<PAGE>
As filed with the Securities and Exchange Commission on September 16, 1999
Registration No. 333-82463
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
PRE-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THERMALTEC INTERNATIONAL, CORP.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 3313 11-3255619
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<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
--------------
(Address, Including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
Andrew B. Mazzone
President
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
COPIES TO:
Edward A. Vrooman Deborah A. Hays
Aitken Irvin Lewin Berlin Vrooman & Cohn LLP Archer & Greiner, P.C.
2 Gannett Drive One Centennial Square
White Plains, New York 10604 Haddonfield, New Jersey 08033
(914) 694-1647 (609) 795-2121
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the Registration Statement becomes
effective and the effective time of the merger of Solar Communications Group,
Inc. with and into the Registrant as described in the Agreement and Plan of
Reorganization, dated as of June 16, 1999.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box, and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-----------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
THERMALTEC INTERNATIONAL, CORP.
68A Lamar Street
West Babylon, New York 11704
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER ____, 1999
-------------------------
TO THE STOCKHOLDERS:
A Special Meeting of Stockholders of Thermaltec International, Corp., a
Delaware corporation, will be held at ___________________________________, at
9:00 A.M., local time, on __________ October ___, 1999, for the following
purposes:
(1) To approve the merger of Solar Communications Group, Inc., a New Jersey
corporation, with and into Thermaltec. As a result of the merger, (a)
each outstanding share of the common stock of Solar Communications will
be converted into 10,000 shares of Thermaltec common stock, resulting in
the issuance of 59,500,000 shares of Thermaltec common stock, (b)
Thermaltec will conduct only the business conducted by Solar
Communications prior to the merger, and (c) Thermaltec's corporate name
will be changed to "Solar Communications Group, Inc."
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
The accompanying Joint Proxy Statement/Prospectus contains detailed
information about the merger and includes a complete copy of the merger
agreement. You should read the entire Joint Proxy Statement/Prospectus and its
exhibits carefully before you decide how to vote. Stockholder approval of the
merger will result in a change in the majority equity ownership interest,
business, name and management of Thermaltec.
The Board of Directors of Thermaltec has fixed the close of business on
September ___, 1999 as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. The affirmative vote
of the holders of a majority of all outstanding shares of Thermaltec common
stock is necessary to approve the merger.
HOLDERS OF THERMALTEC COMMON STOCK ARE ENTITLED TO APPRAISAL RIGHTS UNDER
DELAWARE LAW IN CONNECTION WITH THE MERGER. See "THE MERGER -- Dissenters'
Rights for Thermaltec Stockholders."
The Board of Directors of Thermaltec unanimously recommends that the
Thermaltec stockholders vote in favor of the merger.
You are welcome to attend the Special Meeting. Whether or not you plan to
attend the meeting, please complete, date and sign the enclosed proxy card and
return it promptly in the enclosed envelope. You may revoke your proxy at any
time prior to the time it is voted by following the directions on page 19 of
the Joint Proxy Statement/Prospectus.
By Order of the Board of Directors,
----------------------------------------
Andrew B. Mazzone, Secretary
West Babylon, New York
September ____, 1999
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
1100 Coombs Road
Millville, New Jersey 08332
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER ____, 1999
-------------------------
TO THE STOCKHOLDERS:
A Special Meeting of Stockholders of Solar Communications Group, Inc., a
New Jersey corporation, will be held at ____________________________, at 9:00
A.M., local time, on ________ October ___, 1999, for the following purposes:
(1) To approve the merger of Solar Communications with and into Thermaltec
International, Corp., a Delaware corporation. As a result of the merger,
(a) Thermaltec will be the surviving corporation, (b) each outstanding
share of Solar Communications common stock will be converted into 10,000
shares of Thermaltec common stock, (c) Thermaltec will conduct only the
business conducted by Solar Communications prior to the merger, and (d)
Thermaltec's corporate name will be changed to "Solar Communications
Group, Inc."
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
The accompanying Joint Proxy Statement/Prospectus contains detailed
information about the merger and includes a complete copy of the merger
agreement. You should read the entire Joint Proxy Statement/Prospectus and its
exhibits carefully before you decide how to vote.
The Board of Directors of Solar Communications has fixed the close of
business on September ___, 1999 as the record date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting. The
affirmative vote of a majority of the votes cast by the holders of Solar
Communications common stock at the Special Meeting is necessary to approve the
merger.
HOLDERS OF SOLAR COMMUNICATIONS COMMON STOCK ARE ENTITLED TO DISSENTERS'
RIGHTS UNDER NEW JERSEY LAW IN CONNECTION WITH THE MERGER. See "THE MERGER --
Rights of Dissenting Solar Communications Stockholders."
The Board of Directors of Solar Communications unanimously recommends that
the Solar Communications stockholders vote in favor of the merger.
You are welcome to attend the Special Meeting. Whether or not you plan to
attend the meeting, please complete, date and sign the enclosed proxy card and
return it promptly in the enclosed envelope. You may revoke your proxy at any
time prior to the time it is voted by following the directions on page 21 of
the Joint Proxy Statement/Prospectus.
By Order of the Board of Directors,
----------------------------------------
Alisa A. Rossi, Secretary
Millville, New Jersey
September ____, 1999
<PAGE>
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT! The boards of directors of
Thermaltec International, Corp. and Solar Communications Group, Inc. have
agreed on a merger of the two companies. As a result of the merger, the
following things will happen:
(1) Each outstanding share of the common stock of Solar Communications will be
exchanged for 10,000 shares of Thermaltec common stock. A total of
59,500,000 shares of Thermaltec common stock will be issued.
(2) The stockholders of Solar Communications will own 95.8% of the outstanding
shares of Thermaltec common stock.
(3) Thermaltec will conduct only the business conducted by Solar
Communications immediately prior to the merger.
(4) Thermaltec will change its name to "Solar Communications Group, Inc."
(5) Thermaltec will be managed by the current officers and directors of Solar
Communications.
In preparation for the merger, Thermaltec has transferred substantially all of
its assets and all of its ongoing business operations and liabilities to a
wholly-owned subsidiary, Panama Industries, Ltd. Prior to the merger, all of
the issued and outstanding shares of Panama Industries will be transferred by
Thermaltec to its stockholders, on a pro rata basis.
The merger cannot be completed unless the stockholders of both companies
approve it. We have scheduled special meetings for our stockholders to vote on
the merger. Your Vote Is Very Important.
Whether or not you plan to attend a special meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign, date
and mail your proxy card without indicating how you want to vote, your proxy
will be counted as a vote in favor of the merger. If you are a Thermaltec or
Solar Communications stockholder and fail to return your card, the effect in
most cases will be a vote against the merger.
Only stockholders of record of Thermaltec and Solar Communications common stock
as of September ___, 1999 are entitled to attend and vote at the special
meetings. Both the Solar Communications and Thermaltec special meetings will
take place on October ___, 1999. The times and places of the meetings are as
follows:
For Thermaltec stockholders: 9:00 a.m. at________________________
For Solar Communications stockholders: 9:00 a.m. at_________________________
This joint proxy statement/prospectus provides you with detailed information
about the proposed merger. We encourage you to read this entire document
carefully.
/s/-------------------------------- /s/----------------------------------
Andrew B. Mazzone, President James M. Rossi, Chairman and CEO
Thermaltec International, Corp. Solar Communications Group, Inc.
For a more complete description of the merger, the terms and conditions of the
merger and risk factors associated with the merger, see "The Merger Agreement"
beginning on page 33 and "Risk Factors" beginning on page 7.
The Thermaltec common stock trades on the OTC Bulletin Board under the symbol
"THRM."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the proposed merger, or the shares of
Thermaltec common stock to be issued in connection with the merger, or
determined if this joint proxy statement/prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated September ------ , 1999 and is
first being mailed to stockholders of Thermaltec and Solar Communications on or
about September ------ , 1999.
<PAGE>
AVAILABLE INFORMATION
Thermaltec has filed with the SEC a Registration Statement on Form S-4 under
the Securities Act of 1933, as amended, with respect to the shares of
Thermaltec common stock to be issued in connection with the merger. This joint
proxy statement/prospectus does not contain all of the information set forth in
the registration statement. Certain portions of the registration statement are
omitted from this joint proxy statement/prospectus in accordance with the rules
and regulations of the SEC. Copies of the registration statement, including the
exhibits to the registration statement and other material that is not included
herein, may be inspected without charge at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may also be obtained from the SEC at prescribed rates by writing
to the Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, certain of the documents filed by Thermaltec with the SEC
are available through the SEC's Electronic Data Gathering and Data Retrieval
System, also known as EDGAR, on the SEC's worldwide web site at
http://www.sec.gov.
i
<PAGE>
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE THERMALTEC/SOLAR COMMUNICATIONS
MERGER .................................................................. 1
SUMMARY .................................................................. 3
The Companies ......................................................... 3
The Merger ............................................................ 3
The Spin-Off of Panama Industries ..................................... 4
Approval of the Merger ................................................ 4
Our Reasons for the Merger ............................................ 4
Our Recommendations to Stockholders ................................... 5
Conditions to the Merger .............................................. 5
Termination of the Merger Documents ................................... 5
Regulatory Approvals .................................................. 5
Accounting Treatment .................................................. 5
Material Federal Income Tax Consequences .............................. 6
Listing of Thermaltec Common Stock .................................... 6
RISK FACTORS ............................................................. 7
Risk Factors Related to the Merger and the Surviving Company .......... 7
Risk Factors Related to Panama Industries and the Spin-Off ............ 14
WHERE YOU CAN FIND MORE INFORMATION ...................................... 17
FORWARD-LOOKING STATEMENTS ............................................... 18
COMPARATIVE PER SHARE MARKET PRICE INFORMATION ........................... 18
SPECIAL MEETINGS OF STOCKHOLDERS ......................................... 19
Thermaltec Special Meeting ............................................ 19
Solar Communications Special Meeting .................................. 20
THE PLAN OF MERGER AND RELATED TRANSACTIONS .............................. 22
Background of the Merger .............................................. 22
Reasons for the Merger ................................................ 23
Thermaltec's Reasons for the Merger ................................... 23
Solar Communications' Reasons for the Merger .......................... 24
Material Federal Income Tax Consequences -- Solar Communications ...... 25
Material Federal Income Tax Consequences -- Thermaltec ................ 26
Accounting Treatment .................................................. 27
Restrictions on Resale of Thermaltec Common Stock ..................... 27
Nasdaq Listing ........................................................ 27
Government and Regulatory Matters ..................................... 27
Dissenters' Rights for Thermaltec Stockholders ........................ 27
Rights of Dissenting Solar Communications Stockholders ................ 30
THE MERGER AGREEMENT ..................................................... 33
The Merger ............................................................ 33
Conversion of Shares; No Fractional Amounts ........................... 33
Treatment of Solar Communications Stock Options ....................... 33
Conduct Following the Merger .......................................... 34
Conduct of Business Pending the Merger ................................ 34
Representations and Warranties ........................................ 34
Conditions to the Merger .............................................. 34
Termination of the Merger Documents ................................... 35
Indemnification ....................................................... 35
Ownership of Thermaltec Following the Merger .......................... 36
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ii
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Management of Thermaltec Upon Consummation of the Merger .............. 36
Regulatory Approvals .................................................. 36
Affiliate Agreements .................................................. 36
INFORMATION CONCERNING THERMALTEC ........................................ 37
Business .............................................................. 37
Employees ............................................................. 37
Properties ............................................................ 37
Legal Proceedings ..................................................... 37
DESCRIPTION OF THERMALTEC'S SECURITIES ................................... 37
Thermaltec Common Stock ............................................... 37
Shares Available for Future Sale ...................................... 38
Transfer Agent ........................................................ 38
Thermaltec Warrants ................................................... 38
Price Ranges of Thermaltec Common Stock ............................... 39
PRINCIPAL STOCKHOLDERS OF THERMALTEC ..................................... 39
INFORMATION CONCERNING PANAMA INDUSTRIES ................................. 40
Business .............................................................. 40
Competition ........................................................... 40
Employees ............................................................. 41
Properties ............................................................ 41
Legal Proceedings ..................................................... 41
MANAGEMENT DISCUSSION & ANALYSIS OF OPERATIONS ........................... 41
Results of Operations ................................................. 41
Liquidity and Financial Resources ..................................... 42
Applicability to Panama Industries, Inc. .............................. 43
PANAMA INDUSTRIES COMMON STOCK ........................................... 43
General ............................................................... 43
Shares Available for Future Sale ...................................... 44
Transfer Agent ........................................................ 44
PRINCIPAL STOCKHOLDERS OF PANAMA INDUSTRIES .............................. 44
INFORMATION CONCERNING SOLAR COMMUNICATIONS .............................. 45
Business .............................................................. 45
Competition ........................................................... 50
Employees ............................................................. 51
Properties ............................................................ 51
Legal Proceedings ..................................................... 51
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF SOLAR COMMUNICATIONS ....................... 52
Overview .............................................................. 52
Statement of Operations ............................................... 52
Liquidity and Capital Resources ....................................... 53
Certain Factors that may Affect Future Results ........................ 53
Year 2000 Readiness Disclosure ........................................ 53
MANAGEMENT OF SOLAR COMMUNICATIONS ....................................... 55
Executive Officers and Directors ...................................... 55
Biographical Information .............................................. 55
Executive Compensation ................................................ 57
Certain Transactions .................................................. 57
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iii
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SOLAR COMMUNICATIONS COMMON STOCK .............................................. 57
General ..................................................................... 57
Shares Available for Future Sale ............................................ 58
PRINCIPAL STOCKHOLDERS OF SOLAR COMMUNICATIONS GROUP ........................... 58
COMPARISON OF STOCKHOLDERS RIGHTS .............................................. 60
Comparison of Delaware General Corporation Law and the New Jersey
Business Corporation Act ................................................... 60
Comparison of Certificates of Incorporation and By-Laws of Thermaltec and
Solar Communications ....................................................... 63
Legal Matters .................................................................. 64
Experts ........................................................................ 64
Index to Financial Statements and Pro Forma Financial Information .............. F-1
Annex A -- Agreement and Plan of Reorganization ................................ A-1
Annex B -- Delaware Dissenters' Rights Statute ................................. B-1
Annex C -- New Jersey Dissenters' Rights Statute ............................... C-1
</TABLE>
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE THERMALTEC/SOLAR
COMMUNICATIONS MERGER
Q: What do I need to do now?
A: You are being asked to vote upon the proposed merger of Solar
Communications into Thermaltec. You may vote on the merger by signing your
proxy card and mailing it to us in the enclosed return envelope or by
voting in person at the special meetings. Both the Thermaltec and Solar
Communications special meetings will take place on October ____, 1999.
Q. What if I want to change my vote?
A: Just send in a later-dated, signed proxy card before your special
meeting or attend your special meeting in person and vote.
Q. If I am a Thermaltec stockholder, will I have dissenters' rights?
A: Thermaltec stockholders who do not wish to approve the merger have
dissenters' rights, which are also referred to as "appraisal rights," under
Delaware law. These rights permit a Thermaltec stockholder to have the
"fair value" of their shares determined by the Delaware Chancery Court
under certain circumstances. These rights are subject to a number of
restrictions and technical requirements. Generally, in order to exercise
such rights:
o A Thermaltec stockholder must not vote in favor of the merger; and
o The stockholder must make a written demand for appraisal before the
vote on the merger.
Merely voting against the merger will not protect a Thermaltec stockholder's
appraisal rights. Annex B attached hereto contains the text of the Delaware
dissenters' rights statute.
Q. If I am a Solar Communications stockholder, will I have dissenters' rights?
A: Solar Communications stockholders who do not wish to approve the merger
have dissenters' rights under New Jersey law, which is the right to be paid
the "fair value" of their shares. These dissenters' rights are subject to a
number of restrictions and technical requirements. Generally, in order to
exercise dissenters' rights:
o A Solar Communications stockholder must not vote in favor of the
merger; and
o The stockholder must file a written notice of dissent with Solar
Communications before the vote on the merger.
Merely voting against the merger will not protect a Solar Communications
stockholder's dissenters' rights. Annex C attached hereto contains the text
of the New Jersey dissenters' rights statute.
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as quickly as possible, and
expect to complete it immediately following the stockholder meetings.
Q. If I am a Thermaltec stockholder, what will I receive in the merger?
A: Thermaltec stockholders will continue to own their existing shares of
Thermaltec common stock following the merger. These shares will represent
approximately 4.2% of the outstanding shares of Thermaltec common stock
following the merger.
In addition, prior to the completion of the merger, Thermaltec will
distribute all of the issued and outstanding shares of Panama Industries,
as a dividend, on a pro rata basis, to the Thermaltec stockholders of
record on May 28, 1999.
Q. If I am a Solar Communications stockholder, what will I receive in the
merger?
A: As a result of the merger, for each share of Solar Communications common
stock they own, Solar Communications stockholders will receive 10,000
shares of Thermaltec common stock.
1
<PAGE>
No fractional shares of Thermaltec common stock will be issued and no cash
will be paid for fractional shares. Instead, Solar Communications
stockholders will receive shares of Thermaltec common stock rounded off to
the nearest whole number. Fractional shares of less than one-half of one
share will be rounded down to the nearest whole number. Fractional shares
of one-half of one share or greater will be rounded up to the nearest whole
number.
Solar Communications stock options will be converted into Thermaltec stock
options at the share exchange ratio for Solar Communications common stock
with an adjusted exercise price. Please refer to page 33 for more
information regarding the treatment of Solar Communications stock options.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, we will send Solar Communications
stockholders written instructions for exchanging their stock certificates.
Thermaltec stockholders will keep their current stock certificates and, in
addition, will receive stock certificates representing their interest in
Panama Industries.
Q: When will I receive shares of Thermaltec common stock in the merger?
A: If the merger is completed, Thermaltec will issue, shortly thereafter,
shares of Thermaltec common stock to Solar Communications stockholders who
have returned their Solar Communications stock certificates together with a
completed letter of transmittal supplied by Thermaltec or Thermaltec's
exchange agent, Manhattan Transfer Registrar Co.
Q: What are the tax consequences of the merger to me?
A: We have structured the merger so that, as a general matter, neither you,
Thermaltec nor Solar Communications will recognize any gain or loss for
federal income tax purposes in the merger, except for those Thermaltec or
Solar Communications stockholders who exercise their dissenters' rights. We
have received legal opinions that this is the case.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your
tax advisors for a full understanding of the tax consequences of the merger
to you.
Q: What are the tax consequences of the spin-off of Panama Industries to a
Thermaltec stockholder?
A: The distribution of the shares of Panama Industries to a Thermaltec
stockholder may result in the stockholder recognizing taxable gain without
receiving any cash to pay the resulting tax liability. No appraisal of the
fair market value of the shares of Panama Industries will be obtained by
either Panama Industries or Thermaltec at the time of the distribution. If
the fair market value of the shares of Panama Industries received by a
Thermaltec stockholder is subsequently determined to be greater than the
stockholder's basis in his shares of Thermaltec stock as of the date of the
distribution, the difference will be treated as a capital gain for federal
income tax purposes. If the stockholder has held his Thermaltec stock for
more than twelve months, the gain will be a long-term capital gain. A
holding period of twelve months or less will result in a short-term capital
gain. Thermaltec has received an opinion from its legal counsel as to the
federal income tax effects of the spin-off.
2
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger and the spin-off of Panama
Industries fully, and for more complete descriptions of the legal terms of the
merger and the spin-off of Panama Industries, you should read this entire
document carefully.
The Companies
Thermaltec International, Corp.
Panama Industries, Ltd.
68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
Thermaltec has been engaged in the metallurgical coatings business in North
America and Central and South America since 1994. In preparation for the merger
with Solar Communications, Thermaltec has transferred substantially all of its
assets and all of its ongoing business operations and liabilities to a
wholly-owned subsidiary, Panama Industries, Ltd. Prior to the merger, all of
the outstanding shares of Panama Industries will be distributed, on a pro rata
basis, to the Thermaltec stockholders of record on May 28, 1999.
Solar Communications Group, Inc.
1100 Coombs Road
Millville, New Jersey 08332
(856) 327-7100
Solar Communications was formed in 1996 to provide quality communications
alternatives to the business community. Solar Communications is presently a
development stage company and has not generated any operating revenues. The
company has developed an Internet access solution, known as PCRoomLink, for the
hospitality industry. PCRoomLink's computer-equipped rooms permit a hotel
patron, with or without a laptop computer, to obtain high-speed Internet access
in the privacy of his/her hotel room. PCRoomLink is still in development and
the system has not been installed for commercial use in any hotel.
PCRoomLink(TM) is a trademark of Solar Communications.
The Merger
The merger agreement, entitled "Agreement and Plan of Reorganization," is
attached as Annex A to this joint proxy statement/prospectus. We encourage you
to read the merger agreement carefully since it is the legal document that
governs the terms of the merger. As a result of the merger, the following
things will happen:
(1) Each outstanding share of Solar Communications common stock will be
exchanged for 10,000 shares of Thermaltec common stock. A total of
59,500,000 shares of Thermaltec common stock will be issued.
(2) The stockholders of Solar Communications will own 95.8% of the
outstanding shares of Thermaltec common stock.
(3) Thermaltec will conduct only the business conducted by Solar
Communications immediately prior to the merger.
(4) Thermaltec will change its name to "Solar Communications Group, Inc."
(5) Thermaltec will be managed by the current officers and directors of
Solar Communications.
3
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The Spin-Off of Panama Industries
In preparation for the merger, on May 17, 1999, Thermaltec transferred
substantially all of its assets, and all of its ongoing business operations and
liabilities, to Panama Industries, Ltd., its wholly-owned subsidiary. The only
assets retained by Thermaltec were (1) $300.00 in cash, (2) $58,200.00 on
deposit with Thermaltec's transfer agent representing proceeds received by
Thermaltec pursuant to the exercise of certain outstanding common stock
purchase warrants, and (3) a net operating loss carry-forward of approximately
$1.13 million.
Prior to the completion of the merger, all of the outstanding shares of
Panama Industries common stock will be distributed, on a pro rata basis, to the
Thermaltec stockholders of record on May 28, 1999. Completion of the spin-off
of Panama Industries is a condition to the completion of the merger. Completion
of the merger is not a condition to the completion of the spin-off of Panama
Industries. The spin-off of Panama Industries will occur whether or not the
merger is approved or consummated.
Approval of the Merger
By Thermaltec stockholders:
The affirmative vote of the holders of a majority of the shares of
Thermaltec common stock entitled to vote on the merger is required to approve
the merger. The sole director and officer of Thermaltec, Andrew B. Mazzone, the
President of Panama Industries, Thomas Klein, and their affiliates, who
collectively own 60.1% of the outstanding shares of Thermaltec common stock,
have indicated that they intend to vote in favor of the proposed merger. Thus,
approval of the merger by Thermaltec's stockholders is assured.
By Solar Communications stockholders:
The affirmative vote of a majority of the votes cast by the holders of
Solar Communications common stock is required to approve the merger. The
directors and executive officers of Solar Communications, and their affiliates,
who collectively own 67.3% of the outstanding shares of Solar Communications
common stock, have indicated that they intend to vote in favor of the proposed
merger. Thus, approval of the merger by Solar Communications stockholders is
assured.
Our Reasons for the Merger
Thermaltec's Reasons:
After consultation with Thermaltec's management team and advisors, the
board of directors of Thermaltec concluded that the merger would further the
interests of Thermaltec and its stockholders by giving Thermaltec and its
stockholders an opportunity to participate in the potential growth of the
surviving company. The merger will permit Thermaltec's stockholder to diversify
their existing investment in the metallurgical coatings industry and expand
into the Internet access and telecommunications industries. Existing Thermaltec
stockholders, through ownership of shares in Panama Industries, will retain
their respective pro rata interests in the business operations conducted by
Thermaltec prior to the merger. In addition, they will retain a 4.2% interest
in Thermaltec which will, following the merger, operate in the
telecommunications and Internet industries.
In approving the merger, management of Thermaltec carefully considered the
fact that Solar Communications is a development stage company which has
incurred significant losses and has not generated any operating revenues to
date. While the risk of failure for the surviving company is high, management
of Thermaltec believes that the structure of the transaction minimizes this
risk by transferring the existing business and assets of Thermaltec to a
separate entity. If the surviving company does not succeed, Thermaltec
stockholders will still own their shares of the common stock of Panama
Industries which, as a separate legal entity, would not be responsible for the
liabilities of the surviving company.
4
<PAGE>
Solar Communications' Reasons:
After consultation with Solar Communications' management team and
advisors, the board of directors of Solar Communications concluded that the
merger would further the interests of Solar Communications and its stockholders
through the increased liquidity of shares of Thermaltec common stock. While the
shares of Thermaltec common stock are thinly traded at the present time, they
are listed on the OTC Bulletin Board and are more liquid than the shares of
Solar Communications common stock. While there can be no assurances, management
of Solar Communications believes that such increased liquidity will make it
easier for Solar Communications to raise additional capital in the future and
to acquire other businesses in exchange for stock.
In approving the merger, management of Solar Communications carefully
considered that, as a result of the merger, the assets of Solar Communications
may become subject to the claims of creditors of Thermaltec for liabilities and
obligations incurred by Thermaltec prior to the merger. To minimize this risk,
the principal stockholder of Thermaltec, Andrew B. Mazzone, has agreed to
indemnify Solar Communications for up to $2 million in liabilities related to
the operations of Thermaltec prior to the merger. This indemnification is
secured by certain collateral. To review the terms of this indemnification
obligation in greater detail, see "The Merger Agreement - Indemnification,"
beginning on page 35.
To review the reasons for the merger in greater detail, as well as the
risks of the merger, see "Risk Factors," beginning on page 7, and "The Plan of
Merger and Related Transactions -- Reasons for the Merger," beginning on page
23.
Our Recommendations to Stockholders
To Thermaltec stockholders:
The Thermaltec board believes that the merger and the spin-off of Panama
Industries is in your best interest and unanimously recommends that you vote
FOR the proposal to approve the merger.
To Solar Communications stockholders:
The Solar Communications board believes that the merger is in your best
interest and unanimously recommends that you vote FOR the proposal to approve
the merger.
Conditions to the Merger
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions. See page 34 for a more complete description of such
conditions.
Termination of the Merger Documents
We can agree to terminate the merger documents without completing the
merger, and either of us can terminate the merger documents under various
circumstances, including if the merger is not completed by December 31, 1999.
Regulatory Approvals
The merger must satisfy the requirements of federal and certain state
securities laws.
Accounting Treatment
The merger will be treated as a reverse merger whereby, for accounting
purposes, Solar Communications will be treated as the acquirer in the
transaction.
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Material Federal Income Tax Consequences
The merger has been structured so that, as a general matter, neither
Thermaltec nor Solar Communications, nor the stockholders of either company,
will recognize any gain or loss for federal income tax purposes, except for
those Thermaltec or Solar Communications stockholders who exercise their
dissenters' rights. Legal opinions confirming the federal income tax
consequences of the merger have been obtained by both companies.
As a result of the spin-off of Panama Industries, Thermaltec stockholders
may recognize a taxable capital gain for federal income tax purposes.
Thermaltec has received an opinion from its legal counsel as to the tax effects
of the spin-off. See "The Plan of Merger and Related Transactions -- Material
Federal Income Tax Consequences," beginning on page 26.
