operations for the fiscal years ended
December 31, 1999 and December 31, 1998...................................F-6
Statement of Stockholders' Equity for the
fiscal years ended December 31, 1999 and December 31, 1998................F-7
Statement of Cash Flows for the fiscal years ended
December 31, 1999 and December 31, 1998...................................F-8
Notes to Financial
Statements..................................................................F-10
Supplementary
Schedules...................................................................F-17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Our certificate of incorporation provides that to the fullest extent permitted
by law, no director or officer shall be personally liable to SAVE or its
stockholders for damages for breach of any duty owed to SAVE or its stockholders
and that SAVE may, in its by-laws or in any resolution of its stockholders or
directors, undertake to indemnify the officers and directors of SAVE against any
contingency or peril as may be determined to be in the best interests of SAVE,
and in conjunction therewith, to procure, at SAVE's expense, policies of
insurance. Georgia law, under which SAVE is incorporated, allows a corporation
to indemnify its directors and officers if such director or officer acted in
good faith and in a manner such director or officer reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. We intend to maintain a director and officer liability
insurance policy covering each of our directors and executive officers.
Item 25. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all expenses
payable by the Registrant in connection with the registration of the shares of
common stock offered hereby, other than underwriting discounts and commissions:
35
<PAGE>
Registration Fee--Securities and Exchange Commission $ 2,182
*Accountants' fees and expenses .............................$20,000
*Legal fees and expenses ....................................$20,000
*Printing and EDGAR expenses ................................$10,000
*Miscellaneous ..............................................$ 1,000
-------
Total ..............................................$53,182
=======
* Estimate
Item 26. Recent Sales of Unregistered Securities
Pursuant to Section 4(2) of the Securities Act, SAVE issued the following:
(i) In June 1998, two qualified investors, made loans to us of $55,000,
$110,000, total. Each investor received a promissory note convertible for common
stock at $4.00 per share, along with 20,000 warrants, each warrant entitling the
holder to purchase 1 share of common stock at a price of $1.50. The warrants
expire in June 2000. As of the date of this filing, the promissory notes have
been satisfied and will not be converted into common stock. Commissions were
paid in the form of 20,000 warrants, total, each warrant entitling the holder to
purchase 1 share of common stock at a price of $1.50. The warrants expire in
June 2000.
(ii) In December 1998, a qualified investor made a loan to us of $43,500. The
investor received a promissory note convertible for common stock at $4.00 per
share, along with 17,400 warrants, each warrant entitling the holder to purchase
1 share of common stock at a price of $1.50. The warrants expire in December
2000. As of the date of this filing, the promissory note has been satisfied and
will not be converted into common stock. Commissions were paid in the form of
7,000 warrants, total, each warrant entitling the holder to purchase 1 share of
common stock at a price of $1.50. The warrants expire in December 2000.
(iii) In 1999, qualified investors made loans to us of $150,000. Each investor
received a 1 year promissory note convertible for common stock at $0.75 per
share.
(iv) In January 2000, Lanier Davenport, a qualified investor, as well as a
consultant to us, received (Mr. Davenport and his designees) 600,000 common
shares in exchange for services directly to us, services in connection with
International Fuel Systems, Inc. and for direct investments of $233,500 made in
1998 and 1999.
(v) In January and February 2000, Lanier Davenport, a qualified investor, as
well as a consultant to us, purchased 200,000 shares of common stock for an
investment of $150,000, i.e., $0.75 per share. Such funds were used to retire
the promissory notes discussed in (i) and (ii), above.
36
<PAGE>
(vi) In 2000, qualified investors made loans to us of $100,000. Each investor
received a 1 year promissory note convertible for common stock at $0.75 per
share.
(vii) In 1996 and 1997, we issued 580,000 shares of common stock to qualified
investors under Rule 504 of Regulation D the Securities Act of 1933, as amended.
(viii) In 1996, 20,000 shares of common stock were issued to John I. Davis for
services.
(ix) In 1997, 1,428,000 shares of common stock were issued to Robby E. Davis,
Ricky Davis, Jeffrey Davis and Kerry Davis for services, each receiving 357,000
shares.
(x) In 1997, the Davis Family Trust, in connection with a license agreement
respecting certain patents, received 108,000 shares of common stock.
(xi) In 2000, the Davis Family Trust, in connection with an amendment to a
license agreement respecting certain patents, received 250,000 shares of common
stock.
(xii) In 2000, 100,000 shares of common stock were issued to Frank Davis or his
designee in lieu of past salary.
(xiii) In 2000, 100,000 shares of common stock were issued to the Bressner
Group, Ltd. For services.
(xiv) In 1998, 27,000 warrants were issued for commissions with respect to items
(i) and (ii), above, each warrant entitling the holder to purchase 1 share of
common stock at a price of $1.50 per share. These warrants expire in 2000.
(xv) In 1998, 252,500 warrants were issued for services, each warrant entitling
the holder to purchase 1 share of common stock at a price of $1.00 per share.
These warrants expire in 2003.
(xvi) In 2000, 62,500 warrants were issued for services, each warrant entitling
the holder to purchase 1 share of common stock at a price of $1.00 per share.
These warrants expire in 2005.
II-1
Item 27. Exhibits
The following exhibits are filed as part of this registration
statement. Exhibit numbers correspond to the exhibit requirements of Regulation
S-B.
37
<PAGE>
Number Description
- ------ -----------
3.1 Articles of Incorporation of Save On Energy , Inc.
3.2 Amendment to Articles of Incorporation of Save On Energy , Inc.
3.3 By-laws of Save On Energy, Inc.
4.1 Specimen common stock certificate.
10.1 May 13, 1996 License Agreement By and Between the Davis Family Trust and
Electronic Fuel Control, Inc. ("License Agreement").
10.2 June 18, 1998 Amendment to License Agreement.
10.3 January 3, 2000 Amendment to License Agreement.
10.4 November 23, 1999 Consulting Agreement between Save on Energy, Inc. and
MBO, Inc.
10.5 April 29, 1996 Exclusive Supply Agreement between Ambac International
Corporation and Electronic Fuel Control, Inc.
10.6 Agreement re: IFS and Davenport
23.2 Consent of Certified Public Accountant
II-2
Item 28. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10 (a) (3) of the Securities Act; (ii) reflect in
the prospectus any facts or events which, individually or together, represent a
fundamental change in the information set forth in the Registration Statement,
and (iii) include any additional or changed material information with respect to
the plan of distribution.
2. That for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
38
<PAGE>
4. That for the purpose of determining any liability under the Securities Act,
to treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant under Rule 424(b)(1) or (4), or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Commission declared it effective.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in a successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issuer.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Atlanta,
State of Georgia, on March 22, 2000.
SAVE ON ENERGY, INC.
By: /s/ Robby E. Davis
------------------
President and Directors and
Chief Executive Officer
39
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey Davis and Ricky Davis, and either
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on March 22, 2000.
Signature Title
- --------- -----
/s/ Robby E. Davis President, Chief Executive
- --------------------------- Officer and Director
Robby E. Davis
/s/ Jeffrey Davis
- ---------------------------
Jeffrey Davis Vice President, Secretary and Director
/s/ Ricky Davis
- ---------------------------
Ricky Davis Principal Financial Officer, Principal
Accounting Officer, Treasurer and
Chief Financial Officer
40
<PAGE>
SAVE ON ENERGY, INC.
(FORMERLY ELECTRONIC FUEL CONTROL, INC.)
(A COMPANY IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
SAVE ON ENERGY, INC.
(FORMERLY ELECTRONIC FUEL CONTROL, INC.)
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Report of Independent Accountants
Financial Statements
Balance Sheets Exhibit "A"
Statement of Operations Exhibit "B"
Statement of Stockholders' Equity Exhibit "C"
Statement of Cash Flows Exhibit "D"
Notes to Financial Statements
Supplementary Information
Cost of Sales Schedule "1"
Operating Expenses Schedule "2"
Other Deductions Schedule "3"
F-1
<PAGE>
To the Stockholders of
Save On Energy, Inc.
4851 Georgia Highway 85
Forest Park, Georgia 30050
Report of Independent Accountants
---------------------------------
We have audited the accompanying balance sheets of Save on Energy,
Inc.,(Formerly Electronic Fuel Control, Inc.), a development stage company as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. 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 audit.
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 audit provides 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 Save on Energy, Inc.
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 7 of the
financial statements, the company has suffered recurring losses from operations
in its developmental stage. This condition raises substantial doubt about its
ability to continue as a going concern. Management's plans regarding these
matters are also described in Note 7. The financial
F-2
<PAGE>
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of cost of sales and
operating expenses are presented for the purpose of additional analysis and are
not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
JACK KANE & COMPANY, P.C.
January 21, 2000
F-3
<PAGE>
EXHIBIT "A"
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
DECEMBER 31,
1999 1998
---------- ----------
ASSETS
Current assets
Cash $ 135,766 $ 21,914
Accounts receivable, net (Note 2) 22,773 92,168
Inventory 110,830 214,949
---------- ----------
Total current assets 269,369 329,031
---------- ----------
Property, plant and equipment
Equipment and leasehold improvements 91,624 91,624
Less: accumulated depreciation 58,578 41,261
---------- ----------
Net fixed assets 33,046 50,363
---------- ----------
Other assets
Long term notes receivable 22,500 88,728
Licenses, net (Note 3) 106,324 117,785
---------- ----------
Total other assets 128,824 206,513
---------- ----------
Total assets $ 431,239 $ 585,907
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and loans payable (Note 4) $ 443,500 $ 203,500
Accounts payable 83,145 151,031
Taxes payable 80,558 47,874
Accrued loss on litigation (Note 10) 125,000 -
Accrued expenses 44,507 40,914
---------- ----------
Total current liabilities 776,710 443,319
---------- ----------
Commitments and contingencies (Note 7)
Stockholders' equity (Note 6)
Preferred stock, $.01 par value,
authorized 5,000,000 shares,
none issued $ - $ -
Common stock, $.001 par value,
authorized 20,000,000 shares,
2,136,000 shares issued 2,136 2,136
Additional paid-in capital 1,164,349 1,031,349
Deficit accumulated during the
development stage (1,511,956) (890,897)
---------- ----------
Total stockholders'
(deficit) equity (345,471) 142,588
---------- ----------
Total liabilities and
stockholders' equity $ 431,239 $ 585,907
========== ==========
The accompanying notes to the financial statements are an integral part of these
statements.
F-4
<PAGE>
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
DECEMBER 31,
Common
Stock
Shares Amount
Balance, January 1, 1998 2,136,000 $ 2,136
Increase in additional paid in capital - -
Net loss - -
--------- -------
Balance, December 31, 1998 2,136,000 2,136
Increase in additional paid in capital - -
Net loss - -
--------- -------
Balance, December 31, 1999 2,136,000 $ 2,136
========= =======
Additional disclosure for development stage companies
Common stock issued:
At par 1,536,000 $ 1,536
For services 416,000 416
From private offering 184,000 184
--------- -------
2,136,000 $ 2,136
========= =======
The accompanying notes to the financial statements are an integral part of these
statements.
F-5
<PAGE>
EXHIBIT "C"
Deficit
Accumulated
Additional During
Paid-in Development
Capital Stage
$ 830,849 $ (533,736)
200,500 -
- (357,161)
---------- -----------
1,031,349 (890,897)
133,000 -
- (621,059)
---------- -----------
$1,164,349 $(1,511,956)
========== ===========
$ -0-
20,384
1,143,965
---------
$1,164,349
F-6
<PAGE>
EXHIBIT "B"
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31,
1999 1998
---- ----
Sales $ 560,124 $ 539,443
Cost of sales (Schedule "1") 329,791 194,701
--------- ---------
Gross profit 230,333 344,742
Operating expenses (Schedule "2") 693,379 687,420
--------- ---------
Operating loss (463,046) (342,678)
Other income and expense (Schedule "3") 158,013 14,483
--------- ---------
Net loss $(621,059) $(357,161)
========= =========
The accompanying notes to the financial statements are an integral part of these
statements.
F-7
<PAGE>
EXHIBIT "D"
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1999 1998
---- ----
Cash flows from operating activities
Net loss $(621,059) $(357,161)
Adjustments to reconcile net loss
to net cash (used in)
operating activities:
Depreciation and amortization 28,778 34,161
Changes in assets and liabilities:
Decrease in accounts receivable,
net 69,395 15,771
Decrease (increase) in inventory 104,119 (116,048)
Decrease in other current assets - 1,118
Decrease (increase) in
long term notes receivable 66,228 (24,967)
(Decrease) increase in
accounts payable (67,886) 108,993
Increase in taxes payable 32,684 27,684
Increase in accrued
litigation loss 125,000 -
Increase (decrease) in
accrued expenses 3,593 (61,007)
--------- ---------
Net cash used in
operating activities (259,148) (371,456)
--------- ---------
Cash flows from investing activities
Purchase of fixed assets - (10,193)
Proceeds from sale of fixed assets - 8,800
--------- ---------
Net cash used in
investing activities - (1,393)
--------- ---------
The accompanying notes to the financial statements are an integral part of these
statements.
F-8
<PAGE>
EXHIBIT "D"
(Continued)
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1999 1998
---- ----
Cash flows from financing activities
Net proceeds from line of credit 90,000 50,000
Proceeds from convertible
notes payable 150,000 153,500
Reduction of notes payable in
debt for equity exchange - (124,226)
Increase in additional
paid in capital 133,000 200,500
----------- ----------
Net cash provided by
financing activities 373,000 279,774
----------- ----------
Net increase decrease
in cash 113,852 (93,075)
Cash, at beginning 21,914 114,989
----------- ----------
Cash, at end $ 135,766 $ 21,914
=========== ==========
Supplementary information
Cash paid during the year for:
Interest $ 29,290 $ 9,688
Income taxes - -
Additional disclosure for development state companies
Cumulative amounts since
inception:
Net cash used in
operating activities $(1,209,834) $ (950,686)
Net cash used in
investing activities (93,825) (93,825)
Net cash provided by
financing activities 1,439,425 1,066,425
----------- ----------
$ 135,766 $ 21,914
=========== ==========
The accompanying notes to the financial statements are an integral part of these
statements.
F-9
<PAGE>
SAVE ON ENERGY, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
SUPPLEMENTARY INFORMATION
YEAR ENDED DECEMBER 31,
1999 1998
---- ----
SCHEDULE "1": COST OF SALES
Inventory at beginning $214,949 $ 98,901
Purchases and freight 225,672 310,749
-------- --------
440,621 409,650
Inventory at end 110,830 214,949
-------- --------
Cost of sales $329,791 $194,701
======== ========
SCHEDULE "2": OPERATING EXPENSES
Salaries and wages $175,679 $210,088
Payroll taxes 13,007 14,313
Employee benefits 3,211 13,374
Consulting fees
and outside services 108,053 81,238
Rent 25,950 26,053
Light, heat and power 14,395 14,812
Repairs and maintenance 1,461 3,149
Factory supplies and expenses 10,067 6,842
Research and product testing 3,155 10,103
Insurance 22,841 38,393
Depreciation 17,316 22,699
Amortization of license 11,461 11,462
Provision for doubtful accounts 141,156 67,818
Licenses and permits 358 2,136
Royalties and patents 15,978 12,286
Auto and truck expense 2,996 9,387
Sales promotion, advertising
and public relations 5,847 19,367
Professional fees 35,910 55,567
Travel and transportation 47,931 33,121
Telephone 13,556 14,943
Entertainment 4,398 2,675
Office supplies and expense 14,602 10,551
Dues and subscriptions 2,814 2,253
Sundry taxes 1,061 2,445
Miscellaneous expense 176 2,345
-------- --------
Total operating expenses $693,379 $687,420
======== ========
SCHEDULE "3": INCOME AND EXPENSE
Loss on litigation $125,000 $ -
Interest expense 35,489 21,398
Interest income (2,476) (6,915)
-------- --------
Total other income
and expense $158,013 $ 14,483
======== ========
F-10
<PAGE>
SUPPLEMENTARY INFORMATION
F-11
<PAGE>
SAVE ON ENERGY, INC.
