<PAGE>
As filed with the Securities and Exchange Commission on
March 31, 2000 Reg. No. 0
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
TSET, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 870440410
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
333 South State Street, PMB 111, Lake Oswego, Oregon 97034
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (888) 298-1270
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.001 par value per share
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Part I.
ITEM 1. Description of Business
(a) Business Development
TSET, Inc., "the Company", (formerly Technology Selection, Inc.), is a
Nevada Corporation organized on September 17, 1980, as Penguin Petroleum, Inc.,
in the state of Utah. Stockholders approved a name change on October 6, 1982,
to Petroleum Corporation of America, Inc. On December 29, 1996, the
stockholders approved a reorganization whereby they exchanged their stock on a
one for one basis with Technology Selection, Inc., a Nevada Corporation. The
Company has never achieved operating revenues. TSI's shares began trading on the
over-the-counter bulletin board exchange on August 28, 1996 under the symbol
"TSET." On November 19, 1998, TSI changed its name to TSET, Inc.
(b) Business of Registrant
Located in Lake Oswego, Oregon, the Company's business is to seek out
select business opportunities among a wide range of prospects both domestically
and internationally whereby the Company will act either for its own account or
as a facilitator for other entities whom the Company has a business
relationship. Thus TSET may participate in a transaction by becoming directly
involved by investing in a prospect or TSET may play an indirect role by
matching a prospects product or service with that of another Company and form a
business relationship between the Companies.
The Company does not restrict its search for business opportunities to any
specific business, industry, or geographical location, thus the Company may
participate in a business venture of virtually any kind or nature. Most
recently the Company has reviewed opportunities in healthcare - medical devices,
environmental, telecommunications, entertainment and sports apparel areas.
Some of these opportunities are discussed below.
The main goal of the Company's business strategy is acquire interests or
participate in opportunities that will increase shareholder value through
increased asset base and income. To help in achieving its goal of increasing
shareholder value, the Company will emphasize investment or acquisition in
businesses that have competent and professional management in place.
Important Events and Press Releases
-----------------------------------
In its search for business opportunities, certain significant relationships
have been created and are summarized below.
1. Computerized Thermal Imaging, Inc. The Company enjoys an important
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marketing relationship with Computer Thermal Imaging ("CTI", OTCBB: COII), which
the Company believes these is significant financial potential. On
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November 19, 1998, the Company entered into a Marketing Agreement with CTI,
which was subsequently amended on September 1, 1999 (collectively, the
"Marketing Agreement"). The Marketing Agreement provides that the Company will
use its best efforts and marketing resources to actively market the CTI Systems
in global markets. CTI, at its own expense, is obligated to provide the Company
with sales materials and marketing and technical assistance in order to
facilitate the placement of the CTI Systems.
The non-exclusive marketing rights for the CTI Systems held by the Company
became exclusive for a one-year period following September 1, 1999, whereby the
Company has exclusive marketing rights in all countries of the Middle East,
Mexico, Morocco, and Indonesia. After the Company has effected sales of the CTI
Systems in the aggregate cumulative amount of U.S.$4,000,000 or more, the
Company's exclusive marketing rights will be extended for another one-year
period and include all countries of Central and South America. After the
Company has effected sales of the CTI Systems in the aggregate cumulative amount
of U.S.$10,000,000 or more, the Company's exclusive marketing rights will be
further extended for another one-year period and include all countries of
Europe. These exclusivity periods will be renewed for additional successive
one-year periods for so long as the Company annually achieves the sales
milestones described above.
The Company will be compensated for sales of the CTI Systems under a
commission fee structure at the rate of 25% of the gross proceeds thereof and,
in connection with the first twenty-five CTI Systems only, the Company will
receive shares of CTI's common stock calculated according to a formula set forth
in the Marketing Agreement. The Company is exercising its marketing rights and
is currently actively seeking to place CTI Systems in the above-mentioned
markets. To date there have been no placements.
2. Acquisition of the "Electricity Management Unit."
----------------- ----------------------------------
On August 31, 1999, the Company held a special meeting of the Board of
Directors of TSET in which the acquisition was authorized, in exchange for
100,000 shares of the Company's common stock, of patent and intellectual
property rights relating to a technology and device known as the "Intelligent
Utility Meter System". The transaction has been valued at $0.50 per share or
$50,000. The patents and related technology value of $50,000 have been
capitalized and are reflected as other assets in the accompanying balance sheet.
The Company acquired this device from M&M Associates. The Company issued the
100,000 shares of common stock to the twelve participants in M&M Associates in
consideration for the patents and all other rights of the "Intelligent Utility
Meter System".
The actual device, to be further developed and refined, will be known as
the "Electricity Management Unit" (the "EMU"). M&M Associates will receive a
10% royalty on the net profits realized by the Company upon sales of the EMU in
California and Nevada, and a 1% royalty on the net profits of EMU sales
globally.
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The EMU is a low-cost, multifunctional device that provides a means of
processing the full spectrum of data and information contained or encoded on the
power line that delivers electrical power to consumers. The EMU measures "real"
power over a thousand times per second, computes kilowatts, power factor, demand
and, as a qualified revenue device coupled with a "smart card" information
gathering and retrieval software system, can compute the cost of power consumed
depending upon the time of day; accept prepayment and maintain account balances;
detect and report the occurrence and duration of power outages and voltage
excursions; and, through "smart card" technology, can be read remotely, thus
eliminating on-foot data collection and providing greater accuracy's and
efficiencies in accounting, billing, collection, and cash management. The
Company believes that the EMU could, in time, be a viable replacement for the
mechanical watt-hour device currently used to measure electricity usage, and
could be particularly valuable in those countries in which electricity is
rationed or can be sold on a pre-paid basis due to its ability to track data.
The EMU is still in the development stage and will require some further
investment and development to become a commercially producible device.
3. Agreement to Acquire Comprehensive Medical Services, LLC.
On September 9,
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1999, the Company announced the acquisition of Comprehensive Medical Services,
LLC ("CMS") in exchange for shares of the Company's common stock. To date this
acquisition has not been finalized, however, both companies intent to continue
moving toward consummating the agreement.
CMS is a management company concentrating in the latest medical practices
relating to the treatment of cancer utilizing technologies approved by the Food
and Drug Administration (the "FDA") and reimbursable under Medicare. Such
technologies include early screening tests to determine the presence of anti-
malignin antibodies in the blood, tests are highly accurate in detecting cancers
within weeks of the onset of the disease. In addition, CMS manages medical
practices utilizing ultrasound and microwave hyperthermia in conjunction with
radiation therapy in treating superficial cancers (e.g., breast, prostate, head,
neck, and lung cancers, up to 8 centimeters in depth). This combination therapy
is recognized as the fourth accepted modality in the treatment of cancer, is FDA
approved and Medicare reimbursable, and is two to three times more effective
than radiation therapy alone. Hyperthermia is considered to be a non-invasive
and non-toxic therapy and not harmful to healthy tissues.
TSET's management feels that CMS would augment the Company's relationship
with CTI, through utilizing the CTI Systems in connection with CMS's cancer
diagnostic and treatment technologies. Moreover, the above-mentioned blood
screening test may be valuable as a secondary validation of the early detection
of superficial cancers, which were detected using CTI Systems.
4. Acquisition of Atomic Soccer USA, Ltd. On December 9, 1999, the
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Company signed a letter of intent containing the main terms of the acquisition
of Atomic Soccer USA, Ltd. ("Atomic"). The final document calls for TSET to
receive 100% of Atomic's common shares in exchange for 1,000,000 common shares
of TSET. The closing date has not been determined yet.
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The acquisition agreement calls for Atomic Soccer's executive management
team to remain in place with a TSET representative serving as chairman of Atomic
Soccer's board. TSET will also assist in providing further working capital for
Atomic Soccer to develop and expand U.S. market for its sports apparel and
recognition of its brand names.
Atomic, with headquarters in Madison, Wisconsin, makes and distributes
soccer uniforms under the "Atomic" label, and basketball, volleyball, lacrosse,
and hockey uniforms under the "BAHR" label. Atomic's sports apparel is sold to
catalog companies, team sporting goods dealers, and screen printers, which in
turn sell such apparel primarily to schools and recreational athletes. Atomic
seeks to provide a high quality product at reasonable prices and, to accomplish
these goals, designs its own products, uses some of the same fabrics as are used
by larger brand names, and carefully monitors cost and quality.
Atomic has been in business since 1996. Sales of sports apparel under the
"Atomic" and "BAHR" labels were approximately $297,000 in 1997, approximately
$550,000 in 1998; and is estimating sales an increase in 1999 to approximately
$850,000. A majority of Atomic's product line is sold through independent sales
representatives. The "Atomic" line product line are sold in 17 states, with an
estimated 10-15% market penetration in those states; The "BAHR" line products
are currently sold in 5 states, with an estimated 5-10% market penetration
therein.
5. BioPulse International, Inc. Joint Study Agreement On December 9,
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1999, the Company signed a letter of intent "LOI" with BioPulse International,
Inc. ("BioPulse") to jointly perform a study and evaluation (the "Joint Study")
to determine, among other things, whether a business opportunity exists in The
Peoples' Republic of China for BioPulse's cancer treatment modality known as
"insulin-induced hypoglycemic therapy" (the "Therapy"). A final agreement has
not been executed to date.
Under the LOI BioPulse will bear all costs of preparing the Joint Study,
and the Company will receive a consulting fee of $2,500.00 for each day in which
the Company provides services relating to the Joint Study. The Company feels
that BioPulse selected TSET to participate in the Joint Study in order to gain
access to certain relationships established by the Company through the support
services, including development related and marketing related support services
it provided in The Peoples' Republic of China in behalf of and in cooperation
with its client Computer Thermal Imaging. The Company and BioPulse have not yet
established a commencement date for the Joint Study.
The "insulin-induced hypoglycemic therapy" (the "Therapy") utilizes the
intravenous introduction of insulin in order to substantially lower blood sugar
levels, thereby inducing a carefully-supervised hypoglycemic condition which
specifically targets and destroys cancer cells, while leaving healthy cells
unharmed, all with no adverse side effects. Although insulin therapies have
been used for many years to treat other medical conditions, use of the Therapy
for the treatment of cancer has heretofore been limited. BioPulse's use of the
Therapy, together with a comprehensive
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detoxification and fortification program and nutritional and lifestyle
education, creates an integrated, "systemic" approach to the treatment of cancer
which BioPulse and the Company believe is reliable and effective and of
significant merit and value.
The Joint Study, when started, will recognize the importance of reliable
and effective cancer therapies and treatments as a matter of public health
policy. The Joint Study will also involve an examination of the Chinese legal
and regulatory environment relating to cancer therapies, practices, and
procedures and the means by which any approvals required for the deployment of
the Therapy in The Peoples' Republic of China may be obtained.
6. Acquisition of "Electron Wind Generator" Technology. On December
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27, 1999, the Company signed a letter of intent ("LOI") to acquire certain
rights to a technology known as the "electron wind generator" ("EWG"). These
rights are owned by High Voltage Integrated, LLC ("HVI"), a research and
development company having headquarters in Bellevue, Washington. Final
terms have been reached with a closing date yet to be determined.
High Voltage Integrated, LLC ("HVI") is a research and development company
responsible for the patent-pending technology known as the "Electron Wind
Generator". The Electron Wind Generator is an air movement and purification
device. Testing, performed by the Department of Energy has shown the device
safely and efficiently removes particulate material and even pathogens from the
air silently and effectively. This highly versatile technology has multiple
uses, and can be embodied in a silent, wholly scalable, non-vibrating, energy-
efficient device with no moving parts. This technology is easily adaptable to
existing infrastructure, hardware, and HVAC and other ducting, and is capable of
deployment in a wide range of applications. The parties have defined core areas
in which to concentrate their initial focus, consisting primarily of medical
equipment, automotive, hotel, home, hospital/clinic and certain other
applications.
The LOI calls for the formation of a new entity, "Electron Wind
Technologies, Inc." ("EWT"). EWT will be the operating entity for further
development, licensing, and deployment of the electron wind generator
technology. TSET will acquire 100% of EWT's shares in exchange for 2,000,000
shares of TSET's common stock, and will be represented on EWT's board of
directors. HVI's current management team will assume day-to-day operational
control over EWT. HVI and its principals will transfer to EWT all patent and
other intellectual property rights relating to the electron wind generator
technology (including rights covering all improvements and derivatives). TSET
will also provide initial working capital for EWT and business development
activities in global markets.
Industry and Competition
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There are many established venture capital and financial concerns which
have significantly greater financial and personnel resources and technical
expertise than the Company. Subject to any significant enhancement in resources
the Company will remain an insignificant participant among the firms,
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which engage in the acquisition of business opportunities and will continue to
be at a significant competitive disadvantage compared to the Company's
competitors.
Acquisition and Investment Strategy
-----------------------------------
Since the Company's business strategy is acquire interests or participate
in opportunities that will increase shareholder value, acquiring companies will
play a significant part in the growth of the Company. To that end, the Company
has set some broad guidelines on which to follow when acquiring a business
opportunity. Presently the Company is introduced to numerous business and
investment opportunities on a regular basis by the Company's stockholders, third
parties and management.
A key factor the Company requires in a candidate is competent management.
The Company will consider opportunities as favorable if there is already an
ongoing business in place, if the product is an early development stage product,
are there revenues and will there be a cross-benefit from joining respective
management teams.
The Company relies principally on the services of its CEO, Mr. Jeffrey D.
Wilson.
Working Capital
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The Company has in the past successfully relied on private placements of
common stock securities and the exercise of common warrants in order to sustain
operations. Thought there is no guarantee that future funds other than from
operations will be available, it is anticipated that these same financing
methods can be utilized on an as needed basis for any future cash needs.
ITEM 2. Management Discussion and Analysis of Plan of Operation
Plan of Operations
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The primary short-term objective of the Company is to identify business
opportunities of interest which will enable the Company to increase its asset
base and stockholder value that meet the Company's general acquisition and
investment criteria or otherwise present situations which management believes
warrant further exploration. The Company will always be receptive to evaluating
legitimate and meritorious business opportunities, regardless of the type of
business they fall within.
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Over the next 12 months, the Company intends to concentrate its attention
on entering into definitive agreements relating to the transactions announced in
1999 with CMS, Atomic, and regarding acquisition of the EWG, as well as
continuing its market development support of CTI and for the EMU, and then
implementing the terms thereof. (See "Item 1 -- Business of the Company: and
Important Events.") The Company will also continue to evaluate new acquisition
and investment opportunities presented to it, which appear to satisfy the
Company's acquisition and investment criteria or otherwise present situations
which management believes warrant further exploration.
In the near-term (the next 12-36 months), the Company intends to
concentrate on the further growth, development, and enhancement of the foregoing
transactions, all with a view to maximizing the value of the relationships
developed and the business opportunity thus acquired and compounding the income-
earning potential therefrom and the Company's asset base for capital gains
purposes. The Company also intends to address executive and director
compensation and benefits issues so that the Company will be able to hire and
retain additional management and staff, as needed or as the Company's resources
will permit.
In the long-term (the next 36-60 months), the Company will seek the
enhancement of stockholder values by further compounding the Company's assets
and value through targeted investment, acquisition, merger, capital gains, and
current income from businesses included in the Company's portfolio. As needed,
the Company will consider hiring additional management and staff resources.
During this period, as required by the terms of the transactions described
herein under the caption "Significant Relationships and Important Events" or as
otherwise deemed advisable by the parties thereto, the Company may consider
effecting a spin-off of these acquisitions into their own public vehicle, with
the Company or its nominees to retain an appropriate continuing ownership
interest therein
Results of Operations
Operating expenses for June 30, 1999 year-end of $351,946 increased
$333,967 over June 30, 1998 operating expenses of $17,978. The increase is
attributable to the Company expensing 900,000 shares of the Company's common
stock, which were issued to The Pangaea Group, LLC. as part of a management
agreement with Pangaea. Operating expenses for the six month period ending
December 31, 1999 shows a decrease in expense resulting from the management
expenses incurred in the prior year.
Net cash (used) in Operating Activities for the years ended June 30, 1999
and 1998 was ($10,524) and ($16,832) respectively. For the six-month period
ended December 31, 1999 the net cash used in operations was ($470).
Net cash provided by financing activities for the years ended June 30, 1999
and 1998 was $7,297 and $19,619 respectively. For the six-month period ended
December 31, 1999 the net cash used in operations was $491.
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The net loss from operations for the Company increased $333,842 for the
twelve months ending June 30,1999 to ($351,674) from ($17,832) for the twelve
months ending June 30, 1998.
Year 2000 Issue
- ---------------
The Company experienced no impact as a result of the year 2000 issue on its
business and does not expect the amounts, if any, to be expenses to be material.
No such costs have been expensed to date, since the Company's PC's are all 2000
compliant.
The Company has communicated with its significant vendors and customers to
determine the extent that year 2000 compliance issues of such parties may effect
the Company. At this time, the Company believes there will be no disruption in
business due to its customers' or vendors' year 2000 readiness. The Company has
not established a contingency plan. There can be no guarantee that the systems
of such other companies will be timely converted without a material adverse
effect on the Company's business, financial condition or results of operations.
Item 3. Description of Property
The Company's offices are located at 333 South State Street, PMB 111,
Lake Oswego, Oregon, 97034. The Company currently subleases office premises and
equipment in Lake Oswego, Oregon from Computer Thermal Imaging for $1,200 per
year, which sublease is automatically renewable for successive 12-month periods.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the date of this
Registration Statement regarding certain Ownership of the Company's outstanding
Common Stock by all officers and directors individually, all officers and
directors as a group, and all beneficial owners of more than five percent of the
common stock.
<TABLE>
<CAPTION>
Name and Address Shares Owned Beneficially(1) Percent of Class
- ---------------- ---------------------------- ----------------
<S> <C> <C>
Jeffrey D. Wilson
333 South State Street 1,000,000 3.98%
PMB 111
Lake Oswego, OR. 97034
Li Weijing
333 South State Street 0
PMB 111
Lake Oswego, OR. 97034
</TABLE>
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of the registration
statement upon the exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by
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assuming that options or warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days of the date
of this registration statement have been exercised. Unless otherwise indicated,
the Company believes that all persons named in the table have voting and
investment power with respect to all shares of common stock beneficially owned
by them.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The directors and executive officers of the Company, and significant employees
of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------- --- -----------------------
<S> <C> <C>
Jeffrey D. Wilson 44 Chairman and Chief
Executive Officer
Li Weijing 40 Director, Treasurer and
Secretary
</TABLE>
The directors and officers of the Company will devote such time as they
deem appropriate in the Company's business affairs. It is, however, expected
that the officers will devote the time deemed necessary to perform their duties
for the business of the Company.
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have been
elected and qualified.
The Company may invest the Company's funds and enter into one or more
business ventures or arrangements, on the authority of the Board of Directors
without submitting such proposals to the shareholders for their approval.
Vacancies in the board of directors occurring between annual meetings of
the Company's stockholders are to be filled for the un-expired portion of the
term by a majority of the remaining directors. There is currently a vacancy on
the Company's board of directors, which the Company anticipates will be filled
shortly.
Jeffrey D. Wilson: Mr. Wilson was appointed Chairman and Chief Executive
------------------
Officer on April 20, 1999. Mr. Wilson has had substantial international
transactions expertise in Asia, Europe, Latin America, Africa, and the U.S.,
having represented clients in a wide range of joint venture, corporate finance,
public and private securities, regulatory, asset acquisition, licensing,
franchising, technology, investment, merger and acquisition, leveraged buy-out,
and other transactions, and has assisted clients in gaining access to foreign
markets and in government lobbying activities. From 1992-1999, Mr. Wilson
maintained a private international advisory practice for select clients and
engaged in entrepreneurial ventures. From 1990-1992, he served as international
legal advisory for GGS Co., Ltd., a Tokyo-based Japanese investment company (and
including its Hong Kong, Australian, Canadian, and U.S. affiliates), having
primary responsibility for its international projects. From 1982-1990, he
engaged in the private practice of law. Mr. Wilson speaks Japanese fluently.
Mr. Wilson received a B.A. from Brigham Young University in 1979 and a J.D. from
the University of
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Kansas in 1982, where he was also an associate editor of the Kansas Law Review
and president of the International Law Society.
Li Weijing: Mr. Li has served as TSET's treasurer, secretary, and member
-----------
of its board of directors since 1996, having responsibility for procuring
international contracts and projects. From 1992-1995, Mr. Li served as vice
president/division manager, business information service, for United Information
Technology Corporation, Hualin International, and certain affiliates of Collins
Co., Ltd., in which capacities he was responsible for software product and
market development and business planning, led a 20-member team developing
multilingual word processor and database systems, served as an editorial member
for the industrial rating book, China Leading Companies, which was co-published
-----------------------
by China's statistics bureau, created industrial databases for business credit
services, and acted as liaison with foreign partners on all start-up projects.