Listing of Thermaltec Common Stock
Thermaltec will use its best efforts to cause the shares of Thermaltec
common stock to be issued in connection with the merger, and the shares of
Thermaltec common stock to be reserved for issuance upon the exercise of
outstanding Solar Communications stock options assumed by Thermaltec as part of
the merger, to be approved for listing on the OTC Bulletin Board under the
symbol "THRM". In connection with the merger, Thermaltec's corporate name will
be changed to "Solar Communications Group, Inc." and it is anticipated that its
trading symbol will be changed to "SOLC" following the merger. Management of
the surviving company also intends to apply for listing of all outstanding
shares of the surviving company's common stock on the Nasdaq SmallCap Market.
However, there can be no assurance that such listing will be approved.
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RISK FACTORS
In considering whether to approve the merger and whether or not to
exercise your dissenters' rights under Delaware or New Jersey law (as
applicable), you should consider carefully the risks associated with the merger
and with ownership of the surviving company's common stock following the
merger. These risks are described in detail below.
The risk factors focus on the business and operations of Thermaltec
following the merger. The risk factors also focus on the financial status,
business plans and management of Solar Communications since, following the
merger, Thermaltec will be managed by the current officers and directors of
Solar Communications and conduct only the business conducted by Solar
Communications.
Risks relating to the ownership of Panama Industries common stock are also
included for the benefit of existing Thermaltec stockholders. These risks
should not be considered by Solar Communications stockholders in considering
whether to approve the merger, and whether or not to exercise your dissenters'
rights, since Solar Communications stockholders will have no ownership interest
in Panama Industries following the merger.
Risk Factors Related to the Merger and the Surviving Company
Solar Communications is a development stage company and has not generated
any operating revenues.
Solar Communications was formed in 1996 but is still a development stage
company. To date, Solar Communications has not produced any operating revenues
or shown a profit in its operations. Solar Communications' limited operating
history may make it more difficult for you to evaluate its business and
prospects.
Since Solar Communications is still in the development stage, its business
model is untested. To date, Solar Communications has only installed Version 1.0
of its PCRoomLink Internet access system in two hotel pilot sites. It may take
Solar Communications longer than anticipated to implement its business model,
and some components of Solar Communications' business model may not prove to be
feasible or possible.
Solar Communications' operations are subject to all of the risks inherent
in the development of a new business, including but not limited to marketing
and staffing difficulties, competition, and unanticipated costs and expenses.
We cannot assure you that unanticipated expenses, problems or technical
difficulties will not result in material delays in the commercial acceptance of
PCRoomLink products and services. There also can be no assurance that the
marketing efforts of Solar Communications will generate the sufficient end-user
interest in its products and services necessary to make the company profitable.
Solar Communications has incurred losses since its inception and
anticipates continuing losses. As a result, the company's independent auditors
have expressed doubt as to its ability to continue as a going concern.
As of June 30, 1999, Solar Communications' accumulated deficit was
approximately $1,852,774. Solar Communications anticipates that it will
continue to incur significant losses until, at the earliest, it generates
sufficient revenues to offset the substantial expenditures and operating costs
associated with developing and commercializing its proposed products and
services.
The independent auditors for Solar Communications have included an
explanatory paragraph in their report on the company's financial statements to
the effect that the ability of Solar Communications to continue as a going
concern is in substantial doubt. This concern arises from the fact that Solar
Communications is a development stage company which has suffered recurring
losses and net cash outflows from operations since its inception. As noted by
the auditors in their report, Solar Communications' ability to continue
operating is dependent upon future capital infusions from existing and/or new
investors.
If, after the merger, the surviving company is unable to continue as a
going concern, you may lose all or substantially all of your investment.
Solar Communications currently only has enough funds to satisfy its
anticipated obligations through October 31, 1999. To achieve its business plan
for the next 18 months, it is estimated that the surviving company will have to
raise $560 million in additional capital and/or financing proceeds.
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Based on currently proposed plans and assumptions, it is anticipated that
the surviving company will have sufficient capital to satisfy its contemplated
cash requirements only through October 31, 1999. The surviving company will
then require substantial additional funding. To carry out its business plan, as
presently structured, the surviving company will need to complete, prior to
December 31, 2000, 1,400 hotel installations, at an anticipated cost (without
furniture) of approximately $400,000 per hotel. To achieve this goal, the
surviving company will need additional funding of approximately $560 million,
subject to increase or decrease as a result of the surviving company's actual
operating cash flows. To date, Solar Communications has been able to raise
approximately $12 million in a private placement of shares of its common stock.
Potential sources of funding which have been identified by management
include vendor lines of credit, vendor leasing programs, bank financing and
additional sales of securities by the surviving company. We have no current
arrangements with respect to sources of additional financing. We have no
current relationship with any of the identified types of financing sources. New
relationships would have to be established by the surviving company to secure
additional funding. When needed by the surviving company, additional financing
may not be available on acceptable terms, or at all. The inability to obtain
additional financing, when needed, would have a material negative effect on the
surviving company, including possibly requiring it to curtail or cease
operations.
If any future financing involves a sale of the surviving company's equity
securities, the shares of the surviving company's common stock held by its
stockholders would be substantially diluted. If the surviving company incurs
indebtedness or otherwise issues debt securities, it will be subject to risks
associated with indebtedness, including the risk that interest rates may
fluctuate and the possibility that the surviving company may not be able to pay
principal and interest on the indebtedness.
PCRoomLink is a new concept for providing Internet access and related
computer services to business travelers and other hotel guests. Acceptance and
use of PCRoomLink products and services by the hospitality industry and the
traveling public is uncertain.
PCRoomLink represents a new business concept which will be marketed to
both the hospitality industry and to the ultimate end-user, the business and
other frequent traveler. Achieving market acceptance among hotel properties and
end-users for the PCRoomLink concept, by getting hotel owners to agree to have
PCRoomLink rooms available at their property and end-users to agree to become
PCRoomLink members, is critical to the surviving company's success. Achieving
such acceptance will require significant marketing efforts and expenditures by
the surviving company. There can be no assurance that the surviving company's
strategy for developing hotel property and end-user awareness of, and loyalty
to, PCRoomLink products and services, will result in initial or continued
market acceptance for such products or services. Any lack of interest on the
part of hotel properties to have PCRoomLink installed, or lack or lessening of
demand by end-users for PCRoomLink products or services, would have a material
adverse effect on the surviving company's business, financial condition and
assets as a result of reduced or insufficient operating revenues.
The surviving company is dependent upon continued growth in the use of the
Internet since its operating revenues will be dependent upon the desire of
business travelers and other hotel guests to have high speed Internet access
available in their hotel rooms.
The PCRoomLink concept relies on demand for access to the Internet, and
for products and services related to the Internet, by members of the traveling
public. The Internet has experienced rapid growth in recent years, but demand
and market acceptance for newly introduced Internet-related products and
services are subject to a high level of uncertainty.
Reliability, speed, data capacity, ease of use, accessibility and security
will all play a role in the continued growth and development of the Internet
for commercial use. The Internet has experienced, and it is expected to
continue to experience, significant growth in the number of users. The current
Internet infrastructure may not be able to support the demands placed on it by
this continued growth in use.
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If the market for Internet access services fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if the Internet
access and related products and services the surviving company plans to offer
are not broadly accepted, the surviving company's projected revenues may not be
realized and its business, operating results and financial condition will be
negatively affected.
The surviving company will face significant competition from other
companies engaged in the Internet connectivity business.
The Internet connectivity business is highly competitive, and there are no
substantial barriers to entry. We believe that competition will intensify.
Currently, our primary competitors include:
o companies that provide in-room PCs (such as Integrated Network
Technologies, 4th Communications Network, Inc., and Guest-Tek
Services);
o companies that provide cable modems (such as On Command Corporation,
Suitesurfer Communications, Inc., MagiNet Corporation and LodgeNet
Entertainment Corporation); and
o companies that provide "plug and play" jacks (such as Wayport, Inc.,
OverVoice by CAIS Internet, Darwin Networks, Viator Networks and ATCOM,
Inc.).
Many of our current and potential competitors have substantially greater
human and financial resources, name recognition, market presence and operating
experience than Solar Communications. They may also have significant
competitive advantages through other lines of business and existing business
relationships. The surviving company's future growth and profitability will
depend, in part, upon consumer and commercial acceptance of its technology,
products and services. However, our competitors may develop products or
services that are superior to ours or achieve greater market acceptance than
our products and services.
The surviving company must keep pace with rapidly changing technology in
the Internet access industry.
Our future success will depend, in part, on our ability to: (1) offer
products and services that address the increasingly sophisticated and varied
needs of business travelers and other hotel guests, and (2) respond to
technological advances and emerging industry standards and practices on a
timely and cost-effective basis. The Internet access market in which we will
compete is characterized by:
o rapidly changing technology;
o evolving industry standards;
o changes in user needs;
o numerous competitive services and product offerings; and
o frequent new service and product introductions.
This could result in product obsolescence or short product life cycles.
The surviving company's success will depend, in part, on its ability to (1) use
new technologies effectively, (2) continue to develop its technical expertise,
(3) enhance its existing products and services, and (4) develop new products
and services to meet changing user needs on a timely and cost-effective basis.
The surviving company's ability to compete successfully also depends upon the
continued compatibility of its products and services with other products and
architectures utilized in the Internet access market. Although the surviving
company intends to support emerging standards in the market for Internet
access, there can be no assurance that industry standards will be established
or, if they become established, that the surviving company will be able to
conform to these new standards in a timely fashion and maintain a competitive
position in the market. In addition, the surviving company cannot assure you
that services or technologies developed by others (such as satellite delivery
of Internet access) will not render the surviving company's products, services
or technology noncompetitive, unnecessary or obsolete.
PCRoomLink services are susceptible to disruptive problems due to
mechanical problems, theft, vandalism and computer viruses. As a result of such
problems, the surviving company will need to provide support and maintenance
services for the hardware and software components of the PCRoomLink system.
While we intend to use a combination of in-house staff and third parties for
the provision of such services, we have not yet entered into any such third
party contracts or agreements.
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Despite implementation of security measures, the hardware and software
components of the PCRoomLink system will be vulnerable to computer viruses,
physical or electronic break-ins, theft, vandalism and similar disruptive
problems. Computer viruses, break-ins or other problems caused by the
accidental or intentional actions of PCRoomLink users, current and former
employees, and others could lead to interruptions, delays or a cessation in
service to users of the PCRoomLink system. Any of these risks could result in
decreased use of PCRoomLink products and services by end-users and decreased
acceptance of the concept by hotel owners. Any such decreased use or acceptance
would reduce the surviving company's operating revenues and would have a
negative effect on the surviving company's business, results of operations and
financial condition. We do not carry insurance against these risks because it
is unavailable at a reasonable cost.
The surviving company presently intends to subcontract with reputable
third party organizations to provide certain service, support and maintenance
services for the PCRoomLink hardware and software components. However, to date,
we have not yet entered into any type of service, support or maintenance
agreement for the PCRoomLink system. There can be no assurance that the
surviving company will be able to enter into any such service, support or
maintenance arrangement on favorable terms, if at all. The inability of the
surviving company to be able to subcontract out certain support, service and
maintenance obligations for the PCRoomLink hardware and software components on
favorable terms would result in the surviving company having to provide such
support and maintenance services in-house and could have a material adverse
effect on the surviving company's business, financial condition and assets.
Internet security concerns could hinder the transaction of business over
the Internet, also known as electronic commerce, and the demand for the
surviving company's products and services. In addition, we may be held liable
for security breaches in the PCRoomLink network.
A significant barrier to electronic commerce and communications over the
Internet has been the need for the secure transmission of confidential
information. Despite the implementation of network security measures, security
breaches may occur as a result of the accidental or intentional actions of
PCRoomLink users, current or former employees, or others.
Although management is not aware of any attempts by programmers or
"hackers" to penetrate Solar Communications' current security systems, these
actions could occur in the future. A party who is able to penetrate such
security systems could misuse a PCRoomLink user's personal information or
credit card information and the user might sue the surviving company or bring
claims against the surviving company. Concerns over the security of Internet
transactions and the privacy of users may also inhibit the growth of the
Internet generally, particularly as a means of conducting commercial
transactions.
Security breaches or the inadvertent transmission of computer viruses
could expose the surviving company to a risk of loss or litigation and possible
liability. The surviving company's business, results of operations, and
financial condition could be negatively affected if contractual provisions
attempting to limit its liability in these areas are not successful or
enforceable, or if other parties do not accept these contractual provisions as
part of the surviving company's agreements with them.
The surviving company's operations are subject to risks of system failure.
Our operations depend upon our ability to protect the PCRoomLink network
against damage from acts of nature, power failures, telecommunications failures
and similar events. Because we lease our lines from long-distance
telecommunications companies, Internet backbone providers, regional Bell
operating companies and competitive local exchange carriers, we depend upon
those companies for physical repair and maintenance of those lines. Despite the
precautions we and our telecommunications providers take, the occurrence of a
natural disaster, fire, electrical outage or other unanticipated problem at one
of our telecommunications providers' facilities or PCRoomLink locations may
cause interruptions in the services we provide. Such interruptions in
operations could have a material adverse effect on our business, financial
condition or results of operations.
We may be held liable for information sent through the PCRoomLink network.
Materials may be downloaded and distributed to others through the
PCRoomLink network. The law relating to the liability of Internet service
providers and on-line services companies for information carried on, stored on
or disseminated through their network is unsettled, even with the recent
enactment of the Digital Millennium Copyright Act. We believe that it is
currently also unsettled as to whether the Telecommunications Act of 1996
prohibits and imposes liability for any of the services we provide should the
content of information transmitted be subject to the statute.
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While no one has ever filed a claim against us relating to this issue
since we have not yet commenced doing business, someone may file a claim of
that type in the future and may be successful in imposing liability on us. If
that happens, we may have to spend significant amounts of money to defend
ourselves against these claims and, if we are not successful in our defense,
the amount of damages that we will have to pay may be significant. Any costs
that we incur as a result of defending these claims, or the amount of liability
that we may suffer if our defense is not successful, could materially adversely
affect our profitability.
If, as the law in this area develops, we become liable for information
carried on, stored on, or disseminated through our network, we may decide to
take steps to reduce our exposure to this type of liability. This may require
us to spend significant amounts of money for new equipment and may also require
us to discontinue offering certain of our products or services.
Due to the increasing popularity and use of the Internet, it is possible
that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as content, privacy, access to adult content by
minors, pricing, bulk e-mail (spam), encryption standards, consumer protection,
electronic commerce, taxation, copyright infringement and other intellectual
property issues. We cannot predict the impact, if any, that future regulatory
changes or developments may have on our business, financial condition, or
results of operation.
We rely on other companies to supply our network infrastructure, some of
which may compete directly with us or enter into arrangements with our
competitors.
We rely on other companies to supply our network infrastructure (including
telecommunications services and networking equipment) which, in the quantities
and quality we require, is available only from sole or limited sources. We are,
therefore, vulnerable to the possibility that our suppliers may:
o compete directly with us;
o enter into exclusive arrangements with our competitors; or
o stop selling their products or components to us at commercially
reasonable prices, or at all.
We also depend substantially on telecommunications services providers to
provide the Internet access component of the PCRoomLink system and we are
unable to control the prices for these services. For example, in order to
provide Internet access and other on-line services to our customers, we lease
long distance fiber optic telecommunications lines from national
telecommunications services providers.
Certain of our suppliers, including AT&T and regional Bell operating
companies, are currently subject to various price constraints, including tariff
controls, which may change in the future. In addition, pending regulatory
proposals may affect the prices they charge us. These regulatory changes could
result in increased prices for the products and services they provide to us.
This could reduce the profit margin for our services or require us to increase
the prices which we charge our customers, which could reduce the demand for our
services.
We also do not manufacture any of the computer hardware components or
other equipment to be utilized in the PCRoomLink system, such as furniture,
computers, flat screens, etc. We depend on third parties to manufacture and
supply each of these items to us. Any interruption in these manufacturers'
operations could adversely affect our ability to meet our customers'
requirements, which could cause them to use our competitors' services.
The surviving company's business plan calls for PCRoomLink products and
services to be installed in a minimum of 32,130 hotel rooms (with a 50%
occupancy/use rate for such installed rooms) before the surviving company may
be able to operate profitably.
Currently, Solar Communications has five hotels (with a total of 551
installed rooms) under contract and 32 hotels which have submitted applications
to become PCRoomLink member hotels. The surviving company's present business
plan indicates that PCRoomLink products and services must be installed in a
minimum of 32,130 hotel rooms, with a 50% occupancy/use rate realized for such
rooms, before profitability may be achieved.
There can be no assurance that the surviving company will be able to
establish relationships with a sufficient number of targeted hotel properties,
install a sufficient number of rooms at those properties, or achieve the
required occupancy/use rate to ever operate at a profit.
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Most of the directors and executive officers of Solar Communications have
recently joined the company and have little experience with development stage
companies or companies in the Internet access or hospitality industries.
As a development stage company, Solar Communications' growth to date has
placed, and the planned growth of the surviving company following the merger
will continue to place, a significant strain on its managerial, operational and
financial resources. The surviving company will need to:
o improve its financial and management controls, reporting systems and
procedures;
o expand, train and manage its work force for marketing, sales and
support, product development, site design, and network and equipment
repair and maintenance; and
o manage multiple relationships with various customers, strategic
partners and other third parties.
Many of the directors and executive officers of Solar Communications are
new to the company and do not have any significant experience with the unique
challenges faced by development stage companies. They also do not have a great
deal of experience in the Internet access or hospitality industries, which are
the industries in which the surviving company will compete. Managing the
development of the surviving company's products and services, and the growth of
its business, will require a significant amount of management time and skill.
There can be no assurance that the directors and executive officers of Solar
Communications, in light of their limited experience, will be effective in
managing the surviving company's growth and development.
Management of Solar Communications will have substantial control over the
surviving company and other stockholders of the surviving company may have no
effective voice in its management.
Upon completion of the merger, the current directors and executive
officers of Solar Communications (who will be all of the directors and
executive officers of the surviving company following the merger), and their
affiliates, will own approximately 64.5% of the then outstanding shares of the
surviving company's common stock. Accordingly, these stockholders will possess
substantial control over its operations. This control may allow them to amend
corporation filings, elect all of the surviving company's board of directors,
and substantially control all matters requiring approval by the surviving
company's stockholders, including approval of significant corporate
transactions. Management will also have the ability to delay or prevent a
change in control of the surviving company and to discourage a potential
acquirer of the surviving company or its securities. Other stockholders of the
surviving company may have no effective voice in its management.
Unless a public market develops for the surviving company's securities,
you may not be able to sell your shares.
Prior to the date of this joint proxy statement/prospectus, there has been
only a limited trading market for Thermaltec's common stock. Although
management intends to apply for listing of Thermaltec's common stock on the
Nasdaq SmallCap Market following the merger, there can be no assurance that an
active trading market will develop or be maintained. If Nasdaq refuses to list
Thermaltec's common stock on the Nasdaq SmallCap Market, management of the
surviving company will attempt to have the Thermaltec common stock continue to
trade on the OTC Bulletin Board or in the over-the-counter market on the
so-called "pink sheets". A failure by the surviving company to develop or
maintain an active trading market could negatively affect the price of the
surviving company's securities, as well as adversely affect your ability to
sell your shares.
The share exchange ratio in the merger is fixed and, if the market price
of Thermaltec common stock decreases before the merger is completed, the dollar
value of what Solar Communications stockholders will receive in the merger also
will decrease.
The share exchange ratio in the merger is fixed. This means that, if the
market price of Thermaltec common stock decreases before the merger is
completed, the dollar value of what Solar Communications stockholders will
receive in the merger also will decrease. Some of the reasons why the market
price of Thermaltec common stock may be volatile are discussed in the next
paragraph. Solar Communications stockholders are advised to obtain recent
market quotations for Thermaltec common stock. We cannot assure you as to the
market price of Thermaltec common stock at any time. See "Description of
Thermaltec's Securities -- Price Ranges of Thermaltec Common Stock."
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The number of shares of Thermaltec's common stock that is traded daily on
the OTC Bulletin Board averages less than 1% of the outstanding Thermaltec
common stock. As a result, the market price of Thermaltec common stock may be
volatile.
As a result of Thermaltec's low trading volume, the market price for
Thermaltec common stock may be volatile and may be affected by many factors,
including the following:
o actual or anticipated variations in Thermaltec's quarterly operating
results and net income;
o announcements of technological innovations by Thermaltec or its
competitors;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet industry which affect the ability
of Thermaltec to market PCRoomLink products and services; and
o announcements by Thermaltec or its competitors of significant
acquisitions, strategic partnerships or joint ventures.
After the merger, approximately 11,452,950 or 18.4% of the surviving
company's outstanding shares of common stock will be available for resale in
the public market without restriction. The sale of a large number of these
shares could also adversely affect the surviving company's stock price and
could impair the surviving company's ability to raise capital through the sale
of equity securities or make acquisitions for stock. See "The Plan of Merger
and Related Transactions -- Restrictions on Resale of Thermaltec Common Stock."
Failure of the surviving company's computer systems and software products
to be Year 2000 compliant could cause an interruption in, or failure of, its
normal business activities or operations. Management of Solar Communications
has not done any Year 2000 compliance testing with respect to any of its
current software products or internal operating systems.
The "Year 2000" problem arises from the fact that many currently installed
computer systems and software products are coded to accept only two digit
entries in the date code field. As a result, software that records only the
last two digits of the calendar year may not be able to distinguish whether
"00" means 1900 or 2000. This may result in software failures or the creation
of erroneous results.
While management believes that Solar Communications' current products and
internal systems are Year 2000 compliant, since they are recent purchases of
the most up-to-date systems available, management has not done any Year 2000
compliance testing with respect to any such product or system. When purchasing
products from third party vendors, management intends to obtain representations
from such third party vendors of their products' Year 2000 compliance.
Management also intends to review with Solar Communications' key vendors and
suppliers, the compliance of their systems with Year 2000 processing
requirements.
The failure of products or systems maintained by third parties or the
surviving company's products and systems to be Year 2000 compliant could cause
the surviving company to incur significant expenses to remedy any problems, or
cause system failures which may seriously damage the surviving company's
reputation and business prospects. Solar Communications currently believes that
its most reasonably likely worst case scenario related to the Year 2000 is
associated with its suppliers' Internet operations. The failure of such parties
to ensure Year 2000 compliance would lead to decreased Internet usage and a
delay in or inability to obtain necessary data communication and
telecommunication capacity.
As of the date hereof, Solar Communications has not expended any
significant sums on its Year 2000 compliance efforts.
The surviving company's directors are not personally liable for breaches
of fiduciary duties.
As permitted by the Delaware General Corporation Law, Thermaltec's
certificate of incorporation includes a provision eliminating the personal
liability of our directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In
addition, pursuant to Thermaltec's by-laws, the surviving company will have to
indemnify its officers and directors under certain circumstances,
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including those circumstances in which indemnification would otherwise be
discretionary. The surviving company will also be required to advance to its
officers and directors expenses incurred in connection with proceedings against
them for which they may be indemnified. We are not currently aware of any
pending or threatened litigation or proceeding involving any of Solar
Communications' or Thermaltec's directors, officers, employees or agents in
which indemnification would be required or permitted.
The surviving company may be liable for debts and obligations arising as a
result of Thermaltec's operations prior to the merger.
As part of the spin-off, Thermaltec has transferred all of its debts,
liabilities and obligations to Panama Industries. Panama Industries has agreed
to assume responsibility for all debts, liabilities and obligations incurred by
Thermaltec prior to the merger. However, there can be no assurance that a
creditor will not be successful in holding the surviving company liable for any
such pre-merger debt, liability or obligation.
To minimize the surviving company's exposure to any debts, liabilities or
obligations arising from the operations of Thermaltec prior to the merger,
Andrew B. Mazzone has agreed to indemnify the surviving company for up to $2
million of any such liabilities. Mr. Mazzone has also agreed to provide the
surviving company with certain collateral to secure such indemnification
obligations. See "The Merger Agreement -- Indemnification." However, there can
be no assurance that such indemnification will be available or sufficient to
satisfy any Thermaltec obligation for which the surviving company may be found
to be liable. If the indemnification being provided by Mr. Mazzone is
insufficient to satisfy any Thermaltec obligation which the surviving company
is found to be liable for, the company's financial condition could be
negatively affected.
Risk Factors Related to Panama Industries and the Spin-Off
Panama Industries has not yet operated at a profit.
Thermaltec was formed in 1995 but has not yet shown a profit in its
operations. Following the spin-off, there can be no assurance that Panama
Industries will be able to manage its business properly and generate sufficient
marketplace interest in its products and services to operate at a profit.
Thermaltec has incurred losses since its inception and Panama Industries
anticipates incurring continuing losses. As a result, Panama Industries,
following the spin-off, may not be able to generate the operating cash flows
necessary to continue operations.
As of June 30, 1999, Panama Industries' accumulated deficit was
approximately $60,695. Panama Industries will continue to incur significant
losses until, at the earliest, it generates sufficient revenues to offset the
substantial expenditures and operating costs associated with developing and
commercializing its metallurgical coatings products and services. As a result,
Panama Industries may need additional funds to carry out its proposed
operations.
Potential sources of funding which have been identified by Panama
Industries include vendor lines of credit, bond financing and additional sales
of securities by Panama Industries. There can be no assurance that any
additional funding required by Panama Industries will be available on
commercially reasonable terms, or at all. The inability to obtain additional
financing, when needed, would have a material negative effect on Panama
Industries, including possibly requiring it to curtail or cease operations.
If any future financing involves the sale of equity securities by Panama
Industries, the shares of Panama Industries common stock held by its
stockholders would be substantially diluted. If Panama Industries incurs
indebtedness or otherwise issues debt securities, it will be subject to the
risks associated with indebtedness, including the risk that interest rates may
fluctuate and the possibility that Panama Industries may not be able to pay
principal and interest on the indebtedness.
Compliance with environmental laws and regulations may adversely affect
the growth of Panama Industries and its financial condition.
Panama Industries' operations are subject to federal, state, local and
foreign laws and regulations relating to the storage, handling, generation,
treatment, emission, release, discharge and disposal of certain substances
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and wastes. As a result, Panama Industries may be involved from time to time in
administrative or legal proceedings relating to environmental matters. In
addition, Thermaltec has in the past, and Panama Industries will continue to
incur in the future, capital costs and other expenditures relating to
environmental matters.
Liability under environmental laws may be imposed on current and prior
owners and operators of property or businesses without regard to fault or to
knowledge about the condition or action causing the liability. Panama
Industries may be required to incur costs relating to the remediation of
properties, including properties at which Panama Industries disposes of waste,
and environmental conditions at such properties could lead to claims for
personal injury, property damage or damages to natural resources.
There can be no assurance that any costs Panama Industries may incur
relating to environmental matters will not have a material adverse effect on
its business, financial condition or its result of operations.
Panama Industries faces significant competition in the thermal spraying
industry, and it may not have the financial resources, management experience
and business contacts necessary for it to compete successfully.