(FORMERLY ELECTRONIC FUEL CONTROL, INC.)
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Save on Energy, Inc. ("the Company") was incorporated in Georgia on April
1, 1996 to manufacture and market retrofit systems for the conversion of
gasoline and diesel engines to non-petroleum based fuels such as
compressed natural gas. The Company acquired the exclusive right in North
America to exploit the patents relating to the retrofit devices pursuant
to a license ("the License) acquired on June 1, 1996. On January 3, 2000,
the license was restricted to the United States, Canada, Mexico and the
Nation of Egypt in exchange for a modification of the appertaining
royalty agreement and an issuance of 250,000 shares of additional stock.
The Company is a Development Stage Company as defined in
Financial Accounting Standards Board Statement No. 7. During
1999 and 1998, the Company devoted substantially all of its
efforts to establishing a new business.
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the
financial statements and results of operations for the reporting period.
Actual results could differ from those estimates.
Concentration of Credit Risk
The Company occasionally maintains deposits in excess of federally
insured limits. Statement of Financial Accounting Standards No. 105
identifies these items as a concentration of credit risk requiring
disclosure, regardless of the degree of risk. The risk is managed by
maintaining all deposits in high quality financial institutions.
Cash and Cash Equivalents
For the purpose of reporting cash flows, cash includes cash on hand and
savings accounts.
Inventory
Inventory is stated at the lower of cost, determined on the first-in,
first-out, (FIFO) method, or market.
F-12
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
provided for in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated service lives principally by
the straight line method. Maintenance, repairs and minor improvements are
charged to operations as incurred. Renewals and betterments, which
materially increase the value of property, are capitalized.
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. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statements and income tax purposes.
The differences related primarily to allowance for doubtful receivables
(deductible for financial statement purposes but not for income tax
purposes). The deferred tax assets and liabilities represent the future
tax 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 and tax credits
that are available to offset future taxable income, and reduced by the
portion of deferred taxes not likely to be realized
2. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
1999 1998
---- ----
Accounts receivable $ 23,218 $158,794
Interest receivable 4,180 7,499
Other receivables 375 2,375
-------- --------
27,773 168,668
Less: allowance for
doubtful accounts 5,000 76,500
-------- --------
$ 22,773 $ 92,168
======== ========
3. LICENSES
The License gives the Company the exclusive North American rights to
utilize and exploit five patents including marketing and selling products
and granting sublicenses to others. In addition, the Company has the
first option to acquire the license for the same patents in other
countries where it has not yet been granted. The underlying patents were
developed by the Company's President or the Company's Chief Consultant
and have since been assigned to a trust ("the Trust" or "Licensor"). the
beneficiaries of which are all related to the Chief Consultant.
F-13
<PAGE>
In consideration for the License, the Company executed a promissory note
for $150,000 and is required to pay a royalty of $21 per patent per unit
sold during the life of four of the patents and $150 per unit sold on a
fifth patent for a dual fuel control system, adjusted annually to reflect
changes in the consumer price index. Substantially all of the units sold
require payments under two patents. Under the terms of the License, the
royalty shall be increased by an amount equal to $79 (the "Additional
Royalty") per patent per unit. The Additional Royalty shall be payable
until such time as the amount of Additional Royalty generated from the
sale of units shall aggregate $150,000 plus accrued interest calculated
at the rate of 12% per annum. When said sum is paid, the royalty shall
revert to the original royalty as adjusted to reflect increases in the
consumer price index.
The promissory note was marked paid and returned on June 18, 1998 in
consideration of an issuance of 108,000 shares of the company's stock.
The license agreement was amended on January 3,2000. The amendment
restricts the license rights to the United States, Canada, Mexico and
Egypt, and eliminates all quotas as specified in the original agreements.
In exchange for this amendment the company will issue 250,000 shares of
voting stock to the trust.
4. NOTES AND LOANS PAYABLE
An analysis of notes and loans payable is set forth below:
1999 1998
---- ----
A. Revolving loan payable to Peachtree
National Bank, dated 1998 plus
interest at 8.75%, renewed in 1999
at 10.5% per annum, payable on
May 5, 2000. The bank holds
security interest in the company's
equipment, accounts receivable and
shares in company stock. $140,000 $ 50,000
B. Convertible notes payable to
holders of Warrants, dated 1998,
plus interest at 9% convertible
at $4.00 per share, payable in
18 months. 153,500 153,500
C. Convertible notes payable dated
1999 plus interest at 12%
convertible at $.75 per share,
payable in one year. 150,000 -
-------- --------
$443,500 $203,500
======== ========
F-14
<PAGE>
5. INCOME TAXES
DEFERRED TAX ASSETS ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
Net
Allowance Operating
For Loss
Bad Debts Carryforwards Total
--------- ------------- -----
Balance at December 31, 1997:
<S> <C> <C> <C>
As previously reported $ 4,000 $209,600 $213,600
Change during 1998 26,600 140,700 167,300
-------- -------- --------
Balance at
December 31, 1998 30,600 350,300 380,900
Change during 1999 (28,600) 248,500 219,900
-------- -------- --------
2,000 598,800 600,800
Valuation allowance 2,000 598,800 600,800
-------- -------- --------
Balance at
December 31, 1999 $ -0- $ -0- $ -0-
======== ======== ========
</TABLE>
The Company's net operating loss carry forwards of approximately $1,372,200
expire as follows:
Year Amount
---- --------
2011 $ 246,200
2012 277,800
2013 351,900
2014 496,300
----------
$1,372,200
6. STOCKHOLDERS' EQUITY
Compensation Plans
The Board of Directors and stockholders of the Company have ratified and
approved the Electronic Fuel Control, Inc. 1996 Stock Option Plan (the
"Plan" for which the Company has reserved 500,000 shares of Common stock
for issuance upon the exercise of qualified and non-qualified stock
options granted under the Plan to employees, advisors, consultants and
Directors of the Company at prices and on terms which have not been
determined. As of December 31, 1999 no options have been issued under the
Plan.
On April 29, 1998, as consideration for consulting services with regard
to raising capital from sales in the United States and abroad, the
Company issued warrants which entitle the holders thereof, subject to the
provisions of the warrants, to purchase an aggregate of 252,500 shares of
the Company's Common Stock for $1.00 per share. These warrants expire on
April 29, 2003.
F-15
<PAGE>
In June, 1998, in conjunction with a convertible debt offer (Note 4), the
Company issued warrants which entitle the holders thereof, subject to the
provisions of the warrants, to purchase 60,000 shares of the Company's
Common Stock for $1.50 per share. These warrants expire in June, 2000.
In December 1998, in conjunction with a convertible debt offer (Note 4),
the Company issued warrants which entitle the holders thereof, subject to
the provisions of the warrants, to purchase 24,400 shares of the
Company's Common Stock for $1.50 per share. These warrants expire in
December, 2000.
On April 29, 1998, the Company filed Articles of Amendment of Certificate
of Incorporation in the office of the Secretary of State of Georgia
changing its name to Save On Energy, Inc.
7. COMMITMENTS AND CONTINGENCIES
Minimum Royalties
Pursuant to the License (Note 3), the Company had committed to sell a
minimum number of units each license year ending on May 31. The License
provides for a minimum number of units to be sold and royalties to be
paid each year beginning with 2,500 units in the first year and
increasing one thousand units each year through the eighth year. In the
ninth year and thereafter a minimum of 110,000 units were to be sold.
In June, 1997, the Licensor agreed to add the quotas shortfall from the
first year to the second year, increasing the second year quota to 5,882
units. In June, 1998, the Licensor agreed to suspend the quotas for a
period of three (3) years, i.e. there would be no quotas for the Company
to meet until the license year beginning June 1, 2001 at which time the
quotas would start at 2,500 units per year and continue as is now set
forth in the License Agreement. The licensor had the right to terminate
the License if the quota in any year was not met.
As per Note 3, the quotas have been stricken from the license agreement
in return for further territorial restrictions and issuance of voting
stock.
Consulting Agreement
The Company had a three-year consulting agreement with its Chief
Consultant commencing June 1, 1996. The agreement provides for
compensation of $75,000 in the first year, $80,000 in the second year and
$85,000 in the final year of the agreement. Inasmuch as the Company has
been unable to maintain the agreement, the Chief Consultant has waived
the arrears. The agreement lapsed during 1999 and a further contract has
yet to be signed.
Industrial Lease
The lease on the Company's office and warehouse space expires February
29, 2000.
F-16
<PAGE>
Going Concern
As shown in the accompanying financial statements, the Company incurred a
net loss of $496,059 during the year ended December 31, 1999, and as of
that date, the Company's current liabilities exceeded its current assets
by $382,341 and its total liabilities exceeded its total assets by
$220,471. These factors create an uncertainty about the Company's ability
to continue as a going concern. Management of the Company is developing a
plan to reduce its liabilities by restructuring its debts and converting
a substantial portion into equity, and issuance of additional stock to
shareholders. The ability of the Company to continue as a going concern
is dependent on the plan's success. The financial statements do not
include any adjustments that might be necessary if the Company is unable
to continue as a going concern.
8. RELATED PARTY TRANSACTIONS
During 1998 and 1999, the Company shared general overhead with Combustion
Labs, Inc., a prior licensee, controlled by the Davis Family Trust and
its beneficiaries who are officers of the Company. In addition, the
Company licenses proprietary technology from the Davis Family Trust.
9. PRIOR PERIOD ADJUSTMENTS
The Company's previously issued 1998 financial statements have been
corrected in the current year as a result of certain disclosures. This
resulted in the following changes to accumulated deficit and the related
operating results.
Also corrected was a misstatement of capital stock issued to a
prospective key employee as an inducement to join the Company. The stock
was recorded but never issued inasmuch as the employee reneged and was
never hired.
Accumulated
Deficit Net Loss
As previously reported,
December 31, 1998 $(859,583) $(325,607)
Underaccrual of professional fees
and consultant fees (26,256) (26,256)
Underaccrual of royalty fees
payable to licensor (5,298) (5,298)
Cancellation of unissued
capital stock 240 -
--------- ------
As restated, December 31, 1998 $(890,897) $(357,161)
========= =========
F-17
<PAGE>
The Company's 1998 balance sheet has been corrected to reflect an
agreement with the Davis Family Trust whereby the trust agreed to reduce
the Company's liability by $80,650 in exchange for 108,000 shares.
10. LITIGATION LOSS
In 1999 an independent consultant filed suit against the Company to
recover fees and damages of $125,000 inclusive of interest to December
31, 1999. The consultant's complaint originated from a contract to
provide personal services and expertise, in the field of diesel and
gasoline to natural gas conversions, on a project that occured in 1997
and 1998 in the country of Uzbekistan. The Company contracted with the
consultant at the direction and benefit of another party who was the
primary contractor of the project. Although the Company has defenses
against the plaintiff and will have a recovery claim against the primary
contractor, it is management's opinion, supported by counsel, that a loss
has been sustained in the period. Accordingly, they have accrued the loss
as prescribed by Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies.
F-18
[Letterhead of Secretary of State, State of Georgia]
CONTROL NUMBER: 9610956
EFFECTIVE DATE: 04/01/1996
COUNTY : CLAYTON
REFERENCE : 0091
PRINT DATE : 04/02/1996
FORM NUMBER : 0311
CSC NETWORKS
LISA WILLIAMS
66 LUCKIE STREET
ATLANTA, GA 30303
CERTIFICATE OF INCORPORATION
I, the Secretary of State and the Corporation Commissioner of the State of
Georgia, do hereby certify under the seal of my office that
ELECTRONIC FUEL CONTROL, INC.
has been duly incorporated under the laws of the State of Georgia on the
effective date stated above by the filing of articles of incorporation in the
office of the Secretary of State and by the paying of fees as provided by Title
14 of the Official Code of Georgia Annotated.
WITNESS my hand and official seal in the City of Atlanta and the State of
Georgia on the date set forth above.
[Seal of the State of Georgia]
/s/ LEWIS A. MASSEY
-------------------
LEWIS A. MASSEY
SECRETARY OF STATE
<PAGE>
ARTICLES OF INCORPORATION OF
ELECTRONIC FUEL CONTROL, INC.
The undersigned, an individual, does hereby act as incorporator in adopting the
following Articles of Incorporation for the purpose of organizing a business
corporation in accordance with the provisions of the Georgia Business
Corporation Code:
FIRST: The name of the corporation (hereinafter referred to as the
"corporation") is "Electronic Fuel Control, Inc."
SECOND: (a) The total number of shares of capital stock which the
corporation shall have authority to issue is Twenty Five Million (25,000,000)
shares, of which Twenty Million (20,000,000) shares are designated as common
stock with a par value of $.001 per share and Five Million (5,000,000) shares
are designated as preferred stock with a par value of $.01 per share.
(b) The Corporation is authorized to issue the preferred shares from
time to time in one or more series with such designations, relative rights,
preferences, or limitations as shall be fixed by the Board of Directors in the
resolution or resolutions providing for the issue of such shares, subject to the
limitation, that if the stated dividends and amounts payable on liquidation are
not paid in full, the shares of all series shall share ratably in the payment of
dividends including accumulations, if any, in accordance with the sums which
would be payable on such shares if all dividends were declared and paid in full,
and in any distribution of assets, other than by way of dividends, in accordance
with the sums payable as if same were discharged in full. The Board of Directors
is expressly authorized to adopt such resolution or resolutions providing for
the issue of such shares from time to time as the Board of Directors, in its
discretion, may deem desirable.
THIRD: The street address and the county of the registered agent of the
corporation in the State of Georgia is 4851 Georgia 85, Suite 210, Forest Park,
Clayton County, Georgia 30050. The name of the registered agent of the
corporation at that address is Frank Davis.
FOURTH: The name and address of the incorporator are:
Name Address
---- -------
William P. Ruffa 150 East 58th Street, New York, NY 10155
FIFTH: The street address of the corporation is 4851 Georgia Highway
85, Suite 210, Forest Park, Clayton County, Georgia 30050.
<PAGE>
SIXTH: The purposes for which the corporation is organized, which shall
include the authority of the corporation to engage in any lawful business, are
as follows:
To carry on a general mercantile, industrial, investing, and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, and in
any other lawful capacity, goods, wares, merchandise, commodities, and
unimproved, improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components, resultants, and
by-products thereof; to acquire by purchase or otherwise own, hold, lease,
mortgage, sell, or otherwise dispose of, erect, construct, make, alter, enlarge,
improve, and to aid or subscribe toward the construction, acquisition, or
improvement of any factories, shops, storehouses, buildings, and commercial and
retail establishments of every character, including all equipment, fixtures,
machinery, implements, and supplies necessary, or incidental to, or connected
with, any of the purposes or business of the corporation; and generally to
perform any and all acts connected therewith or arising therefrom or incidental
thereto, and all acts proper or necessary for the purpose of the business.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase, or
otherwise acquire, and to own, use, hold, sell convey, exchange, lease,
mortgage, work, clear, improve, develop, divide, and otherwise handle, manage,
operate, deal in, and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings, and other works and any
interest or right therein; to take, lease, purchase, or otherwise acquire, and
to own, use, hold, sell, convey, exchange, hire; lease, pledge, mortgage, and
otherwise handle, and deal in an dispose of, as principal, agent, broker, and in
any lawful capacity, such personal property, chattels, chattels real, rights,
easements, privileges, notes, bonds, mortgages, and securities as may lawfully
be acquired, held, or disposed of; and to acquire, purchase, sell, assign,
transfer, dispose of; and generally deal in and with, as principal, agent,
broker, and in any lawful capacity, mortgages and other interests in real,
personal, and mixed properties; to carry on a general construction, contracting,
building, and realty management business as principal, agent, representative,
contractor, subcontractor, and in any other lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in
respect of,
<PAGE>
or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to
account, grant licenses and immunities in respect of, manufacture under and to
introduce, sell, assign, mortgage, pledge, or otherwise dispose of, and, in any
manner deal with and contract with reference to:
(a) inventions, devices, formulae, process, and any improvements and
modifications thereof;
(b) letters patent, patent rights, patented process, copyrights,
designs, and similar rights, trade-marks, trade symbols, and other indications
of origin and ownership granted by or recognized under the laws of the United
States of America or of any state or subdivision thereof, or of any foreign
country or subdivision thereof, and all rights connected therewith or
appertaining thereunto;
(c) franchises, licenses, grants, and concessions.