From 1989-1991, Mr. Li was a systems analyst for the Center for European
Economic Studies at Northeastern University in Boston, and worked on the design
and implementation of database systems for labor market research. From 1986-
1988, he worked as a research and teaching assistant in the Computer Science
Department at the University of Massachusetts, developing CASE tools for
software engineering projects and designing and code programming in C. Mr. Li
received a B.S. from Changshi Institute of Technology in the Peoples' Republic
of China in 1982, an M.S. from the University of Massachusetts in 1986,
receiving a graduate research and teaching assistantship award, and an M.A. from
Northeastern University in 1991, receiving a university assistantship award.
Mr. Li's educational accomplishments have emphasized electrical engineering,
computer science, and economics. Mr. Li speaks both Mandarin and Cantonese
fluently.
Item 6. Executive compensation
The following table sets forth the total remuneration to be paid to the
executive officers of the Company. (For the period June 1, 1998 through May 31,
1999)
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Name Other Securities All
and Annual Restricted Underlying Other
Principal Compen Stock Options/ LTIP Compen
Position Year Salary Bonus sation($) Award($) Sar(#) Payouts($) sation($)
President/CEO 1999 $150,000(1) $ 30,000(2) 0 0 0(3) 0 0
Secretary 1999 0 0 0 0 0 0 0
Director 1999 0 0 0 0 0 0 0
Key Personnel: 1999 0 0 0 0 0 0 0
Total: $150,000 $ 30,000 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
Directors as a
Group $150,000 $ 30,000 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Mr. Wilson's salary was deferred for the period May-December 1999. Under
the terms of his employment agreement, Mr. Wilson may elect to defer
compensation and other benefits of employment; however, Mr. Wilson is
entitled to receive interest on all such deferred amounts at the rate of
12% annually until paid in full.
(2) Payable on or before May 1, 2000. Under the terms of his employment
agreement, Mr. Wilson may elect to defer compensation and other benefits of
employment; however, Mr. Wilson is entitled to receive interest on all such
deferred amounts at the rate of 12% annually until paid in full.
(3) Mr. Wilson's employment agreement contemplates the Company granting an
option to acquire 100,000 shares of the Company's common stock annually as
compensation for his service as chairman. As of the date of this
Registration Statement, the Company has not adopted an option program
mechanism for the implementation of this benefit, but intends to do so as
soon as practicable. The Company presently offers no long-term
compensation arrangements to its directors and officers.
Options/Sar Grants
- ------------------
There are no outstanding options or stock appreciation rights granted
to any executive officer or director at the time of this filing and there are no
plans to grant such rights in the near future.
Aggregated Option/Sar Exercises and Fiscal Year End Option/Sar Value Table
- --------------------------------------------------------------------------
Not Applicable
Long Term Incentive Plans
- -------------------------
There are no long term incentive plans in currently in effect.
Compensation of Directors
- -------------------------
The Company's bylaws provide that, by resolution of the board of directors,
each director may be paid their expenses of attendance at meetings of the board
of directors; in addition, each director may be paid a stated salary as a
director. As of the date of this Registration Statement, the Company has not
implemented any salary, fee, or other form of compensation for its directors,
but intends to do so as soon as practicable. The employment agreement of the
Company's chairman and chief executive officer provides for an option to acquire
100,000 shares of the Company's common stock annually for service as the
Company's chairman; however, the terms of such option have not yet been
finalized. The Company has not yet established committees of the board of
directors.
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Employee Contracts and Termination of Employment and Change-in Control
- ----------------------------------------------------------------------
Arrangements
- ------------
The employment agreement of the Company's chairman and chief executive
officer, Jeffrey D. Wilson, provides, among other things, that upon any merger,
sale, share exchange, consolidation, change of control, or other acquisition of
the Company (a "Change of Control Transaction") (a) any shares of the Company's
common stock through any directors' compensation, stock option, or other stock
ownership plan shall immediately vest to Mr. Wilson's account, and (b) if the
Change of Control Transaction results in the termination of his employment, Mr.
Wilson shall be entitled to receive all then-current compensation and benefits
of employment that he would have received for the full term of his employment
but for such termination, the immediate vesting of shares in any stock option or
other stock ownership plan, and the immediate vesting of all matching
contributions made by the Company to any 401(k), savings, profit-sharing, or
other similar arrangements. The provisions of clause (b) above also apply in
the event of any termination of Mr. Wilson's employment for reasons other than
certain "termination events" described in his employment agreement.
The Company entered into an employment agreement with its CEO, (Mr.
Wilson), in April 1999. The agreement provides for base compensation covering
the first 12-month period following his acceptance of a salary amount of $12,500
per month, payable on or before the fifth business day of each month. Also, a
salary bonus of $30,000 shall be paid in one lump sum before May 1, 2000. During
the second 12-month period, he shall be paid a salary of $15,000 monthly, and
during the third 12-month period, he shall be paid a salary of $20,000 monthly,
all payable as stated above. Mr. Wilson has temporarily elected to defer his
compensation payable to him. Pursuant to the agreement, TSET is obligated to pay
him interest on any deferred amounts at the rate of 12% annually until paid in
full.
Mr. Wilson's assignee, The Pangaea Group, LLC, received a signing bonus of
100,000 "investment" shares of TSET's common stock, these shares were fully
vested and non-forfeitable. In addition, The Pangaea Group, LLC, received
900,000 additional "investment" shares of TSET's common stock, which were
distributed at the rate of 100,000 shares per month during the following 9-month
period. The Company expensed the entire 1,000,000 share transaction in April,
1999 at a value of $300,000 or $.30 cents per share.
Mr. Wilson's then-existing percentage share ownership of TSET shall not be
subject to dilution during any period of his employment. Accordingly, TSET
shall, from time to time, issue such additional shares as may be necessary to
maintain his then-current percentage ownership interest. Mr. Wilson or his
nominee may receive these shares in exchange for shares or interests in any
entity owned or controlled by him. Such shares shall be subject to the terms
noted on the certificates. In the event of any merger, sale, share exchange,
consolidation, change of control or other acquistion of TSET, the shares
described in this paragraph, as well as all shares in any such stock option or
other stock ownership program, shall immediately and fully vest to his account.
In addition to the immediately preceding sentence, if any Change of Control
Transactions results in
13
<PAGE>
termination of his employment, the provisions described in the preceding
paragraph relating to payment of his compensation and provisions of Benefits of
Employment shall apply. The company is obligated to issue Mr. Wilson
approximately 4% of the shares involved in any stock transaction which is
affected after May 1, 1999 . Mr. Wilson is due approximately 4,000 shares as a
result of the Company's acquisition of the Intelligent Utility Meter System on
August 31, 1999. These shares have not yet been issued. A liability of $2,000
has been accrued to reflect this future stock issuance. Mr. Wilson shall receive
an additional 100,000 shares of TSET's common stock annually, for his service on
the company's board of directors. The initial issuance of 100,000 shares shall
be due on or before May 1, 2000. The Company has not yet issued these shares or
recorded the compensation due thereunder.
Item 7. Certain Relationships and Related Transactions
In 1999, the Company issued 1,000,000 shares to Pangaea Group LLC, an
affiliate of the Jeff Wilson ( the CEO of the Company) in connection with a
management contract, valued at $.30 per share.
Item 8. Description of Securities
General
As of December 31, 1999, the authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $.001 par vale, of which
25,096,330 shares are outstanding. The following description of the securities
of the Company and certain provisions of the Company's Articles of Incorporation
and By-Laws, each as amended, is a summary and is qualified in its entirety by
the provisions of the Articles of Incorporation and By-Laws as currently in
effect.
Common Stock
Holders of the Company's common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders, including the
election of directors. Accordingly, holders of a majority of the Company's
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election should they choose to do so. Neither
the Company's Articles of Incorporation nor bylaws provide for cumulative voting
for the election of directors. Holders of shares of the Company's common stock
are entitled to receive their pro rata share of any dividends declared from time
to time by the board of directors out of funds legally available therefor.
Holders of shares of the Company's common stock have no preemptive,
subscription, or redemption rights. All outstanding shares of the Company's
common stock are fully paid and non-assessable.
14
<PAGE>
Preferred Stock
The Company's Articles of Incorporation authorizes 50,000,000 shares of
preferred stock, no par value. No shares of preferred stock are issued and
outstanding as of the date of this Registration Statement. The preferred shares
have no voting rights, and other rights associated with the preferred shares
have yet to be determined by the Company's board of directors. There are no
present plans by the Company's board of directors to issue preferred shares or
address the rights to be assigned thereto.
Transfer Agent
The Company's transfer agent is Merit Transfer Company, P.O. Box 292, Salt
Lake City, UT 84110.
15
<PAGE>
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
(A) Market Price
The Company's Common Stock has been quoted on the NASD since (August 28, 1996)
under the symbol "TSET". The following table set forth, the high and low bid
prices for the Common stock for the quarters indicated.
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
<S> <C> <C>
First Quarter 1998 0.44 0.13
Second Quarter 1998 1.00 0.09
Third Quarter 1998 0.56 0.19
Fourth Quarter 1999 1.81 0.16
First Quarter 1999 1.00 0.25
Second Quarter 1999 1.00 0.44
Third Quarter 1999 1.00 0.44
Fourth Quarter 1999 2.75 0.63
</TABLE>
(B) Holders
At the date of this Registration statement there were approximately 600 holders
of Record of 25,096,330 shares of Common Stock, including holders who maintain
their ownership in "street name".
(C) Dividends
The Company anticipates that for the foreseeable future, earnings will be
retained for the development of is business. Accordingly, the Company does no
anticipate paying dividends on the Common Stock in the foreseeable future. The
payment of future dividends will be at the sole discretion of the Company's
Board of Directors and will depend upon among other of the Company and general
business condition.
There are no restrictions on the payment of dividends contained in the Company's
Articles of Incorporation, bylaws, or in any covenant or material contract to
which the company is a party.
Item 2. Legal Proceedings
On January 13, 2000, the Company initiated legal proceedings against Foster
& Price Ltd., an Isle of Man corporation (the "Defendant"). The litigation
arose out of the Defendant's failure, among other things, to make an agreed cash
investment in the Company as provided under a certain Term Sheet signed by the
Company and the Defendant on May 28, 1999, and the Company's subsequent
termination of the Term
16
<PAGE>
Sheet. Prior to such termination, the Company had received numerous verbal
assurances from the Defendant that the promised investment capital was
forthcoming, which promises remained unfulfilled notwithstanding written notice
from the Company that termination would occur if such investment capital was not
provided by a deadline. The Defendant claimed entitlement to the immediate
issuance of 10,000,000 certain shares of the Company's common stock,
notwithstanding its non-performance of key obligations under the Term Sheet.
Discussions between the Company and the Defendant failed to produce a mutually
satisfactory resolution of the matter, whereupon the Company initiated the
litigation to seek judicial declaration that the Term Sheet was validly
terminated by the Company and is null and void, and that the Company and
Defendant have no further contractual obligations between them. The Company
believes that the Defendant's demands are without merit and intends to
vigorously seek judicial declaration in its favor.
Item 3. Changes in Disagreements with Accountants
The Company's financial statements included with this Registration
Statement were audited by Randy Simpson CPA, P.C., he was engaged on or about
October 1998. There has been no change in or disagreement with the Company's
accountants during the two most recent fiscal years or any later interim period.
Item 4. Recent Sales of Unregistered Securities
In April 1999, the Company issued 1,000,000 shares to The Pangaea Group LLC
, an affiliate of the Jeff D. Wilson ( the CEO of the Company) in connection
with a management contract, valued at $.30 per share.
Consultants were issued 25,000 shares for services valued at $.40 per share
and TSET, Inc. issued 100,000 shares for the patents and technology related to
the Intelligent Utility Meter System ("Emu").
Item 5. Indemnification of Directors and Officers
The Company's bylaws provide for the indemnification of directors, officers
and employees of the Company or of any corporation in which any such person
serves as a director, officer, or employee at the request of the Company, to the
fullest extent allowed by law, against expenses (including, without limitation,
attorney's fees, judgments, awards, fines, penalties, and amounts paid in
satisfaction of judgment or in settlement of any action, suit or proceeding)
incurred by any such director, officer, or employee. The Company does not
currently provide director and officer liability insurance, but intends to
obtain such insurance in the near future. The Company will pay all premiums and
other costs associated with such insurance.
17
<PAGE>
Under the terms of his employment agreement, the Company's chairman and
chief executive officer, Jeffrey D. Wilson, is entitled to be indemnified,
defended, and held harmless by the Company from and against any and all costs,
losses, damages, penalties, fines, or expenses (including, without limitation,
reasonable attorneys' fees, court costs, and associated expenses) suffered,
imposed upon, or incurred by him in any manner in connection with his service to
the Company in such capacities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to directors, officers,
and controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable.
18
<PAGE>
Part F/S
19
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
FINANCIAL STATEMENTS
Years ended June 30, 1999 & 1998
and
Six months ended December 31, 1999
20
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Accountants' Report........................................... 3
Financial Statements:
Balance Sheet........................................................... 4
Statement of Operations................................................. 5
Statement of Changes in Stockholders' Equity............................ 6
Statement of Cash Flows................................................. 7
Notes to Financial Statements........................................... 8-9
</TABLE>
21
<PAGE>
Randy Simpson C.P.A., P.C.
11775 South Nicklaus Road
Sandy, Utah 84092
Fax & Phone (801) 572-3009
Board of Directors and Stockholders of TSET, Inc.
(Target Strategic Enhancement Technologies, Inc.)
(Formerly Technology Selection, Inc.)
Lake Oswego, Oregon
Independent Auditors' Report
- ----------------------------
We have audited the balance sheets of TSET, Inc. (formerly Technology Selection,
Inc.), as of December 31, 1999, and June 30, 1999 and the related statements
of operations, changes in stockholders' equity and cash flows for two years
ending June 30, 1999 and 1998 and the six months ended December 31, 1999. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of TSET, Inc.
(formerly Technology Selection, Inc.) as of December 31, 1999, and June 30, 1999
and the results of its operations and its cash flows for two years ending June
30, 1999 and 1998 the and six months ended December 31, 1999 in conformity with
generally accepted accounting principles.
Randy Simpson C.P.A., P.C.
A Professional Corporation
March 17, 2000
Salt Lake City, Utah
22
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
Balance Sheet
Assets
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
--------------------- -------------------
<S> <C> <C>
Current Assets
Cash $ 557 $ 536
Total Current Assets 557 536
Other Assets:
Organization Costs-- 5,688 5,688
Accumulated amortization (4,188) (3,188)
--------------------- -------------------
Net unamortized organizational costs 1,500 2,500
Patents and related technology 50,000 -
--------------------- -------------------
Total Assets $ 52,057 $ 3,036
===================== ===================
Liabilities and Shareholders' Deficit
Current Liabilities:
Accrued compensation $ 126,200 $ 30,150
Advances by stockholders 27,800 27,650
Advances by Computerized Thermal Imaging Inc. 22,383 22,042
-----------------------------------------
Total Current Liabilities 176,383 79,842
Stockholders' Deficit:
Preferred stock, authorized 50,000,000 shares
no preferred shares outstanding - -
Common stock, authorized 50,000,000 shares
of $.001 par value 24,996,330 outstanding at
June 30, 1999 and 25,096,330 at December 31, 1999 25,096 24,996
Paid in Capital 390,618 340,718
Accumulated Deficit (540,040) (442,520)
------------------------------------------
Total Stockholders' Deficit (124,326) (76,806)
------------------------------------------
Total Liabilities and Stockholders' Equity $ 52,057 $ 3,036
==========================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
December 31, 1999 June 30, 1999 June 30, 1998
------------------ ------------- -------------
<S> <C> <C> <C>
Income:
Interest $ 21 $ 272 $ 146
Operating Expense:
Office and general expenses 1,491 8,796 12,978
Accrued compensation-CEO 96,050 33,150 5,000
Management agreement-CEO -- 310,000 -
---------------------------------------------------------
Total Operating Expense 97,541 351,946 17,978
Net Loss $(97,520) $(351,674) $(17,832)
==========================================================
----------------------------------------------------------
----------------------------------------------------------
Net Loss per Common Share $ (0.004) $ (0.014) $ (0.001)
========= ========= ========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For Two Years and Six Months Ended
December 31, 1999
<TABLE>
<CAPTION>
Common Paid -in
Shares Stock Capital
-------------- ---------------- ---------------
<S> <C> <C> <C>
Balance at June 30, 1997 23,971,330 $ 23,971 $ 31,743
Net Loss for the Year Ended June 30, 1998 - - -
-------------- ---------------- ---------------
Balance at June 30, 1998 23,971,330 23,971 31,743
Common stock isssed at $.30 per share to Pangaea
Group, LLC , per CEO management agreement 1,000,000 1,000 299,000
Common stock isssed at $.40 per share to consultant 25,000 25 9,975
Net Loss for the Year Ended June 30, 1999 - - -
-------------- ---------------- ---------------
Balance at June 30, 1999 23,996,330 24,996 340,718
Common stock isssed at $.50 per share to acquire the
patent and technology of the 100,000 100 49,900
Net Loss for the Six Months Ended December 31, 1999 - -
-------------- ---------------- ---------------
Balance at December 31, 1999 24,096,330 $ 25,096 $ 390,618
============== ================ ===============
<CAPTION>
Accumulated Total stockholders'
Deficit Deficit
--------------- ------------------
<S> <C> <C>
Balance at June 30, 1997 $ (73,015) $ (17,301)
Net Loss for the Year Ended June 30, 1998 (17,832) (17,832)
--------------- ----------------
Balance at June 30, 1998 (90,847) (35,133)
Common stock isssed at $.30 per share to Pangaea
Group, LLC , per CEO management agreement - 300,000
Common stock isssed at $.40 per share to consultant - 10,000
Net Loss for the Year Ended June 30, 1999 (351,673) (351,673)
--------------- ----------------
Balance at June 30, 1999 (442,520) (76,806)
Common stock isssed at $.50 per share to acquire the
patent and technology of the 50,000
Net Loss for the Six Months Ended December 31, 1999 (97,520) (97,520)
--------------- ----------------
Balance at December 31, 1999 $ (540,040) $ (124,326)
=============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
Statement of Cash Flows
<TABLE>
<CAPTION>
Six Months Year Year
Ended Ended Ended
December 31, 1999 June 30, 1999 June 30, 1998
-------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss $ (97,520) $ (351,674) $ (17,832)
Amortization 1,000 1,000 1,000
Common stock issued for compensation - 310,000 -
-------------------------- ----------------------- -------------------
Cash Flows Used in Operating Activities (96,520) (40,674) (16,832)
Changes in operating assets and liabilities:
Increase in accrued compensation 96,050 30,150 -
-------------------------- ----------------------- -------------------
Net cash used by operations (470) (10,524) (16,832)
Cash Flows from Financing Activities
Advances from stockholders 150 4,200 8,000
Advances from Computerized Thermal Imaging Inc. (CTI ) 341 3,097 11,619
-------------------------- ----------------------- -------------------
Net cash provided by financing activities 491 7,297 19,619
- - -
-------------------------- ----------------------- -------------------
Net increase (decrease) in cash 21 (3,227) 2,787
Cash at Beginning of Period 536 3,763 976
-------------------------- ----------------------- -------------------
Cash at End of Period $ 557 $ 536 $ 3,763
========================== ======================= ===================
Supplemental Non-cash financing activities:
On August 31, 1999 issued 100,000 shares of Common Stock to acquire the
patents and technology to the Intelligent Utility Meter System at $.50 per share $ 50,000
==================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TSET, INC.
(Formerly Technology Selection, Inc.)
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
-------------------
a. Organization
TSET, Inc., "the Company", (formerly Technology Selection, Inc.), is
a Nevada Corporation organized on September 17, 1980, as Penguin
Petroleum, Inc., in the state of Utah. Stockholders approved a name
change on October 6, 1982, to Petroleum Corporation of America, Inc.
On December 29, 1996, the stockholders approved a reorganization
whereby they exchanged their stock on a one for one basis with
Technology Selection, Inc., a Nevada Corporation. Organizational
costs of $5,000 related to this transaction are being amortized over
5 years. The Company has never achieved operating revenues.
b. Income Taxes
The Company has sustained losses since inception and has net
operating losses since inception and has net operating losses of
approximately $150,000 to offset income, should the Company become
profitable.
c. Computation of Net Loss Per Share
The company has experienced losses from inception, therefore the
company has presented only primary loss per share calculations as
any stock options or other dilutive stock instruments would only
reduce the calculation of loss per share.
2. COMMON STOCK TRANSACTIONS
-------------------------
An initial offering of 1,000,000 shares of common stock was made to the
organizers of the corporation at $0.000125 per share on October 21, 1980.