Panama Industries' principal competitors include all of the traditional
manufacturers of thermal spray equipment and supplies. In addition, the
processes utilized by Panama Industries in its business operations are not
protected by patents or any other proprietary rights. Accordingly, there can be
no assurance that Panama Industries will not face additional competition from
parties whom Panama Industries has trained.
Many of Panama Industries' current and potential competitors have greater
financial resources, operating experience, and existing business relationships.
Panama Industries' future growth and profitability will depend, in part, upon
its ability to locate qualified local partners in developing countries to
establish stand-alone thermal spray shops and to provide such local parties
with on-going training and technical support. There can be no assurance that
Panama Industries will be successful in achieving these goals or competing
successfully in the thermal spray coating industry.
Management of Panama Industries will have substantial control over its
operations and other stockholders of the surviving company may have no
effective voice in its management.
The directors and executive officers of Panama Industries, and their
affiliates, will own approximately 60.1% of its outstanding stock. Accordingly,
these individuals will possess substantial control over its operations. This
control may allow them to amend corporation filings, elect all of the directors
of Panama Industries, and substantially control all matters requiring approval
by the stockholders of Panama Industries.
The shares of stock to be issued by Panama Industries in the spin-off are
"restricted securities" which you may not be able to sell for an extended
period of time, if at all.
All of the shares of Panama Industries to be issued in the spin-off will
be "restricted securities" and will not be eligible for sale without
registration under the Securities Act of 1933 and any applicable state
securities laws, or the availability of an exemption from such registration
requirements. All of such shares may become eligible for sale under Rule 144
promulgated under the Securities Act, within one year from the date of issuance
if all of the conditions of Rule 144 are satisfied.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be added together), including any affiliate of
Panama Industries, who beneficially owns restricted securities for a period of
at least one year is entitled to sell, within any three-month period, shares
equal in number to the greater of (1) 1% of the then outstanding shares of the
same class of shares, or (2) the average weekly trading volume of the same
class of shares during the four calendar weeks preceding the filing of the
required notice of sale with the SEC. The seller must comply with the notice
and manner of sale requirements of Rule 144, and there must be current public
information available about Panama Industries at the time of the sale. In
addition, any person (or persons whose shares must be added together) who is
not, at the time of the sale, nor during the preceding three months, an
affiliate of Panama Industries, and who has beneficially owned the restricted
shares for at least two years, can sell such shares under Rule 144 without
regard to the notice, manner of sale, public information or the volume
limitations described above.
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In addition, no public trading market presently exists for shares of
Panama Industries common stock. Panama Industries does not anticipate that any
such market will develop or, if developed, that it will continue to be
maintained. Because of the restrictions on transferability and the absence of a
trading market, a Panama Industries stockholder may be unable to sell any of
their Panama Industries shares even though financial circumstances may make
such sale desirable.
The distribution of the shares of Panama Industries to a Thermaltec
stockholder in the spin-off may result in the stockholder recognizing taxable
gain for federal income tax purposes without receiving any cash to pay the
resulting tax liability.
The pro rata distribution of shares of Panama Industries to Thermaltec
stockholders in the spin-off will be treated, for federal income tax purposes,
as a return of capital. If the fair market value of the shares of Panama
Industries received by a Thermaltec stockholder is greater than the
stockholder's basis in his shares of Thermaltec stock as of the date of
distribution, the difference will be treated as a capital gain for federal
income tax purposes. If the stockholder has held his Thermaltec stock for more
than twelve months, the gain will be a long-term capital gain. A holding period
of twelve months or less will result in a short-term capital gain.
Neither Thermaltec nor Panama Industries will obtain an appraisal of the
fair market value of the shares of Panama Industries to be issued in the
spin-off. If the United States Internal Revenue Service, in an audit of a
Thermaltec stockholder, asserts a fair market value for the Panama Industries'
stock which would result in a significant tax liability being imposed on the
stockholder, the stockholder will have to use his personal resources to obtain
an expert appraisal of the shares of Panama Industries received by the
stockholder in the spin-off. There can be no assurance that the appraised value
of such shares will be lower than the stockholder's basis in his shares of
Thermaltec stock.
Panama Industries will not pay cash dividends for the forseeable future.
There can be no assurance that the operations of Panama Industries will
result in significant revenues or any level of profitability. Any earnings
which may be generated by Panama Industries will be used, for the foreseeable
future, to finance the growth of Panama Industries business. Accordingly, while
the payment of dividends rests within the discretion of Panama Industries'
board of directors, no cash dividends on any of Panama Industries' stock has
been declared or paid to date, and management does not presently intend to pay
any such cash dividends for the foreseeable future.
Failure of Panama Industries', or its customers' or suppliers', computer
systems to be Year 2000 compliant could cause an interruption in, or failure
of, Panama Industries' normal business activities or operations. Management of
Panama Industries has not done any Year 2000 compliance testing of any of its
internal operating systems, or any such system utilized by any customer or
supplier.
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the computer
programs utilized by Panama Industries that have time sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Panama Industries believes that its internal systems are Year 2000 compliant or
will be upgraded or replaced in connection with previously planned changes to
information systems prior to the need to comply with Year 2000 requirements.
However, Panama Industries is uncertain as to the extent its customers and
vendors may be affected by Year 2000 issues that require commitment of
significant resources and may cause disruptions in the customers' and vendors'
businesses.
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WHERE YOU CAN FIND MORE INFORMATION
Thermaltec has filed a registration statement on Form S-4 with the SEC to
register the shares of Thermaltec common stock to be issued in the merger under
the Securities Act of 1933. This joint proxy statement/prospectus is a part of
the registration statement and constitutes a prospectus of Thermaltec in
addition to being a proxy statement of each of Thermaltec and Solar
Communications for their special meetings. As allowed by SEC rules, this joint
proxy statement/prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the proposed
merger. Neither Solar Communications nor Thermaltec has authorized anyone to
provide you with information that is different from what is contained in this
document. This joint proxy statement/prospectus is dated September ____, 1999.
You should not assume that the information contained in this document is
accurate as of any date other than that date.
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FORWARD-LOOKING STATEMENTS
Both Solar Communications and Thermaltec have made forward-looking
statements in this document that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Thermaltec, Solar Communications or the
surviving company, including those set forth or referenced in "The Plan of
Merger and Related Transactions - Background of the Merger," "- Thermaltec's
Reasons for the Merger," and "- Solar Communications' Reasons for the Merger".
Also, when we use words such as "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. You should note that
many factors, some of which are discussed below and elsewhere in this document,
could affect the future financial results of Thermaltec, Solar Communications
or the surviving company and could cause those results to differ materially
from those expressed or implied in our forward-looking statements contained or
incorporated by reference in this document.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Thermaltec common stock has been traded on the OTC Bulletin Board of the
NASD, Inc. under the symbol "THRM" since July, 1995. There is only limited
trading in the Thermaltec common stock.
There is no established trading market for the Solar Communications common
stock.
The information stated in the table below presents the high and low bid
prices on the OTC Bulletin Board for the Thermaltec common stock on December
11, 1998 and September 7, 1999. December 11, 1998 was the last day on which
trading in the Thermaltec common stock occurred prior to public announcement of
the intention of Solar Communications and Thermaltec to merge. September 7,
1999 was the last practicable trading day for which information was available
prior to the date of this joint proxy statement/prospectus.
The information in the table below also presents the sales prices for the
most recent sale of Solar Communications common stock occurring prior to
December 11, 1998 and September 7, 1999.
The most recent sale of Solar Communications common stock occuring prior
to December 11, 1998 occurred on October 8, 1996. On such date, 1,000 shares of
Solar Communications common stock were sold to the founders of Solar
Communications, James and Alisa Rossi, in a private placement at a price of
$0.25 per share.
The most recent sale of Solar Communications common stock occurring prior
to September 7, 1999 occurred on July 7, 1999. On such date, 1,200 shares of
Solar Communications common stock were sold to accredited investors in a
private placement. These shares were sold at a price of $10,000 per share.
<TABLE>
<CAPTION>
Most Recent
Sale Price
Historical Solar Communications
Thermaltec Common Stock Common Stock
------------------------ ---------------------
High Low
---------- -----------
<S> <C> <C> <C>
December 11, 1998 ......... $ 5.25 $ 2.375 $ 0.25
September 7, 1999 ......... $ 5.30 $ 4.50 $ 10,000.00
</TABLE>
Solar Communications and Thermaltec stockholders are urged to obtain a
current market quotation for Thermaltec common stock. No assurance can be given
as to the future prices of, or markets for, Thermaltec common stock.
On September 7, 1999, there were 56 recordholders of Thermaltec common
stock, although Thermaltec knows that there are other persons who are
beneficial owners of shares of Thermaltec common stock held in street name. As
of September 7, 1999, Thermaltec's transfer agent reported that there were 697
total holders of Thermaltec common stock.
On September 7, 1999, there were 83 recordholders of Solar Communications
common stock.
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SPECIAL MEETINGS OF STOCKHOLDERS
We are sending you this in order to provide you with important information
regarding the merger and to solicit your proxy for use at the special meetings
and at any adjournments or postponements of the special meetings. The special
meetings are scheduled to be held at the times and places described below.
Thermaltec Special Meeting
General. The Thermaltec special meeting is scheduled to be held on October
___, 1999 at 9:00 a.m., local time, at ______________________________. At the
Thermaltec special meeting, Thermaltec stockholders will have the opportunity
to consider and vote upon the proposed merger.
The Thermaltec board of directors has unanimously approved the proposed
merger and recommends that Thermaltec stockholders vote "for" the proposed
merger.
Record Date. The close of business on September ____, 1999, has been fixed
by the Thermaltec board of directors as the record date for the determination
of holders of shares of Thermaltec common stock entitled to notice of and to
vote at the Thermaltec special meeting.
Stock Entitled to Vote. At the close of business on the Thermaltec record
date, Thermaltec had ____________ shares of Thermaltec common stock outstanding
(held by ____ persons of record). Each holder of Thermaltec common stock will
have the right to one vote with respect to the matters to be acted upon at the
Thermaltec special meeting for each share registered in the holder's name on
the books of Thermaltec as of the close of business on the record date.
Quorum; Required Vote. 1,289,059 shares of Thermaltec common stock,
present in person or represented by proxy, at the Thermaltec special meeting
will constitute a quorum. All shares of Thermaltec common stock present in
person or represented by proxy and entitled to vote at the Thermaltec special
meeting, no matter how they are voted or whether they abstain from voting, will
be counted in determining the presence of a quorum. If the Thermaltec special
meeting is adjourned for one or more periods aggregating at least 15 days
because of the absence of a quorum, those stockholders entitled to vote who
attend the reconvened Thermaltec special meeting, if less than a quorum as
determined under applicable law, will nevertheless constitute a quorum for the
purpose of acting upon any matter stated in the Notice of Special Meeting.
Under Delaware law, the affirmative vote of the holders of at least a majority
of the outstanding shares of Thermaltec common stock on the Thermaltec record
date is required for approval of the proposed merger.
Stock Ownership. As of the close of business on the Thermaltec record
date, the sole director and executive officer of Thermaltec, the President of
Thermaltec's wholly-owned subsidiary, and their affiliates, beneficially owned
and had the right to vote, in the aggregate, 1,550,400 shares of Thermaltec
common stock, representing approximately 60.1% of the total votes entitled to
be cast at the Thermaltec special meeting. It is currently expected that
members of the management of Thermaltec and its subsidiary, and their
affiliates, will vote the shares of Thermaltec common stock that they are
entitled to vote in favor of the proposed merger. Accordingly, the affirmative
vote of no other holder of shares of Thermaltec common stock is required to
approve the merger.
Voting and Revocation of Proxies. All shares of Thermaltec common stock
represented by a proxy properly signed and received at or prior to the
Thermaltec special meeting, unless subsequently revoked, will be voted in
accordance with the instructions on the proxy. If a proxy is signed and
returned without indicating any voting instructions, the shares of Thermaltec
common stock represented by the proxy will be voted "for" the proposed merger.
You may revoke your proxy and reclaim your right to vote your shares by giving
written notice of revocation to the Secretary of Thermaltec at any time before
it is voted, by submitting to Thermaltec a duly executed, later-dated proxy or
by voting the shares subject to the proxy by written ballot at the Thermaltec
special meeting. All written notices of revocation and other communications
with respect to revocation of Thermaltec proxies should be addressed to:
Thermaltec International, Corp., 68A Lamar Street, West Babylon, New York
11704, Attention: Andrew B. Mazzone, President. Attendance at the Thermaltec
special meeting will not in and of itself constitute a revocation of a proxy.
The Thermaltec board of directors is not aware of any business to be acted
upon at the Thermaltec special meeting other than as described in this joint
proxy statement/prospectus. If, however, other matters are brought
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<PAGE>
before the Thermaltec special meeting, including, among other things, a motion
to adjourn or postpone the Thermaltec special meeting to another time or place
for the purpose of soliciting additional proxies or otherwise, the persons
appointed as proxies will have discretion to vote or act on the matters
according to their best judgment. However, no proxy which is voted against the
proposed merger will be voted in favor of any adjournment or postponement. The
grant of a proxy will also confer discretionary authority on the persons named
in the proxy to vote on matters incident to the conduct of the Thermaltec
special meeting.
Abstentions and "broker non-votes," explained below, will be counted as
shares present for purposes of determining whether a quorum is present but will
not be voted for or against the proposed merger. Abstentions and broker
non-votes also will not be counted as votes cast for purposes of determining
whether sufficient votes have been received to approve the proposed merger.
Accordingly, abstentions and broker non-votes will have no effect on the
outcome of the vote with respect to the proposed merger. Broker non-votes are
shares held in the name of a broker or nominee for which an executed proxy is
received, but are not voted on the proposal because the voting instructions
have not been received from the beneficial owner or persons entitled to vote
and the broker or nominee does not have the discretionary power to vote.
Solicitation of Proxies. Proxies are being solicited on behalf of the
Thermaltec board of directors. The solicitation of proxies may be made by
directors, officers and regular employees of Thermaltec or its subsidiaries in
person or by mail, telephone, facsimile or telegraph without additional
compensation payable for that solicitation. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxy soliciting materials to the beneficial owners of Thermaltec common stock
held of record by these persons, and Thermaltec will reimburse them for
reasonable expenses incurred by them in so doing. The cost of the solicitation
will be borne by Thermaltec.
Rights of Dissenting Thermaltec Stockholders. Except as otherwise
described in this joint proxy statement/prospectus, each Thermaltec stockholder
who delivers to Thermaltec a written demand for appraisal of the stockholder's
shares before the Thermaltec special meeting and who otherwise complies with
the applicable procedures under Delaware law will be entitled to receive the
fair value of his or her shares of Thermaltec common stock in cash if the
merger is completed.
Solar Communications Special Meeting
General. The Solar Communications special meeting is scheduled to be held
on October _____, 1999 at 9:00 a.m., local time, at
___________________________. The purpose of the Solar Communications special
meeting is to consider and vote upon the proposed merger.
The Solar Communications board of directors has unanimously approved the
proposed merger and recommends that Solar Communications stockholders vote
"for" the proposed merger.
Record Date. The close of business on September ___, 1999 has been fixed
by the Solar Communications board of directors as the record date for the
determination of holders of shares of Solar Communications common stock
entitled to notice of and to vote at the Solar Communications special meeting.
Only holders of record of Solar Communications common stock as of the close of
business on the record date are entitled to notice of, and to vote at, the
Solar Communications special meeting.
Stock Entitled to Vote. As of the close of business on the Solar
Communications record date, there were 5,950 shares of Solar Communications
common stock outstanding. Holders of Solar Communications common stock will be
entitled to one vote for each share of Solar Communications common stock that
they held on the Solar Communications record date. Accordingly, the holders of
Solar Communications common stock are entitled to cast, in the aggregate, 5,950
votes.
Quorum; Required Vote. 2,975 shares of Solar Communications common stock,
present in person or represented by proxy, at the Solar Communications special
meeting will constitute a quorum. The presence in person or by proxy of a
majority of the outstanding shares of Solar Communications common stock will
constitute a quorum for purposes of conducting business at the Solar
Communications special meeting. Under New Jersey law and Solar Communications'
charter, the affirmative vote of a majority of the votes cast by the holders of
Solar Communications common stock at the Solar Communications special meeting
is necessary to approve the proposed merger.
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Stock Ownership. As of the close of business on the Solar Communications
record date, the directors and executive officers of Solar Communications, and
their affiliates, collectively held 4,001.8 shares of the outstanding Solar
Communications common stock, representing approximately 67.3% of the total
votes entitled to be cast at the Solar Communications special meeting. It is
currently expected that members of the management of Solar Communications, and
their affiliates, will vote the shares of Solar Communications common stock
that they are entitled to vote in favor of the proposed merger. Accordingly,
the affirmative vote of no other holder of shares of Solar Communications
common stock is required to approve the proposed merger.
Voting and Revocation Proxies. Shares of Solar Communications common stock
represented by a proxy properly signed and received at or prior to the Solar
Communications special meeting, unless subsequently revoked, will be voted in
accordance with the instructions on the proxy. If you sign and return your
proxy without indicating any voting instructions, the shares of Solar
Communications common stock represented by the proxy will be voted "for" the
proposed merger. You may revoke your proxy and reclaim your right to vote at
any time by giving written notice of revocation to the Secretary of Solar
Communications at any time before it is voted, by submitting to Solar
Communications a duly executed, later-dated proxy or by voting the shares
subject to the proxy by written ballot at the Solar Communications special
meeting. You should send all written notices of revocation and other
communications with respect to revocation of Solar Communications proxies to:
Solar Communications Group, Inc., 1100 Coombs Road, Millville, New Jersey
08332, Attention: Alisa A. Rossi, Secretary. Attendance at the Solar
Communications special meeting will not, in and of itself constitute a
revocation of a proxy. The failure to either return your proxy card or attend
the Solar Communications special meeting in person and vote in favor of the
proposed merger will have the same effect as a vote against the proposed
merger.
The Solar Communications board of directors is not aware of any business
to be acted upon at the Solar Communications special meeting other than as
described in this joint proxy statement/prospectus. If, however, other matters
are brought before the Solar Communications special meeting, including, among
other things, a motion to adjourn or postpone the Solar Communications special
meeting to another time or place for the purpose of soliciting additional
proxies or otherwise, the persons appointed as proxies will have discretion to
vote or act on the matters according to their best judgment. However, no proxy
which is voted against the proposed merger will be voted in favor of any
adjournment or postponement. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the Solar Communications special meeting.
Abstentions will be counted as shares present for purposes of determining
whether a quorum is present but will not be voted for or against the proposed
merger. Abstentions effectively will be a vote against the proposed merger.
Similarly, the failure to either return your proxy card or attend the Solar
Communications special meeting in person and vote in favor of the proposed
merger will count as a vote against the proposed merger.
Solicitation of Proxies. The proxies are being solicited on behalf of the
Solar Communications board of directors. The solicitation of proxies may be
made by directors, officers and regular employees of Solar Communications in
person or by mail, telephone, facsimile or telegraph without additional
compensation payable for that solicitation. The cost of the solicitation will
be borne by Solar Communications.
Rights of Dissenting Solar Communications Stockholders. Except as
otherwise described in this joint proxy statement/prospectus, each Solar
Communications stockholder who delivers to Solar Communications a written
notice of exercise of dissenters' rights before the Solar Communications
special meeting and who otherwise complies with the applicable procedures under
New Jersey law will be entitled to receive the fair value of his or her shares
of Solar Communications common stock in cash if the merger is completed.
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THE PLAN OF MERGER AND RELATED TRANSACTIONS
This section of the joint proxy statement/prospectus describes the
material aspects of the proposed merger. A copy of the merger agreement is also
attached to this joint proxy statement/prospectus as Annex A. You are urged to
read the merger agreement carefully.
Background of the Merger
Late in the summer of 1998, James M. Rossi, Chairman of the Board and CEO
of Solar Communications, and Andrew B. Mazzone, President of Thermaltec,
engaged in a series of general business discussions. The discussions were
initiated by Mr. Mazzone, who was looking for new opportunities to expand his
company's existing products and services. Thermaltec's business was focused in
the slow growing, but stable metallurgical coatings industry. Mr. Mazzone was
looking to diversify Thermaltec's business by expanding into a faster growing
industry. Mr. Mazzone was particularly interested in expanding into the
Internet or telecommunications industries. The discussions between Messrs.
Rossi and Mazzone continued through November, 1998. During this time period,
Mr. Rossi assisted Mr. Mazzone in evaluating several available opportunities
for Thermaltec to expand into the Internet and telecommunications fields,
including a potential transaction with an Internet service provider, a paging
services provider, and a low-powered television services provider.
In December of 1998, Mr. Rossi and Mr. Mazzone began to seriously explore
the possibility of merging their two companies. They both believed that there
was enough business knowledge and contacts between the management of the two
companies to make Solar Communications a commercially viable enterprise and to
introduce its potential product and service offerings to a wider market.
Management of Thermaltec also hoped to establish a Latin American presence for
Solar Communications, based upon Thermaltec's existing contacts in that area,
upon further commercial development of Solar Communications' PCRoomLink product
line.
In mid-December, 1998, Mr. Mazzone and Mr. Rossi executed a letter of
intent, which outlined the general terms for the proposed merger of Solar
Communications with and into Thermaltec. It was decided that Thermaltec would
be the surviving company in the merger to maintain its listing on the OTC
Bulletin Board and its net operating loss carry-forwards.
It was also decided that, prior to the merger, Thermaltec would spin-off
substantially all of its assets and all of its ongoing business operations to a
wholly-owned subsidiary. This decision was made for the following reasons:
(1) The business of Solar Communications and the business of Thermaltec
were in unrelated industries and would be best managed in separate
entities;
(2) Thermaltec wanted to protect the existing investment made by its
stockholders in the metallurgical coatings industry;
(3) Thermaltec wanted to protect, to the greatest extent possible, the
assets and ongoing operations of its metallurgical coatings business
from the liabilities and creditors of Solar Communications; and
(4) Solar Communications wanted to protect, to the greatest extent
possible, the assets and ongoing operations of its Internet access
business from the liabilities and creditors of Thermaltec's
metallurgical coatings business.
Consummation of the merger was made subject to a number of conditions
precedent, including without limitation completion of satisfactory due
diligence by both companies, the receipt of all necessary regulatory and third
party approvals, and execution and delivery of a definitive merger agreement by
Solar Communications and Thermaltec.
From the time that the letter of intent was signed until the definitive
merger agreement was signed on June 16, 1999, the parties worked to complete
the necessary due diligence with respect to both companies, obtain audited
financial statements for both companies, raise additional equity capital for
Solar Communications, and
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negotiate the terms and provisions of the definitive merger agreement,
including the terms of the indemnification to be provided by Mr. Mazzone, the
treatment of outstanding Solar Communications stock options and the
representations and warranties to be provided by both companies. During this
time, both Mr. Rossi and Mr. Mazzone continued to explore unrelated
opportunities in the telecommunications and Internet industries.
The definitive merger agreement, known as the Agreement and Plan of
Reorganization, was executed by Solar Communications, Thermaltec and Mr.
Mazzone on June 16, 1999.
Reasons for the Merger
Certain statements made in the following paragraphs regarding the
potential benefits that could result from the merger are forward-looking
statements based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. The anticipated potential
benefits of the merger may not be realized. Such risks and uncertainties are
set forth under "Risk Factors" and elsewhere in this joint proxy
statement/prospectus.
Thermaltec's Reasons for the Merger
The Thermaltec board of directors has unanimously determined that the
terms of the merger documents and the merger are fair to, and in the best
interests of, Thermaltec and its stockholders. In reaching its determination,
the Thermaltec board of directors consulted with Thermaltec's management, as
well as its legal counsel, accountants and financial advisors and gave
significant consideration to a number of factors bearing on its decision. The
following are the reasons the Thermaltec board of directors believes the merger
will be beneficial to Thermaltec and its stockholders:
o The merger will provide Thermaltec with an opportunity to expand its
current technology base into the telecommunications and Internet
industries;
o The management staff of Solar Communications is much larger and is
more experienced in developing technologies and applications in the
telecommunications and Internet industries than Thermaltec's
management;
o The merger will provide Thermaltec's existing stockholders with an
opportunity to participate in the growing telecommunications and
Internet industries while still retaining their respective pro rata
interests in Thermaltec's former business operations (through their
ownership of the capital stock of Panama Industries); and
o Members of Thermaltec's present management team (who will be members
of the Panama Industries management team following the merger) will be
able to use their existing business contacts in Latin America to
promote PCRoomLink products and services in Latin America, where Solar
Communications does not currently have any established presence.
In addition to the reasons stated above, in the course of its
deliberations concerning the merger, the Thermaltec board of directors
consulted with Thermaltec's management, legal counsel, accountants and
financial advisors and reviewed a number of other factors relevant to the
merger, including:
o Information concerning the business, assets, operations, management
financial condition, operating results, competitive position and
prospects of Thermaltec and Solar Communications;
o The expected tax and accounting treatment of the merger;
o Reports from legal counsel on specific terms of the merger documents;
and
o Thermaltec's belief that the management styles and corporate cultures
of the two companies would be complementary.
The Thermaltec board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including:
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o The possibility of management disruption associated with the merger
and the risk that key technical and management personnel of Solar
Communications might not continue with the surviving company following
the merger;
o The possibility that the merger might adversely affect Solar
Communications' and Thermaltec's relationship with their respective
customers;
o The risk that Solar Communications is a development stage company that
may never generate a profit; and
o The possibility that the distribution of Panama Industries shares to
Thermaltec stockholders in the spin-off might result in federal income
tax liabilities for certain Thermaltec stockholders.
The Thermaltec board of directors concluded, however, that the benefits of
the transaction to Thermaltec and its stockholders outweighed the risk
associated with these negative factors. As a result of their analysis, the
board of directors of Thermaltec concluded that the merger presented
Thermaltec's stockholders with an opportunity to invest in an Internet company
at no cost since their existing investment would be maintained, as a result of
the spin-off, in an unrelated entity. While there is a significant risk that
the surviving company will not achieve profitability, existing Thermaltec
stockholders would not suffer any loss as a result of such failure.
Solar Communications' Reasons for the Merger
The Solar Communications board of directors unanimously believes that the
stockholders of Solar Communications will benefit by becoming stockholders of
the combined enterprise on the basis stated in the merger documents, and that
the proposed merger is advisable and in the best interests of, and that the
terms are fair and equitable to, the Solar Communications stockholders. The
terms of the proposed merger, including the amount of Thermaltec common stock
to be received by the Solar Communications stockholders, are the result of
arm's length negotiations between representatives of Solar Communications and
Thermaltec.
On December 7, 1998, the Solar Communications board of directors held a
meeting at which it considered the proposed merger and the transactions
contemplated by the proposed merger. During its deliberations with respect to
the merits of the proposed merger, the Solar Communications board of directors
considered both business and financial reasons for pursuing a combination with
Thermaltec in contrast to other potential opportunities as an independent
company or in combination with another company. Among the factors considered
were:
o Solar Communications' growth capital needs;
o Solar Communications' need for better name recognition in the
investment communities, both in the United States and abroad;
o Solar Communications' need to have the ability to offer incentive
stock options and other forms of stock-based compensation to attract
and retain qualified employees in a highly competitive market; and
o Solar Communications' future financing prospects.