To have all of the general powers granted to corporation organized
under the Georgia Business Corporation Code, whether granted by specific
statutory authority or by construction of law.
SEVENTH: No holder of any of the shares of any class of the capital
stock of the corporation shall be entitled as of right to subscribe for,
purchase, or otherwise acquire any shares of any class of the capital stock of
the corporation which the corporation proposes to issue or any rights or options
which the corporation proposes to grant for the purchase of shares of any class
of the capital stock of the corporation or for the purchase of any shares,
bonds, securities or obligations of the corporation which are convertible into
or exchangeable for, or which carry any rights, to subscribe for, purchase or
otherwise acquire any shares of any class of capital stock of the corporation,
whether now or hereafter authorized or created, may be issued, or may be
reissued if the same have been reacquired and if their reissue is not
prohibited, and any and all of such rights and options may be granted by the
Board of Directors to such persons or entities, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering the same, or any thereof, to any said
holder.
EIGHTH: The corporation shall, to the fullest extent permitted by the
provisions of the Georgia Business Corporation Code, as the same may be
<PAGE>
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said provisions from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said provisions, and
the indemnification provided for herein shall not be deemed to be exclusive of
any other rights to which those indemnified may be entitled under By-law, vote
of shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of the
Georgia Business Corporation Code, as the same may be amended or supplemented.
TENTH: Action required or permitted by the provisions of the Georgia
Business Corporation Code to be taken at a shareholders' meeting may be taken
without a meeting in accordance with the provisions of Section 14-2-704 of the
Georgia Business Corporation Code if the action is taken by the persons who
would be entitled to vote at a meeting of the shareholders a number of shares
having voting power to cast not less than the minimum number (or numbers, in the
case of voting by groups) of votes that would be necessary to authorize or take
the action at a meeting at a which all shareholders entitled to vote were
present and voted.
ELEVENTH: In discharging the duties of their respective positions and
in determining what is believed to be in the best interest of the corporation,
the Board of Directors, committees of the Board of Directors, and individual
Directors, in addition to considering the effects of any action on the
corporation or its shareholders, may consider the interests of the employees,
customers, suppliers, and creditors of the corporation and its subsidiaries, the
communities in which offices or other establishments of the corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent.
TWELFTH: This Article constitutes an undertaking by the corporation to
publish a notice of filing these Articles of Incorporation as requires by the
provisions of subsection (b) of Section 14-2-201.1 of Georgia Business
Corporation Code.
THIRTEENTH: The duration of the corporation shall be perpetual.
Signed on March 29, 1996.
/s/ William P. Ruffa
--------------------
William P. Ruffa, Incorporator
ARTICLES OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
ELECTRONIC FUEL CONTROL, INC.
(Pursuant to Georgia Business Corporation Code Section 14-2-1006)
ELECTRONIC FUEL CONTROL, INC. (hereinafter called the "Corporation"), a
corporation organized under and by virtue of the Georgia Business Corporation
Code, does hereby certify.
1. The name of the Corporation is Electronic Fuel Control, Inc.
2. The text of each amendment as adopted is as follows:
3. The foregoing amendment was adopted by the Board of Directors and
shareholder action was not required for approval.
Executed on this 29th day of April 1998.
/s/ Jeffrey F. Davis
--------------------
Jeffrey F. Davis
BY-LAWS
OF
ELECTRONIC FUEL CONTROL, INC.
(a Georgia corporation)
------
ARTICLE I
SHAREHOLDERS
1. SHARE CERTIFICATES. Certificates evidencing fully-paid shares of the
corporation shall set forth thereon the statements prescribed by Section
14-2-625 of the Georgia Business Corporation Code ("Business Corporation Code")
and by any other applicable provision of law, shall be signed, either manually
or in facsimile, by one or more of the following officers: the President, a
Vice-President, the Secretary, an Assistant Secretary, the Treasurer, an
Assistant Treasurer, or by one or more officers designated by the Board of
Directors, and may bear the corporate seal or its facsimile. If the person who
signed a share certificate, either manually or in facsimile, no longer holds
office when the certificate is issued, the certificate is nevertheless valid. If
the certificate is signed in facsimile, then it must be countersigned by a
transfer agent or registered by a registrar other than the corporation itself or
an employee of the corporation. The transfer agent or registrar may sign either
manually or by facsimile.
2. FRACTIONAL SHARES OR SCRIP. The corporation may: issue fractions of
a share or pay in money the value of fractions of a share; arrange for
disposition of fractional shares by or for the account of the shareholders; and
issue scrip in registered or bearer form entitling the holder to receive a full
share upon surrendering enough scrip to equal a full share. Each certificate
representing scrip must be conspicuously labeled "scrip" and must contain the
information required by subsection (b) of Section 14-2-625 of the Business
Corporation Code. The holder of a fractional share is entitled to exercise the
rights of a shareholder, including the right to vote, to receive dividends, and
to participate in the assets of the corporation upon liquidation. The holder of
scrip is not entitled to any of these rights unless the scrip provides for them.
The Board of Directors may authorize the issuance of scrip subject to any
conditions considered desirable, including (a) that the scrip will become void
if not exchanged for full shares before a specified date; and (b) that the
shares for which the scrip is exchangeable may be sold and the proceeds paid to
the scripholders.
3. SHARE TRANSFERS. Upon compliance with any provisions restricting the
transferability of shares that may be set forth in the articles of
incorporation, these Bylaws, or any written agreement in respect thereof,
transfers of shares of the corporation shall be made only on the books of the
corporation by the registered holder thereof, or by his attorney thereunto
<PAGE>
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, or with a transfer agent or a registrar and on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon, if any. Except as may be otherwise provided by law or these
Bylaws, the person in whose name shares stand on the books or the corporation
shall be deemed the owner thereof for all purposes as regards the corporation;
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact, if known to the Secretary of the
corporation, shall be so expressed in the entry of transfer.
4. RECORD DATE FOR SHAREHOLDERS. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, to demand a special meeting, or to take any other
action, the Board of Directors of the corporation may fix a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days before the meeting or action requiring such determination
of shareholders. A determination of shareholders entitled to notice of or to
vote at a shareholders' meeting is effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than one hundred twenty days after the date
fixed for the original meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of shareholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares when the corporation is authorized to issue only one class of
shares, and said reference is also intended to include any outstanding share or
shares and any holder or holders of record of outstanding shares of any class
upon which or upon whom the articles of incorporation confer such rights where
there are two or more classes or series of shares or upon which or upon whom the
Business Corporation Code confers such rights notwithstanding that the articles
of incorporation may provide for more than one class or series of shares, one or
more of which are limited or denied such rights thereunder.
6. SHAREHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date fixed from time to
time by the directors. A special meeting shall be held on the date fixed from
time to time by the directors except when the Business Corporation Code confers
the right to call a special meeting upon the shareholders.
- PLACE. Annual meetings and special meetings shall be held at such
place in or out of the State of Georgia as the directors from time to time fix.
- CALL. Annual meetings may be called by the directors or the Chairman
of the Board of Directors, the President, or the Secretary or by any officer
instructed by the directors or the President to call the meeting. Special
meetings may be called in like manner.
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. The corporation
shall notify shareholders of the date, time, and place of each annual and
special shareholders' meeting. Such notice shall be no fewer than ten nor more
than sixty days before the meeting date. Unless the Business Corporation Code or
the articles of incorporation require otherwise, notice of an annual meeting
shall not be required to include a description of the purpose or purposes for
which the meeting is called. Notice of a special meeting must include a
description of the purpose or purposes for which the meeting is called. Unless
the Business Corporation Code or the articles of incorporation require
otherwise, the corporation is required to give notice only to shareholders
entitled to vote at the meeting. A shareholder may waive any notice required by
the Business Corporation Code, the articles of incorporation or the Bylaws
before or after the time stated in the notice. The waiver must be in writing, be
signed by the shareholder entitled to the notice, and be delivered to the
corporation for inclusion in the minutes or filing with the corporate records. A
shareholder's attendance at a meeting waives objection to lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting;
and waives objection to consideration of a particular matter at the meeting that
is not within the purpose or purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented. The term
"notice" as used in this paragraph shall mean notice as prescribed in Section
14-2-141 of the Business Corporation Code.
- VOTING LIST FOR MEETING. After fixing a record date for a meeting,
the corporation shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
must be arranged by voting group, and within each voting group by class or
series of shares, and show the address of and number of shares held by each
shareholder. The shareholders' list must be available for inspection by any
shareholder, his agent, or his attorney at the time and place of the meeting.
- CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, if any, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but, if neither the
Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
- PROXY REPRESENTATION. A shareholder may appoint a proxy to vote or
otherwise act for him by executing a writing which authorizes another person or
other persons to vote or otherwise act on the shareholder's behalf. Execution
may be accomplished by any reasonable means. An appointment of a proxy is
effective when received by the Secretary or other officer or agent authorized to
tabulate votes. An appointment is valid for eleven months, unless a longer
period is expressly provided in the appointment form. An appointment of a proxy
is revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
<PAGE>
- SHARES HELD BY NOMINEES. The corporation may establish a procedure by
which the beneficial owner of shares that are registered in the name of a
nominee is recognized by the corporation as the shareholder. The extent of this
recognition may be determined in the procedure.
- QUORUM. Unless the articles of incorporation or the Business
Corporation Code provides otherwise, a majority of the votes entitled to be cast
on the matter by the voting group constitutes a quorum of that voting group for
action on that matter. Once a share is represented for any purpose at a meeting
other than solely to object to holder the meeting or transacting business at the
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
- VOTING. Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action unless the
articles of incorporation, a Bylaw authorized by the articles under Section
14-2-1021 of the Business Corporation Code, or the Business Corporation Code
requires a greater number of affirmative votes.
7. ACTION WITHOUT MEETING. Action required or permitted by the
provisions of the Business Corporation Code to be taken at a shareholders'
meeting may be taken without a meeting in accordance with the provisions of
Section 14-2-704 of the Business Corporate Code if the action is taken by
persons who would be entitled to vote at a meeting shares having voting power to
cast not less than the minimum number (or numbers, in the case of voting by
groups) of votes that would be necessary to authorize or take the action at a
meeting at which all shareholders entitled to vote were present and voted.
8. ADJOURNMENT. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS GENERALLY - COMPENSATION. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation managed under the direction of, a Board of Directors. The Board may
fix the compensation of directors.
2. QUALIFICATIONS AND NUMBER. Directors shall be natural persons who
are eighteen years of age or older, but need not be shareholders, citizens of
the United States,
<PAGE>
or a residents of the State of Georgia. The initial Board of Directors consists
of persons, which shall be the number of directors until changed. Thereafter,
the number of directors shall not be less than nor more than . The number of
directors may be fixed or changed from time to time, within such minimum and
maximum, by the shareholders or by the Board of Directors. If not so fixed, the
number shall be . The number of directors shall never be less than one.
3. TERMS AND VACANCIES. The terms of the initial directors of the
corporation expire at the first shareholders' meeting at which directors are
elected. The terms of all other directors expire at the next annual
shareholders' meeting following their election. A decrease in the number of
directors does not shorten an incumbent director's term. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number of
directors may be filled by the Board of Directors, but only for a term of office
continuing until the next election of directors by the shareholders and until
the election and qualification of the successor. Despite the expiration of a
director's term, he continues to serve until his successor is elected and
qualifies or until there is a decrease in the number of directors. If a vacancy
occurs on the Board of Directors, including a vacancy resulting from an increase
in the number of directors, the shareholders or the Board of Directors may fill
the vacancy; or if the directors remaining in office constitute fewer than a
quorum of the Board of Directors, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. The Board of Directors may hold regular or special meetings in
or out of the State of Georgia at such place as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Regular meetings of the
Board of Directors may be held without notice of the date, time, place, or
purpose of the meeting. Written, or oral, notice of the time and place shall be
given for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not describe the purpose of
the meeting. A director may waive any notice required by the Business
Corporation Code or by these Bylaws before or after the date and time stated in
the notice. A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting or promptly upon his arrival
<PAGE>
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. Except as
hereinbefore provided, a waiver shall be in writing, signed by the director
entitled to the notice, and delivered to the corporation for inclusion in the
minutes or filing with the corporate records.
- QUORUM AND ACTION. A quorum of the Board of Directors consists of a
majority of the number of directors prescribed in or fixed in accordance with
these Bylaws. If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present shall be the act of the Board of Directors.
The Board of Directors may permit any or all directors to participate in a
regular or special meeting by, or conduct the meeting through use of, any means
of communication by which all directors participating may simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
- CHAIRMAN OF THE MEETING. Meetings of the Board of Directors shall be
presided over by the following directors in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, or any other director chosen by the Board.
5. REMOVAL OF DIRECTORS. The shareholders may remove one or more
directors with or without cause pursuant to the provisions of Section 14-2-808
of the Business Corporation Code.
6. COMMITTEES. The Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each committee
may have one or more members, who serve at the pleasure of the Board of
Directors. The provisions of Sections 14-2-820 through 14-2-824 of the Business
Corporation Code, which govern meetings, action without meetings, notice and
waiver of notice, and quorum and voting requirements, apply to committees and
their members as well. To the extent specified by the Board of Directors or
these Bylaws, each committee may exercise the authority of the Board of
Directors under Section 14-2-801 of the Business Corporation Code except such
authority as may not be delegated under the Business Corporation Code.
7. ACTION WITHOUT MEETING. Action required or permitted by the Business
Corporation Code to be taken at a Board of Directors' meeting may be taken
without a meeting if the action is taken by all members of the Board. The action
must be evidenced by one or more written consents describing the action taken,
signed by each director, and delivered to the corporation for inclusion in the
minutes or filing with the corporate records.
ARTICLE III
OFFICERS
<PAGE>
The corporation shall have a President, and a Secretary, and such other
officers as may be deemed necessary, who may be appointed by the directors. The
same individual may simultaneously hold more than one office in the corporation.
A duly appointed officer may appoint one or more officers or assistant
officers.
Each officer of the corporation shall have the authority and shall
perform the duties prescribed by the Board of Directors or by direction of an
officer authorized by the Board of Directors to prescribe the duties of other
officers; provided, that the Secretary shall have the responsibility for
preparing minutes of the directors' and shareholders' meetings and for
authenticating records of the corporation, and provided further, that unless the
Articles of Incorporating or a resolution of the Board of Directors provide
otherwise, the President shall have the authority to conduct all ordinary
business and may execute and deliver on behalf of the corporation any contract,
conveyance, or similar document not requiring approval by the Board of Directors
or shareholders as provided in the Business Corporation Code.
The Board of Directors may remove any officer at any time with or
without cause.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation and the
name of the initial registered agent of the corporation are set forth in the
original articles of incorporation.
ARTICLE V
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and shall be in such form and contain such other words and/or
figures as the Board of Directors shall determine or the law require.
<PAGE>
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
The corporation's Board of Directors may amend or repeal the Bylaws,
except as otherwise required by the Business Corporation Code. Notwithstanding
the foregoing provision, the corporation's shareholders may amend or repeal the
Bylaws or adopt new Bylaws.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy
of the Bylaws of , a corporation of the State of Georgia, as in effect
on the date hereof.
WITNESS my hand and the seal of the corporation.
Dated:
---------------------------
Secretary of
(SEAL)
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
NUMBER 1132 CUSIP NO. 285708 10 3
SHARES
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The shares have been acquired for investment
and may not be offered, sold or otherwise transferred in the absence of an
effective registration statement with respect to the shares or an exemption from
the registration requirements of said act that is then applicable to the shares,
as to which prior opinion of counsel may be required by the issuer of the
transfer agent."
ELECTRONIC FUEL CONTROL, INC.
AUTHORIZED COMMON STOCK: 20,000,000 SHARES
PAR VALUE $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of common stock of Electronic Fuel Control, Inc.