27
<PAGE>
On November 12, 1980, a public offering of 2,500,000 shares of common stock
was completed at $0.01 per share. Total proceeds were $25,000. Total
shares issued and outstanding on December 31, 1980 were 3,500,000.
On December 31, 1983, 3,855,000 shares of common stock were issued for
services and expenses provided to the Company. Proceeds equaled $.002 per
share. Total shares issued and outstanding at December 31, 1983 were
7,355,000.
On December 31, 1991, 4,223,200 shares of common stock were issued for
services and expenses provided to the Company. Proceeds equaled $.002 per
share. Total shares issued and outstanding at December 31, 1991 were
11,579,200.
In 1992 and 1993, 9,132,130 shares of common stock were issued for services
and expenses provided to the Company through December 31, 1993. Proceeds
equaled $.001 per share. Total shares issued and outstanding at December
31, 1993 were 20,711,330.
In 1994 and 1995, 3,260,000 shares of common stock were issued for services
and expenses provided to the Company through December 31, 1995. Proceeds
equaled $.001 per share. Total shares issued and outstanding at December
31, 1995 were 23,971,330.
In 1999, the Company issued 1,000,000 shares to Pangaea Group LLC , an
affiliate of the Jeff Wilson ( the CEO of the Company) in connection with a
management contract, valued at $ .30 per share. Consultants were issued
25,000 shares for services valued at $.40 per share and TSET, Inc. issued
100,000 shares for the patents and technology related to the Intelligent
Utility Meter System.
3. EXECUTIVE COMPENSATION
----------------------
The Company entered into an employment agreement with its CEO, (Mr.
Wilson), in April 1999. The agreement provides for base compensation
covering the first 12-month period
28
<PAGE>
following his acceptance of a salary amount of $12,500 per month, payable
on or before the fifth business day of each month. Also, a salary bonus of
$30,000 shall be paid in one lump sum before May 1, 2000. During the second
12-month period, he shall be paid a salary of $15,000 monthly, and during
the third 12-month period, he shall be paid a salary of $20,000 monthly,
all payable as stated above. Mr. Wilson has elected to defer his
compensation payable to him. Pursuant to the agreement, TSET is obligated
to pay him interest on any deferred amounts at the rate of 12% annually
until paid in full.
Mr. Wilson's assignee, the Pangaea Group, LLC, received a signing bonus of
100,000 "investment" shares of TSET's common stock, these shares were fully
vested and non-forfeitable. In addition, the Pangaea Group, LLC, received
900,000 additional "investment" shares of TSET's common stock, which were
distributed at the rate of 100,000 shares per month during the following
9-month period. The Company expensed the entire 1,000,000 share transaction
in April, 1999 at a value of $300,000 or $.30 cents per share.
Mr. Wilson's then-existing percentage share ownership of TSET shall not be
subject to dilution during any period of his employment. Accordingly, TSET
shall, from time to time, issue such additional shares as may be necessary
to maintain his then-current percentage ownership interest. Mr. Wilson or
his nominee may receive these shares in exchange for shares or interests in
any entity owned or controlled by him. Such shares shall be subject to the
terms noted on the certificates. In the event of any merger, sale, share
exchange, consolidation, change of control or other acquistion of TSET, the
shares described in this paragraph, as well as all shares in any such stock
option or other stock ownership program, shall immediately and fully vest
to his account. In addition to the immediately preceding sentence, if any
Change of Control Transactions results in termination of his employment,
the provisions described in the preceding paragraph relating to payment of
his compensation and provisions of Benefits of
29
<PAGE>
Employment shall apply. The company is obligated to issue Mr. Wilson
approximately 3.98% of the shares involved in any stock transaction which
is affected after May 1, 1999 . Mr. Wilson is due approximately 4,000
shares as a result of the Company's acquisition of the Intelligent Utility
Meter System on August 31, 1999. These shares have not yet been issued. A
liability of $2,000 has been accrued to reflect this future stock issuance.
Mr. Wilson shall receive an additional 100,000 shares of TSET's common
stock annually, for his service on the company's board of directors. The
initial issuance of 100,000 shares shall be due on or before May 1, 2000.
The Company has not yet issued these shares or recorded the compensation
due thereunder.
4. INTELLIGENT UTILITY METER SYSTEM
--------------------------------
The Company held a special meeting of the Board of Directors of TSET on
August 31, 1999, at which time they acquired, in exchange for 100,000
shares of the Company's common stock, patent and intellectual property
rights relating to a technology and device known as the "Intelligent
Utility Meter System". The transaction has been valued at $.50 per
share or $50,000. The patents and related technology value of $50,000 have
been capitalized and are reflected as other assets in the accompanying
balance sheet. The Company acquired this device from M&M Associates. The
Company issued 100,000 shares to the twelve participants in M&M Associates
in consideration for the patents and all other rights of the "Intelligent
Utility Meter System".
The actual device, to be further developed and refined, will be known
as the "Electricity Management Unit" (the "EMU"). M&M Associates will
receive a 10% royalty on the net profits realized by the Company upon
sales of the EMU in California and Nevada, and a 1% royalty on the net
profits of EMU sales globally.
5. SUBSEQUENT EVENTS
-----------------
a. Atomic Soccer USA, Ltd.
Atomic Soccer USA, Ltd. is a Madison, Wisconsin-based Company who makes
and distributes soccer, basketball, volleyball, lacrosse, and hockey
uniforms. TSET, Inc. has signed
30
<PAGE>
final documentation in the acquisition of Atomic Soccer USA Ltd, but
has not yet issued the 1,000,000 shares of TSET's common stock
committed in the exchange. Atomic Soccer's executive management team
will remain in place with a TSET representative, serving as chairman of
Atomic Soccer's board. TSET will also assist in providing further
working capital for Atomic Soccer to develop and expand U.S. market for
its sports apparel and recognition of its brand names.
b. "ELECTRON WIND GENERATOR"
High Voltage Integrated, LLC ("HVI") is the Redmond Washington-
based research and development company responsible for the patent-
pending technology known as the "Electron Wind Generator". The
Electron Wind Generator is an air movement and purification device.
Testing, performed by the Department of Energy has shown the device
safely and efficiently removes particulate material and even
pathogens silently and effectively. This highly versatile
technology has multiple uses, and can be embodied in a silent,
wholly scalable, non-vibrating, energy-efficient device with no
moving parts. This technology is easily adaptable to existing
infrastructure, hardware, and HVAC and other ducting, and is
capable of deployment in a wide range of applications. The parties
have defined core areas in which to concentrate their initial
focus, consisting primarily of medical equipment, automotive,
hotel, home, hospital/clinic and certain other applications.
TSET, Inc. has entered into a letter of intent with HVI, calling
for the formation of a new entity, "Electron Wind Technologies,
Inc." ("EWT"). EWT will be the operating entity for further
development, licensing, and deployment of the electron wind
generator technology. TSET will acquire 100% of EWT's shares in
exchange for 2,000,000 shares of TSET's common stock , and will be
represented on EWT's board of directors. HVI's current management
team will assume day-to-day operational control over EWT.
31
<PAGE>
HVI and its principals will transfer to EWT all patent and other
intellectual property rights relating to the electron wind
generator technology (including rights covering all improvements
and derivatives). TSET will also provide initial working capital
for EWT and business development activities in global markets.
32
<PAGE>
PART III
Item 1. Index to Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Articles of Incorporation of the Company filed May 21, 1996.
2.2 Articles of Merger of the Company filed June 19, 1996
2.3 Amendments To the Articles of Incorporation of the Company
Filed November, 19, 1998
6.1 High Voltage Integrated, LLC Acquisition Agreement
6.2 Atomic Power Stock Purchase Agreement
6.3 Electricity Management Units Acquisition
* Previously Filed
33
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant: TSET, Inc,
<TABLE>
<CAPTION>
Signature Title Date
- ---------------- ----------- ----
<S> <C> <C>
By: /s/ Jeffrey D. Wilson Chief Executive Officer, March 31, 2000
--------------------- Director - Chairman
Jeffrey D. Wilson
By: /s/ Li Weijing Director March 31, 2000
--------------
Li Weijing
</TABLE>
34
<PAGE>
PART III
Item 1. Index to Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Articles of Incorporation of the Company filed May 21, 1996.
2.2 Articles of Merger of the Company filed June 19, 1996
2.3 Amendments To the Articles of Incorporation of the Company
Filed November, 19, 1998
6.1 High Voltage Integrated, LLC Acquisition Agreement
6.2 Atomic Power Stock Purchase Agreement
6.3 Electricity Management Units Acquisition
* Previously Filed
<PAGE>
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
TECHNOLOGY SELECTION, INC.
I, the undersigned, have this day formed a corporation under and by virtue
of the laws of the State of Nevada and I do hereby state and certify:
FIRST: That the name of said corporation shall be:
TECHNOLOGY SELECTION, INC.
SECOND: That the name and location of the Resident Agent of the
corporation is Scott Ockay at 2880 Meade Ave., Suite 202 Las Vegas, Nevada
89102.
It is hereby expressly provided that other office or offices for the
transaction of the business of the corporation may be maintained at such place
or places, either within or without the State of Nevada as may from time to time
be named and selected by its Board of Directors, or may be provided in the By-
laws of this corporation, and any and all business transacted by Stockholders'
of Directors' meeting of said corporation held outside of the State of Nevada
shall be as effectual for all purposes as though said meetings were held at the
principal office and place of business of said corporation within the State of
Nevada.
THIRD: That the nature of the business and the objects and purpose
proposed to be transacted, promoted or carried on by this corporation are as
follows:
Generally to carry on any lawful business or businesses, and to engage in
any and every line of activity and business enterprise which the Board of
Directors may from time to time deem to be reasonably incident to any of the
objects and purposes above named, or to be beneficial or helpful to the interest
of this corporation, or which may be calculated, directly or indirectly, to
enhance the value of its property, and to carry on any and all of its business
and the other operations in any City, County, State, Province, territory or
place in the world; and to establish head and branch offices and places of
business wherever it may deem advisable; and to do any and all of the matters
and things hereinabove set forth to the extent that natural persons might or
could do, and in any part of the world, either as persons, agents, contractors,
trustees or otherwise, alone or in the company of others.
<PAGE>
FOURTH: That the total authorized capital stock of the corporation shall
consist of Five Hundred Million shares of common stock, with a par value of
$0.001 all of which shall be non-assessable and, entitled to voting power, and,
Fifty Million Shares of Preferred Stock, with no voting power.
FIFTH: The object and powers specified in any clause contained in these
Articles shall not in any wise limit or restrict by reference to, or inference
from the terms of any other clause of these Articles; and the foregoing
enumeration of powers, as specified, shall not be held to limit or restrict in
any manner the general powers of the corporation and the enjoyment thereof as
conferred by the laws of the State of Nevada upon corporations organized under
the general corporation of said State.
SIXTH: The members of the governing board shall be styled "Directors,"
and the number of such directors shall by One (1).
The Board of Directors, or the stockholders, at any regular meeting or
special meeting called for that purpose, by resolution may increase the number
of members of the Board of Directors as deemed advisable, provided that the
number may not be increased to more than nine (9).
SEVENTH: The name and address of the Incorporator, Director, and
Stockholder is as follows:
George Smith
68 South Main St., Suite 607
Salt Lake City, Utah 84101
EIGHTH: The private property of the stockholders of this corporation
shall be, and is hereby made, forever exempt from the debts of the corporation.
NINTH: This corporation shall have perpetual existence.
TENTH: The corporation, through its By-laws, shall have power and
authority to make such provisions as may from time to time be deemed necessary
or advisable for the promotion of the interests of this corporation, and the
corporation may through its By-laws, confer such power, privileges, authorities
and duties upon its Board of Directors as it may deem necessary or advisable
upon an executive committee or other committees; and this corporation and its
Board of Directors shall and may exercise all rights, powers and privileges of
whatsoever kind or nature, whether specifically provided herein or not, which
may now or hereafter be conferred upon similar corporations organized under and
by virtue of the laws
2
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 13 day of May.
/s/ George Smith
---------------------------
George Smith
State of:
County of:
On this 13th day of May, 1996, before me, George Smith, a notary public
personally appeared George Smith, known to me to be the person whose name
subscribed to the within instrument and acknowledged to me that he executed the
same.
My Commission Expires: 12/18/99
[SEAL] /s/ Joell B. Psalto
- --------------------- ----------------------------
<PAGE>
EXHIBIT 2.2
ARTICLES OF MERGER
TECHNOLOGY SELECTION, INC.
These Articles of Merger for TECHNOLOGY SELECTION, INC. are hereby respectively
submitted for filing by the Nevada Secretary of State as required under Sections
78.458 and 78.461 of the State of Nevada Domestic and Foreign Corporation Laws.
WITNESSETH
WHEREAS, a Merger Agreement was entered into on May 21, 1996 by the following:
Constituent Corporation: PETROLEUM CORPORATION OF AMERICA, a Utah
Corporation
Surviving Corporation: TECHNOLOGY SELECTION, INC., a Nevada Corporation
(Wholly owned Subsidiary of PETROLEUM CORPORATION OF AMERICA). and,
WHEREAS, the Merger Agreement was adopted by the Board of Directors of PETROLEUM
CORPORATION OF AMERICA, Utah Corporation and TECHNOLOGY SELECTION, INC., Nevada
Corporation, on May 21, 1996. The address of both Corporations is the same: 68
So. Main Street, Suite #607, Salt Lake City, Utah, 84101.
WHEREAS, approval of the Merger Agreement was required by both the Shareholders
of PETROLEUM CORPORATION OF AMERICA, and TECHNOLOGY SELECTION, INC.. Notice to
the Shareholders was mailed on May 16, 1996, for meetings held on May 29, 1996
for both corporations.
PETROLEUM CORPORATION OF AMERICA, a Utah Corporation
----------------------------------------------------
(Constituent)
-------------
(A) One class of Stock - Common Stock
Authorized 100,000 Shares @ ($0.001 par value)
Issued and Outstanding - 23,971,330
Number of Shares represented at meeting - 22,115,780
Number of Shares voted for approval - 22,115,780
Number of Shares voted against - None
Shareholders unanimously approved Merger Agreement
TECHNOLOGY SELECTION, INC. Nevada Corporation (Survivor)
--------------------------------------------------------
(B) Two Classes of Stock.
Common Stock - Authorized 500,000,000 Shares ($0.001 par
------------ value)
Issued and Outstanding - 1,000 Shares
Preferred Stock - Authorized 50,000,000 (no par value)
---------------
Issued and Outstanding - None
Number of Shares represented at meeting - 1,000
Number of Shares voted for approval - 1,000
Number of Shares against - None
Shareholders unanimously approved Merger Agreement.
<PAGE>
WHEREAS, the Boards of Directors of TECHNOLOGY SELECTION, INC. and PETROLEUM
CORPORATION OF AMERICA have resolved that PETROLEUM CORPORATION OF AMERICA be
merged under and pursuant to the laws of the States of Utah and Nevada into a
single corporation existing under the laws of the State of Nevada, to wit:
TECHNOLOGY SELECTION, INC., which shall be the surviving corporation (the
"Surviving Corporation") in a transaction qualifying as a reorganization within
the meaning of Section 368(a) (1) (F) of the Internal Revenue Code of 1986, as
amended, and qualifying as an exempt transaction in accordance with Rules 145(a)
(2) and 145 (a) (3) to the Securities Act of 1933, as amended.
NOW THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto hereby agree in
accordance with the laws of the States of Utah and Nevada, and that PETROLEUM
CORPORATION OF AMERICA shall be, at the Effective Date (as hereinafter defined),
merged (hereinafter called "Merger") into a single Corporation, and the parties
hereto adopt and agree to the following agreements, terms and conditions
relating to the Merger and the mode of carrying the same into effect.
1. Stockholders' Meetings: Filings; Effects of Merger
---------------------------------------------------
1.1. PETROLEUM CORPORATION OF AMERICA Stockholders' Meeting.
------------------------------------------------------
PETROLEUM CORPORATION OF AMERICA called a meeting of its stockholders to held on
May 29, 1996 in accordance with the laws of the State of Utah, upon due notice
mailed on May 16, 1996 to its stockholders to consider and vote upon, among
other matters, adoption of this Agreement to its stockholders to consider and
vote upon, among other matters, adoption of this Agreement.
1.2. Action by PETROLEUM CORPORATION OF AMERICA as Sole Stockholder of
-----------------------------------------------------------------
TECHNOLOGY SELECTION, INC.. On or before May 29, 1996, PETROLEUM CORPORATION OF
- --------------------------
AMERICA, as the sole stockholder of TECHNOLOGY SELECTION, INC. adopted this
Agreement in accordance with the laws of the State of Utah and Nevada.
1.3. Filing of Certificate of Merger: Effective Date. This Agreement
------------------------------------------------
was adopted by the stockholders of PETROLEUM CORPORATION OF AMERICA in
accordance with the laws of the State of Utah, (b) this Agreement was adopted by
PETROLEUM CORPORATION OF AMERICA as the sole stockholder of TECHNOLOGY
SELECTION, INC. in accordance with the laws of the State of Utah and Nevada, and
(c) this Agreement is not thereafter, and has not theretofore been, terminated
or abandonded as permitted by the provisions hereof, then the Merger Agreement
shall be filed and recorded in accordance with the laws of the State of Nevada
and the State of Utah. Such filings, if practicable, shall be made on the same
day. The Merger shall become effective at 9:00 A.M. on the calendar day
following the day of such filing in Nevada, which date and time are herein
referred to as the "Effective Date."
1.4 Certain Effects of Merger. On the Effective Date, the separate
-------------------------
existence of PETROLEUM CORPORATION OF AMERICA shall cease, and PETROLEUM
CORPORATION OF AMERICA shall be merged into
2
<PAGE>
TECHNOLOGY SELECTION, INC. which, as the Surviving Corporation, shall possess
all the rights, privileges, powers, and franchises, of a public as well as of a
private nature, and be subject to all the restrictions, disabilities, and duties
of PETROLEUM CORPORATION OF AMERICA; and all and singular, the rights,
privileges, powers, and franchises of PETROLEUM CORPORATION OF AMERICA and all
property, real personal, and mixed, and all debts due to PETROLEUM CORPORATION
OF AMERICA on whatever account, as well as for stock subscriptions and all other
things in action or belonging to PETROLEUM CORPORATION OF AMERICA, shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers, and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of PETROLEUM
CORPORATION OF AMERICA, and the title to any real estate vested by deed or
otherwise, under the laws of Utah or Nevada or any other jurisdictions, in
PETROLEUM CORPORATION OF AMERICA shall not revert or be in any way impaired; but
all rights of creditors and all liens upon any property of PETROLEUM CORPORATION
OF AMERICA shall be preserved unimpaired, and all debts, liabilities, and duties
of PETROLEUM CORPORATION OF AMERICA shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said debts,
liabilities, and duties had been incurred or contracted by it. At any time, or
from time to time, after the Effective Date, the last acting officers of
PETROLEUM CORPORATION OF AMERICA or the corresponding officers of the Surviving
Corporation, may in the name of PETROLEUM CORPORATION OF AMERICA, execute and
deliver all such property deeds, assignments, and other instruments and take or
cause to be taken all such further or other action as the Surviving Corporation
may deem necessary or desirable in order to vest, perfect, or confirm in the
Surviving Corporation title to and possession of all PETROLEUM CORPORATION OF
AMERICA's property, right, privileges, powers, franchises, immunities, and
interests and otherwise to carry out the purposes of this Agreement.
2. Name of Surviving Corporation; Certificate of Incorporation; By-Laws
--------------------------------------------------------------------
2.1 Name of Surviving Corporation. The name of TECHNOLOGY SELECTION,
-----------------------------
INC. shall be the Surviving Corporation, from and after the Effective Date.
2.2 Certificate of Incorporation. The Certificate of Incorporation
----------------------------
of TECHNOLOGY SELECTION, INC. as in effect on the date hereof shall from and
after the Effective Date be, and continue to be, the Certificate of
Incorporation of the Surviving Corporation until changed or amended as provided
by law.
2.3 By-Laws. The By-Laws of TECHNOLOGY SELECTION, INC. immediately
-------
before the Effective Date, shall from and after the Effective Date be, and
continue to be, the By-Laws of the Surviving Corporation until amended as
provided therein.
3
<PAGE>
3. Status and Conversion of Securities
-----------------------------------
The manner and basis of converting the shares of the capital stock of
PETROLEUM CORPORATION OF AMERICA and the nature and amount of securities of
TECHNOLOGY SELECTION, INC. which the holders of shares of PETROLEUM CORPORATION
OF AMERICA Common Stock are to receive in exchange for such shares are as
follows:
3.1. PETROLEUM CORPORATION OF AMERICA Common Stock. Every one (1)
---------------------------------------------
share of PETROLEUM CORPORATION OF AMERICA Common Stock which shall be issued and
outstanding immediately before the Effective Date shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted at the
Effective Date into one (1) fully paid share of TECHNOLOGY SELECTION, INC.