In the course of its deliberations concerning the merger, the Solar
Communications board of directors also considered the significant transaction
costs to be incurred by Solar Communications in connection with the merger. The
board concluded that the costs to be incurred were reasonable in light of the
increased liquidity to be afforded to Solar Communications' stockholders as a
result of the merger and the company's enhanced ability to access the public
capital markets following the merger.
The other negative factor considered by the Solar Communications board of
directors when considering the merger was the potential that the surviving
company would be liable for debts, liabilities and obligations incurred by
Thermaltec prior to the merger. It was determined that this risk would be
minimal due to the assumption of such liabilities and obligations by Panama
Industries and the indemnification to be provided by Mr. Mazzone. See "The
Merger Agreement -- Indemnification."
In unanimously approving the merger documents and the transactions
contemplated by the merger documents, the Solar Communications board of
directors determined that:
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o The amount of Thermaltec common stock to be paid in the merger to
holders of Solar Communications capital stock (approximately 95.8% of
the outstanding shares of Thermaltec common stock) was fair in view of
the fact that Solar Communications is a development stage company that
has yet to generate any operating revenues;
o The Thermaltec common stock afforded greater liquidity to Solar
Communications' stockholders since it is currently traded on the OTC
Bulletin Board and Solar Communications' common stock is not listed
for trading anywhere; and
o The amount of Thermaltec common stock to be paid in the merger was
determined through arm's length negotiations between representatives
of Thermaltec and Solar Communications.
The foregoing discussion of the information and factors considered and
given weight by the Solar Communications board of directors in considering the
proposed merger and the transactions contemplated by the proposed merger is not
intended to be exhaustive. In view of the wide variety of factors considered in
connection with its evaluation of the proposed merger, the Solar Communications
board of directors did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in making
its determination nor did it evaluate whether these factors were of equal
weight. In addition, individual members of the board of directors of Solar
Communications may have given different weight to different factors.
Material Federal Income Tax Consequences -- Solar Communications
The following is a description of the material United States federal
income tax consequences of the merger to Solar Communications and the Solar
Communications stockholders who receive Thermaltec common stock in the merger
or perfect dissenters' rights. This summary does not address tax considerations
which may affect the treatment of special status taxpayers such as financial
institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies and foreign taxpayers or of Solar
Communications stockholders who do not hold their Solar Communications stock as
a capital asset at the date the merger is completed. In addition, no
information is provided with respect to the tax consequences of the merger
either under applicable foreign, state or local laws or to persons who acquired
Solar Communications common stock under employee stock options or otherwise as
compensation.
The following discussion is based on the Internal Revenue Code of 1986, as
in effect on the date of this joint proxy statement/prospectus, without
consideration of the particular facts or circumstances of any particular holder
of Solar Communications stock. Solar Communications and Thermaltec have not
sought and will not seek any rulings from the Internal Revenue Service, with
respect to any of the matters discussed in this summary. Archer & Greiner, A
Professional Corporation, as legal counsel to Solar Communications, has
delivered an opinion to Solar Communications confirming that:
o the merger will constitute a statutory merger under the corporate laws
of the State of New Jersey;
o the merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of
1986;
o no gain or loss will be recognized by Solar Communications
stockholders upon the exchange of their Solar Communications stock
solely for Thermaltec common stock;
o the basis of Thermaltec common stock received by Solar Communications
stockholders in the merger will be the same as the basis of their
Solar Communications stock surrendered in exchange therefor; and
o for capital gains purposes, the holding period of Thermaltec common
stock received by Solar Communications stockholders in the merger will
include the period during which the Solar Communications stock
surrendered in exchange therefor was held, provided that the Solar
Communications stock is held as a capital asset at the date the merger
is completed.
A Solar Communications stockholder who perfects dissenters' rights with
respect to his or her shares of Solar Communications stock, and who does not
withdraw his or her rights, will, in general, treat the difference between (a)
the tax basis of the shares of Solar Communications stock held by the
stockholder with respect to which dissenters' rights are perfected, and (b) the
amount received in payment therefor, as capital gain or loss.
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The foregoing is a general discussion of the material federal income tax
consequences of the merger for Solar Communications and Solar Communications
stockholders and is included for general information only. The foregoing
discussion does not take into account the particular facts and circumstances of
each Solar Communications stockholder's tax status and attributes. Accordingly,
each Solar Communications stockholder should consult his or her own tax advisor
regarding the specific tax consequences of the merger, including the
application and effect of federal, state, local and other tax laws and the
possible effects of changes in these tax laws.
Material Federal Income Tax Consequences -- Thermaltec
The following is a description of the material United States federal
income tax consequences of the merger and distribution of the shares of Panama
Industries to Thermaltec and the Thermaltec stockholders. This summary does not
address tax considerations which may affect the treatment of special status
taxpayers such as financial institutions, broker-dealers, life insurance
companies, tax-exempt organizations, investment companies and foreign
taxpayers.
The following discussion is based on the Internal Revenue Code of 1986, as
in effect on the date of this joint proxy statement/prospectus, without
consideration of the particular facts or circumstances of any particular holder
of Thermaltec stock. Solar Communications and Thermaltec have not sought and
will not seek any rulings from the Internal Revenue Service, with respect to
any of the matters discussed herein. Aitken Irvin Lewin Berlin Vrooman & Cohn,
LLP, as legal counsel to Thermaltec, has delivered an opinion to Thermaltec
that:
o the merger will constitute a statutory merger under the corporate laws
of the State of Delaware;
o no income will be recognized by Thermaltec upon the transfer of its
assets and liabilities to Panama Industries;
o no gain or loss will be recognized by Thermaltec upon the distribution
of all of the outstanding shares of Panama Industries to the
Thermaltec stockholders;
o the merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of
1986;
o no gain or loss will be recognized by Thermaltec upon the exchange of
Solar Communications stock solely in exchange for Thermaltec common
stock; and
o no gain will be recognized by a Thermaltec stockholder upon his
receipt of the shares of Panama Industries common stock in the
spin-off unless the fair market value of such Panama Industries shares
on the date of distribution exceeds the stockholder's basis in his
Thermaltec stock.
A Thermaltec stockholder who perfects dissenters' rights with respect to
his or her shares of Thermaltec stock, and who does not withdraw his or her
rights, will, in general, treat the difference between (a) the tax basis of the
shares of Thermaltec stock held by the stockholder with respect to which
dissenters' rights are perfected, and (b) the amount received in payment
therefor, as capital gain or loss.
Thermaltec does not have any current or accumulated earning or profits for
federal income tax purposes. As a result, the pro rata distribution in the
spin-off of the shares of Panama Industries to the noncorporate Thermaltec
stockholders will be treated first as a return of capital, which is not taxed,
but will reduce a shareholder's basis for the Thermaltec stock. If the fair
market value of the Panama Industries stock, as of the date of distribution, is
in excess of the basis, then it will result in a capital gain. If the
stockholder has held the Thermaltec stock for more than twelve months, the gain
will be a long term capital gain. A holding period of twelve months or less
will result in a short term capital gain. A stockholder's basis for determining
gain or loss in the event that the Panama Industries stock is sold in the
future is the fair market value of the Panama Industries stock on the date of
distribution.
Thermaltec and Panama Industries will not obtain an appraisal of the fair
market value of the shares of Panama Industries as of the date of distribution.
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A corporate shareholder of Thermaltec will consider as the amount of the
distribution of Panama Industries shares the lesser of its' fair market value
when distributed, or Thermaltec's adjusted basis of the stock of Panama
Industries immediately prior to the distribution. Otherwise, a corporate
stockholder will treat the distribution of the Panama shares the same as a
noncorporate stockholder.
Thermaltec will not realize any gain or loss on the distribution of the
Panama Industries shares.
The foregoing is a general discussion of the material federal income tax
consequences of the merger and the spin-off for Thermaltec and Thermaltec
stockholders and is included for general information only. The
foregoing discussion does not take into account the particular facts and
circumstances of each Thermaltec stockholder's tax status and attributes.
Accordingly, each Thermaltec stockholder should consult his or her own tax
advisor regarding the specific tax consequences of the merger and the spin-off,
including the application and effect of federal, state, local and other tax
laws and the possible effects of changes in these tax laws.
Accounting Treatment
The merger will be treated as a reverse merger whereby, for accounting
purposes, Solar Communications will be treated as the acquirer in the
transaction.
Restrictions on Resale of Thermaltec Common Stock
The shares of Thermaltec common stock issuable to stockholders of Solar
Communications upon consummation of the merger have been registered under the
Securities Act of 1933. Unless restricted by the terms of lock-up agreements
entered into between Solar Communications and such stockholder, such shares may
be freely traded without restriction by a former stockholder of Solar
Communications who is not deemed to be an "affiliate" of Thermaltec or Solar
Communications, as that term is defined under the Securities Act of 1933.
Shares of Thermaltec common stock received by those stockholders of Solar
Communications who are deemed to be affiliates of Solar Communications or
Thermaltec may be resold without registration under the Securities Act only as
permitted under the Securities Act of 1933. Each person deemed to be an
affiliate of Solar Communications or Thermaltec has agreed not to offer, sell,
pledge, transfer or otherwise dispose of any shares of Thermaltec common stock
distributed to them pursuant to the merger, except (a) in compliance with Rule
145 under the Securities Act of 1933, (b) in a transaction that is otherwise
exempt from the registration requirements of the Securities Act of 1933 and
provided that an opinion of counsel, satisfactory to Thermaltec, has been
provided to Thermaltec to the effect that no such registration is required in
connection with the proposed transaction, or (c) in an offering that is
registered under the Securities Act of 1933. In general, Rule 145, as currently
in effect, imposes restrictions on the manner in which affiliates of Solar
Communications may resell Thermaltec common stock received in the merger and
the amount of Thermaltec common stock that such affiliates (including persons
with whom the affiliates act in concert) may sell within any three-month
period. These restrictions will generally apply for at least one year after the
merger (assuming such person is not then an affiliate of Thermaltec).
Nasdaq Listing
Thermaltec will use its best efforts to have the shares of Thermaltec
common stock to be issued in connection with the merger, and the shares of
Thermaltec common stock to be reserved for issuance upon the exercise of
outstanding Solar Communication's stock options assumed by Thermaltec as part
of the merger, listed on the OTC Bulletin Board under the symbol "THRM." In
connection with the merger, Thermaltec's corporate name will be changed to
"Solar Communications Group, Inc." and it is anticipated that its trading
symbol will be changed to "SOLC" following the merger. The surviving company
will also use reasonable efforts to have all of the shares of Thermaltec common
stock outstanding following the merger listed on the Nasdaq SmallCap Market.
However, there can be no assurance that such listing will be approved. If
Nasdaq refuses to list Thermaltec's common stock on the Nasdaq SmallCap Market,
the surviving company will attempt to have the Thermaltec common stock continue
to trade on the OTC Bulletin Board or in the over-the-counter market on the
so-called "pink sheets". See "Risk Factors -- Unless a public market develops
for the surviving company's securities, you may not be able to sell your
shares".
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Governmental and Regulatory Matters
The merger must satisfy the requirements of all applicable federal and
state securities laws.
Dissenters' Rights for Thermaltec Stockholders
The following discussion is not a complete statement of the law pertaining
to dissenters' or appraisal rights under Section 262 of the Delaware General
Corporation Law. Section 262 is reprinted in its entirety as Annex
B to this joint proxy statement/prospectus. Any Thermaltec stockholder who
desires to exercise his or her appraisal rights should review carefully Section
262 and is urged to consult a legal advisor before electing or attempting to
exercise their rights. All references in Section 262 to a "stockholder" and in
this summary to a "Thermaltec stockholder" or a "holder of Thermaltec stock"
are to the record holder of shares as to which appraisal rights are asserted.
Subject to the exceptions stated below, holders of record of Thermaltec
common stock who comply with the applicable procedures summarized below will be
entitled to appraisal rights under Section 262. Voting against, abstaining from
voting, or failing to vote on approval and adoption of the proposed merger will
not constitute a demand for appraisal within the meaning of Section 262. A
person having a beneficial interest in Thermaltec stock held of record in the
name of another person, such as a broker or nominee, must act promptly to cause
the record holder to follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
Thermaltec stockholders electing to exercise appraisal rights under
Section 262 must not vote for approval of the proposed merger. A vote by a
Thermaltec stockholder against approval of the proposed merger is not required
in order for such stockholder to exercise appraisal rights. However, if a
Thermaltec stockholder returns a signed proxy but does not specify a vote
against approval and adoption of the proposed merger or a direction to abstain,
the proxy, if not revoked, will be voted for approval of the proposed merger,
which will have the effect of waiving such stockholder's appraisal rights.
Under Section 262, except as described below, holders of Thermaltec stock
who follow the procedures stated in Section 262 will be entitled to have their
shares appraised by the Delaware Court of Chancery and to receive payment in
cash of the "fair value" of their shares, exclusive of any element of value
arising from the accomplishment or expectation of the merger, together with a
fair rate of interest, if any, as determined by the court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior the
meeting, most notify each of its stockholders who was a stockholder on the
record date for the meeting with respect to shares for which appraisal rights
are available, that appraisal rights are so available and must include in the
notice a copy of Section 262. This joint proxy statement/prospectus constitutes
such a notice to the holders of Thermaltec stock and a copy of Section 262 is
attached as Annex B to this joint proxy statement/prospectus. Any Thermaltec
stockholder who wishes to exercise his or her appraisal rights or who wishes to
preserve his or her right to do so should review the following discussion and
Annex B carefully because failure to timely and properly comply with the
procedures specified will result in the loss of their appraisal rights.
A holder of Thermaltec stock wishing to exercise his or her appraisal
rights must:
(1) not vote in favor of approval of the proposed merger;
(2) deliver to Thermaltec, prior to the vote on the proposed merger at
the Thermaltec special meeting, a written demand which reasonably
informs Thermaltec of the identity of the Thermaltec stockholder and
that the Thermaltec stockholder intends to demand appraisal of his or
her Thermaltec stock;
(3) be the record holder of the Thermaltec stock on the date the written
demand for appraisal is made; and
(4) continue to hold his or her Thermaltec stock of record until the date
the merger is completed.
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A holder of Thermaltec stock who is the record holder of shares on the
date the written demand for appraisal is made, but who thereafter transfers his
or her Thermaltec stock prior to the date the merger is completed, will lose
any right to appraisal in respect of his or her Thermaltec stock.
Only a holder of record of Thermaltec stock is entitled to assert
appraisal rights for the Thermaltec stock registered in the holder's name. A
demand of appraisal should be executed by or on behalf of the holder of record,
fully and correctly, as the holder's name appears on the holder's stock
certificates. If the Thermaltec stock is owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity. If the Thermaltec stock is owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
a demand for appraisal on behalf of a holder of record. The agent must identify
the record owner or owners and expressly disclose the fact that in executing
the demand, the agent is agent for the owner or owners. A record holder, such
as a broker, who holds Thermaltec stock as nominee for several beneficial
owners, may exercise appraisal rights with respect to Thermaltec stock held for
one or more beneficial owners while not exercising the rights with respect to
the Thermaltec stock held for other beneficial owners. In such a case, the
written demand should state the number of shares of Thermaltec stock as to
which appraisal is sought. Where no number of shares of Thermaltec stock is
expressly mentioned the demand will be presumed to cover all Thermaltec stock
held in the name of the record owner. Stockholders who hold their Thermaltec
stock in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by the nominee.
All written demands for appraisal should be sent or delivered to Thermaltec
at:
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Attention: Andrew B. Mazzone, President
Thermaltec will, within ten days after the date the merger is completed,
notify each Thermaltec stockholder who has complied with the statutory
requirements summarized above that the merger has become effective. Within 120
days after the date the merger is completed, but not thereafter, Thermaltec or
any Thermaltec stockholder who has complied with the statutory requirements
summarized above may file a petition with the Delaware Court of Chancery
demanding a determination of the value of the Thermaltec stock. Thermaltec is
under no obligation to and has no present intention to file a petition with
respect to the appraisal of the fair value of the Thermaltec stock.
Accordingly, it is the obligation of the Thermaltec stockholders to initiate
all necessary action to perfect their appraisal rights within the time
prescribed in Section 262.
Within 120 days after the date the merger is completed, any Thermaltec
stockholder who has complied with the requirements of exercise of appraisal
rights will be entitled, upon written request, to receive from Thermaltec a
statement setting forth the aggregate number of shares of Thermaltec stock not
voted in favor of adoption of the proposed merger and with respect to which
demands for appraisal have been received and the aggregate number of holders of
the shares. These statements must be mailed within ten days after a written
request for these statements has been received by Thermaltec or ten days after
expiration of the aforementioned period for delivery of demands for appraisal,
whichever is later.
If a petition for an appraisal is timely filed, after a hearing on the
petition, the Delaware Court of Chancery will determine the Thermaltec
stockholders entitled to appraisal rights and will appraise the "fair value" of
their Thermaltec stock, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
The Delaware Court of Chancery will determine the amount of interest, if any,
to be paid upon the amounts to be received by persons whose Thermaltec stock
has been appraised.
The costs of the appraisal action may be determined by the Delaware Court
of Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable. The Delaware Court of Chancery may also order that all or a portion
of the expenses incurred by any Thermaltec stockholder in connection with an
appraisal action, including, without limitation, reasonable attorneys' fees and
the fees and expenses of experts utilized in the appraisal proceeding, be
charged pro rata against the value of all the Thermaltec stock entitled to
appraisal.
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Any holder of Thermaltec stock who has duly demanded an appraisal in
compliance with Section 262 will not, after the date the merger is completed,
be entitled to vote the Thermaltec stock subject to the demand for any purpose
or be entitled to the payment of dividends or other distributions on the
Thermaltec stock. That holder will be entitled, however, to dividends or other
distributions payable to holders of record of Thermaltec stock as of a record
date prior to the date the merger is completed.
If any Thermaltec stockholder who properly demands appraisal of his or her
Thermaltec stock under Section 262 fails to perfect, or effectively withdraws or
loses, his or her right to appraisal as provided in Section 262, the stockholder
will continue to own his/her shares of Thermaltec common stock. A Thermaltec
stockholder will fail to perfect, or effectively lose or withdraw, his or her
right to appraisal if, among other things, no petition of appraisal is filed
within 120 days after the date the merger is completed, or if the Thermaltec
stockholder delivers to Thermaltec a written withdrawal of his or her demand for
appraisal. Any attempt to withdraw an appraisal demand more than 60 days after
the date the merger is completed will require the written approval of
Thermaltec.
Failure to follow the steps required by Section 262 for perfecting
appraisal rights may result in the loss of appraisal rights.
In view of the complexities of the foregoing provisions of the Delaware
appraisal rights statute, stockholders of Thermaltec who are considering
pursuing their dissenter's rights may wish to consult legal counsel before
electing to exercise such rights.
Rights of Dissenting Solar Communications Stockholders
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under Chapter 11 of the New Jersey Business Corporation
Act, as amended. Chapter 11 is reprinted in its entirety as Annex C to this
joint proxy statement/prospectus. Any Solar Communications stockholder who
desires to exercise his or her dissenters' rights should review carefully
Chapter 11 and is urged to consult a legal advisor before electing or
attempting to exercise their rights. All references in Chapter 11 to a
"shareholder" and in this summary to a "Solar Communications stockholder" or a
"holder of Solar Communications stock" are to the record holder of shares of
Solar Communications common stock as to which dissenters' rights are asserted.
Subject to the exceptions stated below, holders of record of Solar
Communications common stock who comply with the applicable procedures
summarized below will be entitled to payment of the fair value of such shares
under Chapter 11. Voting against, abstaining from voting or failing to vote on
approval and adoption of the proposed merger will not constitute a notice of
dissent or a demand for payment of fair value within the meaning of Chapter 11.
A person having a beneficial interest in Solar Communications stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect dissenters' rights.
Solar Communications stockholders electing to exercise dissenters' rights
under Chapter 11 must not vote for approval of the proposed merger. A vote by a
Solar Communications stockholder against approval of the proposed merger is not
required in order for such stockholder to exercise dissenters' rights. However,
if a Solar Communications stockholder returns a signed proxy but does not
specify a vote against approval and adoption of the proposed merger or a
direction to abstain, the proxy, if not revoked, will be voted for approval of
the proposed merger, which will have the effect of waiving such stockholder's
dissenters' rights.
Under Chapter 11, except as described below, holders of Solar
Communications stock who follow the procedures stated in Chapter 11 will be
entitled to receive payment in cash of the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or
expectation of the merger. Solar Communications stockholders who properly
perfect their rights will not be entitled to surrender their Solar
Communications stock for the shares of Thermaltec common stock that they would
otherwise have received for their stock in the merger.
Under Chapter 11, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, most notify each of its stockholders who was a stockholder on the
record date for the meeting with respect to shares for which dissenters' rights
are available,
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that such rights are so available and must include in the notice a copy of
Chapter 11. This joint proxy statement/prospectus constitutes such a notice to
the holders of Solar Communications stock and a copy of Chapter 11 is attached
as Annex C to this joint proxy statement/prospectus. Any Solar Communications
stockholder who wishes to exercise his or her dissenters' rights, or who wishes
to preserve his or her right to do so, should review the following discussion
and Annex C carefully because failure to timely and properly comply with the
procedures specified will result in the loss of dissenters' rights under
Chapter 11.
A holder of Solar Communications stock wishing to exercise his or her
dissenters' rights must:
(1) not vote in favor of approval of the proposed merger;
(2) deliver to Solar Communications, prior to the vote on the proposed
merger at the Solar Communications special meeting, a written notice
which reasonably informs Solar Communications of the identity of the
Solar Communications stockholder and that the Solar Communications
stockholder intends to demand payment of the fair value for all, but
not less than all, of his or her shares; and
(3) be the record holder of the Solar Communications stock on the date
the written notice of dissent is made.
Only a holder of record of Solar Communications stock is entitled to
assert dissenters' rights for the Solar Communications stock registered in the
holder's name. A notice of dissent should be executed by or on behalf of the
holder of record, fully and correctly, as the holder's name appears on the
holder's stock certificates. If the Solar Communications stock is owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the notice of dissent should be made in that capacity. If the
Solar Communications stock is owned of record by more than one person, as in a
joint tenancy or tenancy in common, the notice should be executed by or on
behalf of all joint owners. An authorized agent, including an agent for two or
more joint owners, may execute a notice of dissent on behalf of a holder of
record. The agent must identify the record owner or owners and expressly
disclose the fact that in executing the notice, the agent is agent for the
owner or owners. A record holder, such as a broker, who holds Solar
Communications stock as nominee for several beneficial owners may exercise
dissenters' rights with respect to such stock held for one or more beneficial
owners while not exercising the rights with respect to the stock held for other
beneficial owners. In that case, the written notice should state the number of
shares of Solar Communications stock as to which dissenters' rights are
asserted. Where no number of shares of Solar Communications stock is expressly
mentioned, the notice will be presumed to cover all Solar Communications stock
held in the name of the record owner. Stockholders who hold their Solar
Communications stock in brokerage accounts or other nominee forms and who wish
to exercise dissenters' rights are urged to consult with their brokers to
determine the appropriate procedures for the giving of a notice of dissent by
the nominee.
All written notices of dissent should be sent or delivered to Solar
Communications at:
Solar Communications Group, Inc.
1100 Coombs Road
Millville, New Jersey 08332-8217
Attention: Alisa A. Rossi, Secretary
Thermaltec will, within ten days after the date the merger is completed,
notify by certified mail each Solar Communications stockholder who has complied
with the statutory requirements summarized above that the merger has become
effective. Within 20 days after such notice is mailed, any Solar Communications
stockholder who has received such notice and who wishes to dissent must make a
written demand on Thermaltec for payment of the fair value of his Solar
Communications shares. Such written demand should be sent to Alisa A. Rossi at
the Solar Communications address listed above.
The dissenting stockholder must deliver his Solar Communications stock
certificate(s) to Thermaltec not later than 20 days after making such demand.
Thermaltec will endorse the certificate(s) with a legend to the effect that the
stockholder has demanded the fair cash value of the shares represented by the
certificate(s) before returning the certificate(s) to the stockholder. Such
dissenting stockholder will then immediately cease to have any of the rights of
a stockholder of Solar Communications except the right to be paid the fair
value of his shares and any other rights of a dissenting stockholder under
Chapter 11.
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Within ten days of the expiration of the period within which Solar
Communications stockholders may make written demand to be paid the fair value
of their shares, Thermaltec will mail to each dissenting stockholder, the
latest available Solar Communications 12-month profit and loss statement and a
balance sheet and surplus statement of Solar Communications, as of the close of
the 12-month period. The close of the profit and loss statement and the balance
sheet will be as of a date within 12 months prior to the mailing. Thermaltec
may, but need not, accompany the mailing with a written offer to pay each
dissenting stockholder for his shares at a specified price deemed by Solar
Communications to be the fair value thereof.
Unless the dissenting stockholder and Thermaltec agree on the fair cash
value per share of the Solar Communications common stock, within 30 days after
the ten day period described above, the stockholder may serve a written demand
on Thermaltec to commence an action in the Superior Court of New Jersey for the
determination of the fair value of his Solar Communications shares. The Solar
Communications stockholder's demand to commence an action must be served not
later than 30 days after the expiration of the 30-day period stockholders have
in which to agree upon a price with Thermaltec.
Thermaltec has 30 days after receipt of the Solar Communications
stockholder's demand to commence a proceeding in the New Jersey Superior Court.
If Thermaltec fails to institute such proceeding, such stockholder may
institute the proceeding in the name of Thermaltec within 60 days after the
expiration of Thermaltec's 30-day period.
If the New Jersey Superior Court finds that the stockholder is entitled to
be paid the fair cash value of his or her Solar Communications common stock,
the court may appoint an appraiser to receive evidence and to recommend a
decision on the amount of the fair cash value. The court will make a finding as
to the fair cash value of a share of Solar Communications common stock and
render judgment against Thermaltec for its payment with interest at a rate the
court finds to be equitable, from the date of the dissenting stockholder's
demand for payment to the date of payment. The costs and expenses of the
proceedings shall be assessed or apportioned as the court considers equitable.
The rights of any dissenting stockholder will terminate if:
(a) the dissenting stockholder has failed to present his certificate(s)
for notation within the time period specified in Chapter 11, unless a
court having jurisdiction, for good and sufficient cause shown, shall
otherwise direct;
(b) the dissenting stockholder withdraws his demand for payment with the
written consent of Thermaltec;
(c) Thermaltec and the dissenting stockholder have not agreed upon the
fair cash value per share of the Solar Communications common stock
and neither has timely filed or joined in a petition in the New
Jersey Superior Court for a determination of the fair cash value of
the Solar Communications common stock;
(d) the New Jersey Superior Court determines that the stockholder is not
entitled to payment for his shares;
(e) Solar Communications abandons or rescinds the merger agreement; or
(f) a court having jurisdiction permanently enjoins or sets aside the
merger.
Failure to follow the steps required by Chapter 11 for perfecting
dissenters' rights may result in the loss of dissenters' rights. In that event
a Solar Communications stockholder will be entitled to receive the number of
shares of Thermaltec common stock receivable with respect to his Solar
Communications stock in accordance with the terms of the proposed merger.