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 signatures
of its duly authorized officers.
Dated:
_____________________ _____________________
Secretary President
Electronic Fuel Control, Inc.
Corporate Seal
Georgia
INTERWEST TRANSFER CO. INC. P.O. BOX 17136/SALT LAKE CITY, UTAH 84117
COUNTERSIGNED & REGISTERED
_________________________________________________
COUNTERSIGNED Transfer Agent-Authorized Signature
<PAGE>
NOTICE Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ....Custodian....
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..........................
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:_________
________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The shares have been acquired for investment
and may not be offered, sold or otherwise transferred in the absence of an
effective registration statement with respect to the shares or an exemption from
the registration requirements of said act that is then applicable to the shares,
as to which prior opinion of counsel may be required by the issuer of the
transfer agent."
LICENSE AGREEMENT BY AND BETWEEN THE DAVIS FAMILY
TRUST AND ELECTRONIC FUEL CONTROL, INC.
This Agreement is made this the 13th day of May, 1996 by and between:
the DAVIS FAMILY TRUST, a Trust created and registered pursuant to and under the
rules and regulations of the Internal Revenue Service of the United States of
America, having a principal office at 8613 Roswell Road, Suite 201, P.O. Box
502287, Sandy Springs, Georgia, 31150,.Fulton.County, Georgia, (hereinafter
called "Licensor"), and ELECTRONIC FUEL CONTROL, INC., a corporation created
pursuant to and under the laws of the State of Georgia, having its principal
office at 4851 Highway 85, Suite 211, Forest Park, Georgia, 30050 (hereinafter
called "Licensee").
RECITALS
WHEREAS, Licensor owns the rights, title and interests in certain
letters patent of the United States, which letters patent are numbered
5,083.547, dated January 28, 1992, 5,370.097, dated December 6, 1994, and
5,408,978, dated April 25, 1995; and 5,103,795, dated April 14, 1992; and
4,479,466, dated October 30, 1984; and
WHEREAS, said patents involve gaseous fuel and air mixing devices and a
process designed for use with the conversion of aspirated and non-aspirated
diesel engines to the use of compressed natural gas ("CNG"), liquefied natural
gas ("LNG") or propane, or to the conversion of such engines to the use of
multiple fuels; and
WHEREAS, Licensor by virtue of said letters patent owns the
-1-
<PAGE>
rights, title and interest to the design, manufacture, sale, marketing, and
production of equipment, technology, systems, and processes represented thereby;
and
WHEREAS, Licensor is a registered Trust within the meaning of the
Internal Revenue Code of 1986, as amended; and
WHEREAS, Mark W. Crouch is the named Trustee of Licensor; and
WHEREAS, Licensee is a corporation duly organized and existing under
the laws of the State of Georgia; and
WHEREAS, Licensor and Licensee have reached an understanding and
agreement upon certain terms and conditions for the granting by Licensor to
Licensee of the right to produce, manufacture, sell and market the devices,
equipment, materials, products, process, and technology as represented by the
herein identified Letters Patent; and
WHEREAS, pursuant to that agreement Licensee intends to acquire from
Licensor and Licensor intends to provide to Licensee, the right to produce,
manufacture, sell and market the devices, equipment, materials, products,
process, and technology represented by the herein identified Letters Patent; and
WHEREAS, Licensee and Licensor wish to formalize their agreement and
understanding by reducing their agreement and understanding to written form; and
WHEREAS, for and in return for the right to manufacture, produce, sell and
market, the devices,-equipment, materials, products, process, and technology as
above set forth, Licensee
-2-
<PAGE>
shall pay to Licensor certain remuneration and, further, Licensee shall provide
Licensor with other benefits and advantages, as is more fully set forth herein;
and
WHEREAS, this instrument shall not convey and is not intended to convey
any right, power or privilege to Licensee unless and until it shall be duly
signed and executed by the Trustee of Licensor;
NOW, THEREFORE; for and in consideration of the mutual promises,
covenants, warranties, and agreements heretofore made and now set forth in this
Agreement, the parties hereto do hereby agree as follows:
ARTICLE 1 - DEFINITIONS
Certain terms used in-this Agreement shall have. the following
specified meaning and definition:
a) "Licensed Patent Rights" shall when used herein mean:
(1) U.S. Patent Serial No. 5,083,547, dated January 28, 1992 for a natural
gas and air mixing device, as assigned to Licensor; any divisions or
continuations in whole or in part thereof; any U.S. patents or applications
that are later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations of any such
patents; and
(2) U.S. Patent Serial No. 5,408,978, dated April 25, 1995, for a natural
gas and air mixing device, as assigned to Licensor; any divisions or
continuations in whole or in part thereof; any U.S. patent or applica-
-3-
<PAGE>
tions that are later added to this license; any patents issuing on any of
such applications; any reissues or extensions or reexaminations 'of any
such patents; and
(3) U.S. Patent Serial No. 5,370,097, dated December 6, 1994, for a duel
fuel control system which controls the flow of liquid fuel alone or in
combination with a gaseous fuel, as assigned to Licensor; any divisions or
continuations in whole or in part thereof; any U.S. patent or applications
that are later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations of any such
patents; and
(4) U.S. Patent Serial No. 5,103,795, dated April 14, 1992 for a natural
gas and air mixing device, as assigned to Licensor; any divisions or
continuations in whole or in part thereof; any U.S. patent or applications
that are later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations of any such
patents; and
(5) U.S. Patent Serial No. 4,479,466, dated October 30, 1984 for a natural
gas and air mixing device, as as signed to Licensor; any divisions or
continuations in whole or in part thereof.; any U.S. patent or applications
that are later added to this license; any patents issuing on any of such
applications; any reissues or extensions or reexaminations. of any such
patents;
-4-
<PAGE>
b) "Licensed Article" shall mean any article, whether or not consisting of one
or more separate units, produced, manufactured, made, used, marketed or sold
anywhere in the geographic territory specified herein, that is covered by any
unexpired patent, or is covered by one or more claims of a pending patent
application, which patent or application is part of the "Licensed Patent
Rights."
c) "Net Sales" shall mean the sum total of all charges invoiced to
customers of Licensed Articles sold by the Licensee and its affiliates,
sublicensees, agents or distributors less credits or refunds actually allowed
for damaged, outdated, or returned goods.
ARTICLE 2 -- LICENSE AND WARRANTY
(a) Subject to each and every term, provision, condition, and
obligation herein specified and set forth, Licensor hereby grants, and agrees to
grant, to Licensee, within the territory hereinafter set forth, an exclusive
license under the "Licensed Patented Rights" to make, use, sell and lease
"Licensed Articles."
(b) Licensor warrants and represents that it has title to the "Licensed
Patent Rights" and the right to enter into every term of this agreement.
ARTICLE 3 -- IMPROVEMENTS AND METHODS
Subject to and conditioned upon the terms and provisions of Article 2 of this
Agreement, Licensor agrees to tender, upon request of Licensee in writing, for
incorporation into the
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"Licensed Patented Rights" for use in the territory hereinafter specified, a
like license under any U.S: patent or patents applications now or hereafter
owned or enjoyed by Licensor which claims any improvement in any invention
disclosed in any patent or patent application included in the "Licensed Patented
Rights," or any method or process for manufacturing any such invention.
ARTICLE 4 -- ROYALTIES
(a) Royalties. Licensee shall pay or cause to be paid to Licensor, at
the times and on the dates hereinafter specified, a of royalty in accordance
with the terms and provisions of this Article 4.
(1) With respect to the Licensed articles identified in (1)
Article 1, subsection (a)(1), the royalty to be paid shall $21.00
be TWENTY-ONE AND NO/100THS ($21.00) DOLLARS per Licensed
Article sold;
(2) With respect to the Licensed Articles identified in (2)
Article 1, Subsection (a)(2), the royalty to be paid shall $21.00
be TWENTY-ONE AND NO/100THS ($21.00) DOLLARS per Licensed
Article sold;
(3) With respect to the Licensed Articles identified in (3)
Article 1, subsection (a)(3), the royalty to be paid shall $150.00
be ONE HUNDRED AND FIFTY AND N0/100THS ($150.00) per
Licensed Article sold.
(4) With respect to the Licensed Articles identified in (4)
Article 1, subsection (a)(4), the royalty to be paid shall $21.00
be TWENTY-ONE AND NO/100THS ($21.00) DOLLARS
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per Licensed Article sold;
(5) With respect to the Licensed Articles identified in (5)
Article 1, subsection (a)(5), the royalty to be paid shall $21.00
be TWENTY-ONE AND NO/100THS ($21.00) DOLLARS per Licensed
Article sold;
Royalties shall be due and payable to Licensor without diminution or set off.
(b) Commencing one year from the date this Agreement is signed by the
parties and continuing on the same day of each year thereafter until (i) this
Agreement is canceled or terminated in accordance with the terms and provisions
herein otherwise set forth, or (ii) royalties are otherwise no longer due and
payable under other provisions of this Agreement, the royalty to be paid
Licensor for each Licensed. Article shall be adjusted according to the following
terms and provisions:
(1) Beginning one year after this Agreement is signed by the parties
and for the succeeding 12-month period thereafter (each successive twelve (12)
month period to be hereinafter referred to as the "Adjustment Period" the
royalty to be paid Licensor shall be equal to the purchasing power of the
royalty amount that is due and payable to Licensor for the last month in the
immediately preceding 12-month period (hereinafter referred to a the "Base
Month"). As soon as possible after the publication and issuance thereof,
Licensor shall deliver to Licensee a true copy of the Consumer Price Index for
the United States for All Urban Consumers for all items on the bureau of Labor
Statistics of the U.S.
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Department of Labor (hereinafter referred to as the "Index") for the Base Month
and for the calendar month in which the Adjustment Period commences (the
"Initial Adjustment Month"). If the Index for the Initial Adjustment Month shows
an increase in consumer purchasing power as compared to that for the Base Month,
Licensor shall deliver to Licensee a computation showing the increase in the per
unit royalty that shall be effective until the next adjustment period; said
increase to be an amount equal to the percentage increase in the Index for the
Initial Adjustment Month over the Index for the Base Month, multiplied by the
amount of royalty in effect for the last month of the previous 12-month period.
Any such increase shall be added to the royalty for each Licensed Article then
in effect and the sum obtained by adding the amount of any such increase to the
amount of the royalty then in effect for each Licensed Article shall thereafter
become the amount of per unit royalty to be paid by Licensee to Licensor for the
duration of that Adjustment Period. If the Adjustment Period begins on a day
other than the first day of the month, Licensee shall pay to Licensor on or
before the next date that royalties shall be due and payable, all royalties due
Licensor for such period of time that is less than one month. For the purpose of
this Agreement, the "Base Month" shall be May __________, 1997 . Notwithstanding
anything to the contrary contained herein, in no event shall the royalty amount
due Licensor be adjusted in an amount less than that initially set forth in
Article 4(a).
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(c) The royalties herein otherwise specified under subparagraph (a) of
this Article and as adjusted under subparagraph (b) above shall, for such period
as is hereinafter set forth, be increased by an amount equal to SEVENTY-NINE AND
NO/100THS ($79.00) DOLLARS. This increase shall be paid to Licensor until such
time as the amount generated by such increase (i.e., $79.00) shall equal the sum
of ONE HUNDRED FIFTY THOUSAND AND NO/100THS ($150, 000. 00) DOLLARS plus
interest thereon at the rate of twelve (12%) percent per annum. When said sum
plus interest shall be reached, the royalty due Licensor under sub-paragraph (a)
of this Article and as adjusted under subparagraph (b) above shall revert to the
sums specified in said sub-paragraph (a) as adjusted under sub-paragraph (b) and
shall thereafter be due and payable as is otherwise herein set forth.
(d) In addition to the royalties herein otherwise specified under
sub-paragraph (b) above and as additional consideration for the issuance of this
Agreement by Licensor, upon execution of this Agreement Licensee shall execute a
promissory note in substantially the form attached hereto as Exhibit A in the
principal sum of ONE HUNDRED FIFTY THOUSAND AND NO/100THS ($150,000.00) DOLLARS,
bearing interest at a rate of twelve percent (12%) per annum, which principal
and interest shall be due and payable in accordance with the terms and
provisions of said note. The funds represented by said promissory note are
intended to be and shall be construed to be a non-refundable payment to Licensor
disbursed by Licensee as consideration for
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execution of this Agreement and is in excess of and in addition to any and all
royalty payments otherwise due or to become due Licensor under this Agreement.
(e) Time of payment. All royalties earned shall be paid not less than
monthly, with payment therefor being due and payable on the fifth business day
following the last business day of each ,such calendar month, beginning with the
calendar month in which this Agreement is executed. All royalty payments shall
be made to Licensor in a lump sum in cash or by cash equivalent, in currency of
the United States of America which currency shall be in the form, when paid,
which is legal tender for the payment of public and private debts. Each payment
made by Licensee shall be accompanied by a written report signed by the
individual who prepared the report and by an officer of Licensee, and by
financial statements of Licensee for the period for which such royalty is due,
showing the number of Licensed Articles sold for the applicable period. The
financial statements of Licensee shall be broken down into sales of those
Licensed Patented Articles specified in Article 1, subsection (a)(1); Article 1,
subsection (a)(2); and Article 1, subsection (a)(3). If financial statements of
Licensee are unavailable at the time any such royalty payment is made, such
financial statements shall be forwarded to Licensor as soon as they are ready
but in all events they shall be made available to Licensor not later than thirty
(30) days following the date the applicable royalty payment is due and payable.
The unavailability of financial statements shall not be cause for
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non-payment of any royalties then otherwise due. In the event such financial
statements are not available, Licensee shall make a good faith estimate of the
royalties due and shall pay over the amount of that good faith estimate in a
timely manner. Financial statements shall be prepared in accordance with
generally accepted accounting principles, but need not be audited.
Notwithstanding the foregoing, Licensee shall provide Licensor copies of annual
financial statements duly audited not later than three (3) calendar months
following the close of Licensee's fiscal year. Royalty payments shall be
adjusted annually, if necessary, based upon the audited financial statements of
Licensee, which audit shall be completed not later than three (3) calendar
months following the end of each fiscal year. Any overpayment of royalties as
adjusted by such audited financial statements shall be credited against the next
royalty payment due Licensor. Any underpayment of royalties as adjusted by such
audited financial statements shall be paid to Licensor not later than thirty
(30) days following the end of the first quarter following the fiscal year in
which such amount is due.
(f) Leasing. If "Licensed Articles" are produced, sold, marketed, or
manufactured by Licensee or its designee which "Licensed Articles" are
ultimately marketed on a lease basis, all the provisions of this agreement shall
apply, including but not limited to the payment of royalties, and all sums
received by Licensee for any such leased "Licensed Articles" shall be included
within the financial statements of Licensee for all
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purposes. Any Licensed Article that is leased shall, for the purposes of
determining the payment of royalties, be deemed "sold" and royalty payments
thereon shall be due and payable as of the date of the final lease.
ARTICLE 5 -- REPORTING AND AUDIT
Licensee shall keep or cause to be kept accurate books of account
containing all information necessary to establish the amount payable as royalty
under this agreement. Such books of account shall be kept at Licensee's
principal place of business within the State of Georgia and shall be open, for
three years following the close of the calendar year to which they pertain, to
inspection and audit by an independent certified public accountant who is
nominated by Licensor and to whom Licensee has no reasonable objection. Such
inspection and audit shall take place no more than once in each calendar year
and shall be confined to verification of the royalties due Licensor pursuant to
the terms, provisions, and agreements of the parties, including other agreements
between the parties that may hereafter be reduced to writing and signed by the
parties hereto. Any such audit shall be conducted during Licensee's usual and
customary business hours, and upon ten (10) days notice to Licensee. The
inspection and audit conducted by the independent certified public accountant
and the report issued by him shall be final and binding upon Licensee and upon
Licensor.