Common Stock, and outstanding certificates representing shares of PETROLEUM
CORPORATION OF AMERICA Common Stock shall thereafter represent shares of
TECHNOLOGY SELECTION, INC. Common Stock. Such certificates may, but need not be,
exchanged by the holders thereof after the merger become effective for new
certificates for the appropriate number of shares bearing the name of the
Surviving Corporation. The exchange of TECHNOLOGY SELECTION, INC. Common Stock
for PETROLEUM CORPORATION OF AMERICA Common Stock shall be effectuated pursuant
to Rules 145(a)(2) and 145(a)(3) to the Securities Act of 1933, as amended.
3.2. TECHNOLOGY SELECTION, INC. Common Stock Held by PETROLEUM
---------------------------------------------------------
CORPORATION OF AMERICA. All issued and outstanding shares of TECHNOLOGY
- ----------------------
SELECTION, INC. Common Stock held by PETROLEUM CORPORATION OF AMERICA
immediately before the Effective Date shall, by virtue of the Merger and at the
Effective Date, cease to exist and certificates representing such shares shall
be canceled and voided.
3.3. Directors and Officers Elected for TECHNOLOGY SELECTION, INC. The
-------------------------------------------------------------
Directors and Officers for the Surviving Corporation, TECHNOLOGY SELECTION, INC.
are as follows:
Richard V. Secord Director/Chairman of the Board, CEO
David B. Johnston Director/President, COO
Li Wei Jing Director/Secretary-Treasurer
Wang Hong Jun Director
Zhou Ru Bai Director
4. Miscellaneous.
-------------
4.1. This Merger Agreement may be terminated and the proposed Merger
abandoned at any time before the Effective Date of the Merger, and whether
before or after approval of this Merger Agreement by the shareholders of
PETROLEUM CORPORATION OF AMERICA, if the Board of Directors of PETROLEUM
CORPORATION OF AMERICA or of the Surviving Corporation duly adopt a resolution
abandoning this Merger Agreement.
4.2. For the convenience of the parties hereto and to facilitate the
filing of this Merger Agreement, any number of counterparts hereof may be
executed; and each such counterpart shall be deemed to be an original
instrument.
4
<PAGE>
DAVID B. JOHNSTON - DIRECTOR/PRESIDENT & C.O.O.
-----------------------------------------------
Mr. Johnston has been a Director of Thermal Medical Imaging, Inc. since
December, 1995. He is a financial services professional by training, with
extensive experience in medical and computer venture financing. From 1987 to
the present, he founded Computerized Thermal Imaging, Inc., the original
developer of the Company's current technology. From 1984 to 1989, Mr. Johnston
was President of Funding Selection, Inc., an Oregon investment banking and
mergers and acquisitions firm. From 1983 to 1986, he was Chairman of Grace
Capital Ltd. in Oregon, a specialized medical and computer technology private
placement firm. Mr. Johnston received a B.S. degree in Business Administration
from Brigham Young University and a graduate degree in banking and corporate
finance from the University of Southern California.
WANG HONG JUN - DIRECTOR/VICE CHAIRMAN
--------------------------------------
General Manager of China Ywan Wang (Group) Corporation involved in Mainland
China. He is a businessman involved in Mainland China Satellite Communications,
Computer Manufacturing, Compact Disc Company, Thermal Sensor Factory,
Telecommunications Company and Construction Companies and various other
businesses.
LI WEI JING - DIRECTOR/SECRETARY-TREASURER
------------------------------------------
A businessman involved in Mainland China Satellite Communications, Computer
Manufacturing, Compact Disc Company, Thermal Sensor Factory, Telecommunications
Company and Construction Companies and various other businesses. He has a
Masters Degree in Computer Sciences and is an international businessman.
ZHOU RU BAI - DIRECTOR
----------------------
A businessman involved in Mainland China Satellite Communications, Computer
Manufacturing, Compact Disc Company, Thermal Sensor Factory, Telecommunications
Company and Construction Companies and various other businesses.
PRINCIPAL REASONS FOR CHANGING THE CORPORATIONS DOMICILE
-------------------------------------------------------
FROM UTAH TO NEVADA
-------------------
The State of Nevada does not provide for any state corporate income taxation.
Accordingly, from the date of reincorporation in the State of Nevada, the
Company will be able to reduce or eliminate corporate income taxes, which
otherwise may be assessed against the Company under the applicable statutes in
the State of Utah.
Moreover, for many years Nevada has followed a policy of encouraging
incorporation in that state, or and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws that are periodically updated
and revised to meet changing business needs. As a result, many corporations are
now incorporated in Nevada.
4
<PAGE>
IN WITNESS WHEREOF, these Articles of Merger have been executed by PETROLEUM
CORPORATION OF AMERICA and TECHNOLOGY SELECTION, INC.
ATTEST: PETROLEUM CORPORATION OF AMERICA
/s/ [illegible] By: /s/ George Smith
- ---------------------- ---------------------------------
Secretary President
(SEAL)
ATTEST: TECHNOLOGY SELECTION, INC.
/s/ [illegible] By: /s/ George Smith
- ---------------------- ---------------------------------
Secretary President
<PAGE>
STATE OF Utah )
------------------)
COUNTY OF Salt Lake ) ss.
-----------------)
On 6/7/96 , before me, the undersigned,
-----------------------
a Notary Public in and for said State, personally appeared George Smith ,
----------------
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the President of the corporation that executed the within
--------------------
instrument, PETROLEUM CORPORATION OF AMERICA and also known to me to be the
person who executed the within instrument on behalf of the corporation therein
named, and acknowledged to me that such corporation executed the same.
WITNESS my hand and official seal.
/s/ R. Brooke Williamsen
----------------------------
(SEAL) Notary Public
State of
--------------------
My commission expires:
--------------
STATE OF Utah )
------------------)
COUNTY OF Salt Lake ) ss.
-----------------)
On 6/7/96 , before me, the undersigned,
-----------------------
a Notary Public in and for said State, personally appeared George Smith ,
----------------
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the President of the corporation that executed the within
--------------------
instrument, PETROLEUM CORPORATION OF AMERICA and also known to me to be the
person who executed the within instrument on behalf of the corporation therein
named, and acknowledged to me that such corporation executed the same.
WITNESS my hand and official seal.
/s/ R. Brooke Williamsen
----------------------------
Notary Public
(SEAL) State of
--------------------
My commission expires:
--------------
<PAGE>
[STATE OF NEVADA SEAL APPEARS HERE]
I hereby certify that this is a true and complete copy of the document as filed
in this office.
June 19 '96
/s/ Dean Heller
DEAN HELLER
Secretary of State
By: [illegible]
----------------
<PAGE>
EXHIBIT 2.3
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
TECHNOLOGY SELECTION, INC.
--------------------------
Pursuant to Nevada Corporation Code NRS.78.385 the undersigned Corporation
adopts the following Articles of Amendment to its Articles of Incorporation.
ARTICLE I reads as follows:
The name of the Corporation is Technology Selection, Inc.
AMENDMENT
---------
ARTICLE I of the Articles of Incorporation is amended to read:
ARTICLE I
CORPORATE NAME
--------------
The name of the corporation is TSET, Inc.
(Target Strategic Enhancement Technologies, Inc.)
ARTICLE X
AMENDMENT ADOPTED
-----------------
These Amended Articles of Incorporation were presented to the shareholders
of this Corporation for the purpose of amending and replacing the Articles of
Incorporation of this Corporation, at a special meeting of shareholders held
November 19, 1998. As of November 9, 1998, there were 23,971,330 shares of the
Corporation's common stock outstanding and entitled to vote on the amendment.
The amendment does not alter the amount of authorized capital of Five Hundred
Million (500,000,000) shares with $0.001 par value. There is only one class of
shares, that being Common voting stock.
The number of shares voted for and against the adoption of these amended
Articles of Incorporation to replace all previous Articles of Incorporation and
Amendments was:
19,069,620 For 0 Against
---------- -------
TSET, INC.
(Formerly: TECHNOLOGY SELECTION, INC.)
By /s/ Illegible
-------------------------
President
<PAGE>
State of Utah :
:SS
County of Salt Lake :
I /s/ Linda L. Fullmer a Notary Public, hereby certify that on the 19th day of
--------------------
November 1998, personally appeared before me /s/ illegible who being by me
-------------
first duly sworn, declared that he is the person who signed the foregoing
documents as President and that the statements herein contained are true.
In witness hereof, I have hereunto set my hand and seal on the 19th day of
November 1998.
/S/ Linda L. Fullmer
______________________
Notary Public
[SEAL OF NOTARY PUBLIC]
Salt Lake City, UT
______________________
Residing in
My Commission Expires:
March 3, 2001
- -------------
<PAGE>
Exhibit 6.1
-----------
ACQUISITION AGREEMENT
---------------------
THIS ACQUISITION AGREEMENT is entered into effective as of March 13, 2000,
by and among TSET, Inc., a Nevada corporation ("TSET"); High Voltage Integrated,
LLC, a Washington limited liability company ("HVI"); Ingrid Fuhriman, an
individual; Igor Krichtafovitch, an individual; Robert L. Fuhriman II, an
individual; and Alan Thomson, an individual (Ingrid Fuhriman, Igor
Krichtafovitch, Robert L. Fuhriman II, and Alan Thomson are hereinafter
collectively referred to as the "Principals").
WHEREAS, HVI and the Principals have developed and own certain patents
pending and all other related intellectual property rights relating to a certain
high voltage technology innovation known as the "electron wind generator"
(including any and all improvements and derivatives, the "Technology");
WHEREAS, on December 27, 1999, TSET, HVI, and the Principals entered into a
Letter of Intent for the purpose of, among other things, setting forth the main
terms pursuant to which TSET would acquire all of the shares of a new
corporation into which would be transferred the Intellectual Property Rights (as
defined in Exhibit 2B attached hereto and made a part hereof for all purposes)
and the Technology, and other elements of the relationship of the parties;
WHEREAS, TSET, HVI, and the Principals desire to pursue the business
purposes described in Section 1A hereof (all such activities described in such
Section 1A hereof are hereinafter collectively referred to as the "Corporate
Business");
WHEREAS, TSET is willing and able, among other things, to provide and
assist in the provision of working capital necessary to the furtherance of the
Corporate Business, and HVI and the Principals are willing, among other things,
to contribute the Intellectual Property Rights and the Technology and continue
to exert their best efforts in conducting the Corporate Business; and
WHEREAS, the parties hereto desire to conduct the Corporate Business in the
form and through the instrumentality of a new corporation to be known as "Kronos
Technologies, Inc." ("Kronos"), as described herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants, promises, representations, and warranties set forth herein, and for
other good and valuable consideration, the sufficiency, delivery, and receipt of
which are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. Formation of Business Entity. As soon as practicable following the
-----------------------------
execution and delivery of this Agreement by the parties, TSET shall, at its own
expense, cause to occur all steps necessary for the incorporation of Kronos
under the laws of the State of Nevada. Kronos' authorized capital shall consist
of 100,000,000 shares of common stock, par value $0.001 per share (the "Kronos
Shares"). Following incorporation, all costs, expenses, fees, taxes, licenses,
and other charges of maintaining corporate existence, good standing, foreign
qualifications, operations, and conduct of the Corporate Business shall be for
the account of, and shall be borne by, Kronos. The Principals shall retain the
discretion whether to continue the corporate existence of HVI and their
respective ownership interests therein; provided, however, that if the corporate
existence of HVI is terminated, the Principals, as the owners thereof, shall
bear continuing responsibility for the truth and accuracy of all of HVI's
representations, warranties, and fulfillment of all of HVI's undertakings set
forth herein.
1A. Statement of the Corporate Business. The parties agree that the
------------------------------------
Corporate Business of Kronos shall be, among other things:
(a) to own the Intellectual Property Rights and the Technology, and
all improvements thereto and derivatives thereof;
(b) to diligently and aggressively apply the Intellectual Property
Rights and the Technology for the further advancement, development, improvement,
enhancement, deployment, maximization of value, and exploitation thereof in
global markets by, among other things, developing prototypes and production-
model devices embodying the Intellectual Property Rights and the Technology for
the Initial Applications and making the same available to commercial and other
markets globally, and to conduct all such activities with a view to generating
profits;
(c) to take such reasonable and prudent steps as may be necessary and
advisable to:
(i) ensure good faith best efforts are taken to protect,
preserve, enhance, expand, and defend the Intellectual Property Rights and the
Technology by, among other things, establishing appropriate confidentiality and
security arrangements for protecting Kronos's non-public, proprietary
information and trade secrets;
(ii) aggressively monitor developments in the field of the
Intellectual Property Rights and the Technology and employ good faith best
efforts in policing against and preventing infringements or illicit uses
thereof, and enforcing Kronos' rights relating thereto including, without
limitation, the initiation of legal proceedings with respect thereto;
(d) expand the scope and application of the Intellectual Property
Rights and the Technology, through diligently conducting the Corporate Business,
continuing research and development activities for enhancing, improving, and
creating derivative manifestations thereof, diligently pursuing such patent
applications as are already filed, and seeking additional patents and other
legal protections for the Initial Applications (and any and all improvements
thereto and derivatives thereof); and
Page 2
<PAGE>
(e) to establish programs, procedures, and mechanisms whereby the
Principals will benefit economically and have appropriate incentives to
diligently and properly conduct the Corporate Business and seek at all times to
advance Kronos' best interests, and maximize Kronos' profitability and success
for the benefit of TSET; and
(f) to pursue such other activities as Kronos' board of directors may
direct or establish.
2. Transfer of Intellectual Property Rights. Immediately following the
-----------------------------------------
incorporation of Kronos, HVI and the Principals shall execute and deliver to
Kronos any and all necessary and appropriate documents, instruments, and
certificates of assignment, transfer, and conveyance described in Exhibit 2A
attached hereto and made a part hereof for all purposes (collectively, the
"Transfer Documents") relating to the Intellectual Property Rights (as described
in Exhibit 2B attached hereto and made a part hereof for all purposes), such
that all right, title, and interest in and to the Intellectual Property Rights
shall be vested in Kronos for all purposes, free and clear of any and all liens,
claims, encumbrances, and charges thereon. Any Intellectual Property Rights
arising out of future developments, improvements, derivatives, or devices
embodying or including the Intellectual Property Rights or the Technology, and
any patents or other similar legal protections and ownership rights relating
thereto, shall be the property of Kronos.
3. Initial Issuance of the Kronos Shares. Immediately following the
--------------------------------------
transfer of the Intellectual Property Rights to Kronos as described in Section 2
hereof, Kronos' board of directors shall approve, authorize, and cause to be
issued to HVI and the Principals their respective pro rata number of Kronos
Shares as follows:
HVI -0- shares
Ingrid Fuhriman 450,000shares
Igor Krichtafovitch 1,125,000 shares
Robert L. Fuhriman, II 450,000 shares
Alan Thomson 225,000 shares
Upon issuance, the Kronos Shares shall be deemed fully paid and non-assessable.
4. Exchange of Shares. (a) Immediately following the transfer of the
-------------------
Intellectual Property Rights to Kronos and the issuance of the Kronos Shares to
HVI and the Principals, and in exchange for all of the Kronos Shares owned by
each of them, TSET shall deliver to HVI and each of the Principals certificates
representing "investment" shares of TSET's common stock, par value $0.001 per
share (the "TSET Shares"), with HVI and each Principal and the finders
identified below with an asterisk by their names (collectively, the "Finders")
receiving the following allocation of the TSET Shares:
HVI -0- shares
To be held in Escrow 250,000 shares
In Trust 360,000 shares
Page 3
<PAGE>
Ingrid Fuhriman 288,000 shares
Igor Krichtafovitch 720,000 shares
Robert L. Fuhriman, II 288,000 shares
Alan Thomson 144,000 shares
F. Briton McConkie* 180,000 shares
Ralph Thomson* 20,000 shares
The aggregate number of TSET Shares to be issued to HVI and the Principals
pursuant to this Section 4 shall be 2,250,000 shares (the "Aggregate Shares"),
calculated as shown in Exhibit 4 attached hereto and made a part hereof for all
purposes, as sole compensation for the Kronos Shares. HVI and the Principals
understand and acknowledge that the TSET Shares shall be subject to, and HVI and
the Principals agree to at all times observe and comply with any and all
conditions, limitations, and restrictions noted on the certificates representing
the TSET Shares, in addition to any other restrictions set forth in applicable
federal and state securities laws. Any taxes, levies, or other charges assessed
against, or in connection with the acquisiton of, the TSET Shares pursuant to
this Subsection (a) shall be for the account of, and shall be borne solely by,
HVI and the Principals.
(b) Any compensation or finder's fee payable by HVI or the Principals
(or any of them) to any person (including, without limitation, the Finders)
relating to the transactions contemplated by this Agreement shall be paid out of
the Aggregate Shares, the parties agreeing that TSET shall have no financial or
other responsibility whatsoever for payment of any such compensation.
(c) The TSET Shares received by the Finders do not constitute any
ownership interest in Kronos.
5. Management. (a) Kronos' initial board of directors, to be appointed
-----------
by the Principals in connection with the incorporation of Kronos, shall be
comprised of the following individuals:
Ingrid Fuhriman
Igor Krichtafovitch
Robert L. Fuhriman, II
Alan Thomson
Jeffrey D. Wilson (serving as chairman of the board of directors
and representing TSET)
Such directors shall serve in accordance with Kronos' bylaws and applicable law.
(b) Kronos' initial officer and executive management shall be
comprised as follows:
Alan Thomson - Chief Executive Officer and President
Igor Krichtafovitch - Vice President
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Ingrid Fuhriman - Secretary
Robert L. Fuhriman, II - Treasurer
(c) The parties agree that the primary responsibility for Kronos'
day-to-day management, business development, finances and the administration
thereof, budgets (capital, research and development, operations, and others),
and the conduct of the Corporate Business, shall belong to Kronos' board of
directors, but with such consultations and determinations as are consistent with
TSET's ownership of Kronos and subject to the obligations described in Section
15 hereof. In carrying out such responsibilities and conducting all elements of
the Corporate Business, Kronos' board of directors shall at all times conduct
themselves according to the highest fiduciary standards of good faith and sound
business judgment, exerting their individual and collective best efforts to
exploit and maximize the value of the Intellectual Property Rights and the
Technology, seeking to advance the best interests of Kronos, complying with all
laws, rules, and regulations applicable to the Corporate Business, and keeping
available to Kronos the services of Kronos' directors, officers, and key
employees. The Corporate Business shall be conducted by Kronos' board of
directors in the regular and ordinary course in substantially the manner
heretofore conducted by the Principals in and through HVI. The Principals,
individually and collectively, shall dedicate necessary time attention and
efforts to the conduct of the Corporate Business, except as may be otherwise
permitted under Section 6(c) and (d) hereof.
(d) Without limiting the scope of responsibilities described in this
Section 5 or elsewhere herein, or as may be provided in Kronos' articles of
incorporation, bylaws, or under applicable law, Kronos shall ensure that long-
term employment agreements are entered into with its key employees and that
"key-person" insurance is obtained upon commercially reasonable terms as soon as
practicable following the execution and delivery of this Agreement by the
parties, with all costs, premiums, and other associated expenses to be borne by
Kronos.
(e) Wherever in this Agreement reference is made to actions to be
taken by Kronos necessary to implement the transactions and matters contemplated
herein or in the Transfer Documents, the parties agree that they shall vote
their respective Kronos Shares, or cause their representative on Kronos' board
of directors to act, so that all such actions are expeditiously and fully taken.
(f) The parties acknowledge that they are unable to anticipate and
provide herein for every situation and contingency which may arise during the
conduct of the Corporate Business. Accordingly, the parties agree that
principles of good faith and fair dealing will govern their conduct at all times
and that best efforts will be exerted to amicably and expeditiously resolve any
dispute arising hereafter, all with a view to seeking to advance Kronos' best
interests and to maximize the economic value of the Intellectual Property Rights
and the Technology.
6. Initial Applications. (a) As a statement of corporate policy which
---------------------
shall govern all elements of the relationship of the parties hereunder and the
conduct of the Corporate
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Business, the parties intend that all development, advancement, maximization of
value, and exploitation of the Intellectual Property Rights and the Technology
shall occur and be conducted through the instrumentality of Kronos pursuant to
this Agreement; and
(b) The parties agree that Kronos' primary initial efforts and
funding shall focus upon the further development and exploitation of the
hospital/medical clinic, automotive, medical equipment, residential/business,
and hotel applications of the Technology (collectively, and including any and
all improvements thereto and derivatives thereof, the "Initial Applications"),
and to engage in such business development activities as are necessary and
proper to establish markets, licenses, sales, and other activities and
arrangements for the realization of maximum economic return thereon.