In view of the complexities of the foregoing provisions of the New Jersey
dissenters' rights statute, stockholders of Solar Communications who are
considering pursuing their dissenters' rights may wish to consult legal counsel
before electing to exercise such rights.
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THE MERGER AGREEMENT
The following is a brief summary of the material terms of the merger
agreement which will govern the proposed merger between Solar Communications
and Thermaltec. A complete copy of the merger agreement, which is entitled
"Agreement and Plan of Reorganization," is attached to this joint proxy
statement/prospectus as Annex A. You are urged to read the merger agreement
carefully.
The Merger
The merger agreement provides that Solar Communications will be merged
with and into Thermaltec. Thermaltec will operate under the name "Solar
Communications Group, Inc." Following the merger, Thermaltec will conduct only
the business conducted by Solar Communications immediately prior to the merger.
At the time the merger is completed, the current officers and directors of
Thermaltec will resign and the surviving company will be managed by the current
officers and directors of Solar Communications.
Following approval of the merger by the stockholders of both companies and
the satisfaction of certain other conditions set forth in the merger agreement,
Solar Communications and Thermaltec will complete the merger. This will be done
by filing (a) a Certificate of Merger with the Delaware Secretary of State, and
(b) a Certificate of Merger with the New Jersey Department of Revenue. The
completion of the merger is anticipated to occur on or before October 31, 1999.
Conversion of Shares; No Fractional Amounts
At the time the merger is completed, each share of Solar Communications
common stock, other than shares owned by stockholders who perfect their
dissenters' rights under New Jersey law, will automatically be converted into
10,000 shares of Thermaltec common stock. A total of 59,500,000 shares of
Thermaltec common stock will be issued. The stockholders of Solar
Communications will own 95.8% of the outstanding shares of Thermaltec common
stock following the merger.
No fractional shares of Thermaltec common stock will be issued in the
merger and no cash will be paid for fractional shares. ln lieu of the issuance
of fractional shares, the number of shares of Thermaltec common stock to be
issued to each Solar Communications stockholder will be rounded off to the
nearest whole number. Fractional shares of less than one-half of one share will
be rounded down to the nearest whole number. Fractional shares of one-half or
more will be rounded up to the nearest whole number.
Following the merger, Thermaltec, acting through Manhattan Transfer
Registrar Co. as its exchange agent, will deliver to each Solar Communications
stockholder of record as of such date a letter of transmittal with instructions
to be used by such stockholder in surrendering their Solar Communications
certificates. Certificates should not be surrendered by the holders of Solar
Communications common stock until such holders receive the letter of
transmittal from the exchange agent.
Treatment of Solar Communications Stock Options
Under the merger agreement, all outstanding options to acquire shares of
Solar Communications common stock issued pursuant to the Solar Communication
1999 Stock Option Plan will be converted into options to purchase Thermaltec
common stock. Following the merger, each outstanding Solar Communications stock
option will be automatically adjusted to provide that:
o the number of shares of Thermaltec common stock which will be issued
upon the exercise of the option will be equal to the number of shares
of Solar Communications common stock which would have been issued upon
exercise of the option immediately before the completion of the merger,
multiplied by 10,000 (rounded off to the nearest whole number);
o the exercise price per share of Thermaltec common stock under the
option will be equal to the exercise price per share of Solar
Communications common stock under the option immediately before the
completion of the merger, divided by 10,000 (rounded up to the nearest
whole cent); and
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o the option will be governed by the terms and provisions of the
Thermaltec 1999 Stock Option Plan.
The terms and provisions of the Solar Communications 1999 Stock Option
Plan are identical to the terms and provisions of the Thermaltec 1999 Stock
Option Plan.
Conduct Following the Merger
Once the merger is completed, Solar Communications will cease to exist as
a corporation. All of the business, assets, liabilities and obligations of
Solar Communications will be merged into Thermaltec, with Thermaltec remaining
as the surviving company. Following the merger, Thermaltec will continue to
operate the business conducted by Solar Communications prior to the merger and
will change its corporate name to "Solar Communications Group, Inc." The
stockholders of Solar Communications will become stockholders of Thermaltec,
and their rights as stockholders will be governed by the Thermaltec Certificate
of Incorporation and the laws of the state of Delaware. See "Comparison of
Stockholders Rights."
Pursuant to the merger agreement, the certificate of incorporation of
Thermaltec in effect immediately prior to the merger will govern the operations
of the surviving company (subject to the change in the name of Thermaltec to
"Solar Communications Group, Inc.") and the by-laws of Thermaltec will be the
by-laws of the surviving company. Following the merger, the board of directors
of the surviving company will consist of the five directors who were serving as
directors of Solar Communications immediately prior to the merger, until their
respective successors are duly elected or appointed and qualified. The officers
of Solar Communications immediately prior to the merger will serve as officers
of the surviving company, until their successors are duly appointed.
Immediately following the completion of the merger, the sole director and
officer of Thermaltec, Andrew B. Mazzone, will resign.
Conduct of Business Pending the Merger
The merger agreement contains various provisions which govern the actions
of Thermaltec and Solar Communications until the merger is completed or the
merger agreement is terminated. These provisions require each of Thermaltec and
Solar Communications to take actions or to refrain from taking actions with
respect to various matters including:
o Solar Communications conducting its business in the ordinary course
consistent with past practices;
o Thermaltec conducting its business in the ordinary course consistent
with past practices; and
o the parties using their reasonable best efforts to complete the merger
at the earliest practicable date.
To completely understand all of the various covenants and agreements
contained in the merger agreement, you should carefully read the merger
agreement which is attached to this joint proxy statement/prospectus as Annex
A.
Representations and Warranties
The merger agreement contains statements and promises made by Thermaltec
about itself called representations and warranties. In addition, the merger
agreement contains representations and warranties made by Solar Communications.
You can review the representations and warranties contained in the merger
agreement attached to this joint proxy statement/prospectus as Annex A.
Conditions to the Merger
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions, including, among other things, that:
o the merger shall have been approved by Thermaltec's and Solar
Communications' stockholders;
o no lawsuit, judgment or new law shall exist which seeks to or does
prohibit or restrain the merger or which seeks damages as a result of
the merger;
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o Solar Communications shall have received a confirming opinion from its
legal counsel regarding the material federal income tax consequences of
the merger;
o Thermaltec shall have received a confirming opinion from its legal
counsel regarding the material federal income tax consequences of the
merger and the spin-off;
o the representations and warranties of the parties may not be false or
misleading in any material respect; and
o the absence of any material adverse change or material casualty loss
affecting either Thermaltec or Solar Communications or their respective
business, assets or financial condition.
Any of these conditions, other than the requirement for stockholder
approval, may be waived by the parties. However, if any material condition is
waived by the parties following the receipt of stockholder approval for the
merger, we would resolicit stockholder approval for the merger.
To review all of the conditions to the merger, you should read the merger
agreement which is attached to this joint proxy statement/prospectus as Annex
A.
Termination of the Merger Documents
At any time before the merger is completed, whether or not the proposed
merger has been approved by Solar Communications' stockholders or Thermaltec's
stockholders, the merger documents may be terminated and the merger abandoned
by:
o the mutual written consent of Thermaltec and Solar Communications,
authorized by their respective boards of directors;
o written notice from Thermaltec to Solar Communications, or from Solar
Communications to Thermaltec, if it becomes certain, for all practical
purposes, that any of the conditions to the closing obligations of the
party giving the notice cannot be satisfied on or before December 31,
1999, for any reason other than the party's default, and the party is
not willing to waive the satisfaction of the condition; or
o written notice from Thermaltec to Solar Communications, or from Solar
Communications to Thermaltec, if the closing does not occur on or
before December 31, 1999 for any reason other than a breach of the
merger agreement by the party giving the notice.
Indemnification
Under the terms of the merger agreement, neither Solar Communications nor
the surviving company will assume, be subject to, or otherwise be responsible
for any of the debts, liabilities or obligations of Thermaltec existing or
arising at or prior to the time the merger is completed. Andrew B. Mazzone, as
the sole officer and director and principal shareholder of Thermaltec, has
agreed, subject to certain limitations, to personally indemnify and hold
harmless Solar Communications and the surviving company, and their respective
officers, directors, shareholders, employees, agents, representatives,
successors and assigns.
The indemnification being provided by Mr. Mazzone covers any loss, cost,
damage or expense (including reasonable attorneys' fees) arising from or
related to any claim, litigation, lawsuit or proceeding relating to or arising
from any of the following:
(1) any misrepresentation or breach of any covenant, warranty or
agreement made by Thermaltec or Mr. Mazzone in the merger agreement
or any document delivered in connection with the merger;
(2) the conduct of Thermaltec's business at or prior to the time the
merger is completed; or
(3) any debt, liability or obligation of Thermaltec existing or arising
at or prior to the time the merger is completed.
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Mr. Mazzone, at or prior to the merger, will provide Solar Communications
with collateral, consisting of:
(1) either real estate or marketable securities (other than securities
issued by Thermaltec) having a fair market value of not less than
$250,000.00 (after deducting the aggregate outstanding balance of all
indebtedness or other obligations the repayment or performance of
which is secured by a lien on or security interest in such real
estate or marketable securities) and otherwise acceptable to Solar
Communications in its sole discretion, and
(2) a pledge of all of the outstanding securities issued by Thermaltec
and owned by Mr. Mazzone on the date the merger agreement was
executed. The pledged Thermaltec securities must consist of at least
1,425,000 shares of Thermaltec common stock.
The collateral will secure the payment and performance of Mr. Mazzone's
indemnification obligations with respect to any claim for which Thermaltec,
Solar Communications or the surviving company first receives notice prior to
the second anniversary of the date on which the merger is completed. The
aggregate amount for which Mr. Mazzone is liable with respect to all claims for
which indemnification may be sought under the merger agreement is $2 million.
Ownership of Thermaltec Following the Merger
As a result of the merger, the holders of Solar Communications common
stock, other than those who exercise their statutory dissenters' rights, will
become stockholders of Thermaltec. Upon completion of the merger, each
outstanding share of Solar Communications stock, except for shares owned by
Solar Communications stockholders who perfect their statutory dissenters'
rights, will be converted into the right to receive 10,000 shares of Thermaltec
common stock.
Thermaltec will issue approximately 59,500,000 shares of Thermaltec common
stock to Solar Communications stockholders in connection with the merger. Based
upon the number of shares of Thermaltec common stock issued and outstanding on
the Thermaltec record date and the number of shares of Thermaltec common stock
anticipated to be issued in the merger, the shares of Thermaltec common stock
issued to Solar Communications stockholders in the merger will constitute
approximately 95.8% of the outstanding shares of common stock of Thermaltec
after the merger.
As previously noted, holders of outstanding Solar Communications Group
options, at the time the merger is completed, will receive options to purchase
up to 5,000,000 shares of Thermaltec common stock. Assuming the exercise of all
of these Thermaltec stock options after the merger, Solar Communications
stockholders will own approximately 96.2% of the fully diluted common stock of
Thermaltec.
Management of Thermaltec Upon Consummation of the Merger
When the merger is completed, Thermaltec will be managed by the current
directors and officers of Solar Communications. See "Management of Solar
Communications." At the time the merger is completed, the sole director and
officer of Thermaltec, Andrew B. Mazzone, will resign.
Regulatory Approvals
The merger must satisfy the requirements of all applicable federal and
state securities laws.
Affiliate Agreements
It is a condition to the closing obligation of Thermaltec that it receive
from each affiliate of Solar Communications an affiliate agreement stating,
among other things, that the affiliate acknowledges the resale restrictions
imposed by Rule 145 under the Securities Act of 1933 on the shares of
Thermaltec common stock to be received by them in the merger. See "The Plan of
Merger and Related Transactions -- Restrictions on Resale of Thermaltec Common
Stock."
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INFORMATION CONCERNING THERMALTEC
Business
Thermaltec does not conduct any business activities at this time.
Thermaltec transferred substantially all of its assets, and all of its ongoing
business operations and liabilities on May 17, 1999, to its wholly-owned
subsidiary, Panama Industries. The only assets retained by Thermaltec were (1)
$300.00 in cash, (2) $58,000.00 on deposit with Thermaltec's transfer agent
representing proceeds received by Thermaltec pursuant to the exercise of
certain outstanding common stock purchase warrants, and (3) a net operating
loss carry-forward of approximately $1.13 million. See "Information Concerning
Panama Industries -- Business."
Employees
Thermaltec does not presently have any employees. All previous employees
of Thermaltec have been transferred to Panama Industries. See "Information
Concerning Panama Industries -- Employees."
Properties
Thermaltec does not presently own or lease any properties. Thermaltec
maintains its principal executive offices at 68A Lamar Street, West Babylon,
New York 11704, in space leased by Panama Industries. Following the competition
of the merger, it is contemplated that Thermaltec's principal executive offices
will be moved to Solar Communications' offices located at 1100 Coombs Road,
Millville, New Jersey 08332.
Legal Proceedings
Thermaltec is not a party to any legal proceedings which, if adversely
decided, would reasonably be expected to have a material adverse effect on the
financial condition of Thermaltec.
DESCRIPTION OF THERMALTEC'S SECURITIES
Thermaltec Common Stock
Thermaltec has authorized capital stock consisting of 100,000,000 shares
of common stock, par value $.0001 per share. As of the date of this joint proxy
statement/prospectus, 2,578,118 shares of Thermaltec common stock are issued
and outstanding, and 10,000,000 shares are reserved for issuance pursuant to
Thermaltec's 1999 Stock Option Plan. No options have been granted, as of the
date hereof, under the Thermaltec 1999 Stock Option Plan.
The following is a description of the material terms of the Thermaltec
common stock. The rights of the holders of shares of Thermaltec's common stock
are established by Thermaltec's certificate of incorporation, Thermaltec's
by-laws and Delaware law.
The holders of Thermaltec's common stock have no preemptive or
subscription rights in later offerings of Thermaltec common stock. The holders
of Thermaltec's common stock are entitled to share ratably (a) in such
dividends as may be declared by the board of directors out of funds legally
available for such purpose, and (b) upon liquidation, in all assets of
Thermaltec remaining after payment in full of all debts and obligations of
Thermaltec and any preferences granted in the future to any holder of preferred
stock.
Holders of Thermaltec common stock are entitled to one vote for each share
held and have no cumulative voting rights. Accordingly, the holders of more
than 50% of the issued and outstanding shares of Thermaltec common stock
entitled to vote for the election of directors can elect all the directors of
Thermaltec if they choose to do so.
All shares of Thermaltec common stock now outstanding, including the
shares of Thermaltec common stock to be issued to the Solar Communications
stockholders in connection with the merger, are (or will be upon issuance)
fully paid and nonassessable. The board of directors of Thermaltec is
authorized to issue additional shares of Thermaltec common stock within the
limits authorized by Thermaltec's certificate of incorporation without
shareholder action.
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Holders of Thermaltec common stock are entitled to receive such dividends
as may be declared from time to time by the Thermaltec board of directors out
of funds legally available therefor, subject to the terms of any existing or
future agreements between Thermaltec and its debtholders. Thermaltec has never
declared or paid cash dividends on its capital stock, expects to retain future
earnings, if any, for use in the operation and expansion of its business, and
does not anticipate paying any cash dividends in the foreseeable future.
Shares Available For Future Sale
Thermaltec currently has 2,578,118 shares of common stock outstanding (up
to 2,771,518 shares if all the currently outstanding warrants are exercised).
Of these shares, 860,350 shares are freely tradeable without restriction or
further registration under the Securities Act of 1933, except for any shares
purchased by an "affiliate" of Thermaltec (in general, a person who has a
control relationship with Thermaltec) which will be subject to the limitations
of Rule 144 adopted under the Securities Act of 1933. All other outstanding
shares of Thermaltec common stock are "restricted securities" and have not been
registered under the Securities Act of 1933. These "restricted securities" may
not be sold unless registered under the Securities Act of 1933 or sold pursuant
to an exemption from registration, such as the exemption provided by Rule 144.
Under Rule 144 as currently in effect, a person, including an affiliate of
Thermaltec (or persons whose shares are aggregated with an affiliate of
Thermaltec), who has owned restricted shares of Thermaltec common stock
beneficially for at least one year is entitled to sell within any three-month
period, a number of shares that does not exceed the greater of:
(a) 1% of the total number of outstanding shares of the same class
(approximately 25,781 shares assuming only the presently issued
shares of Thermaltec are outstanding); or
(b) the average weekly trading volume of Thermaltec's common stock on all
exchanges and/or reported through the automated quotation system of a
registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of public information
about Thermaltec. A person who has not been an affiliate of Thermaltec for at
least the three months immediately preceding the sale, and who has beneficially
owned his shares of Thermaltec common stock for at least two years, is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above.
Thermaltec has also reserved 10,000,000 shares of Thermaltec common stock
for issuance pursuant to the exercise of options granted under the Thermaltec
1999 Stock Option Plan. No options have been granted, as of the date hereof,
pursuant to the Thermaltec 1999 Stock Option Plan. Pursuant to the terms and
provisions of the merger agreement, following the merger, Thermaltec will
assume all options outstanding under the Solar Communications 1999 Stock Option
Plan. There are 5,000,000 options (adjusted to reflect the conversion ratio in
the merger) outstanding under the Solar Communications 1999 Stock Option Plan
as of the date hereof. Thermaltec intends to register the 10,000,000 shares
reserved for issuance upon exercise of stock options granted pursuant to the
Thermaltec 1999 Stock Option Plan.
Transfer Agent
The transfer agent for the Thermaltec common stock is Manhattan Transfer
Registrar Co., 58 Dorchester Road, Lake Ronkonkoma, New York 11779.
Thermaltec Warrants
As of the date of this joint proxy statement/prospectus, there were
193,400 Thermaltec common stock purchase warrants outstanding, held of record
by 11 persons. Each warrant entitles the registered holder thereof to purchase
one share of Thermaltec common stock, at a price of $1.00 per share, subject to
adjustment in certain circumstances, on or before June 2, 2000. Any share of
Thermaltec common stock issued pursuant to the exercise of a warrant would be a
restricted security. Such shares may not be sold unless registered under the
Securities Act of 1933 or sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144.
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Price Ranges of Thermaltec Common Stock
Thermaltec's common stock is quoted on the OTC Bulletin Board under the
symbol "THRM." The following table sets forth the range of the high and low bid
quotations of the Thermaltec common stock on the OTC Bulletin Board for the
periods indicated:
High Low
------------ ------------
THREE MONTHS ENDED
December 31, 1996 .......... $ 1.500 $ 1.245
March 31, 1997 ............. 1.563 .494
June 30, 1997 .............. 1.000 .347
September 30, 1997 ......... .874 .500
December 31, 1997 .......... 1.248 .688
March 31, 1998 ............. .968 .341
June 30, 1998 .............. 1.063 .500
September 30, 1998 ......... .751 .247
December 31, 1998 .......... 4.926 .235
March 31, 1999 ............. 5.770 2.509
June 30, 1999 .............. 17.465 6.015
The above quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not necessarily represent actual
transactions.
PRINCIPAL STOCKHOLDERS OF THERMALTEC
The following table provides information regarding the beneficial
ownership of Thermaltec's capital stock as of September 7, 1999 and following
the merger by:
o each person who is known by Thermaltec to beneficially own 5% or more
of any class of Thermaltec's capital stock;
o each of Thermaltec's directors;
o Thermaltec's chief executive officer and each of the other four most
highly compensated executive officers of Thermaltec; and
o all of Thermaltec's directors and executive officers as a group:
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Owned
as of August 25, 1999 following the Merger
----------------------- ----------------------
Name and Address of Beneficial Owner No. Percent No. Percent
- -------------------------------------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C>
Andrew B. Mazzone, 1,098,500 42.4% 1,098,500 1.8%
Sole Director and Officer
c/o Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Thomas Klein 465,300 18.0% 465,300 0.7%
c/o Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
All Directors and Officers 1,098,500 42.4% 1,098,500 1.8%
as a Group (1 person)
</TABLE>
In the preceding table, percentage ownership following the merger assumes
that Thermaltec will issue 59,500,000 shares in the merger, and that no
outstanding options or warrants will be exercised prior to the merger.
The shares listed as being beneficially owned by Mr. Mazzone include
12,000 shares which may be acquired upon the exercise of certain common stock
purchase warrants issued by Thermaltec to Mr. Mazzone. The shares listed as
being beneficially owned by Mr. Klein include 1,400 shares which may be
acquired upon the exercise of certain common stock purchase warrants issued by
Thermaltec to Mr. Klein, and 450,000 shares owned by Mr. Klein's two adult
children (as to which Mr. Klein disclaims beneficial ownership).
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INFORMATION CONCERNING PANAMA INDUSTRIES
Business
Panama Industries was incorporated on March 2, 1998 under the laws of the
State of Delaware. It is engaged in the thermal spray coating industry and its
primary business objective is to establish and support thermal spray coating
shops throughout Latin America.
Thermal spraying is a technology used by Panama Industries to coat a
substrate with various materials -- such as metals, alloys, carbides, ceramics,
and some plastics. The coating material utilized depends upon the requirements
of each specific application.
The coatings utilized by Panama Industries are produced from materials in
the form of either wire or powder. The material is melted in a flame or heat
source, and projected onto the substrate by a mixture of air flammable gases to
form the coating. The air, flammable gases and coating are brought together in
a flame in the nozzle of the gun where the coating is melted and sprayed
forward with the flame gases onto the surface to be coated. The gases and
molten coating are cooled by the surface and the coating adheres to the
surface.
Thermal spray coating technology can be utilized in any situation in which
metal surfaces are worn from use or exposed to erosion or corrosion. A few of
the most common applications include the rebuilding of mechanical parts, the
protection of pipes (inside and outside) from corrosion, and the repair of
crankshafts, turbine blades and pumps.
In the opinion of Panama Industries' management, there is a substantial
need for this kind of technology in developing countries. Such countries
typically lack a developed industrial infrastructure, and due to economic
considerations, equipment is used for relatively extended periods of time, and
needs to be refurbished from time to time. South American, Asian, and
developing countries are best suited for the company's stand-alone thermal
spray stops. It will give the owner or co-venture the ability to immediately
begin operations with a stand-alone shop drop-shipped to the place of
operations. With some hands on training provided by Panama Industries, the shop
keeper is in business.
Panama Industries anticipates using one of the following three
arrangements to market its thermal spray coating products and services in Latin
America:
(1) Panama Industries, or a wholly-owned subsidiary, will lease space,
purchase the necessary equipment, hire and train employees, and provide
thermal spray coating services directly to customers.
(2) Panama Industries, or a wholly-owned subsidiary, will lease the
necessary facilities and equipment to a local partner for an annual fee.
Panama Industries would provide the local partner with all necessary
training regarding the thermal spray coating technology.
(3) Panama Industries, or a wholly-owned subsidiary, will enter into a
joint venture relationship with a local partner. Panama Industries or its
subsidiary would provide the necessary technology and equipment. The joint
venture would provide the necessary facility and employees.
Competition
Panama Industries' primary competitors will be the traditional
manufacturers of thermal spray equipment and supplies (i.e. Sulzer Metco,
Westbury, New York. Eutectic Corporation, Flushing, New York, Praxair Inc.
Danbury, Connecticut, H.C. Stark, Newton, Massachusetts, Miller Thermal, Inc.,
Appleton, Wisconsin, Hobbart Tafa Technologies, Concord, New Hampshire).
Although primarily engaged in selling equipment and supplies, the manufacturers
may ultimately shift their strategy to become prime users of the process.
Economic trends have caused the manufacturers of equipment and supplies to lose
profits to the users of the thermal spray process who, in turn, use such
equipment and supplies to apply a coatings service for their customers. The
strong value-added capability in the thermal spray marketplace primarily rests
with the coating service people, not the manufacturer of equipment and
supplies.
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Panama Industries intends to operate smaller shops in diversified
industries to both avoid intense competition and to take advantage of the
flexibility of its structure to capture those opportunities which the
management of larger corporations traditionally shy away from. Panama
Industries intends to deploy equipment and expertise in conjunction with a
local partner in a given country to develop a required facility.
Although Panama Industries will have principal potential competitors,
Panama Industries believes that its willingness to work with local operations
in developing countries to provide equipment without charge, and to provide
on-site technical support will assure that it is not in competition with its
suppliers. Panama Industries intends to position itself as a "value added
reseller". Panama Industries will, however, be in competition with a number of
other companies which supply thermal spray coating equipment, coating materials
and expertise to operations in developing countries. Panama Industries believes
that it can compete with other value-added resellers based on its superior
products, technical expertise and financial terms which are supportive of
start-up operations.
Employees
As of September 7, 1999, Panama Industries employed 18 full-time
employees. None of these employees are covered by a collective bargaining
agreement. Management of Panama Industries believes that its employee relations
are satisfactory.
Properties
Panama Industries' United States facility is located at 68A Lamar Street,
West Babylon, New York 11704. This space consists of 300 square feet of office
space and 1,700 square feet of shop space which is utilized to conduct the
company's spray coating business. The space is leased on a month-to-month basis
for $1,000 per month.
Panama Industries also leases 8,000 square feet of space in San Jose,
Costa Rica. This space consists of 1,000 square feet of office space and 7,000
square feet of spray and machine shop space. The lease commenced in January,
1997 and has a five year term. Rental payments under the lease are $1,500 per
month, subject to adjustment for cost of living increases.
Management of Panama Industries believes that, in general, its physical
properties are well maintained, in good operating condition and adequate for
the company's present purposes. As the need arises, Panama Industries intends
to lease office and shop space in other areas of Latin America. Management of
Panama Industries believes that such space is readily available, on
commercially reasonable terms.
Legal Proceedings
Panama Industries is not a party to any legal proceedings which, if
adversely decided, would reasonably be expected to have a material adverse
effect on the financial condition of Panama Industries.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THERMALTEC
Results of Operations
June 1999 vs. June 1998
For the nine months ended June 30, 1999, Thermaltec had $ 172 thousand of
consolidated sales, compared to $ 247 thousand in the prior years' comparative
period. The operating deficit for the period was $ 173 thousand, a reduction of
49% from the deficit of the same period of 1998.
Operations reported on terminated on May 28, 1999 as all of the assets and
liabilities of Thermaltec were transferred to a wholly-owned subsidiary which
was, in turn, spun off to shareholders of record as of that date. A resumption
in March of 1999 of the funded research project for the New York State Energy
Research &
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Development Authority and increased sales to customers in South Carolina
partially offset reduced sales in the New York region commercial market and
lost business in Costa Rica. The latter was due to an earlier than expected
onset of the rainy season in Central America in June of 1999. Thermaltec
expects to recoup most of that shortfall during the coming months.
Thermaltec reduced its operating deficit primarily due to across the
board reductions in selling expense and in administrative expense in both the
United States and Costa Rica and the closing of Thermaltec's pilot operation
in Puerto Rico. Thermaltec continued to build its customer list in Central
America by expanding coverage to the west coast of Costa Rica. Thermaltec has
begun to extend its coverage into the Republic of Panama, although cumulative
sales to this market are nominal at this time.
The operations of Thermaltec remain essentially unaffected by the
spinning out to its shareholders of the shares of Panama Industries and
the consequent name change. The change in the name of the firm has not had any
discernible effect on the business in the United States. In Central America,
Thermaltec continues to operate through the wholly-owned subsidiary of
Thermaltec de Costa Rica, S.A. Thermaltec transferred its 100% ownership in
that subsidiary to Panama Industries. Thermaltec anticipates that the
change in ownership will have no effect in the Central American market.