ARTICLE 6 -- INFRINGEMENT
(a) Who shall sue. Upon learning of any infringement by any
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third party of any claim of any issued patent included within the "Licensed
Patent Rights," Licensee shall promptly notify Licensor in writing of such
infringement, giving details of the infringement. Licensor and Licensee each
shall have the option either alone or jointly to take such measures as may be
required to terminate or enjoin any infringement. When either party brings an
infringement suit, the other party may but shall not be required to join as
plaintiff but such non-joining party shall cooperate and assist in the
preparation and prosecution of the suit.
(b) Expenses and recoveries. In the case of mutual agreement by
Licensor and Licensee on the institution of an infringement suit, Licensee shall
bear one half of all expenses associated therewith and Licensor shall bear one
half of all expenses associated therewith, unless one party declines to
participate financially in the prosecution of such infringement suit; in the
event one party declines to participate financially in the prosecution of such
infringement suit, the party declining to participate shall be excluded from
bearing a part of such expenses. In the case of such mutual agreement on the
institution of an infringement suit, Licensee shall have one half and Licensor
shall have one half of all damages and penalties recovered that remain after
first reimbursing Licensor and then Licensee for any amounts expended by them in
prosecuting such infringement suit. If Licensor or Licensee shall decline to
participate financially in the prosecution of such infringement suit, the party
so declining to participate shall be excluded from any
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share of the damages and penalties recovered.
ARTICLE 7 -- ADVERSE DECISIONS
(a) Effect. If any claim of any patent included in the
"Licensed Patent Rights" is held invalid or is awarded to another, by a decision
of any tribunal of competent jurisdiction, which decision is not or cannot be
thereafter reversed or set aside, then the construction placed upon such claim
by such tribunal shall be followed from the date of entry of the opinion and
with respect to any claim that is not valid, or not the property of Licensor
under such decision, Licensee shall thereafter be relieved from the payment of
royalties solely with respect to such claim, and from including in its reports
hereunder any equipment or device covered solely by such claim; provided,
however, that (1) if there are conflicting final decisions by courts of equal
jurisdiction, the one of latest date shall be controlling and, (2) the amount by
which the payment of royalties is to be reduced shall be negotiated in good
faith between Licensor and Licensee. In any instance where Licensee is
successful in defending any patent included in the "Licensed Patent Rights" and
Licensor does not contribute one-half of the cost of such defense, all future
royalty payments to be made by Licensee to Licensor hereunder with respect to
the particular patent defended by Licensee shall be reduced by one half until
Licensee shall recover all such defense costs at which time the royalty payments
with respect thereto shall revert to the amounts herein set forth and shall
thereafter be paid according to each term and
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provision hereof.
(b) In the. event that either or both Licensor and Licensee are
unsuccessful in defending against any claims of third parties, with respect to
and only to such claims as either or both are unsuccessful in defending against
Licensor will hold Licensee, its agents and sublicensees free from any claims,
demand, suits or causes of actions including, all judgments, damages and costs,
including reasonable attorneys fees, resulting therefore and arising out of the
use, manufacture, sale, or advertising of, any Licensed Articles.
(c) Contrary decision. In the event of a decision of a tribunal
terminating royalty liability followed by a decision of a tribunal that revives
royalty liability, no royalty shall be payable for the period between the two
decisions.
ARTICLE 8 -- BEST EFFORTS
Licensee shall in good faith use its best efforts to maximize the
number of "Licensed Articles" sold in the geographic territory to which this
Agreement applies.
ARTICLE 9 -- SUBLICENSES
Licensee shall not without the prior written consent of Licensor have
any right to grant sublicenses under this Agreement, which consent shall not be
unreasonably withheld, and provided, however, that any sublicense shall be
subject in all respects to the restrictions, exceptions and termination
provisions contained in this Agreement.
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ARTICLE 10 -- TERM AND TERMINATION
(A) This Agreement and the rights and licenses granted hereunder shall
continue until the later of the expiration of the last Patent hereby licensed
and any extensions thereof, except as is hereinbelow provided.
(B) This Agreement may be terminated by either party upon the
occurrence of any of the events enumerated below by giving sixty (60) days'
written notice to the other party of its intent to terminate this Agreement,
which notice shall reference the subparagraph hereof relied upon by the party
seeking to terminate the Agreement. The noticed party shall have the right
within said sixty (60) days to cure said breach and within which to notify the
other party in writing of said cure.
(1) In the event Licensee is adjudicated bankrupt or insolvent, enters
into a composition with creditors, makes an assignment of all or substantially
all of its assets for the benefit of its creditors, or if a receiver is
appointed for its assets;
(2) In the event that Licensee refuses to produce or manufacture, sell,
market, or to cause to be produced or manufactured, sold, or, marketed the
Licensed Patented Articles;
(3) In the event that any sublicensee of the Licensee is in material
breach or default of any provision of Article 10 of this Agreement which such
default or breach is not cured within the applicable time period granted herein;
(4) Upon the failure or refusal of Licensee to pay Licensor the
royalties herein specified when and as they become due and
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payable;
(5) Upon the failure of the Licensee to meet the quota(s) set forth in
Article 21 hereof;
(6) If, prior to any public offering of the capital stock of Licensee
pursuant to the rules and regulations of the Securities and Exchange Commission
and without the prior written consent by Licensor, which consent will not be
unreasonably withheld, the control of Licensee shall vary from that currently
constituted and which results in the transfer of a majority of the shares of
capital stock of the Licensee which effectively or practically changes the
management and control of Licensee;
(7) A material breach of this Agreement by Licensee, its affiliates,
sublicensees, agents or distributors or by Licensor;
(8) In the event that further lawful performance of this agreement or
any part hereof by either party shall be rendered impossible by or as a
consequence of any law, regulation, order, rule, direction, priority, seizure,
allocations, requisitions, or any other official action by any department,
bureau, board, administration or political subdivision thereof having
jurisdiction over such party.
(C) In the event this Agreement shall be terminated as provided in this
Article 10, Licensee shall duly account to Licensor for all royalties within
twenty (20) days after the expiration of any applicable cure period of such
termination and shall make an accounting to Licensor of the inventory of
Licensed Articles which it and any of its affiliates and sublicensees have
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on hand as of the date of such termination. Licensee, its affiliates and
sublicensees shall then have the right, for a period of one year after said
termination, to sell such inventory provided that such net sales shall be
subject to the royalty rates set forth above and so payable to Licensor.
(D) All payments of royalties made to Licensor before the effective
date of any cancellation or termination of this Agreement shall belong to
Licensor and Licensee shall make no claim to or for any reimbursement thereof.
(E) After any cancellation or termination of this license agreement,
the "Licensed Patent Rights" shall immediately revert to and become the sole and
exclusive property of Licensor.
ARTICLE 11 -- CONFIDENTIALITY
The parties hereto understand and agree that, except for information
published for general dissemination to the public and for information usually
and customarily available from any public source, Licensee shall not, without
the prior written consent of Licensor, divulge, disclose, or otherwise furnish
to any person, firm, corporation, partnership, or other entity not a party
hereto (except where compelled to do so by a court of a competent jurisdiction)
any trade secret, confidential or other sensitive information concerning or
relating to Licensor or the "Licensed Patented Articles."
ARTICLE 12 -- NO CLAIM AGAINST PATENTS
Licensee acknowledges and agrees that the terms and provisions of this
Agreement are not intended to grant nor shall they
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be construed as granting any past, present, or future claim against any of
Licensor's trademarks, trade names, patents, equipment, materials or products,
but is intended only as a license granted by Licensor to Licensee for and only
for the territory herein specified (or as may hereafter be agreed upon in
writing) on the terms, conditions, and provisions herein set forth. Accordingly,
Licensee agrees that it shall not make any claim against Licensor with respect
thereto.
ARTICLE 13 -- SUCCESSORS AND ASSIGNS
This agreement shall bind, and inure to the benefit of, each of the
parties, and their respective successors in interest and assigns. No assignment
or attempted assignment by Licensee of this Agreement or of any right, duty;
interest, or obligation of Licensee as herein set forth shall be valid or
enforceable without the prior written consent of Licensor, which consent may be
granted or withheld by Licensor for no reason or for any reason.
ARTICLE 14 -- INFORMATION CONCERNING LICENSED PATENT RIGHTS
(a) Inspection. Licensor hereby grants, and agrees to grant, to
Licensee and its duly authorized agents, a power of inspection of all U.S.
patent applications included in the "licensed patent rights," and Licensor
further agrees to execute and deliver to Licensee such further documents as may
be reasonably needed by Licensee to carry out the intent of this provision.
(b) Information. The parties agree to keep each other fully
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informed of the progress of the prosecution of all U.S. patent applications, if
any, that are included in the "Licensed Patent Rights."
ARTICLE 15 -- NOTICES
Licensee may send all notices and reports and other communications and
may make all payments under this license to Mark W. Crouch, Trustee, Davis
Family Trust, 8613 Roswell Road, Suite 201,.P.O. Box 502287, Sandy Springs,
Georgia, 31150, or to any successor trustee designated by him in written
communication or, in the event of his death or incapacity, to such successor
trustee as may be lawfully appointed or designated by a proper authority.
Licensor may send all notices, tenders, and other communications to Electronic
Fuel Control, Inc., 4851 Highway 85, Suite 211, Forest Park, Georgia, 30050 or
to such other address as Licensee may hereafter designate in writing by its
authorized representative(s). All notices and other communications mentioned or
referenced in this agreement, including royalty payments, may be mailed postpaid
to the last known address of the designated individual or entity. All notice
periods and other times for taking any action mentioned in this license shall
start on the day that such notice or other communication is actually mailed.
ARTICLE 16 -- ALTERATIONS
This agreement may not be altered, modified, or changed except by an instrument
in writing signed by (1) an authorized officer of the Licensee as a result of a
duly authorized vote of Licensee's Board of Directors and by (2) an authorized
repre-
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sentative of the Licensor.
ARTICLE 17 -- WARRANTIES
Unless required to do so under any federal or state law, Licensee
agrees that with respect to any "licensed patented article" it shall not issue
or cause to be issued or condone or permit any designee or sublicensee to issue
or cause to be issued any express or implied warranty or representation of
merchantability or fitness for a particular purpose to any person, firm,
corporation, partnership or other legally cognizable entity.
Further, Licensee agrees that it shall not make any intentional or
willful misrepresentation in its sale, marketing, and distribution of Licensor's
products, supplies, materials, and conversion kits, or of any component thereof,
which in any way violates or transcends any federal law or statute enacted by
Congress or any state law or statute enacted by any one of the legislatures of
the various states of the United States; nor any rule or regulation of the
Environmental Protection Agency of the U.S. Government or any successor agency
created to fulfill the role now carried out by same, the Energy Department of
the U.S. Government or any successor agency created to fulfill the role now
carried out by same; any agency of any State, local, or municipal government or
political subdivision which has functions, roles, or purposes designed to
fulfill an exact, similar, or complimentary role at said level of government as
the Energy Department or the Environmental Protection Agency. Licensee does
hereby agree to hold harmless and indemnify Licensor, its offi-
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cers, agents, representatives, insurers, servants, agents and employees from any
and all claims, actions, causes of action, loss, cost, damages, expense, bodily
and personal injury and property damages, loss of service, and all other
expenses and costs of whatsoever nature or kind, including without limiting the
generality of the foregoing actual attorneys fees, costs and expenses of
litigation, witness fees, and the like, on account of or resulting from or
arising out of any violation by Licensee of its duties, obligations, and
responsibilities as set forth in this Article 17 or elsewhere in any other
Article of this Agreement.
ARTICLE 18 -- INSURANCE
Subject to the specified minimums herein set forth Licensee hereby
agrees that it shall at all times obtain, pay for, secure, and maintain product
liability insurance in such sums as Licensee shall deem sufficient to fully
indemnify and pay any and all claims for bodily injury or for property damage
made against Licensee or made against Licensor with respect to the Licensed
Patented Articles manufactured, sold, installed, and marketed by Licensee or by
any sublicensee, and from any claim made against Licensee or against Licensor by
any member of the consuming public who purchases, buys, or leases one or more of
the Licensed Patented Articles. Licensee shall be deemed to be in compliance
with this Article 18 if but only if Licensee shall obtain, secure, and pay for
product liability insurance which shall afford indemnity against claims for
bodily injury in a sum of not
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less than FIFTEEN MILLION AND NO/100THS ($15,000,000.00) DOLLARS and against
claims for property damage in a sum of not less than FIVE MILLION AND NO/100THS
($5,000,000.00) DOLLARS. All such insurance, in addition to Licensee, shall name
Licensor as a named insured therein and shall contain a clause or language
prohibiting the issuer of each such policy from canceling said insurance during
the policy term without having first given at least thirty (30) days, prior
written notice to Licensor of any such cancellation. Said insurance shall be
purchased from a solvent and licensed insurance company authorized to do
business in the geographic territory set forth in Article 20 but protections and
coverages granted by said insurance shall extend to and shall be valid in every
jurisdiction contained within the territorial boundaries set forth in Article 20
hereof.
ARTICLE 19 -- NOT LEGAL AGENT
(a) Licensee understands and agrees that by entering into this
Agreement it is not and shall not become the agent or legal representative of
Licensor for any purpose whatsoever and that the terms and provisions of this
Agreement are intended as and only as and shall be construed to be a contractual
relationship granting to Licensee only such rights and creating only such
obligations as are herein specifically set forth. In the event of a violation of
this covenant by Licensee, its agents, servants, employees, or representatives,
Licensee hereby agrees to hold harmless and indemnify Licensor, its officers,
agents, representatives, insurers, servants, and employees from any and
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all claims, actions, causes of action, loss, cost, damages, expense, bodily and
personal injury and property damages, loss of service, and all other expenses
and costs of whatsoever nature or kind on account of or resulting from or
arising out of any such violation.
(b) Licensee agrees that no term or provision of this Agreement grants
or is intended to grant any right or authority to Licensee to assume or to
create on behalf of Licensor any obligation, duty, or responsibility, express or
implied, to any party that is not a signatory to this agreement, nor to create
or assume any such obligation or responsibility, express or implied, on behalf
of or in the name of Licensor to any party not a signatory to this agreement,
nor to bind Licensor in any manner or thing to any person, firm, corporation,
partnership, or other entity that is not a signatory to this Agreement.
ARTICLE 20 -- GEOGRAPHIC TERRITORY
This licensing Agreement covering the "Licensed Patented Rights" shall
encompass and be valid within and only within the boundaries of the continental
United States of America, Mexico, and in Canada. Licensee agrees that it shall
not outside the within specified geographic territory, without the prior written
consent of Licensor, manufacture, sell, market, or produce equipment,
technology, systems, and processes represented by the Licensed Patented
Articles. Excepting the geographic territory specified in the immediately
preceding sentence and any other geographic territory which on the effective
date of this Licens-
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party upon such terms, conditions, and provisions as Licensor in its sole
discretion shall deem appropriate or advisable.
ARTICLE 21 -- QUOTAS
During the Term of this Agreement Licensee hereby agrees to sell not
less than TWO THOUSAND FIVE HUNDRED (2,500), in the aggregate, Licensed Articles
during the first year this Agreement is in force; THREE THOUSAND FIVE HUNDRED
(3,500), in the .aggregate, Licensed Articles during the second year this
Agreement is in force; FOUR THOUSAND FIVE HUNDRED (4,500), in the aggregate,
Licensed Articles during the third year this Agreement is in force; FIVE
THOUSAND FIVE HUNDRED (5,500), in the aggregate, Licensed Articles during the
fourth year this Agreement is in force; SIX THOUSAND FIVE HUNDRED (6,500), in
the aggregate, Licensed Articles during the fifth Year this Agreement is in
force; SEVEN THOUSAND FIVE HUNDRED (7,500), in the aggregate, Licensed Articles
during the sixth year this Agreement is in force; EIGHT THOUSAND FIVE HUNDRED
(8,500), in the aggregate, Licensed Articles during the seventh year this
Agreement is in force; TEN THOUSAND (10,000), in the aggregate, Licensed
Articles during the eighth year this Agreement is in force; and for each
successive year thereafter, TEN THOUSAND (10,000), in the aggregate, Licensed
Articles. For the purpose of this Article 21 the term "year" shall mean the 365
consecutive day period following the execution hereof and each successive 365
consecutive day period occurring thereafter.