7. Future Applications. In keeping with the corporate policy described in
--------------------
Section 6(a) hereof, the parties intend that potential military applications of
the Intellectual Property Rights and the Technology be conducted through Kronos;
provided, however, that TSET understands and acknowledges that a contract
containing a no-shop provision (the "Military Contract") currently exists
between HVI and Bath Iron Works/General Dynamics Corporation ("BIW/GD"),
covering certain dimensions of the Technology as specified in Exhibit 7 attached
hereto and made a part hereof for all purposes. TSET shall place 250,000 TSET
shares in an escrow account (the "Escrow Shares") for distribution to a trust to
be established by the Principals (as referenced in Section 4 hereof) (the
"Trust") for the purpose of receiving issuance the Escrow Shares in the event
the no-shop provision of the Military Contract is adjusted, waived, or
renegotiated in such a manner that enables such military applications to be
conducted through Kronos. HVI believes in good faith that the Military Contract
can be contributed to Kronos within 60 days of the date of this Agreement.
Should such contribution not occur within such 60-day period, the Escrow Shares
may, at TSET's sole option, be returned to TSET, or TSET may, at its sole
option, extend the time period for the Military Contract to be contributed to
Kronos, with the Escrow Shares to remain in such escrow account until released
to the Trust pursuant to the renegotiation of the Military Contract to enable
the Military Contract and all such military applications to be contributed, and
the contribution thereof, to Kronos. All parties agree that the release of the
Escrow Shares to the Trust shall be the sole compensation for the renegotiation
and contribution of the Military Contract and all other military applications of
the Intellectual Property Rights and the Technology, with the allocation of the
Escrow Shares to the Trust to be specified by HVI and the Principals at the time
of the release thereof pursuant to this Section 7.
8. Contributions by TSET. (a)(i) TSET shall assist and support Kronos'
---------------------
capital-raising efforts and shall provide and make available to Kronos working
capital in the aggregate amount of $500,000.00 (the "Initial Funding") over the
six-month period next following the execution and delivery of this Agreement and
the Transfer Documents (the "Funding Period"). To the extent required, TSET
shall use its own shares in order to arrange for, procure, and ensure
availability of the Initial Funding; provided, however, that TSET's obligation
to provide the Initial Funding shall not be construed as or constitute any
assumption of any obligation regarding any indebtedness, operating expenses, or
other financial liabilities of HVI or any of the Principals, other than those
potential liabilities
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identified in Exhibit 8A. Provision of the Initial Funding shall be the sole
financial obligation owed by TSET to Kronos; provided, however, that TSET may
elect, but is not obligated, to provide to Kronos funding in addition to the
Initial Funding in appropriate cases to be determined by TSET in its sole and
absolute discretion. Within 10 days of the execution and delivery of this
Agreement and the Transfer Documents, Kronos' board of directors shall establish
an operating budget, including provision for, among other things, the prudent
expenditure and conservation of funds for working capital, the development of
working prototype devices embodying the Technology to enable demonstration
thereof in, and the perfection and policing of the Intellectual Property Rights,
all with a view to the efficient and profitable conduct of the Corporate
Business.
(ii) The parties agree that the Initial Funding shall be released by
TSET to Kronos pursuant to schedule attached as Exhibit 8B and made a part of
this Agreement for all purposes. Should TSET fail to release funds pursuant to
Exhibit 8B, TSET shall be in default of this Agreement and Section 8(b)(i) of
this Agreement shall apply.
(iii) In addition to providing the Initial Funding, TSET shall also
assist Kronos in arranging manufacturing for devices embodying the Technology,
as well as assistance and support in business development and marketing
activities as may be requested by Kronos from time to time.
(b) The parties acknowledge that TSET's undertaking to provide the
Initial Funding is a significant inducement to HVI and the Principals to enter
into the Transfer Documents and consummate the transactions contemplated herein
and therein, and that on or before the lapse of the Funding Period TSET shall
have provided to Kronos the entire amount of the Initial Funding in the amounts
and at the times specified in Exhibit 8B. In the event TSET provides less than
all of any installment of the Initial Funding pursuant to Exhibit 8B within 5
business days of the due date therefor, Kronos shall provide immediate written
notice to TSET that an event of default has occurred hereunder (the "Default
Notice"). If TSET fails to provide the unpaid portion of such installment to
Kronos within 15 days of TSET's receipt of the Default Notice (the "Cure
Period"), the number of Kronos Shares owned by TSET shall be reduced to reflect
the proportionate value of the Initial Funding provided by TSET to Kronos, with
the number of the Kronos Shares deducted from TSET's holding to be transferred
to and distributed among HVI and the Principals on a pro rata basis (the "Share
Adjustment"). The Share Adjustment shall occur within 10 days following lapse
of the Cure Period if TSET fails during the Cure Period to provide the unpaid
portion of the Initial Funding installment in question. If TSET fails to
provide four consecutive installments of the Initial Funding pursuant to
Schedule 8B prior to the lapse of the Cure Period for the final of such four
installments, this Agreement and the Transfer Documents shall be terminated and
deemed null and void and the Intellectual Property Rights shall be assigned,
transferred, and conveyed by Kronos to HVI and the Principals, as they may
direct in writing to TSET.
(c) If TSET fails to provide any Initial Funding (or any installment
thereof) as described in Subsection (b) above, the sole remedy of HVI and the
Principals shall be the
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Share Adjustment, or the termination of this Agreement and the Transfer
Documents and assignment, transfer, and conveyance to HVI and the Principals of
the Intellectual Property Rights, as the case may be, all as described in
Subsection (b) above.
No party shall have any liability to the other for monetary damages of any
description whatsoever including, without limitation, incidental, consequential,
or punitive damages.
9. Options and Other Programs. HVI and the Principals understand and
---------------------------
acknowledge that, as of the date hereof, neither TSET nor Kronos has adopted any
stock option, incentive, profit-sharing, savings, or other similar programs
(collectively, the "Programs"), but that adoption of the Programs as soon as
practicable after the date hereof is an objective of both TSET and Kronos. The
terms and conditions of participation, contribution, matching, vesting, and
other elements of the Programs shall be established by the respective boards of
directors of TSET and Kronos. The Principals shall be entitled to participate
in Programs adopted by TSET, subject to any conditions or restrictions imposed
on such participation by TSET's board of directors. As an additional inducement
to the Principals and to ensure participation by the Principals in the future
success of Kronos, TSET, as sole stockholder of Kronos, hereby agrees to reserve
20% of Kronos' authorized capital stock to be used in Programs to be adopted by
Kronos' board of directors and consents to the full participation of the
Principals therein, subject to the terms for such participation established by
Kronos' board of directors; provided, however, that the final terms of the
Programs adopted by Kronos' board of directors shall be subject to TSET's prior
written consent, which consent shall not be unreasonably withheld, conditioned,
or delayed.
10. Future Events. TSET, HVI, and the Principals intend that, at an
--------------
appropriate and mutually agreed time in the future, due and good faith
consideration be given to effecting a transaction pursuant to which Kronos may
become a publicy-owned entity (the "Reconstitutive Decision"); provided,
however, that the parties' decision to retain Kronos as a wholly- or majority-
owned subsidiary of TSET or effect a transaction pursuant to which Kronos'
ownership materially changes but it remains privately held shall not be deemed a
breach of this Section 10. Notwithstanding the foregoing, the parties agree
that a Reconstitutive Decision shall not occur earlier than twenty four months
following the date of this Agreement. In the event of any Reconstitutive
Decision, TSET (or its nominees) shall retain not less than a non-dilutible 20%
ownership interest therein for a period of two years and no single shareholder
shall hold any greater percentage than TSET for a period of two years.
11. Employment Agreements. TSET and Principals agree to cause Kronos to
----------------------
enter into employment agreements with the Principals in a form substantially
similar to the Employment Agreement attached to this Agreement as Exhibit 11,
the parties understanding that the final terms and conditions thereof shall be
the result of negotiations between Kronos and each of the Principals; provided,
however, that Kronos shall not execute any such employment agreement without
TSET's prior written consent, which consent shall not be unreasonably withheld,
conditioned, or delayed.
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12. Representations and Warranties of HVI and the Principals. HVI and
---------------------------------------------------------
each of the Principals, jointly and severally, hereby represent and warrant to
TSET as follows:
(a) HVI is duly organized, validly existing, and in good standing
under the laws of the State of Washington and has all requisite power,
authorizations, consents, and approvals necessary to own its assets and carry on
its business as now being conducted, and to consummate the transactions
contemplated herein and in the Transfer Documents.
(b) Except as disclosed in Exhibit 12(b) attached hereto and made a
part hereof for all purposes, neither the execution of this Agreement or the
Transfer Documents nor the performance of its obligations hereunder and
thereunder does or will conflict with or violate any provision of HVI's
constituent documents; violate, conflict with, or result in the breach or
termination of, or constitute a default, event of default (or an event which
with notice, lapse of time, or both, would constitute a default or event of
default), under the terms of any material agreement to which HVI or any of the
Principals is a party or by which HVI or any the Principals or any of their
respective or collective securities, properties, or businesses are bound;
constitute a violation by HVI or any of the Principals of any laws or judgments
(other than any violation, conflict, breach, or default that would not prevent
HVI or any of the Principals from consummating the transactions contemplated
herein and in the Transfer Documents or otherwise performing its or their
individual or collective obligations thereunder); or result in the creation of
any lien, claim, or encumbrance upon HVI, any of the Principals, the
Intellectual Property Rights, or the Technology.
(c) Except as disclosed in Exhibit 12(c) attached hereto and made a
part hereof for all purposes, there are no legal or arbitral proceedings
(whether or not the defense thereof or liability with respect thereto is covered
by policies of insurance) pending or, to the best knowledge of HVI and any of
the Principals, threatened, against HVI or any of the Principals which could
reasonably be expected to prevent HVI or any of the Principals from consummating
the transactions contemplated herein or in the Transfer Documents.
(d) Except as disclosed in Exhibit 12(d) attached hereto and made a
part hereof for all purposes, all negotiations relating to this Agreement and
the Transfer Documents and the transactions contemplated herein and therein have
been carried on without the intervention of any party acting in behalf of HVI or
any of the Principals in such manner as to give rise to any valid claim against
HVI or any of the Principals, individually or collectively, for any broker's or
finder's fee or similar compensation (whether payable in cash, Kronos Shares,
interest in HVI or the Outside Business, or otherwise) in connection therewith.
(e) HVI has all necessary corporate power and authority, and each of
the Principals have the power, legal capacity, and authority, to execute,
deliver, and perform its and their respective obligations hereunder and under
the Transfer Documents; and the execution, delivery, and performance by HVI and
each of the Principals of this Agreement and the Transfer Documents to which HVI
is a party has been duly authorized by all necessary corporate action on its
part or is within the authority of the person executing and
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delivering the same, and is within the authority of each of the Principals. This
Agreement and the Transfer Documents to which HVI and the Principals are a party
constitute the legal, valid, and binding obligations of each of them,
enforceable against any and all of them in accordance with the terms thereof,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights and general principles of
equity.
(f) Except as disclosed in Exhibit 12(f) attached hereto and made a
part hereof for all purposes, HVI and the Principals have filed all tax returns
and all other tax documentation that are required to be filed by any of them,
and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by any of them, except for such taxes as are being contested
in good faith by appropriate proceedings and for which adequate reserves are
being maintained.
(g) Except as disclosed in Exhibit 12(g) attached hereto and made a
part hereof for all purposes, no authorizations, approvals, or consents of, and
no filings or registrations with, any governmental agency or authority are
necessary for the execution, delivery, and performance by HVI and each of the
Principals of this Agreement and each of the Transfer Documents to which they
are a party or for the validity or enforceability thereof.
(h) No material statement, information, or exhibit disclosed or
otherwise furnished to TSET by HVI or any of the Principals in connection with
the negotiations among the parties or any representations upon which TSET may
have relied, contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statement made not misleading.
(i) HVI and each of the Principals shall at all times hereunder
comply with all conditions, restrictions, and limitations applicable to the TSET
Shares and the provisions of all federal and state securities laws applicable to
the ownership and transfer thereof.
(j) No oral or written compensation arrangement or agreement exists,
and no shares or units (or warrants or options to acquire the same), or revenue
interests, or royalties have been granted, orally or in writing, or are owned
by, HVI's advisory board members.
(k) Except as disclosed in Exhibit 12(k) attached hereto and made a
part hereof for all purposes:
(i) HVI and the Principals own full right, title, and interest
in and to the Intellectual Property Rights that are being assigned, transferred,
and conveyed to Kronos pursuant to this Agreement and the Transfer Documents,
free and clear of any and all liens, claims, encumbrances, and charges, and no
licenses or other superior claims, rights, or entitlements exist or have been
granted or suffered to exist by HVI and the Principals in favor of any other
person with respect thereto; and
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(ii) HVI and the Principals are unaware of any
infringements or illicit uses of the Intellectual Property Rights or the
Technology by any person.
13. Battelle. TSET hereby acknowledges and agrees that HVI has disclosed
---------
to TSET, and that TSET fully understands, the circumstances of HVI's dispute
with Battelle Memorial Institute ("Battelle") concerning Battelle's unauthorized
disclosures to third parties related to HVI's proprietary technology and know-
how, at least part of which includes in the Intellectual Property Rights and the
Technology. HVI hereby represents to TSET that Battelle has made an offer to
settle the dispute, which offer is unacceptable to HVI. HVI further represents
that HVI and Battelle are, as of this date hereof, engaged in good faith
negotiations concerning the terms and conditions of a settlement acceptable to
HVI. Based on the foregoing and other factors, including correspondence and
other materials requested from and supplied to HVI by Battelle, HVI believes in
good faith that HVI's position in the dispute is strong and that HVI will be
able to settle its differences with Battelle without resorting to formal legal
proceedings. Accordingly, TSET agrees that its sole remedy and recourse, in the
event that Battelle makes any claim in formal legal proceedings or otherwise, or
with respect to any of HVI's representations and warranties herein, shall be
against HVI directly and not to any Principal.
14. Representations and Warranties of TSET. TSET hereby represents and
---------------------------------------
warrants to HVI and each of the Principals as follows:
(a) TSET is duly organized, validly existing, and in good standing
under the laws of the State of Nevada and has all requisite power,
authorizations, consents, and approvals necessary to own its assets and carry on
its business as now being conducted, and to consummate the transactions
contemplated herein and in the Transfer Documents.
(b) Neither the execution of this Agreement or the Transfer
Documents nor the performance of its obligations hereunder and thereunder does
or will conflict with or violate any provision of TSET's articles of
incorporation or bylaws; violate, conflict with, or result in the breach or
termination of, or constitute a default, event of default (or an event which
with notice, lapse of time, or both, would constitute a default or event of
default), under the terms of any material agreement to which TSET is a party or
by which TSET or its securities, properties, or businesses are bound; or
constitute a violation by TSET of any laws or judgments (other than any
violation, conflict, breach, or default that would not prevent TSET from
consummating the transactions contemplated herein and in the Transfer Documents
or otherwise performing its obligations thereunder).
(c) There is no proceeding (whether or not the defense thereof or
liability with respect thereto is covered by policies of insurance) pending or,
to TSET's best knowledge, threatened, against TSET which could reasonably be
expected to prevent TSET from consummating the transactions contemplated herein
or in the Transfer Documents.
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(d) TSET has all necessary corporate power and authority to
execute, deliver, and perform its obligations hereunder and under the Transfer
Documents; and the execution, delivery, and performance by TSET of this
Agreement and the Transfer Documents to which it is a party has been duly
authorized by all necessary corporate action on its part or is within the
authority of the person execution and delivering the same. This Agreement and
the Transfer Documents to which TSET is a party constitute the legal, valid, and
binding obligations of TSET, enforceable against it in accordance with the terms
thereof, except as may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights and general
principles of equity.
15. Par Stock Purchase. TSET shall have the right (the "Share Purchase
-------------------
Right") to purchase any and all authorized but unissued shares of Kronos'
capital stock (the "Unissued Shares") at a per share purchase price equal to the
par value thereof ($0.001 par value per share); provided, however, that the
Share Purchase Right shall not apply to the shares of Kronos' capital stock
reserved for issuance in connection with Programs to be adopted by Kronos as
contemplated in Section 9 hereof. TSET shall be entitled to exercise the Share
Purchase Right at any time it feels its interests would be served by so doing,
upon not less than 5 days' prior written notice to Kronos (the "Exercise
Notice"), without the need to obtain any further consent from HVI, the
Principals, or Kronos, or to provide any further justification therefor. Upon
receipt of the Exercise Notice, Kronos shall not offer, solicit any offer to
buy, sell, assign, transfer, or convey any of the Unissued Shares without TSET's
prior written consent, which consent may be withheld in the sole and absolute
discretion thereof. The Principals, in their capacities as directors of Kronos,
agree to take all actions requested by TSET in order to give effect to this
Section 14 in the event TSET elects to purchase the Unissued Shares pursuant
hereto. TSET shall pay the purchase price for that number of the Unissued
Shares to be acquired pursuant to exercise of the Share Purchase Right within 30
days of the date of the Exercise Notice. Upon confirmed receipt of the purchase
price therefor, Kronos' board of directors shall cause certificates representing
that number of Unissued Shares purchased by TSET pursuant to the Share Purchase
Right to be issued and delivered to TSET in such denominations as TSET may
request. TSET shall be entitled to immediately exercise the Share Purchase
Right if any transaction contemplated by Kronos may involve the sale,
assignment, or transfer of more than 50% of Kronos' authorized capital to any
person not owned or controlled by TSET. TSET and the Principals shall cause
Kronos' board of directors to ratify this Section 14, such that no further
action thereof shall be required relating to the issuance of the Unissued Shares
to TSET, other than instructions issued by TSET to any executive officer of
Kronos pursuant to the Exercise Notice. The Share Purchase Rights shall survive
any recapitalization of Kronos and shall apply to any additional shares of
Kronos' capital stock which may be newly authorized pursuant to any future
amendment of Kronos' articles of incorporation or which may remain unsold
following any transactions with prospective investors or strategic business or
financial partners of Kronos involving such newly-issued shares.
15. Books, Records, and Audit Rights. (a) The Principals, in their
---------------------------------
capacities as directors and executive officers of Kronos, shall cause Kronos to
keep complete, accurate, and secure original physical and electronic books and
records of all financial, business, legal,
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and other transactions. Financial books and records shall be made, kept, and
maintained on a calendar year basis in accordance with generally accepted
accounting principles applied on a consistent, uniform, and non-discriminatory
basis and applicable to the Corporate Business.
(b) The books and records of Kronos, together with all documents and
other information pertaining to Kronos' business, shall be kept at Kronos'
principal place of business, and shall at all reasonable times (and for a period
of 3 years following any termination of this Agreement and the Transfer
Documents) be available for physical inspection, examination, and audit and may
be copied and excerpts may be taken therefrom, by any duly authorized
representative of TSET. TSET shall at all times be entitled to, among other
things, exercise TSET's audit rights, verify any information provided to TSET by
Kronos pursuant to this Section 15 or otherwise, and monitor Kronos' compliance
with its obligations.
(c) At all times (and for a period of 3 years following any
termination of this Agreement and the Transfer Documents), TSET shall have the
right, at its own expense, to audit Kronos' books and records. Kronos shall
make such books and records available for physical inspection, review, and audit
during normal business hours and upon 48 hours' prior written notice from TSET,
to any authorized representative, certified public accountant, or legal counsel
designated by TSET.
(d) Kronos's board of directors shall do the following, at Kronos'
expense:
(i) deliver to TSET on or before March 15 of each year cause an
annual report containing an audited balance sheet and profit and loss and cash
flow statements to be prepared by Kronos' auditors; and
(ii) deliver to TSET on or before the fifteenth day following
the end of each calendar month, cause to be prepared on a monthly basis an
unaudited balance sheet and unaudited profit and loss and cash flow statements
for the month and cumulatively for the calendar year to date (to be certified by
Kronos' president and chief financial officer as being true and correct to the
best of their knowledge).
16. Distribution of Profits. The parties agree that, as the sole
------------------------
stockholder of Kronos, all profits resulting from the conduct of the Corporate
Business shall belong to TSET, and that TSET shall be entitled to distribution
thereof from Kronos on a regular basis. The Principals, in their capacity as
directors of Kronos, agree to vote in favor of such distributions as requested
from time to time by TSET. TSET hereby covenants that it shall, in connection
with any request for such distribution, ensure that sufficient cash remains
allocated to Kronos to provide for three months operating and working capital
needs for the continuation and advancement of the Corporate Business, funding of
Programs relating to profit-sharing or other benefits plans in favor of the
Principals according to the terms thereof, plus reasonable reserves for
contingencies or extraordinary items. In connection with any request by TSET
for a cash distribution, TSET and Kronos' board of directors shall consult to
determine Kronos' reasonable cash needs, as provided above.