1998 vs. 1997
During 1998, sales declined by 38% from the prior years' level to $ 276
thousand, primarily reflecting the winding down of the first phase of a funded
research project for the New York State Energy Research & Development
Authority, begun in February 1996. The project called for Thermaltec to develop
alternative metallurgical coating processes to chrome plating. The latter
process, used for both high-hardness coatings and for decorative purposes, is
highly toxic and presents industry with severe problems of air pollution,
ground water contamination and toxic waste disposal. Thermaltec's assigned goal
was to investigate existing technologies that had a potential for replacing the
technology of chrome plating and to work with technology partners to develop
new equipment and operating parameters. Phase I of the project was completed in
December of 1997, for a project total of $ 495 thousand in billings; the second
phase of the project, with a total funding of $ 89 thousand, did not begin
until March 1999, resulting in a one year depression in Thermaltec's sales.
Offsetting the decline in the United States, revenues in Costa Rica expanded by
$ 78 thousand as Thermaltec expanded its penetration of the industrial,
agricultural, and power generation markets.
Operating expenses during 1998 increased by 9% despite the overall decline
in sales, as Thermaltec continued to invest in the building of its
infrastructure in Costa Rica. Thermaltec continued to carry the expenses of
the operations in the Dominican Republic and in Puerto Rico until they were
terminated in February and May of 1998, respectively. Operating expenses at
Thermaltec de Costa Rica were reduced for the year by $17 thousand, reflecting
the non-repetition of one-time moving costs in the prior year of the Costa
Rican operation to a larger facility.
Liquidity and Financial Resources
Thermaltec has not achieved profitability since its inception in 1994. As
a result, it is limited in the amount of debt it can or would wish to incur;
instead, it has relied on the sale of equity to fund its development to date.
Debt outstanding as of June 30, 1999 consists primarily of $ 25 thousand of a
bank note and the remainder in equipment financing; all of that debt has been
obtained with personal guarantees by Thermaltec's president, Andrew Mazzone.
Since inception, Thermaltec has received an aggregate of $ 1.1 million from
the sale of equity.
A close review of business operations at June 30, 1999 indicates that
despite past losses, Thermaltec remains viable, with good prospects for
expansion in both the United States and in Central America. Thermaltec
anticipates contracts for applying corrosion protection coatings on two bridges
for the New York State Department of Transportation and is installing improved
quality control and cost accounting systems at Thermaltec de Costa Rica.
Year 2000 Compliance
The operations of the predecessor business of Thermaltec, already
transferred to Panama Industries, is not highly vulnerable to disruption due to
the "Y2K" problem. Thermaltec is in the process of replacing entirely its
computer hardware and accompanying software and expects that to be completed
before the end of October,
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1999. In the opinion of management, all reasonable steps have been or will have
been taken, to insulate Thermaltec from "Y2K" disruption. The management of
Thermaltec has been advised that the financial institutions upon which it
relies for banking and insurance services have also taken all appropriate steps
to protect their respective service delivery capability.
Inflation
The amounts presented in the financial statements do not provide for the
effect of inflation on Thermaltec's operations or its financial position.
Amounts shown for machinery, equipment and leasehold improvements and for costs
and expenses reflect historical cost and do not necessarily represent
replacement cost. The net operating losses shown would be greater than reported
if the effects of inflation were reflected either by charging operations with
amounts that represent replacement costs or by using other inflation
adjustments.
Applicability to Panama Industries, Inc.
The foregoing applies to Thermaltec and to its successor company, Panama
Industries, which continues unchanged in the marketplace, except as noted above.
PANAMA INDUSTRIES COMMON STOCK
General
Panama Industries has authorized capital stock consisting of 10,000,000
shares of common stock, par value $.0001 per share. As of the date of this
joint proxy statement/prospectus, 2,578,118 shares of Panama Industries common
stock are issued and outstanding. All of such shares are owned by Thermaltec
and will be distributed, on a pro rata basis, to Thermaltec's stockholders of
record as of May 28, 1999 in the spin-off. In addition, Panama Industries has
reserved 193,400 shares of its common stock for issuance pursuant to the
exercise of the outstanding Thermaltec common stock purchase warrants. Panama
Industries will not receive any type of consideration for the issuance of such
shares.
The following is a description of the material terms of the Panama
Industries common stock. The rights of the holders of shares of Panama
Industries common stock are established by Panama Industries' certificate of
incorporation, Panama Industries' by-laws and Delaware law.
The holders of Panama Industries common stock have no preemptive or
subscription rights in later offerings of Panama Industries common stock. The
holders of Panama Industries common stock are entitled to share ratably (a) in
such dividends as may be declared by the board of directors out of funds
legally available for such purpose, and (b) upon liquidation, in all assets of
Panama Industries remaining after payment in full of all debts and obligations
of Panama Industries and any preferences granted in the future to any holder of
preferred stock.
Holders of Panama Industries common stock are entitled to one vote for
each share held and have no cumulative voting rights. Accordingly, the holders
of more than 50% of the issued and outstanding shares of Panama Industries
common stock entitled to vote for the election of directors can elect all the
directors of Panama Industries if they choose to do so.
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All shares of Panama Industries common stock now outstanding, including
the shares of Panama Industries common stock to be issued to Thermaltec
stockholders in connection with the spin-off, are (or will be upon issuance)
fully paid and nonassessable. The board of directors of Panama Industries is
authorized to issue additional shares of Panama Industries common stock within
the limits authorized by Panama Industries' certificate of incorporation
without shareholder action.
Holders of Panama Industries common stock are entitled to receive such
dividends as may be declared from time to time by the Panama Industries board
of directors out of funds legally available therefor, subject to the terms of
any existing or future agreements between Panama Industries and its
debtholders. Panama Industries has never declared or paid cash dividends on its
capital stock, expects to retain future earnings, if any, for use in the
operation and expansion of its business, and does not anticipate paying any
cash dividends in the foreseeable future.
Shares Available For Future Sale
Panama Industries currently has 2,578,118 shares of common stock
outstanding (up to 2,771,518 shares if all the currently outstanding Thermaltec
common stock purchase warrants are exercised). All outstanding shares of Panama
Industries common stock, including the shares to be issued to Thermaltec
stockholders in the spin-off, are "restricted securities" and have not been
registered under the Securities Act of 1933. These "restricted securities" may
not be sold unless registered under the Securities Act of 1933 or sold pursuant
to an exemption from registration, such as the exemption provided by Rule 144.
Under Rule 144 as currently in effect, a person, including an affiliate of
Panama Industries (or persons whose shares are required to be added to shares
owned by an affiliate of Panama Industries), who has owned restricted shares of
Panama Industries common stock beneficially for at least one year is entitled
to sell within any three-month period, a number of shares that does not exceed
the greater of:
(a) 1% of the total number of outstanding shares of the same class
(approximately 25,781 shares assuming only the presently issued
shares of Panama Industries are outstanding); or
(b) the average weekly trading volume of Panama Industries' common stock
on all exchanges and/or reported through the automated quotation
system of a registered securities association during the four
calendar weeks preceding the date on which notice of the sale is
filed with the SEC.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of public information
about Panama Industries. A person who has not been an affiliate of Panama
Industries for at least the three months immediately preceding the sale, and
who has beneficially owned his shares of Panama Industries common stock for at
least two years, is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.
Transfer Agent
The transfer agent for the Panama Industries common stock is Manhattan
Transfer Registrar Co., 58 Dorchester Road, Lake Ronkonkoma, New York 11779.
PRINCIPAL STOCKHOLDERS OF PANAMA INDUSTRIES
All of the outstanding shares of the capital stock of Panama Industries
are currently owned by Thermaltec. The following table provides information
regarding the beneficial ownership of Panama Industries' capital stock
following the completion of the spin-off by:
o each person who, to the knowledge of Panama Indsutries, will
beneficially own 5% or more of any class of Panama Industries' capital
stock;
o each of Panama Industries' directors;
o Panama Industries' chief executive officer and each of the other four
most highly compensated executive officers of Panama Industries; and
o all of Panama Industries' directors and executive officers as a group:
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Shares Beneficially Owned
following the Spin-Off
Name and Address ------------------------
of Beneficial Owner No. Percent
- ---------------------------------------------- ----------- ----------
Andrew B. Mazzone, 1,098,500 42.7%
Chairman of the Board and Director
c/o Panama Industries, Ltd.
68A Lamar Street
West Babylon, New York 11704
Thomas Klein 465,300 18.1%
President, Secretary, Treasurer and Director
c/o Panama Industries, Ltd.
68A Lamar Street
West Babylon, New York 11704
All Directors and Officers 1,563,800 60.3%
as a Group (2 persons)
The shares listed as being beneficially owned by Mr. Mazzone include
12,000 shares which may be acquired upon the exercise of certain common stock
purchase warrants issued by Thermaltec to Mr. Mazzone. The shares being listed
as beneficially owned by Mr. Klein include 1,400 shares of Panama Industries
common stock which may be acquired upon the exercise of certain common stock
purchase warrants issued by Thermaltec to Mr. Klein, and 450,000 shares owned
by Mr. Klein's two adult children (as to which Mr. Klein disclaims beneficial
ownership).
INFORMATION CONCERNING SOLAR COMMUNICATIONS
Business
General. Solar Communications is headquartered in Millville, New Jersey.
Solar Communications is a New Jersey corporation which was organized on October
7, 1996.
Solar Communications is in the process of developing a proprietary group
of products and services known as "PCRoomLink." PCRoomLink will connect
travelers worldwide through a system of personal computers with high-speed
Internet access that will be installed in hotel rooms worldwide. Targeted
primarily at business travelers, in an effort to increase their productivity
and enhance their lifestyle and "workstyle" while on the road, PCRoomLink's
Version 1.0 allows hotel guests to either use an in-room personal computer or
plug in their own personal laptop to access the system's high-speed network.
Once connected, users are able to send and receive web-based e-mail and
navigate the Internet for business or personal use. PCRoomLink Version 1.1,
currently under Alpha testing, will add Microsoft(R) Office Suite 2000,
Microsoft(R) games, 18 national advertisers, access to local advertisers,
PCRoomLink based e-mail and local disk storage to the system's capabilities.
Solar Communications intends to install PCRoomLink in member hotels free
of charge. In the future, guests at PCRoomLink properties, will be able to
utilize the system's complimentary opening interface to access hotel services,
such as room service and virtual concierge, and make purchases, or access
specialized services from key national advertisers who have entered into
agreements with Solar Communications. Guests may also choose to have a daily
fee ($17.95 initially) conveniently added to their hotel bill to access popular
software applications, send, receive and check web-based e-mail, and navigate
the Internet via the high-speed PCRoomLink network.
Background. With industry consolidation and globalization being two of the
dominant business themes of the late 1990's, business travel among multiple
sites and clients is becoming more prevalent than ever. While business travel
is obviously critical to the success of many companies, technology has not kept
pace with the increasing demands of the time-pressed business traveler.
While upwards of two-thirds of all business travelers presently carry
laptop computers, the hotels in which these travelers stay are ill-equipped to
handle their technological needs. Studies show that only 7% of hotels across
the United States have some type of in-room Internet connectivity, mostly in
the form of a rudimentary phone jack. While these jacks offer basic Internet
access, they require the traveler to wrestle with a variety of cords, cables,
connectors and computer configurations, and to endure the boredom and
frustration associated with
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having their data sluggishly navigate through standard PBX lines that were
never designed to perform such a function. Add to that the additional headache
of carrying around the laptop to start with and the risks associated with
theft, loss or damage en route, and it is clear that the current technological
options for the business traveler are less than ideal.
In fact, it is the tedious nature and inconvenience associated with
laptops that is in part driving the computer industry's development of the PDA
(Personal Digital Assistant). Industry insiders predict that, as they become
more advanced, PDAs will replace laptops in performing basic mobile computing
tasks.
Recognizing the present inconveniences faced by business travelers,
management of Solar Communications believes that providing fully functional
personal computers with high-speed Internet access in hotel rooms is the
logical solution. By creating a national, and eventually international, network
of PCRoomLink member hotels, Solar Communications will provide business
travelers with a convenient solution to their desire to remain connected and to
have computing ability directly in their room or suite -- either by plugging in
their own laptop or by using the in-room personal computer. Since the
PCRoomLink network will bypass the standard hotel PBX system, sluggish data and
slow-loading web pages will no longer a problem. As PDAs become more accepted
and sophisticated, a full-fledged in-room personal computer will allow for
quick data transfer through connecting cradles or infrared readers.
PCRoomLink Products and Services. PCRoomLink is an innovative solution to
the problem of Internet access while traveling. PCRoomLink's software Version
1.0 is currently installed in 75 hotel rooms at its first pilot hotel, The
Holiday Inn, Runnemede, New Jersey. An additional 100 rooms have been installed
with Version 1.0 at the Houstonian Hotel in Houston, Texas.
PCRoomLink's service contains a complimentary opening interface to access
the Internet with high-speed T-1 connectivity at speeds of 1.2 megabits per
second, or approximately 20 times faster than today's standard 56.6 K modems.
The system incorporates the Tut Express GS Access System, which amplifies the
hotel's current standard copper telephone lines to achieve "instant on"
Internet access. Each PCRoomLink room is installed with the following items:
o 15 inch LCD flat screen monitor
o A small footprint CPU with 400 mhz processor, 6.4 GB hard drive and 64
MB RAM
o Speakers
o Mouse
o Keyboard
o Tut Expresso MDU Home Run Card
o Customized wall-mounted desk unit
o Ethernet jack to enable laptop connectivity
By installing a fully functional personal computer and Ethernet jack in each
room, PCRoomLink's system allows for simultaneous use of the personal computer,
laptop and telephone.
With respect to the hardware installed in each member hotel, PCRoomLink's
two pilot sites are configured as follows:
o two or three servers (dependent on the configuration) for hosting the
operating system, applications, firewall requirements and billing
o Tut Systems chassis and necessary cards
o Back-up power supply
o Rack(s)
PCRoomLink Version 1.0 is free to guests at the two pilot hotel properties
and is supported twelve hours per day, seven days per week, by a customer
service help desk staffed by Solar Communications employees.
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Solar Communications intends to release PCRoomLink Version 1.1 on or about
October 1, 1999. This version will replace Version 1.0 in the Holiday Inn,
Runnemede, New Jersey and the Houstonian Hotel, Houston, Texas. In addition to
the features and hardware incorporated in Version 1.0, PCRoomLink Version 1.1
will include a more extensive complimentary opening interface with access to
Microsoft(R) Office Suite 2000, 18 national advertisers, access to local
advertisers, Microsoft(R) games, web based e-mail and local disk storage. In
addition, this version will incorporate Intel LANDesk(R), which will allow for
remote management of desktop units by Solar Communications. Each hotel will be
supported by a 24 hour per day, seven day a week, customer service help desk
staffed by Solar Communications employees. The service will be $17.95 for
guests staying at the Holiday Inn in Runnemede, New Jersey and free for six
months at the Houstonian Hotel.
Solar Communications has contracts with three additional hotels, totaling
approximately 376 rooms. These hotels are currently in the site survey and
equipment selection process of the installation. Additionally, 32 applications
have been received from hotels applying to become PCRoomLink members. These
applications are currently under review by management of Solar Communications.
Once developed, the most innovative aspect of PCRoomLink will be the broad
variety of services that are included in the system. Located in either a
custom-made fold down desk/cabinet unit that is designed to match the decor of
the hotel room, or placed on the room's desk or work station, the PCRoomLink
monitor is continually on, with the welcome screen discreetly highlighting
numerous services available to the guest free of charge.
Included on the PCRoomLink welcome screen are on-line hotel services, such
as room service and concierge, as well as links to key national advertisers
that have partnered with Solar Communications to provide enhanced services to
PCRoomLink users. To date, Solar Communications has reached agreement with nine
national companies, such as FTD Florist, Gameworks Corporation, and the Golf
Network, to advertise free of charge through December 31, 1999. Additionally,
five airlines have agreed to allow Solar Communications to hot link their
websites so that PCRoomLink users will have access to the airlines' individual
websites without leaving the PCRoomLink network.
Unlike other services that simply charge hotels to install jacks in their
rooms, PCRoomLink is a complete system that is provided to the hotel free of
charge and is designed to make business travel easier, more comfortable and
more efficient. If a guest reserves the use of a PCRoomLink hotel room, he/she
is billed for the service daily, whether it is used or not. If a guest does not
reserve a PCRoomLink room but is assigned to one by the hotel, he/she can
simply click on the PCRoomLink logo on their screen. Here, they will be
informed of the daily fee for the service that will be added to their hotel
bill if they log on to the PCRoomLink network. The services provided through
the PCRoomLink welcome screen will still be accessible free of charge if the
guest chooses not to log on to the PCRoomLink network. Once logged on, guests
can use PCRoomLink's Internet connection or e-mail to conveniently perform a
variety of beneficial tasks, such as:
o surfing the web to research a client;
o editing a contract to secure a deal before they leave town;
o e-mailing their family a special message;
o revising a presentation to take advantage of new information; and
o e-mailing their offices with key updates from the road.
Guests do not need to become PCRoomLink members to use the service.
However, by signing up for complimentary PCRoomLink membership, guests are able
to utilize the convenient PCRoomLink services, including sending and receiving
e-mail, from any PC with Internet access by logging on to www.pcroomlink.net.
In addition, members are also able to select other personalized services, such
as the addition of links to their most-used vendors or clients.
Business Strategy. Solar Communications is creating a network of member
hotels and end-users by providing personal computers and high-speed Internet
access to the hospitality industry through its branded product, PCRoomLink.
Beginning with its two pilot hotels, Solar Communications will furnish
dedicated T1 circuit(s)
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to each of its member hotels. Through use of a third party technology, Solar
Communications will provide high-speed Internet access within its member hotels
via existing copper wiring, allowing the simultaneous transmission of data and
voice traffic while avoiding traffic bottlenecks at the hotel PBX.
In Version 1.0 of the PCRoomLink software, Solar Communications is
equipping rooms with wall-or desk-mounted personal computers that are
interconnected via on-site servers. This configuration will allow end-users
Internet connectivity to access their web-based e-mail accounts and surf the
Internet. In addition, Solar Communications will provide an Ethernet jack in
each room for laptop connectivity. It is Solar Communications belief that many
travelers, once presented with an alternative to bringing their laptops with
them, will elect to leave them at home knowing they will have access to
personal computers and the Internet while on the road.
Solar Communications expects to launch Version 1.1 of its software and
interface on or about October 1, 1999. This version will allow guests not only
access to the Internet but allow guests to use PCRoomLink's computers complete
with the Microsoft(R) Office 2000 software suite, PCRoomLink web-based e-mail,
games and local storage.
Each PCRoomLink computer's local storage will be divided into three
partitions. The first partition will house the active applications. The second
partition will be blank. The third partition will house the operating system.
In the event a computer locks-up during use, Solar Communications can
effectively restart the computer and protect all saved data remotely using a
combination of Intel LANDesk(R) and HPOpenview(R). After a guest checks out,
the partition which hosts the guest's documents will be wiped clean along with
the history of what sites the guest visited. Additionally, Solar Communications
has developed software which will allow it to monitor all essential internal
components of the hardware -- such as the monitor, keyboard and mouse.
Hotels have been receptive to Solar Communications' proposed business
model because PCRoomLink addresses the desire of the hospitality industry to
provide additional ways to increase revenue. Solar Communications has
structured its business model in such a way as to make PCRoomLink risk-free
from the hotel's perspective, while augmenting the hotel's existing revenue
streams through commissions and increased occupancy rates. In addition, the
hospitality industry has been responsive to Solar Communications' products and
services because of the additional opportunities they afford hotels to attract
business travelers, a coveted market segment. One of these opportunities is a
customized web interface, allowing for an attractive and effective presentation
of hotel specific information (i.e. room service menus, convention information,
etc.) and local points of interest (i.e. sight seeing, local events, etc.). As
part of its development plans, Solar Communications also intends to affiliate
with a variety of advertisers, both on the national and local levels, to
present on-line games, retailing, business services, gift products, etc. to
travelers.
Toward accomplishing its objectives, Solar Communications has aligned
itself with selected industry leaders as follows.
o AT&T: AT&T has been selected by Solar Communications as its preferred
vendor to supply dedicated T-1 circuits to connect each PCRoomLink
member hotel to the Internet backbone, web hosting, network monitoring
and bandwidth management. AT&T has verbally agreed to a master discount
structure based upon a per megabyte bandwith usage factor. AT&T has
also agreed to provide Solar Communications with limited IP Network
Services consulting at no charge. Additionally, AT&T has granted Solar
Communications a limited right to use AT&T's brand logo in PCRoomLink's
marketing literature.
o Compaq: Compaq has agreed to provide significant discounts and a 3%
rebate on all Compaq items purchased by Solar Communications.
Additionally, Compaq has granted Solar Communications a limited right
to use Compaq's brand logo in PCRoomLink's marketing literature. In
return, Solar Communications will give Compaq a right of first refusal
on all personal computers purchased for itself or for its member
hotels.
o Critical Path: Under the terms of its agreement with Critical Path,
Solar Communications has sub-contracted the management and maintenance
of its e-mail system including Solar Communications' web mail page,
which will be included in Version 1.1 of PCRoomLink's mailbox software,
at a cost of $.25 per month per mailbox. The package includes five
megabytes of storage per mailbox, standard web mail features, and
support.
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o Proximity Systems: Proximity Systems has agreed to design and
manufacture all of Solar Communication's requirements for customized
wall-mounted and stand alone desks that incorporate the personal
computer supplied by Solar Communications to its member hotels. The
agreement has no termination date and provides that Proximity Systems
will not design and manufacture wall-mounted or stand alone desks for
any competitor of Solar Communications.
Maintenance. Despite implementation of security measures, the hardware and
software components of the PCRoomLink system will be vulnerable to computer
viruses, physical or electronic break-ins, theft, vandalism and similar
disruptive problems. Computer viruses, break-ins or other problems caused by the
accidental or intentional actions of PCRoomLink users, current and former
employees, and others could lead to interruptions, delays or a cessation in
service to users of the PCRoomLink system. Solar Communications intends to
subcontract with reputable third party organizations to provide certain service,
support and maintenance services for the PCRoomLink hardware and software
components. However, to date, Solar Communications has not yet entered into any
type of service, support or maintenance agreement for the PCRoomLink system.
Target Market. It is Solar Communications strategy to focus on four
targeted groups: the hospitality industry, the end-user, strategic alliance
partners (advertisers), and local alliance partners (advertisers).
o Hospitality Industry: Toward acquiring member hotels, Solar
Communications has implemented two sales channels initially consisting
of ten direct sales executives and three agent-based organizations with
multiple sales executives. It is anticipated that an Internet-based
sales channel will be supported by the end of 1999.
o End-Users: Solar Communications intends to develop a network of
end-users who will require PCRoomLink's services. This network of
end-users will be developed through traditional end-user marketing
programs designed to attract the business traveler. Additionally, Solar
Communications has employed ten business development sales executives
who will work directly with Fortune 100 companies that maintain a large
staff of business travelers. These sales executives will educate target
companies on PCRoomLink services and benefits. Additionally, in
PCRoomLink Version 1.2, these sales executives will identify and set up
the security measures necessary to allow business travelers access to
their "internal intranet".
o Strategic Alliance Partners: The strategic relationships formed with
key national and regional advertisers will not only bring additional
revenue to Solar Communications, but also enhance the Internet
purchasing options available for PCRoomLink users and members.
Currently, Solar Communications employs two sales executives in this
area and has reached agreements with nine national advertisers to
participate in its opening hotel interface.
o Local Alliance Partners: Solar Communications intends to develop a
national sales force that concentrates on selling advertising space on
an individual hotel's website. This group currently employs two sales
executives and targets, as advertisers, local vendors such as boutiques
and restaurants. Each individual hotel website can house approximately
80 advertisers. To date, three advertisers have signed up for the
Holiday Inn, Runnemede, New Jersey pilot hotel site. The design of
these individual advertisers websites will be subcontracted to a third
party design firm. The cost for each design is charged back to the
local advertiser.
Promotional strategies to these groups include the design of specific
Internet advertising tools to list hot links of member hotels for reservations,
the development of a strategy for hosting and being hosted on various related
websites and browsers, and the inclusion of advertising banners on Solar
Communications website.
Pricing. Research reveals two important characteristics about the
hospitality industry. The first is a resistance to risk and the second is a
limited capital market. Solar Communications has designed a revenue share
pricing program to respond to these concerns, as outlined below:
o The hotel is offered a share of the revenue which varies dependent upon
whether the hotel requires furniture provided by PCRoomLink in exchange
for entering into a 72 month agreement with Solar Communications.
o Under the hotel agreement, Solar Communications determines the retail
rate, the number of rooms deployed, the hotel's percentage of revenue,
and the limits on the amount of charge-backs to the hotel.
Hotels regard this strategy as minimally risky because the hotels do not
pay Solar Communications anything unless they "rent" the PCRoomLink equipped
rooms and are themselves realizing revenue from the transaction.
49
<PAGE>
Competition
Within the hospitality industry, market demand for high-speed Internet
service continues to rapidly escalate. In the past six years, at least 30
companies have offered some type of in-room Internet access to the hospitality
industry, typically through installing data jacks in guest rooms for laptop
connectivity. Some of these companies have been successful in installing trials
at selected high-profile hotel properties across the country, with brand name
hotels such as Holiday Inn, Hyatt, Marriott, Hilton, and Wingate beginning to
consider in-room, high-speed Internet connectivity more seriously.
Solar Communications has categorized its competitors as (1) direct
competitors, (2) indirect competitors, and (3) international competitors.
o Direct competitors are defined as companies offering comparable
computer-based services to those of Solar Communications. The following
three direct competitors have been identified:
o 4th Communications Network, Inc.: Based in San Jose CA, 4th
Communications Network, Inc. provides Internet and interactive
applications through an in-room PC or TV in hotel lobby areas. With
PC installations in less than five hotel properties to date, 4th
Communications Network's emphasis has been on installing in-room
jacks. The biggest advantage Solar Communications has, when
compared to 4th Communications Network, is Solar Communications'
end-user focus and frequent user program. Solar Communications is
designing these vehicles to build a loyal, growing community of
Internet-savvy travelers who will choose PCRoomLink hotels over 4th
Communications Network hotels because of convenience and the
program attributes of Solar Communications' user program. 4th
Communications Network has focused its efforts strictly on its
deployment partner, the hotel.
o Integrated Network Technologies (IntXX): Locally focused in
Minnesota, IntXX has installations in two hotels.
o Guest-Tek Services: This company was established three years ago as
a division of Guest-Tek Interactive Entertainment Ltd., a Canadian
services company which specializes in providing computer services
to hotels and their guests. Guest-Tek has no installations
currently in the United States, but does have a proven track record
with a well-known Vancouver luxury hotel, the Pan Pacific.