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ARTICLE 22 -- CORPORATE APPROVALS
Licensee represents and warrants that the execution of this Agreement
by its corporate officers identified below has been duly authorized by
Licensee's board of directors, that execution of this Agreement is not in
conflict with any Bylaw or other agreement to which Licensee is a party and that
the terms and provisions specified herein will be a binding obligation of
Licensee, enforceable in accordance with its terms.
ARTICLE 23 -- TRUST AUTHORITY
Licensor represents and warrants that the execution of this Agreement
by its trustee named below is duly authorized by the trust instrument, is not in
conflict with the trust instrument or with any other agreement to which the
Trust is signatory, and will be a binding obligation of Licensor, enforceable in
accordance with its terms.
ARTICLE 24 -- ENTIRE AGREEMENT
With respect to the issuance of the license rights granted Licensee by
Licensor hereunder, this Agreement supersedes any and all agreements, whether
oral or written, between the parties hereto and each party hereto hereby
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party hereto or anyone acting on
behalf of any party hereto, which are not embodied herein, and that no other
agreement, statement or promise with respect to such license rights not
contained in this Agreement shall be valid and binding.
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ARTICLE 25 -- PARTIAL INVALIDITY
If any provision of this Agreement is or shall be held by any court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions of this Agreement shall nevertheless continue in full force and
effect without being impaired or invalidated in any way.
ARTICLE 26 -- ATTORNEYS' FEES
Should litigation be commenced between the parties hereto or their
personal representatives concerning any of the terms or provisions of this
Agreement or the rights and duties of the parties hereto in relation thereto,
the party prevailing in such arbitration or litigation shall be entitled, in
addition to such other relief as may be granted, to a reasonable sum as and for
its or their attorneys' fees in such litigation. The amount of any such
attorneys' fees shall be determined by the court (but not the jury).
ARTICLE 27 -- CHOICE OF LAW
This agreement and any disputes arising under it shall be governed by
and interpreted under the law of the State of Georgia.
ARTICLE 28 -- BINDING NATURE
This Agreement shall be binding upon and inure to the benefit of the
parties thereto and their respective representatives, heirs, successors and
assigns.
ARTICLE 29 -- COUNTERPARTS
This agreement may be executed in one or more counterparts,
-28-
<PAGE>
each of which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement by
affixing respectively the signature of a duly authorized officer of Licensee and
the Trustee of the Davis Family Trust, this the 20 day of June, 1996 to be
effective as of the 1 day of June, 1996.
ELECTRONIC FUEL CONTROL, INC.
/s/ Robby E. Davis
----------------------------
Its president
/s/ Joseph L. Benedello
- -----------------------------
Witness
- ----------------------------
Attested to: CORPORATE SEAL
/s/ Jeffrey F. Davis
- ----------------------------
Corporate Secretary
THE DAVIS FAMILY TRUST
/s/ Mark W. Crouch
----------------------------
Mark W. Crouch, Trustee
/s/Judy L. Barrow
- ----------------------------
Witness
-29-
<PAGE>
SECRETARY'S CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES individually and on behalf of
Electronic Fuel Control, Inc., a Georgia corporation (the "Corporation"), and in
connection with the execution of a certain license agreement made by the Davis
Family Trust in favor of the Corporation dated May 13, 1996, and a promissory
note made by the Corporation in favor of the Davis Family Trust which will be
dated as of May 13, 1996, that I am the Assistant Secretary of the Corporation
and that attached hereto as Exhibit A is a true and correct copy of resolutions
adopted by the Unanimous Written Consent of the Board of Directors of the
Corporation dated June 3, 1996, that such resolutions are the only resolutions
of the Board of Directors or the stockholders of the Corporation dealing with
the subject matter thereof and the such resolutions have not been amended or
rescinded and are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation this 25th day of July, 1996.
William P. Ruffa, Assistant Secretary
[Letterhead of Davis Family Trust]
Jeffrey F. Davis, Vice President June 18, 1998
Electronic Fuel Control, Inc.
4851 Georgia Highway 85
Suite 210
Forest Park, Ga., 30297
Re: Licensing Agreement between Davis Family
Trust and Electronic Fuel Control, Inc.
Dear Mr. Davis:
Following up on our various telephone conversations of the past several weeks,
this letter is intended as a summary of the agreement we have reached regarding
alterations in the existing Licensing Agreement between Electronic Fuel Control,
Inc. and the Davis Family Trust. This agreement is subject to your company
meeting all of the conditions specified and fulfillment of those conditions by
the dates and times set forth.
The amount of the debt owed to the Davis Trust by Electronic Fuel Control, Inc.
("EFC") as of December 31, 1997 was $133,635.08. EFC has proposed to liquidate
that debt on July 31, 1998 under the terms and conditions herein set forth. On
July 31, 1998 the amount EFC will owe the Davis Trust, including interest
accrued from January 1, 1998 through and including that date, will be
$143,576.10. EFC will pay to the Trust the sum of $43,576.10 on July 31, 1998
and, in addition, EFC on that date will tender to the Trust 108,000
non-assessable, unencumbered, duly authorized and issued shares of EFC's common
stock. The Trust will then mark the existing, $150,000.00 promissory note "paid
in full" and will return the original of said note to EFC. Additionally, the
Trust will suspend the quotas in the Licensing Agreement for a period of three
(3) years as set forth in my letter to you of June 4, 1998.
If you agree that the contents of this letter accurately represents our
understanding, please sign where your name appears below and return a signed
copy of this document to me at the address set forth above.
<PAGE>
Jeffrey F. Davis, Vice President
Page Two
June 18, 1998
With kind regards, I remain
Sincerely yours,
/s/ Mark W. Crouch
------------------
Mark W. Crouch, acting
in his capacity as Trustee
of the Davis Family Trust
MWC/mwc
cc: file
I agree that the contents of this letter accurately represents our
understanding.
/s/ Jeffrey F. Davis
- --------------------
Jeffrey F. Davis, Vice President
06/19/98
- --------
Date
AMENDMENT TO LICENSE AGREEMENT BETWEEN
THE DAVIS FAMILY TRUST AND ELECTRONIC
FUEL CONTROL, INC.
This Amendment is entered into this the 3rd day of January, 2000,
between the DAVIS FAMILY TRUST and ELECTRONIC FUEL CONTROL, INC.
WHEREAS, the DAVIS FAMILY TRUST ("Trust") and ELECTRONIC DUEL CONTROL,
INC. ("EFC") entered into a License Agreement dated May 13, 1996 under which
ELECTRONIC FUEL CONTROL, INC, received certain rights to letters patent owned by
the Trust and the Trust received certain remuneration; and
WHEREAS, the EFC and the Trust have reached agreement on certain
changes to be made to said License Agreement and wish to reduce those changes
to' written form;
NOW, THEREFORE, for and in consideration of the mutual promises;
covenants, warranties, and agreements heretofore made and now set forth in this
Agreement, the parties hereto do hereby agree as follows:
I.
The first sentence of Article 20 of that certain License Agreement
entered into between the Trust and EFC dated May 13, 1996 is hereby stricken in
its entirety and the following language is inserted in lieu thereof:
"This licensing Agreement covering the "Licensed Patented Rights" shall
encompass and be valid within and only within the boundaries of the
continental United States of America, Mexico, Canada, the sovereign
nation of Egypt as the borders thereof are defined on January 3, 2000,
-1-
<PAGE>
and South America."
II.
The content and language of Article 21 of that certain License
Agreement entered into between the Trust and EFC dated May 13, 1996 is hereby
stricken in its entirety and the following language is inserted in lieu thereof:
"Reserved."
3.
In return for the changes herein agreed upon by the Trust upon
execution hereof by EFC, EFC shall issue or cause to be issued 250,000 shares of
EFC's common voting stock in the name of the Davis Family Trust and deliver said
stock to the Trustee of said Trust. It is agreed that said stock shall be issued
on the basis of the price of EFC common voting stock as reflected on the
exchange where said stock is traded at the close of business on August 5, 1999.
The parties agree that the 250,000 shares of common voting stock issued pursuant
to this Amendment to License Agreement shall not be encumbered by any
restrictions on the sale or transfer thereof extending beyond a period of twelve
(12) calendar months from the date of issuance. Further; EFC agrees that the
ownership percentage held by the Trust in EFC after issuance of said common
voting shares shall not thereafter be diluted nor shall EFC permit said
ownership percentage to be diluted by any act, deed, or conduct of EFC, it
officers, agents, representatives, directors, or other person or entity acting
or purporting to act on its behalf.
-2-
<PAGE>
4.
This agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement by
affixing respectively the signature of a duly authorized officer of EFC and by
the Trustee of the Davis Family Trust, this the 4 day of January, 2000.
ELECTRONIC FUEL CONTROL, INC.
/s/ Robby E. Davis
------------------
Robby E. Davis
Its president
/s/ Donna Henderson
- -------------------
Donna Henderson
Witness
Attested to: CORPORATE SEAL
/s/ Jeffrey F. Davis
- --------------------
Jeffrey F. Davis
Corporate Secretary
THE DAVIS FAMILY TRUST
/s/ Mark W. Crouch, Trustee
---------------------------
Mark W. Crouch, Trustee
_________________________
Witness
-3-
CONSULTING AGREEMENT
This consulting agreement (the "Agreement") is made and entered into as
of the 23rd day of November, 1999 (the "Effective Date"), by and between MBO,
Inc., a South Carolina Corporation ("MBO") and Save On Energy, Inc. a Georgia
Corporation ("SAVE" or the "Company"), for the purpose of defining and
acknowledging the terms of this Agreement.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Exclusivity. The Company hereby engages MBO on an exclusive basis for the
term specified in Paragraph 2 hereof to render services to the Company as
its corporate finance consultant, financial advisor and consulting adviser
upon the terms and conditions set forth herein.
2. Term and Termination. This Agreement shall be effective for a period of one
year (the "Initial Term"), commencing upon the Effective Date of this
Agreement and may be extended as the parties shall mutually agree in
writing (the "Term"), subject to the establishment of arrangements for
additional compensation and other appropriate terms for such extension.
Beginning 90 days after the Effective Date of this Agreement, either party
may terminate MBO's engagement hereunder at any time by giving the other
party at least 60 days prior written notice, subject to the provisions of
Paragraph 4 through 18, all of which shall survive any termination of this
Agreement. MBO may terminate this Agreement immediately for a breach of
paragraph 5, 6, or 7 or upon any material breach of this Agreement.
3. Services to be Provided. During the Term of this Agreement, MBO shall
provide the Company with such regular and customary consulting advice as is
reasonably requested by the Company, provided that MBO shall not be
required to undertake duties not reasonably within the scope of the
financial advisory and/or consulting services contemplated by this
Agreement. Michael B. Orr will personally provide this consulting advice.
It is understood and acknowledged by the parties that the value of MBO
advice is not readily quantifiable, and that MBO shall be obligated to
render advice upon the request of the Company, in good faith, but shall not
be obligated to spend any specific amount of time in so doing. MBO's duties
may include, but will not necessarily be limited to, providing
recommendations and assisting in the following:
(a) Preparing a business plan and detailed financial objections, including
the formation of the key strategies that will drive the business.
Preparation of this plan is understood to be dependent upon the input
of management and will be based on readily available external
information.
(b) Rendering advice with regard to internal operations, including:
i. the formation of corporate goals and strategies and their
implementation; and
ii. determining the corporate organization structure and personnel.
(c) Preparing a marketing plan and creating the structure for its
execution, including:
i. performing the duties of the Company's chief marketing officer on
an interim basis;
ii. overseeing the development and production the necessary marketing
tools, such as brochures;
Page 1 of 7
<PAGE>
iii. supervising the activities of the Company's distributors and
sales agents;
iv. directing the activities of public relations and/or advertising
agencies that the Company may engage; and
v. assisting the overall execution of the marketing component of the
plan.
(d) Assisting the Company in preparing the filings and taking the actions
necessary to become a "Reporting Company";
(e) Rendering advice and providing assistance in connection with the
preparation of interim and annual financial reports;
(f) Rendering advice with regard to the following corporate finance
matters:
i. structuring and changes in the capitalization of the Company;
ii. changes in the Company's corporate structure;
iii. redistribution of shareholdings of the Company's stock;
iv. sales of securities in private transactions;
v. the Company's financial structure and its divisions or
subsidiaries;
vi. securing, when and if necessary and possible, additional
financing through banks and/or insurance companies; vii.
alternative uses of corporate assets; and viii. structure and use
of debt.
(g) Rendering advice or assistance with regard to any of the following
merger or acquisition activities:
i. the acquisition and/or merger of or with other companies;
ii. divestiture or any other similar transaction; and
iii. the sale of the Company itself (or any significant percentage,
assets, subsidiaries or affiliates thereof); and
(h) Rendering advice and/or assistance with regard to any of the following
capital raising activities:
i. bank financing or any other financing from financial institutions
or individuals (including but not limited to revolving credit
facilities, lines of credits, term loans, rediscounted credit
facilities, senior and junior loans, whether collateralized or
unsecured, etc.);
ii. assist in preparing the Private Placement Memorandum;
iii. assist in identifying a placement agent for the Company's
securities; and
iv. assist in identifying an underwriter in any public offering of
the Company's securities.
4. Compensation. In consideration for the services rendered by MBO to the
Company pursuant to this Agreement (and in addition to the expense
reimbursements provided for in Paragraph 6 hereof), the Company shall
compensate MBO as follows:
(a) Initial Retainer. The Company shall pay MBO an initial non-refundable
fee in the amount of Ten Thousand Dollars ($10,000) upon its receipt
of the first $250,000 in funding.
(b) Business Plan Preparation. The Company shall pay MBO a further fee in
the amount of Fifteen Thousand Dollars ($15,000) upon completion of
the business plan and financial
Page 2 of 7
<PAGE>
model. MBO agrees to defer this payment until a cumulative total of
Five Hundred Thousand dollars ($500,000) has been raised for and
received by the Company.
(c) Additional Compensation. The Company will pay MBO a further fee of ten
percent (10%) of all equity money that the Company receives as a
result of our efforts, including debt instruments that carry a
provision for conversion into equity. Payment of this fee is due
immediately upon receipt of cleared funds at the Company's bank.
(d) Initial Warrants. The Company shall issue to MBO and/or its designees,
subject to MBO completing certain specified activities, Warrants to
purchase Two Hundred Fifty Thousand (250,000) shares of the Company's
common stock at Seventy-five cents ($0.75) per share in accordance
with the following schedule:
100,000 Warrants upon receipt of $250,000 raised by MBO, and
50,000 Warrants upon completion of the Business Plan and
Financial Model, and
50,000 Warrants upon the receipt of cumulative funds of $500,000,
and
50,000 Warrants upon receipt of a total of $750,000.
All Warrants issued to MBO shall expire three (3) years from the date
of issuance and shall have "piggy back" and demand registration rights
and anti-dilution provisions as are normal and customary.
(e) Monthly Retainer. The Company shall pay MBO a monthly consulting fee
of five thousand dollars ($5,000) per month during the term of this
Agreement, the first payment of which shall be due January 1, 2000.
MBO agrees to defer each month's retainer until the first receipt of
funding above $250,000 for the Company.
(f) Merger and Acquisition Fee. If any Transaction (as hereinafter
defined) is consummated during the Term of this Agreement with any
parties, when such party has been introduced directly or indirectly by
MBO during the Term hereof, the Company shall pay at the closing of
each such Transaction a cash fee equal to the sum of:
i. five percent (5%) of the first five million dollars of the
Aggregate Consideration (as herein after defined) of a
Transaction, plus
ii. four percent (4%) of the second five million dollars of the
Aggregate Consideration of a Transaction, plus
iii. three percent (3%) of the third five million dollars of the
Aggregate Consideration of a Transaction, and plus
iv. two percent (2%) of the Aggregate Consideration over fifteen
million dollars.
v. In no event, however, shall the fee provided for within this
subparagraph be less than $25,000.
vi. Aggregate Consideration is defined and computed as follows:
1) The total sale proceeds and other consideration received
(which shall be deemed to include amounts paid into escrow)
by the Company and/or its shareholders or by a target and/or
its shareholders upon the consummation of the Transaction
(including payments made in installments), inclusive of
cash, securities, notes, consulting agreements and
agreements not to compete, plus the total value of
liabilities assumed.