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17. Indemnification. (a)HVI shall indemnify, defend, and hold harmless
----------------
TSET and Kronos from and against any and all third party claims of patent,
intellectual property, or proprietary rights infringement (and including any and
all damages, losses, fines, penalties, royalties, costs and expenses arising out
of or associated therewith, including reasonable attorney's fees, hereinafter
collectively referred to as "losses") which may be asserted against TSET or
Kronos on the grounds that the Intellectual Property Rights, the Technology, or
any device or other manifestation thereof, infringe upon such third party's
rights, provided that such claim arises out of any event, fact or circumstance
occurring prior to the transfer of the Intellectual Property Rights to Kronos.
HVI shall not enter into any settlement or compromise of any such claim or
action without TSET's prior written consent. TSET and Kronos shall be entitled
to participate in or conduct the defense of any such claims, with the cost
thereof to be for the account of HVI and HVI and shall pay to TSET and Kronos,
as the case may be, the amount of any losses and reimburse the expense of any
defense undertaken by TSET or Kronos within 10 days after receipt of written
notice therefor. Any claims arising after the transfer of the Intellectual
Property Rights to Kronos shall be the sole responsibility of Kronos and TSET.
(b) Anything in this Agreement to the contrary notwithstanding, TSET
hereby acknowledges and agrees that the Principals are parties to this Agreement
for the purpose of, among other things, assigning the Intellectual Property
Rights and the Technology to Kronos and effecting the exchange of stock
described in this Agreement, and that TSET's sole remedy and recourse, in the
event of any breach of any representation, warranty or covenant by HVI set forth
herein, shall be to HVI directly and not to any Principal.
(c) TSET and HVI shall indemnify, defend and hold harmless each other
from and against any and all third party losses arising from any breach
hereunder or in the event any representation or warranty made by either of them
herein is untrue or misleading in any material respect and, as a result thereof,
either TSET or HVI, as the case may be, suffers a loss. The Principals shall
have the indemnification obligation described in this Section 17 to the extent
of any breach by them of any of their obligations hereunder including, without
limitation, those obligations described in Section 5 hereof, or in the event any
representation or warranty made by them is untrue or misleading in any material
respect and, as a result thereof, a loss is suffered by TSET; provided, however,
that only the individual Principal that has committed a breach of this Agreement
or has made an untrue or misleading representation or warranty to TSET shall
have the indemnification obligation described in this Section 17.
18. Arbitration. (a) In the event of any default or dispute between,
------------
breach by, or other controversy involving, the parties hereto regarding the
subject matter of this Agreement or the Transfer Documents (in any case, a
"Dispute"), the parties shall exert their respective good faith best efforts to
amicably resolve and settle the same. Toward this end, the parties shall
consult and negotiate with each other in good faith and understanding their
mutual best interests to reach a just and equitable solution reasonably
satisfactory to them. In the event the Dispute cannot be amicably resolved and
settled through good faith negotiations, the parties agree to submit the Dispute
to arbitration rather than litigation.
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<PAGE>
(b) All arbitration proceedings instituted by the parties hereunder
shall take place in Clackamas County, Oregon and shall be governed by the rules
of the American Arbitration Association (the "AAA") applicable to contracts of
this type. If the parties to the Dispute cannot agree on the appointment of an
arbitrator, the parties agree that the AAA shall appoint an independent
arbitrator, whose decision shall be final and binding upon the parties and not
subject to appeal to any court or government agency or authority, and shall be
enforceable in any court of competent jurisdiction; provided, however, that the
arbitrator shall not award or require the payment of, and the parties shall not
seek, incidental, consequential, or punitive damages except in cases of bad
faith breach of this Agreement or the Transfer Documents, gross negligence, or
willful misconduct. The parties shall not seek to delay or prevent the
implementation of any decision of the arbitrator. The prevailing party in any
arbitration brought hereunder shall be entitled to recover reasonable attorney's
fees and related costs and expenses of the arbitration.
(c) The parties each acknowledge that their agreement to resolve
Disputes through arbitration constitutes a waiver of their right to resolve
Disputes in any court, and that in arbitration proceedings the parties may not
be entitled to all of the rights that would otherwise be available to them in
court proceedings.
19. General Provisions.
-------------------
(a) Integration and Amendment. This Agreement and the Transfer
--------------------------
Documents constitute the entire agreement between the parties with respect to
the subject matter hereof and supercedes all prior agreements and understandings
with respect hereto and thereto. No other agreement, whether oral or written,
shall be used to modify or contradict the provisions hereof or of any
Transaction Document unless the same is in writing, signed by the parties, and
states that it is intended to amend the provisions of this Agreement or any
Transaction Document.
(b) Counterparts. This Agreement and the Transfer Documents may be
-------------
executed in multiple counterparts (and by facsimile signature, to be followed by
manual signature), each of which shall be deemed an original, and all of which
shall be deemed to constitute a single agreement, document, instrument, or
certificate, as the case may be.
(c) Binding Effect. This Agreement and the Transfer Documents shall
---------------
be binding upon and inure to the benefit of the heirs, successors, and permitted
assigns of the parties hereto; provided, however, that HVI and the Principals
shall not assign any of their respective rights or delegate any of their
respective responsibilities without the prior written consent of Kronos and
TSET, which consent may be withheld in the sole and absolute discretion thereof.
(d) Waiver. No failure by any party to this Agreement or any
-------
Transfer Document to exercise, no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege hereunder or any other document,
instrument, or certificate relating hereto, shall operate as a waiver or any
relinquishment for the future thereof; and no single
Page 15
<PAGE>
or partial exercise of any right, power, or privilege hereunder or any other
document, instrument, or certificate relating hereto shall preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
(e) Severability. If any provision (or portion thereof) of this
-------------
Agreement or any Transfer Document is adjudged illegal or unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
continue in full force and effect. In any such case, the provision deemed
illegal or unenforceable shall be remade or interpreted by the parties in a
manner that such provision shall be enforceable to preserve, to the maximum
extent possible, the original intention and meaning thereof.
(f) Notices. All notices or other communications given or made
--------
hereunder or under any Transfer Document shall be in writing and may be
delivered personally, by express, registered, or certified mail (return receipt
requested), by special courier, or by facsimile transmission (to be followed by
delivery of a written original notice in the most expeditious manner possible,
as aforesaid), all postage, fees, and charges prepaid, to TSET, Kronos, HVI, or
any of the Principals, as the case may be, to the following addresses (which may
be changed by the parties from time to time upon written notice given as
aforesaid):
To TSET: 333 South State Street, PMB 111
-------- Lake Oswego, OR 97034
Tel: 503.293.1270
Fax: 503.635.4452 and
503.293.7233
Attn: Jeffrey D. Wilson
Chairman and Chief Executive
Officer
To HVI: 13910 S.E. 23rd Street
------ Bellevue, WA 98005
Tel: 425.746.9647
Fax: 425.746.0719
To Ingrid Fuhriman: 13910 S.E. 23rd Street
------------------- Bellevue, WA 98005
Tel: 425.746.9647
Fax: 425.746.0719
To Robert L. Fuhriman II: 13910 S.E. 23rd Street
------------------------- Bellevue, WA 98005
Tel: 425.746.9647
Fax: 425.746.0719
Page 16
<PAGE>
To Dr. Igor Krichtafovitch: 822 S.E. 233rd Street
--------------------------- Bothell, WA 98021
Tel: 425.750.9004
Fax: 425.806.8556
To Alan Thomson: 2411 North 750 East
---------------- Provo, UT 84601
Tel: 801.360.0456
Fax: 801.342.2380
Notices hereunder shall be deemed given when delivered in person, upon
confirmation of successful transmission when sent by telex or facsimile (to be
followed by delivery by express or regular mail), or 5 days after being mailed
by express, registered, or certified mail (return receipt requested), postage
prepaid.
(g) Headings. The headings in this Agreement are solely for
---------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
(h) Costs, Expenses, and Taxes. Each party shall bear its own costs,
---------------------------
expenses, and taxes incurred or associated with the transactions contemplated
herein and in the Transfer Documents.
(i) Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Oregon, exclusive of its conflicts
of laws principles.
[SIGNATURES APPEAR ON NEXT PAGE]
Page 17
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
effective as of the date first written above.
TSET, Inc.
By:____________________________________
Jeffrey D. Wilson
Chairman and Chief Executive Officer
HIGH VOLTAGE INTEGRATED, LLC
By:____________________________________
Name:_______________________________
Authorized Signatory
_______________________________________
Ingrid Fuhriman, individually
_______________________________________
Igor Krichtafovitch, individually
_______________________________________
Robert L. Fuhriman II, individually
_______________________________________
Alan Thomson, individually
Page 18
<PAGE>
LIST OF EXHIBITS
Exhibit 2A -- Description of Transfer Documents
Exhibit 2B -- Intellectual Property Rights
Exhibit 4 -- Calculation of the Aggregate Shares
Exhibit 7 -- Future Applications
Exhibit 8A -- Schedule of Potential Liabilities
Exhibit 8B -- Schedule of Initial Funding Payments
Exhibit 11 -- Form of Employment Agreement
Exhibit 12(b) -- Defaults and Breaches
Exhibit 12(c) -- Litigation
Exhibit 12(d) -- Finders and Brokers
Exhibit 12(f) -- Taxes
Exhibit 12(g) -- Consents and Approvals
Exhibit 12(k) -- Encumbrances, Liens, or Superior Claims upon the
Intellectual Property Rights and the Technology;
Infringements
Page 19
<PAGE>
Exhibit 6.2
TSET, par value $0.001 per share (the "TSET Shares"), to be allocated on a pro
rata basis among the Stockholders and the Employees as follows:
Todd P. Ragsdale 196,660 TSET Shares
James Eric Anderson 380,355 TSET Shares
Judi Anderson 163,883 TSET Shares
Timothy Beglinger 144,217 TSET Shares
Atomic Millennium
Partners, LLC 104,885 TSET Shares
Jonathan Beglinger 3,500 TSET Shares
Michael Santry 3,500 TSET Shares
Suzanne May 2,000 TSET Shares
Thomas Bates 500 TSET Shares
Sterling Anderson 500 TSET Shares
The TSET Shares shall be the sole compensation for the Atomic Shares of the
Stockholders.
(b) Simultaneously with the execution and delivery of this Agreement
by the parties:
(i) each of the Stockholders shall deliver to TSET
certificates representing all of the Atomic Shares owned by them, accompanied by
appropriate stock powers endorsed in blank, and shall cause the Atomic Shares to
be registered in TSET's name on ASUSA's share registry and perform any and all
other actions required by applicable law to evidence TSET's ownership of the
Atomic Shares; and
(ii) TSET shall deliver to each of the Stockholders
certificates representing the number of TSET Shares to be acquired by them, and
shall cause the TSET Shares to be registered in the names of each of the
Stockholders on TSET's share registry and perform any and all other actions
required by applicable law to evidence ownership of the TSET Shares by each
Stockholder.
Immediately following the exchange of shares contemplated in this Subsection
(b), TSET shall own 100% of ASUSA's shares and ASUSA shall be a wholly owned
subsidiary of TSET.
(c) The Stockholders understand and acknowledge that the TSET Shares
shall be subject to, and the Stockholders agree to at all times observe and
comply with, any and all conditions, limitations, and restrictions noted on the
certificates representing the TSET Shares, in addition to any other restrictions
set forth in applicable federal and state securities laws. Any taxes, levies, or
other charges assessed against, or in
<PAGE>
connection with the acquisition of, the TSET Shares by each Stockholder pursuant
to this Section 2 shall be for the account of, and shall be borne solely by,
each such Stockholder.
(d) Any compensation or finder's fee payable by ASUSA or the
Stockholders (or any of them) to any person relating to the transactions
contemplated by this Agreement shall be paid out of the TSET Shares to be
received by them, the parties agreeing that TSET shall have no financial or
other responsibility whatsoever for payment of any such compensation.
3. Management. (a) Following TSET's acquisition of the Atomic Shares,
-----------
ASUSA's board of directors shall be comprised of the following individuals:
Todd P. Ragsdale
James Eric Anderson
Timothy Beglinger
Jeffrey D. Wilson (serving as chairman of the board of directors
and representing TSET)
Such directors shall serve in accordance with ASUSA's bylaws and applicable law.
In the event of any tie concerning any matter brought before ASUSA's board of
directors for a vote, Jeffrey D. Wilson, as chairman of the board of directors,
shall have the tie-breaking vote.
(b) Following TSET's acquisition of the Atomic Shares, ASUSA's
officers and executive management shall be comprised as follows:
Todd Ragsdale President
James Eric Anderson Vice-president
Timothy Beglinger Secretary and Treasurer
(c) The parties agree that the primary responsibility for ASUSA's day-
to-day management, business development, finances and the administration
thereof, budgets (capital, operations, and others), and the conduct of the
Corporate Business (as defined in Section 4 hereof), shall belong to ASUSA's
board of directors, but with such consultations and determinations as are
consistent with TSET's ownership of ASUSA. In carrying out such responsibilities
and conducting all elements of the Corporate Business, ASUSA's board of
directors shall at all times conduct themselves according to the highest
fiduciary standards of good faith and sound business judgment, exerting their
individual and collective best efforts to pursue the Corporate Business, seeking
to advance the best interests of ASUSA, complying with all laws, rules, and
regulations applicable to the Corporate Business, and keeping available to ASUSA
the services of its directors, officers, and key employees. The Corporate
Business shall be conducted by ASUSA's board of directors in the regular and
ordinary course in substantially the manner heretofore connected. The directors
and officers of ASUSA, individually and collectively, shall dedicate their full
time attention and efforts to the conduct of the
Page 2
<PAGE>
Corporate Business, except as may be otherwise permitted by ASUSA's board of
directors.
(d) The parties acknowledge that they are unable to anticipate and
provide herein for every situation and contingency, which may arise during the
conduct of the Corporate Business. Accordingly, the parties agree that
principles of good faith and fair dealing will govern their conduct at all times
and that best efforts will be exerted to amicably and expeditiously resolve any
dispute arising hereafter, all with a view to seeking to advance ASUSA's best
interests and maximize the value of ASUSA's business enterprise.
4. The Corporate Business. The parties understand and acknowledge that
-----------------------
the "Corporate Business" of ASUSA is the distribution of soccer uniforms under
the "Atomic" brand label and basketball, volleyball, lacrosse, and hockey
uniforms under the "BAHR" brand label, primarily through independent sales
representatives. TSET intends that the Corporate Business shall be conducted in
substantially the same manner as conducted prior to TSET's acquisition of the
Atomic Shares, and that the Corporate Business shall also include the pursuit of
such other activities as ASUSA's board of directors may determine from time to
time including, without limitation, recruitment of additional distributors for
the "Atomic" and "BAHR" brand labels and expansion of the geographical
territories in which ASUSA's products are marketed, distributed, and sold;
potential acquisition of additional sports apparel and equipment
distributorships and expansion of ASUSA's current product lines to achieve a
greater diversity; protect ASUSA's trademarks, tradenames, label names, and
other valuable rights; and such other activities as may enhance the value and
name recognition of the "Atomic" and "BAHR" labels, all with a view to advance
ASUSA's best interests and maximize ASUSA's profitability and success for the
benefit of TSET. In addition, as soon as practicable TSET intends to give
favorable consideration to the acquisition of ASUSA's maquiladora cut-and-sew
facility (Atomic S.A. de C.V.) in Ensenada, Mexico.
5. Contributions by TSET; Claw-back. (a)(i) TSET shall assist and support
---------------------------------
ASUSA's capital-raising efforts and shall provide and make available to ASUSA
working capital in the aggregate amount of up to $1,000,000.00 (the "Initial
Funding") over the 12-month period next following the execution and delivery of
this Agreement (the "Funding Period"). ASUSA hereby acknowledges that TSET has,
prior to the date of this Agreement, provided and ASUSA has received a portion
of the Initial Funding in the amount of $125,125.00. To the extent required,
TSET shall use its own shares in order to arrange for, procure, and ensure
availability of the Initial Funding; provided, however, that TSET's obligation
to provide the Initial Funding shall not be construed as or constitute any
assumption of any obligation regarding any indebtedness, operating expenses, or
other financial liabilities of ASUSA or the Stockholders including, without
limitation, those financial obligations owed to David M. Ragsdale or Paul Hix as
described in Exhibit 5 attached hereto and made a part hereof for all purposes.
Provision of the Initial Funding shall be the sole financial obligation owed by
TSET to ASUSA; provided, however, that TSET may elect, but is not obligated, to
provide to ASUSA
Page 3
<PAGE>
funding in addition to the Initial Funding in appropriate cases to be determined
by TSET in its sole and absolute discretion. Within 10 days of the execution and
delivery of this Agreement, ASUSA's board of directors shall establish an
operating budget, including provision for, among other things, the prudent
expenditure and conservation of funds for working capital over the Funding
Period while achieving the overall goals of the Corporate Business.
(ii) TSET acknowledges that ASUSA currently has outstanding a
$500,000 revolving line of credit, and that the guaranty thereof provided by
David M. Ragsdale must be replaced on or before June 30, 2000 (the "Replacement
Date"). TSET hereby agrees to exert its best efforts to retire or renew such
line of credit with replacement guaranties on or before the Replacement Date.
(b)(i) The parties acknowledge that TSET's undertaking to provide the
Initial Funding is a significant inducement to ASUSA and the Stockholders to
enter into this Agreement and consummate the transactions contemplated herein,
and that on or before the lapse of the Funding Period TSET shall have provided
to ASUSA the entire amount of the Initial Funding. In the event TSET provides
less than all of the Initial Funding by or before the lapse of the Funding
Period, ASUSA shall provide written notice to TSET that an event of default has
occurred hereunder (the "Default Notice"). If TSET fails to provide the unpaid
portion of the Initial Funding to ASUSA within 45 days of TSET's receipt of the
Default Notice (the "Cure Period"), the number of Atomic Shares owned by TSET
shall be reduced to reflect the proportionate value of the Initial Funding
provided by TSET to ASUSA, with the number of the Atomic Shares deducted from
TSET's holding to be transferred to and distributed among the Stockholders on a
pro rata basis (the "Share Adjustment"). The Share Adjustment shall occur within
10 days following lapse of the Cure Period if TSET fails during the Cure Period
to provide the unpaid portion of the Initial Funding.
(ii) If TSET fails to provide any Initial Funding prior to the
lapse of the Funding Period and the resulting Cure Period, this Agreement shall
be terminated and deemed null and void and the Atomic Shares shall be assigned,
transferred, and conveyed by TSET to the Stockholders, as they may direct in
writing to TSET.
(c) If TSET fails to provide any Initial Funding prior to the lapse of
the Funding Period and the resulting Cure Period, the sole remedy of ASUSA and
the Stockholders shall be:
(i) the Share Adjustment (in case of the events described in
Subsection (b)(i) above); and
(ii) the termination of this Agreement and assignment,
transfer, and conveyance to ASUSA and the Stockholders of the Atomic Shares (in
case of the events described in Subsection (b)(ii) above).
Page 4
<PAGE>
No party shall have any liability to the other for monetary damages of any
description whatsoever including, without limitation, incidental, consequential,
or punitive damages.
6. Options and Other Programs. TSET intends to adopt for itself, and
---------------------------
intends that ASUSA adopt, stock option, incentive, profit-sharing, savings, and
other similar programs (the "Programs"), as soon as practicable after the date
hereof. The terms and conditions of participation, contribution, matching,
vesting, and other elements of the Programs shall be established by the
respective boards of directors of TSET and ASUSA. ASUSA's directors, executive
management, and key employees (collectively, "management") shall be entitled to
participate in Programs adopted by TSET, subject to any conditions or
restrictions imposed on such participation by TSET's board of directors. As an
additional inducement to management and to ensure participation by management in
the future success of ASUSA, TSET, as sole stockholder of ASUSA, hereby agrees
to reserve up to 20% of ASUSA's authorized capital stock to be used in Programs
to be adopted by ASUSA's board of directors and consents to the full
participation of management therein, subject to the terms for such participation
established by ASUSA's board of directors; provided, however, that the final
terms of the Programs adopted by ASUSA's board of directors shall be subject to
TSET's prior written consent, which consent shall not be unreasonably withheld,
conditioned, or delayed.
7. Future Events. At an appropriate and mutually agreed time in the
--------------
future, TSET intends to give due and good faith consideration to effecting a
transaction pursuant to which ASUSA may become a publicly-owned entity (the
"Reconstitutive Decision"); provided, however, that a decision to retain ASUSA
as a wholly- or majority-owned subsidiary of TSET or effect a transaction
pursuant to which ASUSA's ownership materially changes but remains privately
held shall not be deemed a breach of this Section 7. In the event of any
Reconstitutive Decision, TSET (or its nominees) shall retain not less than a
non-dilutible 20% ownership interest in ASUSA.