Guest-Tek recently made its American debut at the HITEC show in
Atlanta, Georgia. Guest-Tek currently offers services and equipment
that PCRoomLink does not provide, such as in-room digital cameras
and video conferencing capabilities.
o Indirect competitors are defined as companies that offer Internet
access without associated computer hardware, thereby requiring
travelers to use their own laptops to access the Internet. Solar
Communications predicts that travelers, when presented with a viable
alternative, will elect to leave their laptop computers at home,
knowing they will have access to the necessary hardware and software
while on the road. Solar Communications believes this fact, along with
Solar Communications focus on end-user marketing and retention
programs, will provide an effective means to position it against these
indirect competitors. Toward accomplishing this, Solar Communications
expects to commit to a multimillion dollar advertising campaign on the
Internet, on TV and in publications targeted to the business traveler.
Although their installations are not as complete as those proposed by
Solar Communications, indirect competitors currently have installations
with several major chains. These competitors include:
o LodgeNet Entertainment Corporation, OnCommand Corporation, and
Suitesurfer Communications, Inc. All of these competitors utilize
coaxial cable to deliver their signal to in-room televisions.
Installation and space limitations are the major advantages, as is
the fact that many of these vendors have existing relationships
with hotels. From a competitive perspective, Lodge
Net's bandwidth allocation, customer acceptance and potential loss
of revenue (through non-access to in-room movies by travelers) are
detriments to this method and work to the advantage of Solar
Communications.
50
<PAGE>
o ATCOM, Inc., Business Anywhere USA, OverVoice by CAIS Internet,
Wayport, Inc., Darwin Networks, and Viator Networks. Each of these
indirect competitors offers a service that is not as complete as
PCRoomLink, with most providing only in-room "plug and play" jacks.
o International competitors are those who are currently marketing their
services in locations other than in the United States and include Aford
(London, England), Connectotel (London, England), Logic Communications
Ltd. (Bermuda), NetGame Cable (Israel), and SuiteSurfer (Canada).
While recognizing the competitive landscape in which it operates, Solar
Communications believes that its solution is differentiated from those of its
competitors in several key ways, as described below:
o The offering of a complete turnkey solution that includes the necessary
in-room hardware and software in addition to an Ethernet jack
connection.
o The intent to create and maintain a growing Internet community of
frequent users who will be offered member benefits.
o The intent to create a web interface that is customized and
systematically updated for each member hotel allowing for the
communication of hotel and area specific information. This will be
accomplished using a standard platform. These will be designed by Solar
Communication web designers with input from hotel management. In most
cases, this will be linked to the existing hotel. As to the local
advertisers, these web sites will be subcontracted to third parties for
design if an existing web site does not exist.
o The intent to create a multi-faceted multimillion dollar marketing
program that targets groups of Internet end-users in addition to member
hotels. To date, Solar Communications' competitors focus their
marketing efforts strictly on the hospitality industry without creating
demand among travelers.
o The creation of the Local Area Network (LAN) based advantages that a
collection of networked personal computers offers hotels and guests
including:
o The ability of hotels to communicate hotel-related information to
their guests;
o The ability of hotel guests to transact with hotel restaurants and
concierge services, among others, via local hotel web sites or
e-mail.
o The ability of guests to obtain site-specific information regarding
local points of interest and events, directions to the airport, and
transportation options; and
o The ability of guests to conduct area specific, as well as
nationally focused, electronic commerce transactions for ordering
food, gifts, apparel, and other merchandise.
Employees
As of September 7, 1999, Solar Communications Group had 105 employees.
None of Solar Communications employees is represented by a union. Management
believes that Solar Communications' relationship with its employees is good.
Properties
Solar Communications' executive offices are located in 31,609 square feet
of executive office space at 1100 Coombs Road, Millville, New Jersey. Solar
Communications' lease for this space extends through December 31, 1999 at a
monthly rental of $36,219.
Management of Solar Communications believes that its current facilities
are adequate to meet its needs through the end of the year.
Legal Proceedings
Solar Communications is not a party to any legal proceedings which, if
adversely decided, would reasonably be expected to have a material adverse
effect on the financial condition of Solar Communications.
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<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SOLAR COMMUNICATIONS
The following discussion of the financial condition and results of
operations of Solar Communications should be read in conjunction with the
Financial Statements and the Notes thereto included elsewhere in this joint
proxy statement/prospectus. This joint proxy statement/prospectus contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. Solar Communications actual results could differ
materially from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere in this joint proxy
statement/prospectus. See "Risk Factors."
Overview
Solar Communications is a development stage enterprise and, accordingly,
has had no revenue through June 30, 1999. Since inception, Solar Communications
has suffered losses and net cash outflows from operations.
Solar Communications' product, PCRoomLink, is a system of personal
computers with high-speed Internet access that Solar Communications is planning
to install in hotel rooms in the United States and abroad. Targeted primarily
at business travelers, in an effort to increase their productivity and enhance
their lifestyle and "workstyle" while on the road, PCRoomLink allows hotel
guests to either use an in-room personal computer or plug in their own personal
laptop to access the system's high-speed network. Once connected, users of
PCRoomLink Version 1.0 will be able to send and receive e-mail messages and
navigate the Internet for business or personal use. By utilizing PCRoomLink
Version 1.1, scheduled to be released on or about October 1, 1999, hotel guests
will also have access to the Microsoft(R) Office 2000 Software Suite,
PCRoomLink's web-based e-mail, games, and local data storage.
Solar Communications will install PCRoomLink in member hotels at no charge
to the hotel. Guests in PCRoomLink equipped rooms may utilize the system's
complimentary opening interface, without charge, to access hotel services, such
as room service and virtual concierge, and make purchases, or access
specialized services, from key national companies. Guests in PCRoomLink
equipped rooms, for a daily fee ($17.95 initially), will have the ability to
access popular software applications, send, receive and check web-based e-mail,
and navigate the Internet via the high-speed PCRoomLink network. The daily fee
will be automatically added to a guest's hotel bill by the hotel if the guest
requests a PCRoomLink equipped room. If the guest is assigned to a PCRoomLink
equipped room by the hotel, the daily fee will be charged only if the guest
actually accesses the PCRoomLink network.
Solar Communications also intends to derive revenues from the sale of
advertising space to local and national advertisers.
Statement of Operations
Solar Communications had an accumulated deficit of $1,852,774 through June
30, 1999. Of this deficit, $1,778,612 relates to the interim period for the
nine months ended June 30, 1999 and was largely attributable to salaries,
advertising and product development expenses. Of the total amount,
approximately $266,000 related to interface, software and product development.
Solar Communications presently has 105 employees and expects to increase
that number to 198 by June of 2000. The increase in employees will be primarily
in Solar Communications 24 hours a day, seven days a week, customer help center
and in its operations, engineering and design staff.
In July, 1999, Solar Communications consolidated two previous office
locations into 31,609 square feet of office space located at 1100 Coombs Road,
Millville, New Jersey. As a result, Solar Communications incurred moving
expenses of less than $10,000. However, the company's rent expense increased
from $4,850 per month to $36,219 per month.
52
<PAGE>
Liquidity and Capital Resources
Solar Communications' future capital requirements will relate principally
to the installation of PCRoomLink hardware and related software at member
hotels. Solar Communications business plan provides for the installation of 650
hotels through June of 2000. Solar Communications will require approximately
$260,000,000 in capital to complete such installations. The initial cost to
Solar Communications is approximately $400,000 per hotel, or $3,175 per room,
if 126 rooms are deployed and no furniture is required. An additional $900 per
room will be expended if furniture is required. The furniture cost is partially
offset by a 5% reduction in the hotel's revenue sharing percentage. Solar
Communications believes that a portion of the funds required for PCRoomLink
installations will come from vendor financing and bank financing, with the
balance coming from future equity offerings.
In July, 1999 Solar Communications sold 1,200 shares of its common stock,
at a price of at $10,000 per share, in a private placement pursuant to Rule 506
of the Securities Act of 1933. Additionally, in August, 1999, Solar
Communications issued 10 shares of stock in return for services rendered by an
employment recruiter during the period from April 1, 1999 to June 30, 1999. For
purposes of its financial statements, the transaction was valued at $10,000 per
share. Based on currently proposed plans and assumptions, it is anticipated
that Solar Communications will have sufficient capital to satisfy its
contemplated cash requirements through October 31, 1999. Solar Communications
will then require substantial additional funding. Therefore, Solar
Communications continuing viability is dependent upon its ability to continue
to raise additional funds.
Potential sources of funding which have been identified by management
include vendor lines of credit, vendor leasing programs, bank financing and
additional sales of securities by Solar Communications. Solar Communications
has no current arrangements with respect to sources of additional financing
and, when needed by Solar Communications, such additional financing may not be
available on commercially reasonable terms, or at all. The inability to obtain
additional financing, when needed, would have a material negative effect on
Solar Communications, including possibly requiring it to curtail or cease
operations.
Certain Factors that may Affect Future Results
Solar Communications' future results may be subject to substantial risks
and uncertainties. Solar Communications' future revenue streams will come from
daily access fees and local and strategic advertising. Solar Communications'
profitability will be dependent upon the number of advertisers it can secure
and the percentage occupancy and utilization of its PCRoomLink installed rooms.
Solar Communications' quarterly and annual operating results are impacted
by a variety of factors that could materially adversely affect revenues and
profitability, including the percentage occupancy and utilization of its
PCRoomLink installed rooms, or anticipated changes in economic conditions.
Because Solar Communications' operating expenses are relatively fixed, an
unanticipated shortfall in revenue in a quarter may have an adverse impact on
Solar Communications' results of operations for that quarter. As a result of
the foregoing and other factors, Solar Communications may experience material
fluctuations in future operating results on a quarterly or annual basis which
could materially and adversely affect its business, financial condition,
operating results and stock price.
Year 2000 Readiness Disclosure
Background. In the past, many computer software programs were written
using two digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the Year 2000
issue. If this situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
Risks Associated with the Year 2000 Problem. Solar Communications utilizes
computer systems in many aspects of its business. Year 2000 problems in Solar
Communications computer systems could disrupt operations and have a material
adverse impact upon Solar Communications operating results.
53
<PAGE>
Solar Communications is also exposed to the risk that one or more of its
vendors or service providers could experience Year 2000 problems that adversely
impact the ability of the vendor or service provider to provide goods and
services. This is not considered a significant risk with respect to the
suppliers of goods, due to the availability of alternative suppliers. However,
disruption of other services, such as telephone service, could, depending upon
the extent of the disruption, have a material adverse impact on Solar
Communications operations. To date, Solar Communications is not aware of any
vendor or service provider Year 2000 issue that would have a material adverse
impact on Solar Communications operations. However, Solar Communications has no
means of ensuring that its vendors or service providers will be Year 2000
compliant. The inability of vendors or service providers to complete their Year
2000 resolution process in a timely fashion could have a material adverse
impact on Solar Communications. The effect of non-compliance by vendors or
service providers is not determinable at this time.
Widespread disruptions in the national or international economy resulting
from Year 2000 issues, or in specific industries, such as commercial or
investment banks, could also have a material adverse impact on Solar
Communications. The likelihood and effect of these disruptions is not
determinable at this time.
Approach. Solar Communications is in the process of coordinating its
response to the Year 2000 problem, and of implementing Year 2000 compliance
procedures at Solar Communications' offices and properties consisting of the
following:
o compiling information as to the information technology, referred to as
IT, and non-IT systems that may be sensitive to the Year 2000 problem;
o identifying and prioritizing critical systems;
o inquiring of third parties with whom Solar Communications does
significant business, i.e., vendors, service providers and customers,
as to the state of their Year 2000 readiness;
o analyzing critical systems to determine which systems are not Year 2000
compliant and evaluating the costs to repair or replace those systems;
and
o repairing or replacing noncompliant systems and testing those systems
for which representation as to Year 2000 compliance has not been
received or for which representation was received but has not been
confirmed.
Status. Based upon the analysis conducted to date, Solar Communications
believes its major critical systems are currently compliant or will be
compliant by December 31, 1999.
Costs. Based on internal estimates, as to which it has received no
independent verification, the total cost to Solar Communications of making its
systems Year 2000 compliant is estimated to be insignificant.
54
<PAGE>
MANAGEMENT OF SOLAR COMMUNICATIONS
Executive Officers and Directors
The current executive officers and directors of Solar Communications are
as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ ----- ------------------------------------------------------------
<S> <C> <C>
James M. Rossi ............... 47 Chairman of the Board and Chief Executive Officer; Director
Alisa A. Rossi ............... 33 Chief Administrative Officer and Secretary; Director
Monty S. August .............. 55 Director
Domenic J. Romano ............ 59 Director
Raymond T. Brown ............. 51 President and Chief Operating Officer; Director
Raymond J. Romano ............ 48 Sr. Vice President, Finance and Chief Financial Officer
Susan D. Schneider ........... 56 Sr. Vice President, Marketing
Wallace Rogers, Jr. .......... 33 Chief Technical Officer
Daniel P. Finley ............. 34 Vice President, Business Development
Barbara O'Gara ............... 45 Vice President, Sales and Hotel Alliances
Joseph C. Sandora ............ 39 Vice President, Strategic Partnerships
Charles G. Parker ............ 34 Vice President, Local Alliances
Yuriy R. Porytko ............. 30 Vice President, Operations
Alex P. Furda ................ 35 Vice President, Travel Services
Louis E. Brigante ............ 52 Vice President, Vendor Relations
</TABLE>
Biographical Information
James M. Rossi is a co-founder of Solar Communications and has been a
director and Chairman and Chief Executive Officer of Solar Communications since
October, 1996. Mr. Rossi has served as a director of JMR Marketing Corporation,
a telecommunication consulting firm, since 1971, as a director of Cam-Comm,
Inc., a data fiber optics reseller, since 1997, and as a director of Camanco,
Inc., a consulting firm, since 1997. Mr. Rossi also served as Chairman and
Chief Executive Officer of JMR Marketing Corporation from 1971 to July, 1999,
as Chairman and Chief Executive Officer of Cam-Comm, Inc. from 1977 to July,
1999, and as a President of Camanco, Inc. from 1997 to July 1999. Mr. Rossi
resigned as an officer of each of these companies to devote his full working
time and attention to Solar Communications.
Alisa A. Rossi is a co-founder of Solar Communications and has served as a
director and Secretary and Chief Administrative Officer of Solar Communications
since October, 1996. In addition. Ms. Rossi has served as a director of JMR
Marketing Corporation since 1989, as a director of Cam-Comm, Inc. since 1997,
and as a director of Camanco, Inc., since 1997. Ms. Rossi also served as Vice
President of JMR Marketing Corporation from 1989 through July, 1999, as Vice
President of Cam-Comm, Inc. from 1997 to July, 1999, and as a Vice President of
Camanco, Inc. from 1997 to July, 1999. Ms. Rossi resigned as an officer of each
of these companies to devote her full working time and attention to Solar
Communications.
Monty S. August has been a member of the Board of Directors of Solar
Communications since October, 1998. Since 1991, he has served as Chief
Executive Officer and Chairman of the Board of UK Paper, PLC, the largest
printing and writing paper company in the United Kingdom.
Domenic J. Romano has been a member of the Board of Directors of Solar
Communications since November, 1998 and has served as the managing partner of
Romano, Hearing & Testa, a Certified Public Accounting firm located in
Vineland, New Jersey, since 1967.
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<PAGE>
Raymond T. Brown has been President and Chief Operating Office of Solar
Communications since May, 1999 and a member of its Board of Directors since
November, 1998. Prior to joining Solar Communications, Mr. Brown served in a
number of senior management roles with PSE&G's nuclear power generation
facility in Salem, New Jersey from March, 1994 to January, 1998, including
positions as Outage Shift Manager, member of the Management Oversight Group and
Manager of Strategic Planning.
Raymond J. Romano has been Vice President of Finance and Chief Financial
Officer of Solar Communications since May, 1999. Prior to joining Solar
Communications, Mr. Romano served from 1990 to 1999 as Vice President of
Operations of Lodging Concepts, Inc., a hotel amenity distributor. Mr. Romano
currently serves as Chairman of the Board of Transpirator Technologies, Inc., a
medical device company.
Wallace Rogers, Jr. has been Chief Technical Officer of Solar
Communications since January, 1999. Prior to joining Solar Communications, Mr.
Rogers served as President of Xpress Electronic Services, Inc., a Vineland, New
Jersey-based networking and integration company, from 1991 to 1998. Mr. Rogers
has also served as a member of the Board of Directors of three additional
technology-based companies, including Xpress Electronic Services, Inc. (from
1998 to present), Express Web Services, Inc. (from 1997 to present), and
Delaware Valley Net Connect, an Internet service provider (from 1996 to
present).
Daniel P. Finley has served as Vice President, Business Development for
Solar Communications since April, 1999. A 1993 graduate of the Wharton School
of Business' Executive MBA program, Mr. Finley's career includes a variety of
senior management roles within General Electric, including that of Vice
President of GE LogistiCom, a satellite and wireless data subsidiary of GE
Capital from June, 1996 to March, 1998. Most recently, he served as CFO and
VP/Business Development for American Digital Networks and the Telephone Company
of Central Florida from March, 1998 to March, 1999.
Barbara O'Gara joined Solar Communications in June, 1999 as Vice President
of Sales and Hotel Alliances. Prior to joining Solar Communications, Ms. O'Gara
spent a year operating her own company, "Amenity Works," which provides brand
name amenities to the high-end luxury hotel and resort market. From 1996 to
1998, Ms. O'Gara served as a Marketing Consultant for Bath & Body Works. From
1996 to 1998, she served as Vice President of Hotel Marketing and Sales for
Neutrogena Corporation.
Joseph C. Sandora has been Vice President, Strategic Partnerships for
Solar Communications since March, 1999. Prior to assuming his current role, Mr.
Sandora served as Vice President of Sales and Corporate Sales Manager of Dupli
Envelope and Graphics of Syracuse, New York from July, 1997 to March, 1999.
Prior to that, he worked as Sales Manager, Fine Papers, for ResourceNet
International, a division of International Paper Corporation, from April, 1996
to May, 1997. From July, 1982 to April, 1996, Mr. Sandora served as a Sales
Representative for Alling and Cory Paper Company.
Susan D. Schneider joined Solar Communications in April, 1999 as Vice
President, Marketing. Previously, she served in the same capacity for Harrah's
Atlanic City, the flagship property for the nation's largest casino
entertainment company, from 1993 to 1999.
Charles G. Parker has been Vice President, Local Alliances for Solar
Communications since June, 1999. Prior to joining Solar Communications, Parker
served as Manager, Marketing & Sales for Allegheny Plastics, from October, 1994
to May, 1999.
Yuriy R. Porytko has served as Vice President of Operations for Solar
Communications since June, 1999. From October, 1998 to June, 1999, Mr. Porytko
worked in Business Development for Network Visions, Inc., a communications
transport integration company. Mr. Porytko was Regional Director with
Metromedia International Telecommunications, Inc. from November, 1997 to
October 1998. From January, 1996 to November, 1997, Mr. Porytko served as
President and Chief Executive Officer of Suburban Connect, a paging and
wireless messaging company. From May, 1993 to January, 1996, Mr. Porytko was
first General Manager, then Vice President, of Beyond Beepers Delaware Valley,
Inc., a paging and telecommunications reseller.
Alex P. Furda has been has been Vice President of Travel Services for
Solar Communications since June, 1999. From September 1998 to June 1999. Mr.
Furda consulted for a variety of on-line travel companies. Mr. Furda was Vice
President of Ultramac Travel Management from March 1997 to September 1998. From
July 1993 to March 1997 Mr. Furda served as Vice President and General Manager
of Travel One.
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<PAGE>
Louis E. Brigante has been Vice President, Vendor Relations since August,
1999. Prior to joining Solar Communications, Mr. Brigante served as District
Sales Vice President of the Middle Market Group at the U.S. Fleet Leasing
Division of Associates First Capital Corporation from January 1993 to July
1999. Mr. Brigante also served as East Coast Regional Manager for GE Capital
Corporation from January 1987 to December 1992.
James M. Rossi and Alisa A. Rossi are married. There are no other family
relationships among the directors and executive officers of Solar
Communications Group.
Members of the board of directors of Solar Communications have one year
terms. Officers are appointed by the board of directors and serve at the
pleasure of the Board.
Executive Compensation
The following table sets forth certain information with respect to
compensation paid by Solar Communications Group for the year ended September
30, 1998 and for the period from October 7, 1996 (date of inception) to
September 30, 1997 to Solar Communications' chief executive officer, James M.
Rossi:
SUMMARY COMPENSATION TABLE
Annual
Compensation
------------------ All Other
Name and Principal Position Year Salary Bonus Compensation
- ----------------------------- ------ -------- ------- -------------
James M. Rossi, CEO ......... 1998 -0- -0- -0-
1997 -0- -0- -0-
In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted from the table because
the aggregate amount of such perquisites and other personal benefits
constitutes less than the lesser of (a) $50,000, or (b) 10% of the total of
annual salary and bonuses for the officer for such year.
No stock options have been granted to Mr. Rossi by Solar Communications.
Certain Transactions
James M. and Alisa A. Rossi co-founded Solar Communications in October,
1996. At the time of incorporation, they were issued 1,000 shares of Solar
Communications common stock for an initial capital contribution of $250. In
October, 1998, James M. and Alisa A. Rossi were issued an additional 3,284.4
shares of Solar Communications common stock, as founder's stock, for no
additional consideration.
In December, 1998, JMR Marketing Corporation was issued 250 shares of
Solar Communications common stock to satisfy a $98,349 obligation owed by Solar
Communications to JMR Marketing Corporation. This obligation represented amounts
owed by Solar Communications to JMR Marketing Corporation for office space,
telephone and computer equipment, and other office supplies furnished by JMR
Marketing Corporation to Solar Communications, and reimbursement of certain
other business-related expenses paid by JMR Marketing Corporation on behalf of
Solar Communications. James M. and Alisa A. Rossi own 60% of the outstanding
capital stock of JMR Marketing Corporation.
SOLAR COMMUNICATIONS COMMON STOCK
General
Solar Communications has authorized capital stock consisting of 10,000
shares of common stock, no par value per share. As of the date of this joint
proxy statement/prospectus, 5,950 shares of Solar Communications common stock
are issued and outstanding.
The following is a description of the material terms of the Solar
Communications common stock. The rights of the holders of shares of Solar
Communications common stock are established by Solar Communications'
certificate of incorporation, Solar Communications' by-laws and New Jersey law.
The following statements do not purport to be complete or give full effect to
statutory or common law, and are subject in all respects to the applicable
provisions of the Solar Communications' certificate of incorporation, Solar
Communications' by-laws and New Jersey law.
The holders of Solar Communications common stock have no preemptive or
subscription rights in later offerings of Solar Communications common stock and
are entitled to share ratably (i) in such dividends as may be declared by the
board of directors out of funds legally available for such purpose, and (ii)
upon liquidation,
57
<PAGE>
in all assets of Solar Communications remaining after payment in full of all
debts and obligations of Solar Communications and any preferences granted in
the future to any preferred stock. Solar Communications has not paid, prior to
the date hereof, any dividends on the Solar Communications common stock.
Holders of Solar Communications common stock are entitled to one vote for
each share held and have no cumulative voting rights. Accordingly, the holders
of more than 50% of the issued and outstanding shares of Solar Communications
common stock entitled to vote for the election of directors can elect all the
directors if they choose to do so. All shares of Solar Communications common
stock now outstanding, are fully paid and nonassessable. The board of directors
of Solar Communications is authorized to issue additional shares of Solar
Communications common stock within the limits authorized by Solar
Communications certificate of incorporation without shareholder action.
Shares Available For Future Sale
Solar Communications currently has 5,950 shares of common stock
outstanding (up to 6,450 shares if all the stock options currently outstanding
under the Solar Communications 1999 Stock Option Plan are exercised). Of these
shares, 1,000 shares owned by James M. Rossi and Alisa A. Rossi are freely
tradeable without restriction or further registration under the Securities Act
of 1933, subject to compliance with the limitations imposed by Rule 144 adopted
under the Securities Act of 1933 (since both James M. Rossi and Alisa A. Rossi
are affiliates of Solar Communications).
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
Solar Communications (or persons whose shares are required to be added to those
sold by an affiliate of Solar Communications), who has owned restricted shares
of common stock beneficially for at least one year is entitled to sell within
any three-month period, a number of shares that does not exceed the greater of;
(a) 1% of the total number of outstanding shares of the same class
(approximately 59.5 shares, assuming only the existing shares of
Solar Communications are outstanding); or
(b) the average weekly trading volume of Solar Communications' common
stock on all exchanges and/or reported through the automated
quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is
filed with the SEC.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of public information
about Solar Communications. A person who has not been an affiliate of Solar
Communications for at least the three months immediately preceding the sale and
who has beneficially owned the shares of Solar Communications common stock for
at least two years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
PRINCIPAL STOCKHOLDERS OF SOLAR COMMUNICATIONS GROUP
The following table provides information regarding the beneficial
ownership of Solar Communications capital stock as of September 7, 1999 by:
o each person who is known by Solar Communications to own beneficially 5%
or more of any class of Solar Communications' capital stock;
o each of Solar Communications' directors;
o Solar Communications' chief executive officer; and
o all of Solar Communications' directors and executive officers as a
group:
58
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Name of Beneficial Owner No. Percent
- -------------------------------------------------- ----------- ----------
<S> <C> <C>
James M. Rossi ................................ 2,755 46.3%
Alisa A. Rossi ................................ 2,755 46.3%
Monty S. August ............................... 1,400 23.5%
Raymond T. Brown .............................. 55.3 0.9%
Domenic S. Romano ............................. 30 0.5%
Raymond J. Romano ............................. 17.5 0.3%
Wallace Rogers, Jr. ........................... 37.5 0.6%
Susan D. Schneider ............................ 10 0.2%
Louis E. Brigante ............................. 46.5 0.8%
All directors and executive officers as a group
(11 persons) ................................ 4,001.8 67.3%
------- ----
</TABLE>
The address for all beneficial owners is c/o Solar Communications Group,
Inc., 1100 Coombs Road, Millville, New Jersey 08332.
The shares owned by James M. Rossi and Alisa A. Rossi include:
(a) 2,100 shares of Solar Communications common stock which James M.
Rossi and Alisa A. Rossi own as joint tenants,
(b) 100 shares of Solar Communications common stock owned by their minor
children,
(c) 205 shares of Solar Communications common stock owned by Camanco,
Inc., all of the outstanding stock of which is owned by James M. and
Alisa A. Rossi,
(d) 100 shares of Solar Communications common stock owned by Cam-Comm,
Inc., 38% of the outstanding stock of which is owned by James M. and
Alisa A. Rossi, and
(e) 250 shares of Solar Communications common stock owned by JMR
Marketing Corporation, 60% of the outstanding stock of which is owned
by James M. and Alisa A. Rossi.
The shares owned by Monty S. August include:
(a) 100 shares of Solar Communications common stock owned by Cam-Comm,
Inc., 19% of the outstanding stock of which is owned by Patrixbourne,
Inc. (all of the outstanding stock of which is owned by Mr. August),
and
(b) 250 shares of Solar Communications common stock owned by JMR
Marketing Corporation, 30% of the outstanding stock of which is owned
by Patrixbourne, Inc.
The shares reported as being owned by all the directors and executive
officers of Solar Communicaitons, as a group, include:
(a) 15 shares of Solar Communications common stock owned by Mr. Romano's
wife (as to which he disclaims beneficial ownership), and
(b) 2.5 shares of Solar Communications common stock owned by SR&L
Partners, of which Mr. Romano owns one-third of the outstanding
partnership interests.