Page 3 of 7
<PAGE>
2) If a portion of such consideration includes contingency
payments (whether or not related to future earnings or
operations), Aggregate Consideration will include 75% of the
face value of such payments without regard to whether the
conditions for the payment of such contingent amounts have
been or may be satisfied.
3) If the Aggregate Consideration for the Transaction consists
in whole or in part of securities, for the purposes of
calculating the amount of Aggregate Consideration, the value
of such securities will be the value thereof on the day
preceding the consummation of the Transaction as the Company
and MBO agree; provided, however, that in the case of
securities for which there is a public trading market, the
value will be determined by the average last sales price for
such securities for the last twenty (20) days prior to such
consummation as determined by MBO and communicated by MBO to
the Company. If there is no public trading market for such
securities but securities have been sold in a private
placement within the past 24 months, the fair market value
shall be based upon the gross sales price in the last such
private placement. For other property received or receivable
as a part of the Aggregate Consideration and the parties are
unable to agree, then each of MBO and the Company will
select an investment banking firm respected in the merger
and acquisition field to determine a value and the midpoint
between the two values established by the two independent
experts will be the fair market value for the purpose
hereof.
vii. For the purposes of this Agreement, any of the following events
shall constitute a "Transaction":
1) The sale, outside of the ordinary course of business, of the
Company or a majority of its assets, securities, or business
by means of a merger, consolidation, joint venture, exchange
offer or purchase or sale of stock or assets, or any
transaction resulting in any change of control of the
Company or its assets or business; or
2) The purchase by the Company, outside of the ordinary course
of business, of another company or a majority of its assets,
securities or business by means of a merger, consolidation,
joint venture, exchange offer or purchase or sale of stock
or assets.
(g) Third-Party Debt Placements. In the event MBO is involved in
originating a debt facility, inclusive of revolving credit facilities,
lines of credits, term loans, rediscounted credit facilities, senior
and junior loans, whether collateralized or unsecured, etc., (the
"Credit Facility") with a bank or other institutional lender (the
"Lending Source"), the Company will pay MBO a fee of two percent (2%)
of the maximum amount of the Credit Facility. In the event MBO is
involved in arranging an increase in a Credit Facility, the Company
will pay MBO a fee of two percent (2%) of the increase from the
maximum amount of the existing Credit Facility to the maximum amount
of the new Credit Facility. In no event, however, shall the fee
provided for within this subparagraph be less than $25,000.
(h) Strategic Alliances and Partnerships. In the event MBO introduces the
Company to a joint venture partner or customer and sales develop as a
result of the introduction, the Company agrees to pay a "Commission"
of two percent (2%) of total sales generated directly from this
introduction during the first three (3) years following the date of
the first sale. Total sales shall mean cash receipts less any
applicable funds, returns, allowances, credits and
Page 4 of 7
<PAGE>
shipping charges and monies paid by the Company by way of settlement
or judgment arising out of claims made or threatened against the
Company. Commission payments shall be paid on the 15th day of each
month following the receipt of customers' payment. In the event any
adjustments are made to the total sales after the commission has been
paid, the Company shall be entitled to an appropriate refund or credit
against future payments due under this Agreement.
5. Payment of Fees. All fees to be paid pursuant to this Agreement are due and
payable to MBO in cash at the closing or closings of any transaction as
specified in Paragraph 4 hereof or within 10 days upon presentation of
invoices as specified elsewhere.
6. Expense Reimbursement. In addition to the compensation payable hereunder,
and regardless of whether any transaction set forth in Paragraphs 3 or 4
hereof is proposed or consummated, the Company shall reimburse MBO for all
travel and out-of-pocket expenses incurred in connection with the services
performed by MBO pursuant to this Agreement, including without limitation,
hotel, food and associated expenses, telephone calls and legal expenses.
Any travel or other reimbursable expenses in excess of $500 per month shall
be approved in advance by the Company.
7. Payment Terms. Invoices for consulting fees, other fees and expense
reimbursement are due and payable immediately upon presentation. Unpaid
invoices will accrue interest at the rate of one percent (1.0%) per month
or part thereof.
8. Continuing Obligation. In the event that this Agreement shall not be
renewed or if terminated for any reason notwithstanding any such renewal or
termination, MBO shall be entitled to a full fee as provided under
Paragraph 4 hereof, for any transaction for which the discussions were
initiated during the Term of this Agreement and which is consummated within
a period of twelve (12) months after non-renewal or termination of this
Agreement.
9. Confidentiality. The Company acknowledges that all opinions and advice
(written or oral) given by MBO to the Company in connection with MBO's
engagement are intended solely for the benefit and use of the Company in
considering the transaction to which they relate, and the Company agrees
that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of MBO to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the company make any public references to MBO, or use
MBO's name in any annual reports or any other reports or releases of the
Company without MBO's prior written consent.
10. Independent Contractors. The Company acknowledges that MBO is in the
business of providing consulting and financial services advice to others.
Nothing herein contained shall be construed to limit or restrict MBO in
conducting such business with respect to others, or in rendering such
advice to others. MBO, and specifically Michael B. Orr, shall perform its
services hereunder as an independent contractor and not as an employee of
the Company or an affiliate thereof. It is expressly understood and agreed
to by the parties hereto that MBO shall have no authority to act for,
represent or bind the Company or any affiliate thereof in any manner,
except as may be agreed to expressly by the Company from time to time.
11. Reliance. The Company recognizes and confirms that, in advising the Company
and in fulfilling its engagement hereunder, MBO will use and rely on data,
material and other information furnished to MBO by the Company. The Company
acknowledges and agrees that in performing its services under this
engagement, MBO may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same.
Page 5 of 7
<PAGE>
12. Notices. Any notice or communication permitted or required hereunder shall
be in writing and shall receipt requested, or (ii) by facsimile, to the
respective parties as set forth below, or to such other address as either
party may notify the other of in writing:
If to the Company, to: Save On Energy, Inc.
Airport Industrial Center, Suite 210
4851 Georgia Highway 85
Forest Park, Georgia 30297
Telephone: 404-765-0131
Facsimile: 404-765-0171
Attention: Robbie E. Davis
Its: President
If to MBO, to: MBO, Inc.
22 Quail Hill Drive
Greenville, South Carolina 29607
Telephone: 864-458-9620
Facsimile: 864-458-9795
Attention: Michael B. Orr
Its: President
13. Indemnification. MBO and the Company have entered into a separate letter
agreement dated the date hereof (the "Indemnity Letter"), providing for the
indemnification of MBO by the Company and for the indemnification of the
Company by MBO in connection with MBO's engagement hereunder.
14. Counterparts. This Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same original document.
15. Assignability and Modification. This Agreement is not assignable and cannot
be modified or changed, nor can any of its provisions be waived, except by
the mutual agreement in writing of all parties.
16. Governing Law. This Agreement shall be governed by the laws of the State of
Georgia.
17. Severability. Each paragraph, term or provision of this Agreement shall be
considered severable and if, for any reason, any paragraph, term or
provision is determined to be invalid or contrary to any existing or future
law or regulation, such will not impair the operation, or effect the
remaining portions, or this Agreement.
18. Dispute Resolution. The parties shall attempt amicably to resolve
disagreements by negotiating with each other. In the event that the matter
is not amicably resolved through negotiation, any controversy, dispute or
disagreement arising out of or relating to this Agreement (a "Controversy")
shall be submitted to a nationally recognized arbitration association, such
as the American Arbitration Association, for final binding arbitration,
which shall be conducted by a single arbitrator (the "Arbitrator") in
Atlanta, Georgia, pursuant to Arbitration Rules of the American Arbitration
Association (the "Rules"). Notwithstanding anything to the contrary
contained in the Rules, the Arbitrator shall not award consequential,
exemplary, incidental, punitive or special damages.
If any party shall desire relief of any nature whatsoever from any other party
as a result of any Controversy, such party will initiate such arbitration
proceedings within a reasonable time, but
Page 6 of 7
<PAGE>
in no event more than one (1) year after the facts underlying said Controversy
first arise or become known to the party seeking relief (whichever is later).
The failure of such party to institute such proceedings within said period shall
be deemed a full waiver of any claim for such relief. Arbitrator may award the
prevailing party its costs for the arbitration proceeding, including its
reasonable attorneys' fees and costs. The parties agree that the decision and
award of the Arbitrator shall be taken, but that such award or decision may be
entered as a judgment and enforced in any court having jurisdiction over the
party against whom enforcement is sought. Any equitable relief awarded under
this paragraph shall be dissolved upon issuance of the Arbitrator's decision and
order.
The parties hereto hereby consent to the jurisdiction of the federal courts or
the state courts located in Atlanta, Georgia for any proceedings under this
paragraph.
Save On Energy, Inc.
By: /s/ Robby E. Davis
------------------
Robby E. Davis
Its: President
MBO, Inc.
By: /s/ Michael B. Orr
------------------
Michael B. Orr
Its: President
Page 7 of 7
SUPPLY AGREEMENT
This Agreement made as of the 29th day of April, 1996, by and between Ambac
International Corporation ("Ambac"), a Delaware corporation having its principal
place of business at I-77 at Killian Road, Columbia, South Carolina and
Electronic Fuel Control, Inc. ("EFC"), a Georgia corporation having its
principal place of business at Suite 210, 4851 Georgia Highway, Forest Park,
Georgia.
WHEREAS, Ambac has developed and sold dual fuel control systems for various
engine applications as set forth in Attachment A;
WHEREAS, EFC has developed gaseous fuel technology and mixing devices for
use in the conversion system under which naturally aspirated and turbo charged
internal combustion engines can be fueled with compressed or liquefied natural
gas or propane, or converted to the use of multiple fuels; and
WHEREAS, EFC has approached Ambac to develop a duel fuel control system for
use with the EFC gaseous fuel technology mixing device in a dual fuel conversion
system.
1. DEFINITIONS
For the purposes of this Agreement, the following terms shall have these
respective meanings:
EFC Dual Fuel Control Systems and Components" shall mean an electronically
controlled, closed loop, speed and load sensitive, controller system, and
components thereof, meant to control both diesel and gas fuels,
proportionately metering both fuels via electronic control and said system
shall be specifically developed for and adapted to a EFC Gaseous Fuel
1
<PAGE>
Technology Mixing Device(s) as such term is defined below.
"EFC Gaseous Fuel Technology Mixing Device" shall mean the electronically
controlled, closed loop natural gas/diesel conversion system initially
developed by Frank Davis.
"Ambac Products" shall mean the products sold hereunder.
"Dual Fuel Control Systems and Components" shall mean an Ambac developed
electronic controller system, and components thereof, meant to control both
diesel and gas fuels, proportionately metering both fuels via electronic
control, and which is not developed specifically for EFC and for which
Ambac did not use Proprietary Information, as such term is defined
hereunder, of EFC in the development thereof.
2. DEVELOPMENT
Ambac agrees to design and develop an EFC Dual Fuel Control System(s) and
Components for use with the EFC Gaseous Fuel Technology Mixing Devices.
Ambac shall immediately begin development of an analog EFC Dual Fuel
Control System and upon mutual agreement of the parties, it will commence
development of a digital EFC Dual Fuel Control System. Ambac shall
establish proprietary part numbers in the name of EFC for the EFC Dual Fuel
Control System(s) and Components.
2
<PAGE>
3. EXCLUSIVE SALES RIGHTS
A. Ambac agrees to sell EFC Dual Control Systems and Components only to EFC
for a period of twenty (20) years from the date hereof and all parties
requesting information from Ambac on EFC Dual Control Systems and
Components and EFC Gaseous Fuel Technology Mixing Device shall be referred
by Ambac to EFC.
B. After successful completion of development and testing of the first EFC
Dual Fuel Control Systems and Components required hereunder, agreement on
price(s) and the exhaustion of existing EFC supplies of its current dual
fuel control systems (including EFC's existing inventory of and its open
orders for its current dual fuel control systems), EFC agrees to purchase
from Ambac, its requirements for dual fuel control systems for its EFC
Gaseous Fuel Technology Mixing Device(s) for a period of twenty (20) years
from the date hereof and upon the terms set forth herein; provided,
however, that the technology and price for components will allow EFC to
remain competitive and that Ambac is able to satisfy EFC's product
requirement as requested on a timely basis and that the products purchased
hereunder conform to industry quality standards. If Ambac becomes
non-competitive hereunder, it shall have an opportunity meet the
competitive conditions.
C. Ambac shall retain the right to sell Dual Fuel Control Systems and
Components to any party; provided, however, Ambac shall be prohibited
3
<PAGE>
from selling to any party other than EFC, any Dual Fuel Control System(s)
developed by Ambac which are identical or similar to the EFC Dual Fuel
Control System(s) to be developed hereunder.
4. SALES TERMS
A. On or prior to the completion of development of the respective EFC Dual
Fuel Control Systems and Components, the parties shall mutually agree on
price terms for each component thereof.
B. All purchase orders placed by EFC with Ambac for Ambac Products sold
hereunder shall be subject in all respects to the terms and conditions of
this Agreement, including the Ambac's Standard Terms and Conditions of
Sale, attached hereto as Exhibit A and such terms and conditions of this
Agreement shall apply in lieu of any terms and conditions on EFC's purchase
order forms or other related documents.
C. EFC shall make payment for the Ambac Products purchased pursuant to this
Agreement in accord with the terms as set forth in EFC's Terms and
Conditions which are attached hereto as Exhibit B. Ambac shall have the
right to change the Terms and Conditions set forth in Exhibit A and B
hereto, applicable to all unaccepted orders upon 120 days written notice to
EFC.
D. EFC will not return any of the Ambac Products purchased hereunder for
credit or exchange unless and until EFC receives Ambac's consent. Ambac
shall not unduly withhold consent for the return of components supplied by
Ambac that are subject to coverage under the Ambac Warranty, as such
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term is defined below, due to a defect attributable to Ambac or its
vendors, which consent will not be unreasonably withhold and the decision
rendered by Ambac in each case shall be in accordance with industry custom,
standards and practice.
5. WARRANTY
Ambac Products sold under this Agreement shall be subject to Ambac's then
current standard warranty provisions covering the Ambac Products which are
contained in Ambac's Warranty Administration Manual ("Ambac Warranty"). Any
changes from Ambac's standard warranty policy must be agreed to by both
parties in writing.
6. OWNERSHIP OF TECHNOLOGY
Ambac shall retain all technological rights to the EFC Dual Fuel Control
Systems and Components and EFC shall retain all technological rights to the
EFC Gaseous Fuel Technology Mixing Device(s); provided, however, that the
technology to the EFC Dual Fuel Control Systems and Components is not
covered under the existing patents owned by the Davis Family Trust.
7. CONFIDENTIALITY
In connection with the performance of this Agreement, Ambac and EFC
contemplate the possible disclosure to each other of portions of certain
"Proprietary Information" (defined below) of the disclosing party.
5
<PAGE>
A. For the purpose of this Agreement, the term "Proprietary Information"
shall mean any and all technical information bearing an appropriate
confidentiality notice which is originated or collected by the disclosing
party, whether recorded in documentary form or otherwise, relating to the
design, construction, operation, manufacture, testing, servicing and/or
selling EFC Dual Fuel Control Systems and EFC Gaseous Fuel Technology
Mixing Devices including without limitation, design concepts,
specifications, drawings, manufacturing procedures, parts lists, test
procedures and data, bill of materials, performance data, names and
addresses of components suppliers and service and maintenance manuals.
B. The receiving party agrees that it will maintain Proprietary Information
received from the other party hereto in strict confidence using the same
standard of care it uses in protecting its own Proprietary Information and
it will not disclose to any third party such Proprietary Information unless
and until it is released from this obligation in writing by the other party
hereto. The receiving party may disclose Proprietary Information only to
its employees necessarily in the use thereof for the purposes set forth
herein. The receiving party agrees to advise such employees of the
confidential nature of the Proprietary Information and of the existence and
importance of this Agreement and the terms protecting the confidentiality
of Proprietary Information.