8. Representations and Warranties of ASUSA and the Stockholders. ASUSA
-------------------------------------------------------------
and each of the Stockholders, jointly and severally, hereby represent and
warrant to TSET as follows:
(a) Corporate Organization. ASUSA is duly organized, validly
-----------------------
existing, and in good standing under the laws of the State of Wisconsin and has
all requisite power, authorizations, consents, and approvals necessary to own or
lease its assets and carry on its business as currently being conducted, and to
consummate the transactions contemplated herein. ASUSA is duly licensed or
qualified and in good standing in all jurisdictions in which the character of
the properties owned or leased by it or the nature of its business requires it
to be so licensed or qualified. Complete and correct copies of all constitutive
documents of ASUSA have been delivered to TSET. ASUSA's minute books or other
similar records contain an accurate record of all meetings and other corporate
action of its stockholders and board of directors (and any committees thereof).
Page 5
<PAGE>
(b) No Defaults or Breaches. Except as disclosed in Exhibit 8(b)
------------------------
attached hereto and made a part hereof for all purposes, neither the execution
of this Agreement nor the performance of its obligations hereunder and
thereunder does or will:
(i) conflict with or violate any provision of ASUSA's
constituent documents;
(ii) violate, conflict with, or result in the breach or
termination of, or constitute a default, event of default (or an event which
with notice, lapse of time, or both, would constitute a default or event of
default), under the terms of any
(A) contract, agreement, commitments, or other binding
undertakings, whether or not reduced to writing (collectively, "Contracts"), or
(B) permits, authorizations, approvals, registrations,
or licenses granted by or obtained from any governmental, administrative, or
regulatory authority (collectively, "Permits"),
to which ASUSA or any of the Stockholders is a party or by which ASUSA or any of
the Stockholders or any of their respective or collective securities,
properties, or businesses are bound;
(iii) constitute a violation by ASUSA or any of the Stockholders
of any
(A) laws, rules, or regulations of any governmental,
administrative, or regulatory authority (collectively, "Laws"), or
(B) judgments, orders, rulings, or awards of any court,
arbitrator, or other judicial authority or any governmental, administrative, or
regulatory authority (collectively, "Judgments"); or
(iv) result in the creation of any lien, claim, or encumbrance
(collectively, "Liens") upon ASUSA, the Atomic Shares, or any of the
Stockholders.
(c) Actions and Proceedings. Except as disclosed in Exhibit 8(c-1)
------------------------
attached hereto and made a part hereof for all purposes, there are no actions,
suits, claims, or legal, administrative, arbitration, or other alternative
dispute resolution proceedings or investigations (collectively, "Proceedings")
(whether or not the defense thereof or liability with respect thereto is covered
by policies of insurance) pending or, to the best knowledge of ASUSA and any of
the Stockholders, threatened, to which ASUSA or any of the Stockholders is our
would be a party, including, without limitation, any Proceeding which could
reasonably be expected to restrain, prevent, or prohibit ASUSA or any of the
Stockholders from consummating the transactions contemplated herein, or to
obtain damages or other relief in connection with, this Agreement or any of the
transactions
Page 6
<PAGE>
contemplated herein. Except as disclosed in Exhibit 8(c-2) attached hereto and
made a part hereof for all purposes, there is no Judgment outstanding against
ASUSA or any Stockholder.
(d) No Brokers. Except as disclosed in Exhibit 8(d) attached hereto
-----------
and made a part hereof for all purposes, all negotiations relating to this
Agreement and the transactions contemplated herein have been carried on without
the intervention of any party acting in behalf of ASUSA or any of the
Stockholders in such manner as to give rise to any valid claim against ASUSA or
any of the Stockholders, individually or collectively, for any broker's or
finder's fee or similar compensation (whether payable in cash, Atomic Shares,
any interest in ASUSA, or otherwise) in connection therewith. No basis exists
whatsoever for any such broker's or finder's fee or similar compensation to be
payable by TSET.
(e) Authority. ASUSA has all necessary corporate power and authority,
----------
and each of the Stockholders have the power, legal capacity, and authority, to
execute, deliver, and perform its obligations hereunder; and the execution,
delivery, and performance by ASUSA and each of the Stockholders of this
Agreement has been duly authorized by all necessary corporate action on its part
or is within the authority of the person executing and delivering the same, and
is within the authority of each of the Stockholders. This Agreement constitutes
the legal, valid, and binding obligations of ASUSA and each of the Stockholders,
enforceable against any and all of them in accordance with the terms thereof,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights and general principles of
equity.
(f) Taxes and Tax Returns. Except as disclosed in Exhibit 8(f-1)
----------------------
attached hereto and made a part hereof for all purposes:
(i) ASUSA has filed all tax returns and reports of all Taxes
(as hereinafter defined) required to be filed by it and has timely given and
delivered all Tax notices, accounts, and information required to be given by it
with respect to Taxes for which ASUSA may be liable. All information provided in
such returns, reports, notices, accounts, and information was, when filed or
given, complete and accurate. All Taxes required to be paid by ASUSA that were
due and payable prior to the date of this Agreement have been paid in full,
except for such taxes as are being contested in good faith by appropriate
proceedings and for which adequate reserves are being maintained. Adequate
provisions in accordance with generally accepted accounting principles
consistently applied have been made in ASUSA's financial statements for the
payment of all Taxes for which ASUSA may be liable for the periods covered
thereby that were not yet due and payable as of the date thereof, regardless of
whether the liability for such Taxes is disputed;
(ii) There are no pending or, to the best knowledge of ASUSA
and each Stockholder, threatened, audits or investigations relating to any Taxes
for which
Page 7
<PAGE>
ASUSA may become directly or indirectly liable. No deficiencies for any Taxes
have been proposed, asserted, or assessed against ASUSA and no state of facts
exists or has existed that would constitute grounds for the assessment of a Tax
liability against ASUSA. There are no agreements in effect to extend the period
of limitations for the assessment or collection of any Taxes for which ASUSA may
become liable and no requests for any such agreements are pending;
(iii) Except as disclosed in Exhibit 8(f-2) attached hereto and
made a part hereof for all purposes, ASUSA has withheld from its employees and
timely paid to the appropriate authority proper and accurate amounts for all
periods through the date hereof in compliance with all Tax withholding
provisions of all applicable federal, state, and local laws;
(iv) All copies of all returns and reports of all Taxes filed
by ASUSA on or prior to the date of this Agreement, provided or made available
to TSET by ASUSA, are complete and accurate; and
(v) ASUSA has neither elected, nor otherwise been granted, any
preferential tax treatment or made any sort of commitment vis-a-vis any Tax
authorities, whether in connection with a reorganization or otherwise.
As used in this Subsection (f), the terms "Tax" shall mean (A) all taxes,
assessments, levies, imposts, duties, fees, withholdings, or other similar
mandatory charges, including, without limitation, income taxes, franchise taxes,
transfer taxes or fees, sales taxes, excise taxes, ad valorem taxes, withholding
taxes, minimum taxes, estimated taxes, and social charges or contributions; and
(B) any interest, penalties, or additions to tax imposed on a Tax described in
clause (A) above, imposed by an national, regional, local, or foreign government
or subdivision or agency thereof.
(g) Consents. Except as disclosed in Exhibit 8(g) attached hereto and
---------
made a part hereof for all purposes, no authorizations, approvals, or consents
of, and no filings or registrations with, any governmental agency or authority
are necessary for the execution, delivery, and performance by ASUSA and each of
the Stockholders of this Agreement or for the validity or enforceability hereof.
(h) Sufficiency of Information. No material statement, information,
---------------------------
or exhibit disclosed or otherwise furnished to TSET by ASUSA or any of the
Stockholders in connection with the negotiations among the parties or any
representations upon which TSET may have relied, contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statement made not misleading.
(i) Compliance with Law. ASUSA and each of the Stockholders shall at
--------------------
all times hereunder comply with all conditions, restrictions, and limitations
applicable to the TSET Shares and the provisions of all federal and state
securities laws applicable to the ownership and transfer thereof.
Page 8
<PAGE>
(j) Compensation Matters. Except as disclosed in Exhibit 8(j)
---------------------
attached hereto and made a part hereof for all purposes, no oral or written
compensation arrangement or agreement exists, and no shares or units (or
warrants or options to acquire the same), or revenue interests, or royalties
have been granted, orally or in writing, or are owned by, ASUSA's board of
directors, employees, or any Stockholder.
(k) Intellectual Property. (i) Exhibit 8(k-1) attached hereto and
----------------------
made a part hereof for all purposes sets forth an accurate and complete list of
the following:
(A) all registered or unregistered trademarks, trademark
applications, servicemarks, servicemark applications, assumed names, trade
names, and brand label names used or held by ASUSA in connection with its
operations and intended conduct of the Corporate Business (collectively,
"Trademarks"), indicating for each Trademark whether it is owned or licensed
from a third party and whether the Trademark is licensed to any third party; and
(B) all patents registered or applied for by ASUSA or
licensed from a third party, indicating for each such patent whether it is owned
or licensed from a third party and whether such patent is licensed to any third
party.
(ii) The Trademarks and patents listed in Exhibit 8(k-1) have
been duly registered or filed with the appropriate trademark and patent
authority for each of the jurisdictions indicated in Exhibit 8(k-1), and such
registrations have been properly maintained and renewed in accordance with all
applicable legal requirements.
(iii) There are no adverse claims or demands of any person
pertaining to any of the Trademarks or patents listed in Exhibit 8(k-1) and
there is no valid basis for any such claim.
(iv) Except as disclosed in Exhibit 8(k-1), ASUSA has the sole
and exclusive right to use the Trademarks, patents, copyrights (and applications
therefor), technology, know-how, processes, and trade secrets (collectively, and
including the Trademarks, the "Intellectual Property Rights") required for or
incident to the conduct of the Corporate Business, in the jurisdictions in which
the Corporate Business has been or will be conducted or where ASUSA's products
are distributed, and the consummation of the transactions contemplated in this
Agreement will not alter or impair any such rights.
(v) The use or other exploitation by ASUSA of the Intellectual
Property Rights used or held by ASUSA in connection with its operations and the
conduct of the Corporate Business does not infringe on or dilute the rights of
any other person.
(vi) Except as disclosed in Exhibit 8(k-2) attached hereto and
made a part hereof for all purposes, neither ASUSA nor any of the Stockholders
are
Page 9
<PAGE>
aware of any infringements or illicit uses of the Intellectual Property Rights
used or held by ASUSA in connection with its operations or the conduct of the
Corporate Business
(l) Ownership of Atomic Shares. Except as disclosed in Exhibit 8(l)
---------------------------
attached hereto and made a part hereof for all purposes, each Stockholder holds
full title to, and is duly registered as the owner of, the Atomic Shares to be
transferred by such Stockholder pursuant to this Agreement, free and clear of
any and all Liens.
(m) Subsidiaries. Exhibit 8(m), attached hereto and made a part
-------------
hereof for all purposes, sets forth an accurate and complete list of each
company, partnership, or other business entity of which 10% or more of the
outstanding share capital or other equity interest is owned, directly or
indirectly, by ASUSA (in any case, a "Subsidiary"), indicating the jurisdiction
of incorporation, capital structure, and the nature and level of ownership in
such Subsidiary and any other stockholder thereof. Each Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has full power and authority to
own, lease, and operate the assets held or used by it and to conduct its
business as currently conducted. Each Subsidiary is duly licensed or qualified
and in good standing in all jurisdictions in which the character of the
properties owned or leased by it or the nature of its business requires it to be
so licensed or qualified. Complete and correct copies of all constitutive
documents of each Subsidiary have been delivered to TSET. The minute books or
other similar records of each Subsidiary contain an accurate record of all
meetings and other corporate action of its stockholders and board of directors
(and any committees thereof).
(n) Title to Property; Condition; Sufficiency. (i) ASUSA has:
------------------------------------------
(A) with respect to all real estate owned by it, good
and marketable fee simple title, and
(B) with respect to all real estate which is leased by
it, valid and subsisting leasehold estates, in each instance free and clear of
any and all liens, claims, and encumbrances, other than "Permitted
Encumbrances," and
(C) with respect to all of the other assets owned by it,
good title free and clear of any and all Liens, other than Permitted
Encumbrances.
As used in this Subsection (n), the term "Permitted Encumbrances" shall mean any
Liens that are immaterial, individually and in the aggregate, to the assets to
which they relate and do not interfere with the full use and enjoyment of such
assets.
(ii) The properties and other assets owned or leased by ASUSA
constitute all properties and other assets necessary for the conduct of the
businesses and activities conducted by ASUSA.
Page 10
<PAGE>
(o) Financial Statements. (i) Complete and correct copies of the
---------------------
audited and consolidated financial statements (i.e., balance sheet and profit
and loss statement) of ASUSA since inception are attached hereto as Exhibit 8(o)
and made a part hereof for all purposes (collectively, the "Financial
Statements").
(ii) The Financial Statements give a true and accurate account
of the consolidated financial condition, assets and liabilities of ASUSA as of
the dates thereof, and the results of operations and changes in financial
condition for the periods then ended. Except as otherwise disclosed in Exhibit
8(o), the Financial Statements have been prepared in accordance with generally
accepted accounting principles, consistently applied. Any Interim Financial
Statements (herein so called) will, when prepared, give a true and accurate
account of the financial condition, assets and liabilities of ASUSA at the date
thereof and the results of its operations and changes in financial position for
the period to which the Interim Financial Statements apply and will be prepared
in accordance with generally accepted accounting principles, consistently
applied.
(iii) As of December 31, 1999, ASUSA had no liabilities or obligations of any
nature, whether known or unknown, accrued, absolute, contingent, or otherwise,
and whether due or to become due (collectively, "Liabilities") which were either
(A) required by generally accepted accounting principles to be reflected in
financial statements, or (B) individually or in the aggregate material to
ASUSA's financial condition, and that, in either case, were not reflected or
expressly reserved against in the audited/consolidated balance sheet included in
the Financial Statements or specifically disclosed or provided for in the notes
thereto. Since December 31, 1999, ASUSA has not incurred any Liability except
Liabilities that (X) were incurred in the usual and ordinary course of business
consistent with past practice, and (Y) are not, individually or in the
aggregate, material to ASUSA's financial condition.
(iv) Since January 1, 2000, ASUSA has conducted its businesses
only in the ordinary and usual course in substantially the same manner as
theretofore conducted, has not undergone or suffered any change in its condition
(financial or otherwise), income, properties, Liabilities, operations, or
prospects which has been, in any individual case or in the aggregate, materially
adverse to ASUSA, and has not taken any of the following actions:
(A) amended any of its constitutive documents;
(B) acquired by merger, consolidation, purchase of stock
or assets or otherwise, any corporation, partnership, association, or other
business organization or division thereof;
(C) altered its outstanding capital stock or equity
interests or declared, set aside, made, or paid any dividends or other
distributions in respect of its capital stock or equity interests (in cash or
otherwise), or purchased or redeemed any shares of its capital stock or equity
interests;
Page 11
<PAGE>
(D) issued or sold (or agreed to issue or sell) any of
its capital stock or equity interests or any options, warrants, or other rights
to purchase any such stock or interests or securities convertible into or
exchangeable for such stock or interests;
(E) not incurred, other than in the ordinary course of
business consistent with past practice, any indebtedness for borrowed money
(including through the issuance of debt securities) or varied the terms of any
existing indebtedness or guaranty or otherwise become liable for any Liabilities
of any third party;
(F) mortgaged, pledged, or subjected to any lien, claim,
or encumbrance any of its properties other than in the ordinary course of
business consistent with past practice;
(G) discharged or satisfied any material lien, claim, or
encumbrance or paid or satisfied any material obligation or Liability (fixed or
contingent) or compromised, settled, or otherwise adjusted any material claim or
litigation;
(H) acquired or disposed of any substantial assets or
rights, other than in the ordinary course of business or entered into any
contract whose term exceeds one year or is unlimited and which may not be
terminated by ASUSA on less than three months' notice without payment of any
penalty;
(I) made any changes in its accounting procedures or
practices;
(J) granted to any director, officer, consultant, or
employee any increase or modification of compensation or benefits, or any
severance or termination pay, or made any loan to or entered into any employment
agreement or arrangement with any such person;
(K) adopted, entered into, amended in any material
respect, announced any intention to adopt or terminate, any policies,
procedures, employee benefit plans, programs, or arrangements of general
applicability;
(L) directly or indirectly, other than with respect to
negotiating and entering into this Agreement, (1) solicited, initiated, or
encouraged any inquiries, discussions, or proposals from any other person
relating to a possible acquisition of all or any part of the Atomic Shares or
assets of ASUSA, (2) continued, solicited, encouraged, or entered into
negotiations or discussions relating to any such possible acquisition, (3)
furnished to any other person any information (not already in the public domain)
relating to ASUSA, or (4) entered into or consummated any agreement or
understanding providing for any such acquisition; or
Page 12
<PAGE>
(M) entered into any oral or written commitments or
understandings to take any of the foregoing actions .
(p) Outstanding Commitments. (i) Exhibit 8(p) attached hereto and
------------------------
made a part hereof for all purposes contains an accurate list of all Contracts
(but excluding orders placed in the ordinary course of business consistent with
past practice by ASUSA's customers or suppliers) to which ASUSA is a party or by
which any of its assets or operations are bound or affected and which:
(A) involve the obligation (including contingent
obligations) by or to ASUSA to pay amounts of $2,500.00 or more,
(B) are Contracts whose term exceeds one year or is
unlimited (with the exception of labor agreements) and which may not be
terminated by ASUSA on less than three months' notice without payment of any
penalty or premium,
(C) are Contracts under whose terms ASUSA is bound to
refrain from carrying out or to restrict certain activities, or to refrain from
competing with any third party,
(D) are Contracts with any Stockholder, director,
officer, or employee of ASUSA, or any relative or affiliate of any such person,
or
(E) were not entered into in the ordinary course of
ASUSA's business.
(ii) All Contracts listed in Exhibit 8(p) are valid, binding,
and enforceable by ASUSA in accordance with their respective terms and ASUSA is
not in default under any of such Contracts. No other party to any of such
Contracts is in default thereunder nor does there exist any event or condition,
which upon giving of notice or the lapse of time or both, would (A) constitute a
default or event of default thereunder or (B) entitle any other party thereto to
terminate such Contract.
(iii) None of the Contracts to which ASUSA is a party or a
beneficiary violates any provision of any applicable Law or Judgment. All
Contracts between ASUSA, on the one hand, and its suppliers, customers,
distributors, agents, or licensees on the other hand, have been concluded under
normal market conditions, without any preferential conditions or exceptional
discounts, in accordance with normal commercial practice.
(q) Employment Matters. (i) Exhibit 8(q-1) attached hereto and made
-------------------
a part hereof for all purposes sets forth all of the collective rules applicable
to ASUSA's employees (the "Collective Rules") including, without limitation,
applicable collective bargaining agreements and company agreements; any
exceptional agreements concluded with employee representatives; the remuneration
system, including premiums, bonuses,
Page 13
<PAGE>
commissions, and advantages in kind; profit-sharing, incentive, and company
savings plans; retirement or health insurance plans pursuant to which employees
are entitled to receive advantages in addition to those provided for by law or
applicable collective bargaining agreements; and any regional, local, or
individual company or establishment practices which provide for advantages which
exceed those provided for by law or applicable collective bargaining agreements.
(ii) Exhibit 8(q-2) attached hereto and made a part hereof for
all purposes sets forth all consulting, employment, severance, termination, or
compensation Contracts of ASUSA with any Stockholder or former stockholder or
with any current director, officer, consultant, or with any individual employee
or manager pursuant to which such employee or manager receives benefits which
exceed those provided for by law or the applicable Collective Rules including,
without limitation, increased severance pay, extended notice periods, advantages
in kind, or pensions (the "Employment Agreements"). None of the Employment
Agreements provides for payments measured by the value of any equity security of
or interest in ASUSA or in connection with any change in control of ASUSA and no
amount will become due to any employee, consultant, officer, or director of
ASUSA under the Collective Rules or any Employment Agreement solely as a result
of the transactions contemplated in this Agreement.
(iii) Exhibit 8(q-3) attached hereto and made a part hereof for
all purposes sets forth all obligations of ASUSA to employee representative
organizations which exceed those provided for by law or in the applicable
Collective Rules.
(iv) ASUSA is now and has in the past been in compliance with
all provisions of applicable labor and social security laws, the Collective
Rules, and the Employment Agreements and all payments due thereunder from ASUSA
have been made when due and all amounts properly accrued as Liabilities of ASUSA
which have not been paid have been properly recorded on ASUSA's books.
(v) Since inception, there have occurred no strikes, slow
downs, work stoppages, or other similar labor actions by any group of ASUSA's
employees. Except as set forth in Exhibit 8(q-3), no Proceeding arising out of
any labor grievance under any Law, the Collective Rules, or any Employment
Agreement is pending or, to the best knowledge of ASUSA and each Stockholder,
threatened.
(vi) ASUSA has not made any commitment to any public agency,
labor organization, employees' representatives, or any other party, relating to
the numbers of ASUSA's employees or to future collective dismissals.
(r) Environmental, Health, and Safety. (i) ASUSA has obtained and
----------------------------------
been in compliance with all terms and conditions of any and all Permits which
are required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Laws and Judgments relating to public
health and safety, worker health and safety, and
Page 14
<PAGE>
pollution or protection of the environment, including Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands, or otherwise relating
to the testing, characterization, classification, manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes. All such Permits are valid and in full force and effect for the
conduct of ASUSA's business as such business are presently conducted, and where
applicable, timely renewal applications have been submitted for all such
Permits. No Proceeding has been filed or commenced against ASUSA alleging any
failure to comply with any such Laws, Judgments, or Permits.
(ii) ASUSA has no Liability (and there is no past or present
fact, status, condition, activity, occurrence, action, or failure to act related
to the past or present operations, properties, or facilities of ASUSA that forms
or reasonably could form the basis for the imposition of any Liability):
(A) under any Law relating to protection of human health
or safety or concerning employee or worker health and safety or relating
generally to the environment,
(B) for damage to any site, location, natural resources,
or body of water (surface or subsurface) or for failure to report or clean up
any discharges of any substance, or
(C) for any illness of or personal injury to any of its
employees or any third party.
(s) Insurance. Exhibit 8(s) attached hereto and made a part hereof
----------
for all purposes sets forth a complete list and brief description (specifying
the insurer, the coverage and policy number or covering note number with respect
to binders) of all policies, binders, or Contracts to which ASUSA is a party or
by which any of its assets are covered, of property, fire, liability, product
liability, workmen's compensation, vehicular, crime, fiduciary, builders' risk,
title, and other insurance or Contracts in the nature of insurance
(collectively, the "Insurance Contracts"). The Insurance Contracts listed on
Exhibit 8(s) are in full force and effect in accordance with their respective
terms and will remain in full force and effect hereafter. ASUSA has not received
any notice that it is in default with respect to any provision of any Insurance
Contracts. ASUSA has not provided inaccurate, incomplete, or misleading
information in connection with any Insurance Contract or failed to give any
notice or present any claim thereunder in due and timely fashion or as required
by any such Insurance Contract so as to jeopardize full recovery thereunder.
Page 15
<PAGE>
(t) Compliance with Legal Requirements. (i) ASUSA and each
-----------------------------------
Stockholder is currently conducting, and has in the past conducted, its
respective businesses in compliance with all applicable Laws, Judgments, and
Permits.
(ii) ASUSA possesses, and upon consummation of the transactions
contemplated in this Agreement will continue to possess all Permits necessary to
conduct its operations as they are currently being conducted and all such
Permits are and will remain in full force and effect. No Proceeding to modify,
suspend, terminate, or otherwise limit any such Permit is pending or, to the
best knowledge of ASUSA and each Stockholder, threatened.
(iii) Neither ASUSA nor any Stockholder has received any notice
in any form (including any citations, notices of violations, complaints, consent
orders, or inspection reports) which would indicate that such party was not at
the time of such notice or is not currently in compliance with all such
applicable Laws, Judgments, and Permits.
(u) Capitalization. ASUSA's capitalization is as set forth in Section
---------------
1 hereof, and the Stockholders listed are the only stockholders of ASUSA and
have sole right to own the Atomic Shares shown opposite their respective names.
No other person has any right or expectancy to own any Atomic Shares, whether
through option, purchase, grant, or other means by which any right or expectancy
of ownership could arise or become vested in any such person.
The representations and warranties contained in this Section 8 shall survive the
execution and delivery of this Agreement without limitation as to time
9. Representations and Warranties of TSET. TSET hereby represents and
---------------------------------------
warrants to ASUSA and the Stockholders as follows:
(a) TSET is duly organized, validly existing, and in good standing
under the laws of the State of Nevada and has all requisite power,
authorizations, consents, and approvals necessary to own its assets and carry on
its business as now being conducted, and to consummate the transactions
contemplated herein.
(b) Neither the execution of this Agreement nor the performance of its
obligations hereunder and thereunder does or will conflict with or violate any
provision of TSET's articles of incorporation or bylaws; violate, conflict with,
or result in the breach or termination of, or constitute a default, event of
default (or an event which with notice, lapse of time, or both, would constitute
a default or event of default), under the terms of any material agreement to
which TSET is a party or by which TSET or its securities, properties, or
businesses are bound; or constitute a violation by TSET of any laws or judgments
(other than any violation, conflict, breach, or default that would not prevent
TSET from consummating the transactions contemplated herein or otherwise
performing its obligations thereunder).
Page 16
<PAGE>
(c) There is no proceeding (whether or not the defense thereof or
liability with respect thereto is covered by policies of insurance) pending or,
to TSET's best knowledge, threatened, against TSET which could reasonably be
expected to prevent TSET from consummating the transactions contemplated herein.
(d) TSET has all necessary corporate power and authority to execute,
deliver, and perform its obligations hereunder; and the execution, delivery, and
performance by TSET of this Agreement to which it is a party has been duly
authorized by all necessary corporate action on its part or is within the
authority of the person execution and delivering the same. This Agreement
constitutes the legal, valid, and binding obligations of TSET, enforceable
against it in accordance with the terms thereof, except as may be limited by
applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights and general principles of equity.
10. Distribution of Profits. The parties agree that, as the sole
------------------------
stockholder of ASUSA, all profits resulting from the conduct of the Corporate
Business shall belong to TSET, and that TSET shall be entitled to distribution
thereof from ASUSA on a regular basis. The directors of ASUSA agree to vote in
favor of such distributions as requested from time to time by TSET. TSET hereby
covenants that it shall, in connection with any request for such distribution,
ensure that sufficient cash remains allocated to ASUSA to provide for reasonable
operating and working capital needs for the continuation and advancement of the
Corporate Business, funding of Programs relating to profit-sharing or other
benefits plans according to the terms thereof, plus reasonable reserves for
contingencies or extraordinary items. In connection with any request by TSET for
a cash distribution, TSET and ASUSA's board of directors shall consult to
determine ASUSA's reasonable cash needs, as provided above.
11. Arbitration. (a) In the event of any default or dispute between,
------------
breach by, or other controversy involving, the parties hereto regarding the
subject matter of this Agreement (in any case, a "Dispute"), the parties shall
exert their respective good faith best efforts to amicably resolve and settle
the same. Toward this end, the parties shall consult and negotiate with each
other in good faith and understanding their mutual best interests to reach a
just and equitable solution reasonably satisfactory to them. In the event the
Dispute cannot be amicably resolved and settled through good faith negotiations,
the parties agree to submit the Dispute to arbitration rather than litigation.
(b) All arbitration proceedings instituted by the parties hereunder
shall take place in Clackamas County, Oregon and shall be governed by the rules
of the American Arbitration Association (the "AAA") applicable to contracts of
this type. If the parties to the Dispute cannot agree on the appointment of an
arbitrator, the parties agree that the AAA shall appoint an independent
arbitrator, whose decision shall be final and binding upon the parties and not
subject to appeal to any court or government agency or authority, and shall be
enforceable in any court of competent jurisdiction; provided, however, that the
arbitrator shall not award or require the payment of, and the parties
Page 17
<PAGE>
shall not seek, incidental, consequential, or punitive damages except in cases
of bad faith breach of this Agreement, gross negligence, or willful misconduct.
The parties shall not seek to delay or prevent the implementation of any
decision of the arbitrator. The prevailing party in any arbitration brought
hereunder shall be entitled to recover reasonable attorney's fees and related
costs and expenses of the arbitration.
(c) The parties each acknowledge that their agreement to resolve
Disputes through arbitration constitutes a waiver of their right to resolve
Disputes in any court, and that in arbitration proceedings the parties may not
be entitled to all of the rights that would otherwise be available to them in
court proceedings.
12. Indemnification. (a) From and after the date of this Agreement, ASUSA
----------------
and each Stockholder jointly and severally agree to pay and to indemnify fully,
hold harmless, and defend TSET and its directors, officers, employees, agents,
representatives, attorneys, successors, and assigns from and against any and all
Liabilities, damages, penalties, Judgments, assessments, losses, fines, charges,
costs, and expenses (including, but not limited to, reasonable attorney's fees
and the costs and expenses of litigating any claims) (collectively, "Damages")
incurred by any of them arising out of, relating to, or based upon:
(i) any inaccuracy or breach of any representation or warranty
of ASUSA or any Stockholder set forth in Section 8 hereof or elsewhere herein;
and
(ii) any breach of any covenant or agreement of ASUSA or any
Stockholder contained in this Agreement.
TSET's right to be indemnified hereunder shall not be limited or affected by any
investigation conducted or notice or knowledge obtained by or on behalf of TSET.
(b) In the event that (A) any claim, demand, or Proceeding is asserted
or instituted by any party other than the parties hereto and their affiliates
which could give rise to Damages for which TSET intends to seek indemnification
from ASUSA or the Stockholders hereunder (a "Third Party Claim") or (B) TSET
intends to make a claim to be indemnified by ASUSA or the Stockholders hereunder
which does not involve a Third Party Claim (a "Direct Claim"), TSET shall
promptly, within 21 days of the date on which it first becomes aware of the
existence of such claim, send written notice to ASUSA and the Stockholders
specifying the nature of such claim or demand and the amount (or a good faith
estimate of such amount, which estimate shall not be conclusive of any final
amount of such claim and demand) (a "Claim Notice"); provided, however, that
failure to provide a Claim Notice still not constitute any waiver or
relinquishment of TSET's rights to indemnification hereunder.
(c) In the event of a Third Party Claim, ASUSA and the Stockholders
may participate, at their own expense, in the defense thereof with legal counsel
of their own choice reasonably acceptable to TSET. Unless ASUSA and the
Stockholders shall have
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<PAGE>
agreed in writing that any and all Damages to TSET are fully covered by the
indemnities provided herein, no Third Party Claim may be settled without TSET's
prior written consent, which consent shall not be unreasonably withheld,
conditioned, or delayed.
(d) In the event of a Direct Claim, unless ASUSA and the Stockholders
notify TSET within 30 days after receipt of a Claim Notice that they dispute
such Direct Claim, the amount of such Direct Claim shall be conclusively deemed
a liability of ASUSA and the Stockholders and shall be paid to TSET no later
than 10 days following lapse of such 30-day period.
13. General Provisions.
-------------------
(a) Integration and Amendment. This Agreement constitutes the entire
--------------------------
agreement between the parties with respect to the subject matter hereof and
supercedes all prior agreements and understandings with respect hereto and
thereto. No other agreement, whether oral or written, shall be used to modify or
contradict the provisions hereof unless the same is in writing, signed by the
parties, and states that it is intended to amend the provisions of this
Agreement.
(b) Counterparts. This Agreement may be executed in multiple
-------------
counterparts (and by facsimile signature, to be followed by manual signature),
each of which shall be deemed an original, and all of which shall be deemed to
constitute a single agreement, document, instrument, or certificate, as the case
may be.
(c) Binding Effect. This Agreement shall be binding upon and inure to
---------------
the benefit of the heirs, successors, and permitted assigns of the parties
hereto.
(d) Waiver. No failure by any party to this Agreement to exercise, no
-------
delay in exercising, and no course of dealing with respect to, any right, power,
or privilege hereunder or any other document, instrument, or certificate
relating hereto, shall operate as a waiver or any relinquishment for the future
thereof; and no single or partial exercise of any right, power, or privilege
hereunder or any other document, instrument, or certificate relating hereto
shall preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege.
(e) Severability. If any provision (or portion thereof) of this
-------------
Agreement is adjudged illegal or unenforceable by a court of competent
jurisdiction, the remaining provisions shall nevertheless continue in full force
and effect. In any such case, the provision deemed illegal or unenforceable
shall be remade or interpreted by the parties in a manner that such provision
shall be enforceable to preserve, to the maximum extent possible, the original
intention and meaning thereof.
(f) Notices. All notices or other communications given or made
--------
hereunder shall be in writing and may be delivered personally, by express,
registered, or certified mail (return receipt requested), by special courier, or
by facsimile transmission
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<PAGE>
(to be followed by delivery of a written original notice in the most expeditious
manner possible, as aforesaid), all postage, fees, and charges prepaid, to TSET,
ASUSA or any of the Stockholders, as the case may be, to the following addresses
(which may be changed by the parties from time to time upon written notice given
as aforesaid):
To TSET: 333 South State Street, PMB 111
-------- Lake Oswego, OR 97034
Tel: 503.293.1270
Fax: 503.293.7233
Attn: Jeffrey D. Wilson
Chairman and Chief Executive Officer
To ASUSA: 6045 Monona Drive
--------- Madison, WI 53716
Tel: 608.226.9982
Fax: 608.226.9670
Email: [email protected]
Attn: Todd P. Ragsdale
To Todd P. Ragsdale: 6205 Westin Drive
-------------------- Madison, WI 53719
Tel: 608.278.7086
To James Eric Anderson: Calle Huerta 132 Col Carlos
----------------------- Ensenada, BC Mexico
Tel: 52.615.42369
To Jewel Anderson: 5251 Anna Lane
------------------ Middleton, WI 53562
Tel: 608.233.6515
To Timothy Beglinger: 2200 U.S. Highway 51
--------------------- Stoughton, WI 53589
Tel: 608.873.0961
To Atomic Millennium Partners: 305 East Spring Road
------------------------------ Dodgeville, WI 53533
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<PAGE>
Attn: Tim Singer
Tel: 608.935.3361
Notices hereunder shall be deemed given when delivered in person, upon
confirmation of successful transmission when sent by telex or facsimile (to be
followed by delivery by express or regular mail), or 5 days after being mailed
by express, registered, or certified mail (return receipt requested), postage
prepaid.
(g) Costs, Expenses, and Taxes. Each party shall bear its own costs,
---------------------------
expenses, and taxes incurred or associated with the transactions contemplated
herein.
(h) Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Oregon, exclusive of its conflicts
of laws principles.
[SIGNATURES APPEAR ON NEXT PAGE]
Page 21
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
effective as of the date first written above.
TSET, Inc.
By:_____________________________________
Jeffrey D. Wilson
Chairman and Chief Executive Officer
ATOMIC SOCCER USA, LTD.
By:_____________________________________
Name:________________________________
Title:_______________________________
________________________________________
Todd P. Ragsdale, individually
________________________________________
James Eric Anderson, individually
________________________________________
Jewel Anderson, individually
________________________________________
Timothy Beglinger, individually
ATOMIC MILLENNIUM PARTNERS, LLC
By:_____________________________________
Name:________________________________
Authorized Signatory
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<PAGE>
ACKNOWLEDGED AND AGREED:
________________________________________
Jonathan Beglinger, individually
________________________________________
Michael Santry, individually
________________________________________
Suzanne May, individually
________________________________________
Thomas Bates, individually
________________________________________
Sterling Anderson, individually
Page 23
<PAGE>
List of Exhibits
Exhibit 5 -- Financial Obligations Owed by ASUSA to David M.
Ragsdale and Paul Hix
Exhibit 8(b) -- Defaults and Breaches
Exhibit 8(c-1) -- Litigation
Exhibit 8(c-2) -- Judgments
Exhibit 8(d) -- Finders and Brokers
Exhibit 8(f-1) -- Taxes
Exhibit 8(f-2) -- Tax Withholdings
Exhibit 8(g) -- Consents and Approvals
Exhibit 8(j) -- Compensation or Other Agreements in Favor of
Management, Employees, or Stockholders
Exhibit 8(k-1) -- Intellectual Property
Exhibit 8(k-2) -- Encumbrances, Liens, or Superior Claims upon the
Intellectual Property Rights and the Technology;
Infringements
Exhibit 8(l) -- Liens upon the Atomic Shares Owned by the
Stockholders
Exhibit 8(m) -- Subsidiaries
Exhibit 8(o) -- Financial Statements
Exhibit 8(p) -- Outstanding Commitments
Exhibit 8(q-1) -- Collective Rules
Exhibit 8(q-2) -- Employment Agreements
Exhibit 8(q-3) -- Obligations to Employee Representative
Organizations; History of Labor Actions
Exhibit 8(s) -- Insurance
Page 24
<PAGE>
Exhibit 6.3
MEMORANDUM OF AGREEMENT
TSET, Inc., a corporation organized and existing under the laws of Nevada
("TSET"); M&M Associates, a partnership between Melvin L. Fuller and Maggie E.
Weisberg ("M&M"); and Melvin L. Fuller, an individual resident of the State of
California ("Fuller"), hereby agree as follows:
1. M&M hereby sells, assigns, transfers, and conveys to TSET all right,
title, and interest in and to that certain Patent No. 4,803,632, issued on
February 7, 1989 for a technology and device commonly known as the "Intelligent
Utility Meter System" (the "Patent"), together with any and all improvements,
modifications, and derivatives thereof and applications therefor (collectively,
the "Improvements"). M&M represents and warrants to TSET that it has complete
and unencumbered ownership of the Patent, legal authority to enter into the
transactions described herein, and does not require the approval or consent of
any other person in connection herewith. In addition to this Memorandum of
Agreement, M&M agrees to cooperate in good faith with, and execute and delivery
to TSET, any and all additional documents, instruments, certificates, and
assignments which may be necessary to more fully evidence the transactions
described herein and perfect TSET's ownership in the Patents. In addition to
the foregoing, the parties agree that TSET shall be entitled, at its sole
option, to pursue any litigation and causes of action which M&M and Fuller may
be entitled to pursue, in connection with any actual or potential infringement
on the Patents or the Improvements (the "Potential Litigation").
2. In full and complete consideration and payment for the transactions
described in paragraph 1 above, the parties further agree that:
(a) TSET shall issue to M&M (or its nominee, and in such number of
certificates and denominations as M&M may reasonably request) 100,000 shares of
TSET's common stock (the "M&M Shares"), M&M acknowledging that the M&M Shares
are "investment shares" and shall be subject to the holding period restrictions
relating to resale and transfer applicable thereto;
(b) TSET shall pay to M&M a royalty of 10% on the net profits realized
by TSET upon sales of "Electricity Management Units" (the "EMU") in the States
of California and Nevada; and
(c) TSET shall pay to M&M a royalty of 1% on the net profits realized
by TSET upon sales of the EMU globally.
Any compensation payable to any persons other than M&M pursuant to this
Memorandum of Agreement or otherwise relating to the Patents and the
Improvements shall be paid out of the compensation described in this paragraph
2.
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3. The parties agree that M&M, in the person of Fuller and others who have
been instrumental in the development of the EMU, will be cooperative in
consulting with TSET with respect to the EMU and in the ongoing development and
design of new conceptions, applications, and Improvements, production of
brochures, videos, and other informational and promotional materials, marketing
and distribution activities of TSET with respect thereto, and in connection with
the Potential Litigation. The parties shall in good faith agree on rates of
compensation for Fuller and such others.
4. This Memorandum of Agreement: (a) shall be binding upon, and inure to
the benefit of, the respective successors, assigns, and heirs of the parties;
(b) may be signed in multiple counterparts, each of which shall be
deemed an original, and all of which shall be deemed one agreement; the parties
agree that facsimile signatures shall be sufficient to form the binding
obligations contemplated herein regardless of whether manual signatures are
exchanged;
(c) constitutes the entire agreement between the parties with respect
to the subject matter hereof and, except as provided above, supersedes all prior
agreements and understandings with respect thereto; no other agreement, whether
oral or written, shall be used to modify or contradict the provisions hereof
unless the same is in writing, signed by the parties, and states that it is
intended to amend the provisions of this Memorandum of Agreement; and
(d) shall be governed by, and construed in accordance with, the laws of
the State of Oregon, exclusive of conflicts of laws rules. Any disputes between
the parties hereto shall be resolved by arbitration, to be held in Portland,
Oregon. A three-person arbitration panel shall be selected, one arbitrator by
TSET, one arbitrator by M&M, and the two arbitrators thus selected shall select
a third arbitrator. The written decision of such arbitration panel shall be
final and binding upon the parties.
IN WITNESS WHEREOF, the parties have executed and delivered this Memorandum
of Agreement effective as of the date first written above.
TSET, Inc.
By: /s/ Jeffrey D. Wilson
Chairman and Chief Executive Officer
M&M Associates
By: /s/ Melvin F. Fuller
Authorized Signatory
By: /s/ Maggie E. Weisberg
Authorized Signatory
/s/ Melvin F. Fuller, individually