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<PAGE>
C. The receiving party will not use such Proprietary Information for any
purpose other than those set forth herein.
D. The obligations of this Agreement shall not apply to any part of the
Proprietary Information which the receiving party can show to have been in
the public domain or in the receiving party's possession at the time of the
disclosure hereunder.
8. TERM AND TERMINATION
A. This Agreement shall continue in force and effect for a period of twenty
(20) years from the date hereof, unless it is otherwise terminated by
either party for "good cause", which shall include, but not be limited to
any material or repetitive breach by either party of any obligation,
policy, procedure or requirement set forth in this Agreement, if such party
shall fail to correct such breach within forty-five (45) days after receipt
of written notice, which notice shall specify the grounds for such breach.
B. In the case of a termination, the terminating party shall give sixty
(60) days prior written notice of termination to the other party. The
forty-five (45) day period provided above to allow for cure of a breach
shall, for purposes of calculating the sixty (60) days notice period, be
included as part of such sixty (60) day period.
C. Within thirty (30) days after the effective date of termination, EFC
shall pay all monies due and owing hereunder. EFC shall pay interest on any
past due balances at the rate of fifteen percent (15%) per annum and
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shall also pay the Company's cost of collection, including reasonable
attorney fees. 9. NOTICES
All notices or communications are permitted to be sent by one party to the
other under the provisions of this Agreement shall be in writing and shall
be deemed sufficiently sent if transmitted by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Ambac: Ambac International Corporation
P.O. Box 85
Columbia, SC 29202
Attention: President
If to EFC: Electronic Fuel Control, Inc.
Suite 210
4851 Georgia Highway 85
Forest Park, GA 30050
Attention: Frank Davis & J. R. Harper
10. ASSIGNMENT
This Agreement is not assignable by either party without the other party's
prior written consent, which consent will not be unreasonably withheld;
provided, however, either party may assign this Agreement to a successor
entity acquiring all or substantially all of the property, assets and
business of either party.
11. WAIVER
That the failure by either party to enforce any term or condition of this
Agreement shall not constitute a waiver of that party's right to enforce
the same term or condition upon the occasion of a subsequent default or
breach.
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12. SEVERABILITY
If one or more provisions of this Agreement shall be held, by a court or
other adjudicatory body, to be unenforceable for any reason, such finding
shall in no manner affect the enforceability of the remaining provisions of
this Agreement.
13. CHOICE OF LAW
This Agreement shall be construed and enforced in accordance with the laws
of the State of Georgia, U.S.A.; without regard to the principles of
conflict of laws thereof.
14. RESOLUTION OF DISPUTES
In the event of any dispute or difference arising out of or relating to
this Agreement or the breach thereof, the parties shall use their best
efforts to settle such disputes or differences. To this effect, they shall
consult and negotiate with each other, in good faith and understanding of
their mutual interest, to reach a just and equitable solution satisfactory
to both parties. If the parties do not reach such solution within a period
of thirty (30) days, then the disputes or differences shall finally be
settled and determined by a single arbitrator under the then current
Commercial Arbitration Rules of the American Arbitration Association
("AAA"). The arbitration shall be held and the award shall be deemed to be
made in Augusta, Georgia. The decision and award of the arbitrator shall be
final and judgment may be entered upon it in accordance with the applicable
law in any court having jurisdiction.
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15. FORCE MAJEURE
Neither party shall be liable for failure to perform any part of this
Agreement when such failure is due to strikes, riots, fires, wars, acts of
God, or any other contingencies beyond the reasonable control of the
parties.
16. AMENDMENT
This Agreement may not be modified or terminated orally, an no
modification, termination, or attempted waiver shall be valid unless set
forth in writing signed by all of the parties hereto.
17. BINDING AGREEMENT
That this Agreement shall be binding and conclusive upon and inure to the
benefit of the respective parties hereto and their respective successors,
heirs, assigns, executors, administrators and legal representatives.
18. ENTIRE AGREEMENT
A. That this Agreement together with the Exhibits hereto are a part of this
Agreement as though set forth in full herein.
B. That this Agreement together with the Exhibits hereto, contains the
entire agreement of the parties hereto, and this Agreement supersedes any
and terminates all previous agreements made between the parties hereto.
19. EFFECTIVE DATE
This Agreement shall commence as of the date it is fully executed by both
parties hereto.
<PAGE>
AMBAC INTERNATIONAL ELECTRONIC FUEL CONTROL, INC.
CORPORATION
/s/ Laurence D. Hurwitz /s/ Robby E. Davis
----------------------- ------------------
By: Laurence D. Hurwitz By: Robby E. Davis
its General Counsel & its President
Assistant Secretary
<PAGE>
Exhibit A
Standard Terms and Conditions of Sale
1. PURCHASE ORDERS
The Buyer agrees that the terms and conditions set forth herein shall be
applicable to all quotations and purchase orders covering the sale of Seller's
products and services and shall supersede all printed terms and conditions set
forth in Purchase Orders used by the Buyer, Seller shall not be deemed to have
waived these terms and conditions of sale if it fails to object to terms and
conditions appearing in Buyer's purchase orders and Buyer's acceptance of
products or services called for in said orders shall constitute the Buyer's
acceptance of these terms and conditions of sale as the only terms applicable to
the purchase of such goods or services.
2. PRICES
Prices are subject to adjustment in accordance with provisions contained
elsewhere herein. In addition to the stipulated purchase price of the goods, any
and all taxes (not including any income or excess profits taxes) that may be
imposed by any taxing authority, arising from the sale, delivery, or use of the
goods and for which the Seller may be held responsible for collection or payment
either on its own behalf or on behalf of the Buyer, shall be paid by the Buyer
to Seller upon the Seller's demand.
3. DELIVERY, TITLE AND RISK OF LOSS
All goods shall be delivered to the Buyer F.O.B. the Seller's factory. Title to
and the risk of loss of or damage to all goods sold hereunder shall remain with
the Seller until, and shall pass to the Buyer upon, delivery of the goods to the
Buyer or any agent of the Buyer, including a common carrier or warehouse.
4. INSPECTION
If upon receipt and inspection of goods by Buyer at destination, such goods
shall appear not to be in conformance with the Contract, the Buyer shall, within
thirty (30) days after the receipt hereof, notify the Seller of such condition
and afford Seller a reasonable opportunity to inspect the goods and make any
appropriate adjustment or replacement. The remedies afforded Buyer under the
Paragraph 7 hereof entitled "Warranty" shall be exclusive for defective goods
discovered upon inspection but shall not be cut off by reason of Buyer's failure
to discover the defect in the goods within the inspection period provided above
this paragraph.
5. PAYMENT
Unless otherwise provided, payment for goods purchased and delivered under this
Contract shall be made in U.S. dollars at the prices stipulated within thirty
(30) days after the date of delivery to the F.O.B. point. Buyer shall not delay
payment for goods pending inspection under Paragraph 4 above.
6. PACKAGING
The goods to be delivered hereunder shall be packed and packaged in accordance
with sound commercial practice for domestic shipment. Unless otherwise provided,
export or other special packaging will be at additional charge to the Buyer.
7. EXCUSABLE DELAYS
Buyer acknowledges that the goods called for hereunder are to be manufactured by
or for Seller to fulfill this order and that the delivery dates are based on the
assumption that there will be no delay due to causes beyond the reasonable
control of Seller. Seller shall not be charged with any liability for delay or
non-delivery when due to delays of supplier, acts of God or the public enemy,
compliance in good faith with any applicable foreign or domestic governmental
regulation or order whether or not it proves to be invalid, fires, riots, labor
disputes, unusually severe weather or any other cause beyond the reasonable
control of Seller. To the extent that such causes actually retard deliveries on
the part of the Seller, the time for the performance shall be extended for as
many days beyond the date thereof as is required to obtain removal of such
causes. This provision shall not, however, relieve Seller from using its best
efforts to avoid or remove such causes. This provision shall not, however,
relieve Seller from using its best efforts to avoid or remove such causes and
continue performance with reasonable dispatch whenever such causes are removed.
8. LIMITATION ON LIABILITY
The price allocable in this Contract to any product or service alleged to be the
cause of any loss or damage to the Buyer shall be ceiling limit on Seller's
liability, whether founded in Contract or tort (including negligence), arising
out of, or resulting from (i) this Contract or the performance of breached
thereof, (ii) the design, manufacture, deliver, sale, repair, replacement or
(iii) the use of any such product or the furnishing of any such service. In no
event shall Seller have any liability of any incidental or consequential
damages.
9. COMPLIANCE WITH FAIR LABOR STANDARDS ACT
Seller hereby certifies that goods sold hereunder which are produced or
manufactured in the United States are produced in compliance with the Fair Labor
Standards Act of 1938, as amended. All requirements as to the certificate
contemplated in the October 26, 1949 amendment shall be considered as satisfied
by the certification.
EXHIBIT A.EF
<PAGE>
EXHIBIT B
EFC Terms and Conditions
TERMS: 2% Net 10th Proximo
AGREEMENT BY AND BETWEEN LANIER DAVENPORT,
INTERNATIONAL FUEL SYSTEMS, INC. AND SAVE ON ENERGY, INC.
---------------------------------------------------------
THIS AGREEMENT, dated as of January 7, 2000, (the "Agreement") between
Save on Energy, Inc. ("Save"), Lanier Davenport ("Davenport") and International
Fuel Systems, Inc. (*IFS") (collectively, the "Parties") supercedes the
agreement dated June 24, 1999, by and between IFS and SAVE, as well as all other
agreements and understandings between the Save and Davenport and between Save
and IFS.
NOW, THEREFORE, in consideration of $10 cash in hand, the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by all Parties, the
Parties hereby agree as follows:
1. SAVE shall deliver instructions to the transfer agent of SAVE
concurrent with the execution of this Agreement, and shall cause to be issued
and delivered within five (5) business days, Six Hundred Thousand (600,000)
common shares of SAVE to the designees of Lanier Davenport, prior payment for
such shares having duly been acknowledged by SAVE, as follows:
Shareholder Name, Address, Social Security Number Number of Shares
(a) Lanier M. Davenport 255,000
P.O. Box 178
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(b) Lanier M. Davenport, Jr., UTMA 30,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(c) Steven Ray Davenport, UTMA 30,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(d) Sarah Byrd Davenport, UTMA 30,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(e) Jonathan P. Hoover 40,000
802 Scenic Highway
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(f) Carol Espinosa 40,000
Two Market Street, Apartment 306
Chattanooga, Tennessee 37402
Social Security Number: ###-##-####
<PAGE>
(g) Dennis L. Knight 40,000
998 Boynton Drive
Ringgold, GA 30736
Social Security Number: ###-##-####
(h) Kota Suttle 20,000
2631 Druid Oaks Drive
Atlanta, GA 30329
Social Security Number: ###-##-####
(i) Daryl Powell 40,000
2716 Autumn Chase Drive
Chattanooga, TN 37421
Social Security Number: ###-##-####
(j) Gerald B. Andrews 75,000
111 Highland Drive
West Point, GA 31833
Social Security Number: ###-##-####
2. The shares described in Section 1 above shall bear piggy back registration
rights, entitling these shares to be registered with any other registration
made by SAVE. SAVE will be obligated to file with the SEC to cause such
shares to be registered, within six (6) months from the date of this
Agreement.
3. Davenport shall purchase from SAVE Two Hundred Thousand (200,000) common
shares of SAVE, subject to Rule 144, at a price of $0.75 per common share
for the amount of One Hundred Fifty Thousand Dollars ($150,000.00), to be
paid in two separate installments of One Hundred Five Thousand Dollars
($105,000.00) and Forty Five Thousand Dollars ($45,000.00) , respectively.
The first installment shall be placed in escrow until sufficient evidence
has been presented to Davenport that the shares have been delivered. Upon
release from escrow of the first installment, Davenport shall place, within
five (5) business days, the second installment in escrow. SAVE shall
concurrently instruct the transfer agent of SAVE, and shall cause to be
issued and delivered, Two Hundred Thousand Shares (200,000) of the common
stock of SAVE. The second installment shall be released from escrow upon
delivery of the 200,000 shares. These shares shall be issued as follows:
(a) Lanier M. Davenport 45,000
P.O. Box 178
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(b) Lanier M. Davenport, Jr., UTMA 10,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
<PAGE>
(c) Steven Ray Davenport, UTMA 10,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(d) Sarah Byrd Davenport, UTMA 10,000
P.O. Box 187
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(e) Jonathan P. Hoover 25,000
802 Scenic Highway
Lookout Mountain, TN 37350
Social Security Number: ###-##-####
(f) Carol Espinosa 25,000
Two Market Street, Apartment 306
Chattanooga, Tennessee 37402
Social Security Number: ###-##-####
(g) Gerald B. Andrews 75,000
111 Highland Drive
West Point, GA 31833
Social Security Number: ###-##-####
4. IFS shall diligently work toward identifying and securing OEMs to purchase
Save's products. Upon receipt by SAVE, its assigns, or successors, of an
OEM cumulative order for a minimum of 500 units of diesel conversion kits
at a reasonable profit to SAVE, procured through the substantive efforts of
IFS, SAVE shall instruct the transfer agent of SAVE, and shall cause to be
issued and delivered, within five (5) business days, Four Hundred Thousand
(400,000) common shares of SAVE, as Davenport shall specify in writing. For
purposes of this Agreement, OEM shall be defined as a company which
manufactures diesel engines or is a substantial purchaser of diesel engines
for installation in new equipment.
5. Any notice, required or other, to SAVE shall be deemed given if sent by IFS
or Davenport via certified mail or overnight carrier to SAVE's address as
follows:
Save On Energy, Inc.
4851 Georgia Highway 85
Suite 210
Forest Park, Georgia 30297
Any notice, required or other, to Davenport or IFS shall be deemed given if
sent by SAVE via certified mail or overnight carrier to IFS's address as
follows:
International Fuel Systems, Inc.
Suite 405 - Krystal Building
One Union Square
Chattanooga, TN 37402
<PAGE>
6. Any dispute, controversy or claim arising out of, relating to or in
connection with this Agreement shall be referred to, and finally settled
by, arbitration under and in accordance with the rules of arbitration of
the American Arbitration Association then in effect. Such arbitration shall
take place in Atlanta, Georgia.
7. Faxed copies of this Agreement are deemed to be originals for purpose of
enforcement of this Agreement. In the event any section or sections of this
Agreement are held to be invalid, the remaining sections are still deemed
valid and binding and shall continue in effect. This Agreement shall be
executed simultaneously in multiple counterparts each of which shall be
deemed original, but all of which constitute the same document.
8. This is the entire agreement between the Parties. Any modifications or
amendment to this Agreement must be in writing and executed by both
Parties. This Agreement specifically supercedes all prior agreements,
contracts, arrangements, understandings and representations between SAVE
and either Davenport or IFS, whether orally or in writing, and all such
prior agreements, contracts, arrangements, understandings and
representations shall be deemed canceled and mull and void. This Agreement
shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the Parties have set their hand as of the date first
set forth above.
INTERNATIONAL FUEL SYSTEMS, INC. SAVE ON ENERGY, INC.
By: /s/ Lanier M. Davenport By: /s/ Robby E. Davis
----------------------- ------------------
Lanier M. Davenport Robby E. Davis
Chairman President
By Resolution of the Board of By Resolution of the Board of
Directors Directors
/s/ Lanier M. Davenport
- -----------------------
Lanier M. Davenport
INDEPENDENT AUDITOR'S CONSENT
We have issued our report dated January 21, 2000 accompanying the financial
statements of Save On Energy, Inc. (formerly Electronic Fuel Control, Inc.) for
the years ended December 31, 1999 and 1998 which are included in this
Registration Statement. We consent to the inclusion in the Registration
Statement of the aforementioned report and to the use of our name, as it appears
under the caption "Experts".
JACK KANE & COMPANY, P.C.
NEW YORK, NY
March 21, 2000