59
<PAGE>
COMPARISON OF STOCKHOLDERS RIGHTS
The rights of Thermaltec stockholders are governed by Thermaltec's
certificate of incorporation, by-laws and the Delaware General Corporation Law.
The rights of Solar Communications stockholders are governed by Solar
Communications' certificate of incorporation, by-laws and the New Jersey
Business Corporation Act. After the date the merger is completed, the rights of
Solar Communications stockholders who become Thermaltec stockholders will be
governed by Thermaltec's certificate of incorporation, by-laws and the Delaware
General Corporation Law.
The following is a summary of the material differences between the rights
of Thermaltec stockholders and the rights of Solar Communications stockholders.
Comparison of the Delaware General Corporation Law and the New Jersey Business
Corporation Act
Appraisal rights in merger or consolidation. Under New Jersey law, unless
the certificate of incorporation otherwise provides, a dissenting shareholder
of a New Jersey corporation which is a party to a consolidation, or which is
not the surviving corporation in a merger, or which is the surviving
corporation in a merger requiring shareholder approval, has appraisal rights
with respect to any shares other than:
(1) shares listed on a national securities exchange or held of record by
not less than 1,000 holders, and
(2) in exchange for which, pursuant to the plan of merger of
consolidation, the shareholder will receive cash and/or securities
which will be listed on a national securities exchange or held of
record by not less than 1,000 holders. The Solar Communications
Certificate of Incorporation does not modify these statutory
appraisal rights.
Under Delaware law, shareholders of a Delaware corporation have appraisal
rights in a merger or consolidation, except for certain mergers and
consolidations not requiring any vote by shareholders of the corporation, with
respect to any shares other than:
(1) shares listed on a national securities exchange, or
(2) held of record by more than 2,000 holders. However, even with respect
to shares so listed or held, appraisal rights exist if, pursuant to
the plan of merger, the shareholder is to receive, in exchange for
his shares, anything other than stock of the surviving corporation
listed on a national securities exchange or held of record by more
than 2,000 holders or cash in lieu of fractional shares.
Appraisal rights on disposition of assets. Under New Jersey law, a
dissenting shareholder in a New Jersey corporation has appraisal rights in the
case of any sale, lease, exchange or other disposition of substantially all of
the assets of the corporation not in the usual or regular course of business as
conducted by the corporation, except with respect to:
(1) shares listed on a national securities exchange or held of record by
not less than 1,000 holders,
(2) a transaction pursuant to a plan of dissolution of the corporation
which provides for the distribution of substantially all of its net
assets to shareholders according to their interests within one year,
where such transaction is wholly for cash and/or securities which
will be listed on a national securities exchange or held of record by
not less than 1,000 holders, or
(3) a sale pursuant to court order.
Delaware law does not provide for appraisal rights in connection with a
disposition of assets.
Vote required to authorize certain changes. In general, under New Jersey
law, in the case of corporations organized after 1969 (such as Solar
Communications), a disposition of all or substantially all of the assets other
than in the regular course of business, a charter amendment or a merger or
consolidation must be authorized by the affirmative vote of a majority of the
votes cast, and by such vote of each class entitled to vote as a class, with
respect to any such matter.
In general, under Delaware law, a sale, lease or exchange of all or
substantially all of the assets, a charter amendment or merger or consolidation
must be authorized by the affirmative vote of a majority of the outstanding
shares entitled to vote thereon.
Class voting on merger or consolidation. Under New Jersey law, any class
or series of shares shall be entitled to vote as a class if the plan of merger
or consolidation contains any provision which, if contained in a proposed
charter amendment, would entitle the class or series to vote as a class on the
amendment.
Delaware law does not provide for a class vote on a plan of merger or
consolidation.
60
<PAGE>
Source of dividends. Under New Jersey law, dividends may not be paid if,
after giving effect to the dividend, either (1) the corporation would be unable
to pay its debts as they become due in the ordinary course of its business, or
(2) the corporation's total assets would be less than its total liabilities.
Under Delaware law, dividends may be paid out of surplus or, in the
absence thereof, out of the net profits of the current and/or next preceding
fiscal year, except where capital represented by stock enjoying a preference
upon the distribution of assets thereby would be impaired.
Power to adopt, amend or repeal by-laws. Under New Jersey law, the power
to adopt, amend and repeal by-laws of a corporation is vested in the board of
directors unless such power is reserved to the stockholders in the certificate
of incorporation. However, by-laws made by the board of directors may be
amended and/or repealed and new by-laws adopted by the stockholders. The
stockholders may prescribe in such by-laws that the board may not amend or
repeal by-laws approved by stockholders. The Solar Communications by-laws may
be amended by the board of directors or by the stockholders.
Under Delaware law, the power to adopt, amend or repeal by-laws of a
corporation is vested in the corporation's stockholders, although the
corporation's certificate of incorporation may also vest such power in the
corporation's board of directors. The Thermaltec certificate of incorporation
provides that the Thermaltec by-laws may be adopted, amended or repealed by the
Thermaltec board of directors.
Action by stockholders by written consent in lieu of a meeting. Under New
Jersey law, except as otherwise provided in a corporation's certificate of
incorporation, any action (other than the election of directors) required or
permitted to be taken at a meeting of the corporation's stockholders, may be
taken without a meeting upon the written consent of stockholders who would have
been entitled to cast the minimum number of votes which would have been
necessary to take such action at a meeting at which all shares entitled to vote
thereon were present and voted (except that the election of directors requires
the unanimous written consent of all stockholders). The corporation must give
all stockholders advance notice of such proposed action if the proposed action
involves a merger, consolidation or sale of substantially all of the assets of
a corporation.
Under Delaware law, except as otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken at a
meeting of a corporation's stockholders may be taken without a meeting if a
written consent, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
have been necessary to take such action at a meeting at which all stockholders
entitled to vote thereon were present and voted.
Removal of directors. Under New Jersey law, one or more or all directors
of a corporation may be removed for cause or, unless otherwise provided in the
certificate of incorporation, without cause by stockholders by the affirmative
vote of a majority of the votes cast by the holders of shares entitled to vote
thereon.
The provisions of Delaware law are similar to New Jersey law in this
respect, except with respect to corporations with classified boards of
directors. If the board of directors is classified, a director may be removed
only for cause unless the corporation's certificate of incorporation provides
otherwise.
Special meetings of stockholders. Under New Jersey law, holders of not
less than 10% of a corporation's voting stock may apply to the New Jersey
Superior Court for an order directing a special meeting of stockholders to be
held. The Solar Communications by-laws provide that a special meeting of
stockholders for any purpose or purposes may be called by the board of
directors, Chairman of the Board or President, and shall be called by the
Chairman of the Board, President or Secretary at the request in writing by
stockholders owning not less than a majority of the entire capital stock of the
corporation issued and outstanding and entitled to vote.
Under Delaware law, special meetings of stockholders may be called by the
board of directors or by such person or persons as may be authorized by a
corporation's certificate of incorporation or by-laws. The provisions in the
Thermaltec by-laws relating to special meetings of the stockholders allow
special meetings to be called at anytime by the President, or the board of
directors, or stockholders entitled to cast at least one-fifth of the votes
which all stockholders are entitled to cast at the particular meeting being
called.
De facto merger. Under New Jersey law, stockholders have the same voting
and dissent and appraisal rights as if they were stockholders of a surviving
corporation in a merger, if (1) voting shares outstanding or
61
<PAGE>
issuable after the transaction exceed by more than 40% voting shares
outstanding before the transaction, or (2) shares entitled to participate
without limitation in distributions outstanding or issuable after the
transaction exceed by more than 40% such shares outstanding before the
transaction.
The DGCL does not contain a comparable provision.
Guaranty. Under New Jersey law, a corporation may give a guaranty not in
furtherance of its direct or indirect business interests only when authorized
at a meeting of stockholders by the affirmative vote of all of the votes cast
by the holders of each class and series of shares entitled to vote thereon. If
authorized by such a vote, the guaranty may be secured by the corporation's
property.
Under Delaware law, a Delaware corporation may guaranty obligations of a
third party, whether or not in furtherance of a specific corporate purpose,
without stockholder approval.
Shareholders' derivative actions. New Jersey law contains certain
provisions which have the effect of discouraging derivative actions.
Specifically, New Jersey law authorizes the court to award reasonable expenses
and attorneys' fees to the successful defendants in a derivative action upon a
finding that the action was brought without cause. In addition, the corporation
may require the plaintiff or plaintiffs to give security for the reasonable
expenses, including attorneys' fees, that may be incurred by the corporation or
by other named defendants for which the corporation may become legally liable
if the plaintiff or plaintiffs are holders of less than 5% of the outstanding
shares of any class or series of such corporation (or voting trust certificates
therefor) unless the shares or trust certificates so held have a market value
in excess of $25,000.
The DGCL does not contain comparable provisions.
Proxies. Under New Jersey law, a proxy is valid for no longer than eleven
months unless a longer period is specified. In addition, a proxy is revocable
at will unless coupled with an interest. The death or incapacity of a
stockholder does not revoke a proxy and it will continue in force until
revocation by the stockholder's personal representative.
Under Delaware law, a proxy is not valid beyond three years from its date
unless it so provides for a longer period. In addition, for a proxy to be
irrevocable it must so state and be coupled with an interest in the stock
itself or in the corporation generally. In the case of a revocable proxy, death
or incapacity will revoke the proxy.
Inspection of books and records. Under New Jersey law, a stockholder of
record for at least six months immediately preceding his demand, or any holder
(or a person authorized on behalf of such holder) of at least 5% of the
outstanding shares of any class or series, shall have the right to examine for
any proper purpose the corporation's books and records.
Under Delaware law, any stockholder upon written demand under oath stating
the purpose thereof has the right during usual business hours to inspect for
any proper purpose the stock ledger, list of shareholders and other books and
records of the corporation, and to make copies or abstracts therefrom.
Anti-takeover statute. New Jersey has adopted a type of anti-takeover
statute known as a "business combination" statute. Subject to numerous
qualifications and exceptions, the statute prohibits an interested stockholder
of a corporation from effecting a business combination with the corporation for
a period of five years unless the corporation's board approved the transaction
prior to the stockholder becoming an interested stockholder. An "interested
stockholder" is defined to include any beneficial owner of more than 10% of the
voting power of the outstanding voting stock of the corporation and any
affiliate of the corporation who within the prior five year period has at any
time owned 10% or more of the voting power. The term "business combination" is
defined broadly to include, without limitation, a merger of the corporation
with the interested stockholder or any corporation which after such merger
would be an affiliate of the interested stockholder, and any transfer of 10% or
more of the corporation's assets to the interested stockholder or affiliate
thereof. The effect of the statue is to protect minority stockholders from
mergers in which they will be "frozen out" after the merger, by prohibiting
transactions in which an acquirer could favor itself at the expense of minority
stockholders. The New Jersey statute, however, does not apply to companies
which do not have either their principal executive offices or significant
business operations located in New Jersey.
62
<PAGE>
Delaware has adopted a business combination type of anti-takeover statute
which operates in a manner similar to the New Jersey statute. Although there
are numerous differences between the Delaware statute and the New Jersey
statute, the most significant include the following:
(1) under the Delaware statute, the moratorium imposed on a business
combination with an interested stockholder is three years, as opposed
to five under the New Jersey statute;
(2) the Delaware statute defines "interested stockholder" using a 15%
ownership threshold rather than the 10% threshold under the New
Jersey statute;
(3) the Delaware statute permits an interested stockholder to avoid the
moratorium by acquiring 85% of the corporation's voting power in the
same transaction in which that stockholder becomes an interested
stockholder (the New Jersey statute does not contain a comparable
provision); and
(4) the Delaware statute applies to Delaware corporations regardless of
the locations of their offices and business operations (the law would
therefore apply to Thermaltec).
Comparison of Certificates of Incorporation and By-Laws of Thermaltec and
Solar Communications
Authorized shares of capital stock. The Solar Communications certificate
of incorporation, as amended, authorizes the issuance of 10,000 shares of Solar
Communications common stock, 5,950 shares of which were issued and outstanding
as of September 7, 1999.
The Thermaltec certificate of incorporation, as amended, authorizes the
issuance of 100,000,000 shares of Thermaltec common stock, 2,578,118 shares of
which were issued and outstanding as of September 7, 1999.
Meetings. Pursuant to the Solar Communications by-laws, annual meetings of
Solar Communications stockholders shall be held on the second Tuesday in
October if not a legal holiday, or at such other date and at such other time as
the Solar Communications board may determine. At each annual meeting, the Solar
Communications stockholders entitled to vote shall elect a board of directors,
and they may transact such other corporate business as may properly be brought
before the meeting. Special meetings of Solar Communications stockholders may
be called for any purpose by the Solar Communications board, the Chairman of
the Board or the President. Written notice of any meeting of Solar
Communications stockholders shall be mailed not less than ten nor more than 60
days before such meeting to each Solar Communications stockholder entitled to
vote at the meeting.
Special meetings of the Solar Communications board may be called by the
President on two days' notice to each director, or such shorter period of time
before the meeting as will be sufficient for the convenient assembly of the
directors so notified. Special meeting can be called by any director in like
manner and notice on the written request of two or more directors.
Pursuant to the Thermaltec by-laws, annual meetings of Thermaltec
stockholders for the election of directors and for such other business as may
be stated in the notice of the meeting shall be held at such date as the
Thermaltec board shall determine and as set forth in the notice of the meeting.
At each annual meeting, the Thermaltec stockholders entitled to vote shall
elect a board of directors and they may transact such other corporation
business as shall be stated in the notice of the meeting. Special meetings of
Thermaltec stockholders may be called for any purpose by the President, the
board of directors or by stockholders entitled to cast at least one-fifth of
the votes which all stockholders are entitled to cast at the particular
meeting. Written notice shall be given to each Thermaltec stockholder entitled
to vote at the meeting not less than ten nor more than 60 days before the date
of the meeting.
Special meetings of the Thermaltec board may be called by the President or
the Secretary on the written request of a majority of the directors on at least
ten days' notice to each director.
Directors and officers. Pursuant to the Solar Communications by-laws, the
Solar Communications board may fix the number of directors, but such number may
not be less than one. The Solar Communications board
63
<PAGE>
has currently fixed the number of directors at five. The officers of Solar
Communications shall be a Chairman of the Board and CEO, a President, a
Secretary and a Treasurer and there may be one or more Vice Presidents, one or
more Assistant Secretaries and one or more Assistant Treasurers as the Solar
Communications board may elect.
Pursuant to the Thermaltec by-laws, the number of directors comprising the
Thermaltec board shall not be less than one nor more than seven persons. The
Thermaltec board has currently fixed the number of directors at one. The
officers of Thermaltec shall be a President, a Treasurer and a Secretary. In
addition, the Thermaltec board may elect a Chairman, one or more Vice
Presidents and such Assistant Secretaries and Assistant Treasurers as they may
deem proper.
LEGAL MATTERS
The validity of the shares of Thermaltec common stock offered hereby will
be passed upon for Thermaltec by Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP.
Edward A. Vrooman, a principal of such firm, is the owner of 20,000
restricted shares of Thermaltec common stock which he received in exchange for
legal services rendered on behalf of Thermaltec prior to March, 1999.
EXPERTS
The financial statements of Solar Communications Group, Inc. have been
audited by Withum, Smith & Brown, independent accountants as set forth in their
report on the financial statements appearing in this joint proxy
statement/prospectus. The report contains an explanatory paragraph describing
conditions that raise doubt about Solar Communications Group, Inc.'s ability to
continue as a going concern as described in Note 2 to the financial statements.
The financial statements are included in reliance upon the report of Withum,
Smith & Brown on the authority of that firm as experts in accounting and
auditing.
The financial statements of Thermaltec International, Corp. and
Subsidiaries have been audited by Capraro, Centofranchi, Kramer & Co., P.C.,
independent accountants, as set forth in their report on the financial
statements appearing in this joint proxy statement/prospectus. The financial
statements are included in reliance upon the report of Capraro, Centofranchi,
Kramer & Co., P.C. on the authority of that firm as experts in accounting and
auditing.
64
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Financial Statements of Thermaltec International, Corp. and Subsidiaries
Independent Auditors' Report ............................................................. F-2
Consolidated Balance Sheets, September 30, 1997 and 1998 and June 30, 1999 (unaudited) ... F-3
Consolidated Statements of Operations and Comprehensive Income For the Years Ended
September 30, 1997 and 1998 and for the Nine Month Periods ended June 30, 1998 and 1999
(unaudited) F-4
Consolidated Statements of Cash Flows For the Years Ended September 30, 1997 and 1998 and
for the Nine Month Periods ended June 30, 1998 and 1999 (unaudited) .................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) For the Period from
October 1, 1997 to September 30, 1998 and for the Nine Month Period ended June 30, 1999
(unaudited) ............................................................................. F-6
Notes to Consolidated Financial Statements ............................................... F-7
Financial Statements of Solar Communications Group, Inc. (A Development Stage Enterprise)
Independent Auditors' Report ............................................................. F-14
Balance Sheets, September 30, 1997 and 1998 and June 30, 1999 (unaudited) ................ F-15
Statements of Operations For the Period October 7, 1996 (Date of Inception) to September
30, 1997, for the Year Ended September 30, 1998, and for the Nine Month Periods ended
June 30, 1998 and 1999 (unaudited) and Cumulative from Inception to June 30, 1999
(unaudited) ............................................................................. F-16
Statements of Changes in Stockholders' Equity (Deficit) For the Period October 7, 1996
(Date of Inception) to September 30, 1998 and for the Nine Month Period ended June 30,
1999 (unaudited) ........................................................................ F-17
Statements of Cash Flows For the Period October 7, 1996 (Date of Inception) to September
30, 1997, for the Year Ended September 30, 1998, and for the Nine Month Periods ended
June 30, 1998 and 1999 (unaudited) and Cumulative from Inception to June 30, 1999
(unaudited) ............................................................................. F-18
Notes to Financial Statements ............................................................ F-19
Unaudited Pro Forma Condensed Consolidated Financial Information ......................... F-26
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999 ............. F-27
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Year Ended
September 30, 1997 ...................................................................... F-28
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Year Ended
September 30, 1998 ...................................................................... F-29
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Nine Month
Period ended June 30, 1998 .............................................................. F-30
Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Nine Month
Period ended June 30, 1999 .............................................................. F-31
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements ................. F-32
</TABLE>
F-1
<PAGE>
INSERT LETTERHEAD
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Thermaltec International Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Thermaltec
International Corporation and Subsidiaries as of September 30, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the periods then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Thermaltec
International Corporation and Subsidiaries as of September 30, 1998 and 1997,
and the results of its operations and cash flows for the periods then ended, in
conformity with generally accepted accounting principles.
/s/ Capraro, Centofranchi, Kramer & Co. P.C.
South Huntington, New York
February 12, 1999
F-2
<PAGE>
Thermaltec International Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
as of as of as of
9/30/97 9/30/98 6/30/99
------------- --------------- ---------------
<S> <C> <C> <C>
Assets
- ------
Current Assets
Cash and Cash Equivalents ............................. $ 4,792 $ 5,604 $ 58,500
Trade Accounts Receivable ............................. 71,869 61,496 --
Inventory ............................................. 30,182 65,088 --
Prepaid and Other Current Assets ...................... 7,686 9,292 --
---------- ------------ ------------
Total Current Assets .................................. 114,529 141,480 58,500
---------- ------------ ------------
Fixed Assets
Machinery and Equipment ............................... 176,121 145,523 --
Leasehold Improvements ................................ 51,104 40,120 --
---------- ------------ ------------
Gross Fixed Assets ................................... 227,225 185,643 --
Less: Accumulated Depreciation ........................ (46,284) (65,926) --
---------- ------------ ------------
Net Fixed Assets ...................................... 180,941 119,717 --
---------- ------------ ------------
Other Assets
Organization Costs, Net of Amortization ............... 12,193 7,889 --
Other Assets .......................................... 339 3,120 --
---------- ------------ ------------
Total Other Assets .................................... 12,532 11,009 --
---------- ------------ ------------
Total Assets ............................................. $ 308,002 $ 272,206 $ 58,500
========== ============ ============
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
Current Liabilities
Notes Payable ......................................... $ 42,114 $ 44,495 $ --
Vendor Accounts Payable ............................... 68,067 79,958 --
Other Liabilities ..................................... 71,513 89,309 --
Shareholder Loan ...................................... 103,667 105,642 --
---------- ------------ ------------
Total Current Liabilities ............................... 285,361 319,404 --
---------- ------------ ------------
Long-Term Liabilities
Long-Term Debt Less Current Maturities ................ 40,745 20,764 --
---------- ------------ ------------
Total Liabilities ....................................... 326,106 340,168 --
---------- ------------ ------------
Common Stock (Authorized 10,000,000 shares,
$.0001 Par Value; issued & outstanding:
2,578,118) ............................................ 205 239 258
Additional Paid-In Capital .............................. 787,796 1,122,762 1,449,547
Retained Earnings (Deficit) ............................. (814,695) (1,217,379) (1,391,305)
Accumulated Other Comprehensive Income:
Foreign Currency Translation Adjustment ............... 8,590 26,416 --
---------- ------------ ------------
Total Stockholders' Equity (Deficit) .................... (18,104) (67,962) 58,500
---------- ------------ ------------
Total Liabilities and Stockholders' Equity (Deficit) ..... $ 308,002 $ 272,206 $ 58,500
========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Thermaltec International Corp. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the For the For the For the
year ending year ending 9 months ending 9 months ending
9/30/97 9/30/98 6/30/98 6/30/99
------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Sales ................................................. $ -- $ -- $ -- $ --
Cost of Sales ......................................... -- -- -- --
---------- ---------- ---------- ----------
Gross Profit .......................................... -- -- -- --
General and Administrative Expenses ................... -- -- -- --
---------- ---------- ---------- ----------
Income (Loss) from Continuing Operations .............. -- -- -- --
Income (Loss) from Discontinued Operations ............ (259,719) (402,684) (339,332) (173,926)
---------- ---------- ---------- ----------
Net Loss .............................................. (259,719) (402,684) (339,332) (173,926)
---------- ---------- ---------- ----------
Other Comprehensive Income:
Foreign Currency translation adjustments ............. 8,337 17,826 13,036 12,063
---------- ---------- ---------- ----------
Total Comprehensive Income (Loss) ..................... $ (251,382) $ (384,858) $ (326,296) $ (161,863)
========== ========== ========== ==========
Basic and Diluted Loss Per Share-Continuing
Operations ........................................... $ -- $ -- $ -- $ --
========== ========== ========== ==========
Basic and Diluted Loss per Share-Discontinued
Operations ........................................... $ (0.13) $ (0.19) $ (0.16) $ (0.07)
========== ========== ========== ==========
Weighted Average Number of Shares Outstanding ......... 2,046,750 2,105,489 2,073,251 2,449,971
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Thermaltec International, Corp. and Subsidiaries
Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the year For the year For the nine For the nine
ending ending months ended months ended
9/30/97 9/30/98 6/30/98 6/30/99
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss ...................................... $ (259,719) $ (402,684) $ (339,332) $ (173,926)
---------- ---------- ---------- ----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation & Amortization ................. 30,665 34,901 22,666 17,676
Common Stock Issued for Services ............ 16,001 58,000 58,000 71,401
Foreign Exchange Revaluation (Gains)
Losses ..................................... 8,337 17,826 13,036 12,603
Loss on Disposal of Assets .................. -- 19,680 19,680 --
(Increase) decrease in:
Receivables ................................ (19,183) 10,373 10,571 (16,922)
Inventories ................................ 23,829 (5,416) 223 7,240
Prepaid and other current assets ........... (7,686) (1,606) (4,833) 3,969
Other Assets ............................... (25) (2,781) 11,986 (45,278)
Increase (decrease) in:
Accounts Payable ............................ (9,272) 11,891 51,716 33,536
Accrued Expenses and Other Current
Liabilities ................................ 9,475 58,409 113,127 48,703
---------- ---------- ---------- ----------
Total Adjustments ........................ 52,141 201,277 296,172 132,928
---------- ---------- ---------- ----------
Net cash used in operating activi-
ties .................................... (207,578) (201,407) (43,160) (40,998)
---------- ---------- ---------- ----------
Cash Flows from Investing Activities:
Purchases of Fixed Assets & Leasehold
Improvements ................................ (125,502) (18,543) -- --
---------- ---------- ---------- ----------
Cash Flows from Financing Activities:
Proceeds from sale of shares net of offer-
ing costs ................................... -- 277,000 62,301 113,367
Proceeds from Issuance of Notes Payable. 15,953 -- -- --
Repayments of Notes Payable ................... -- (17,600) (15,600) (19,493)
Net Proceeds (Repayments) of Shareholder Loans 103,667 (38,638) (2,439) 20
---------- ---------- ---------- ----------
Net cash provided by financing
activities .............................. 119,620 220,762 44,262 93,894
---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents ................................... (213,460) 812 1,102 52,896
Cash & Cash Equivalents, Beginning of
Period ........................................ 218,252 4,792 4,792 5,604
---------- ---------- ---------- ----------
Cash & Cash Equivalents, End of Period ......... $ 4,792 $ 5,604 $ 5,894 $ 58,500
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Thermaltec International Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
For the Years Ended September 30, 1997 and 1998 and
the Nine Months Ended June 30, 1999
<TABLE>
<CAPTION>
Accumulated
Common Stock
--------------------- Additional Retained Other
Number of Paid-In Earnings Comprehensive
Shares Amount Capital (Deficit) Income Total
----------- -------- ------------ ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance ................... 2,034,750 $203 $ 771,797 $ (554,976) $ 252 $ 217,276
Net Loss for the
year ended 9/30/1997 ............. (259,719) (259,719)
Stock issued for services during
the year ended 9/30/97 ........... 16,001 2 15,999 16,001
Other Comprehensive Income:
Foreign Currency Translation
Adjustment ....................... 8,338 8,338
--------- ---- ---------- ------------ --------- ----------
Balance September 30, 1997 .......... 2,050,751 205 787,796 (814,695) 8,590 (18,104)
Net Loss for the year ended
9/30/1998 ........................ (402,684) (402,684)
Stock sold during the year
ended 9/30/98 .................... 288,600 28 276,972 277,000
Stock issued for services .......... 58,000 6 57,994 58,000
Other Comprehensive Income:
Foreign Currency Translation
Adjustment ....................... 17,826 17,826
--------- ---- ---------- ------------ --------- ----------
Balance September 30, 1998 .......... 2,397,351 239 1,122,762 (1,217,379) 26,416 (67,962)
--------- ---- ---------- ------------ --------- ----------
Unaudited:
Net Loss for the nine months
ended 6/30/99 .................... (173,926) (173,926)
Warrants exercised during the
nine months ended 6/30/99 ........ 113,367 12 113,355 113,367
Stock issued for services .......... 67,400 7 71,394 71,401
Other Comprehensive Income:
Foreign Currency Translation
Adjustment ....................... 12,603 12,603
Effect of spin-off of Panama
Industries ....................... 142,036 (39,019) 130,017
--------- ---- ---------- ------------ --------- ----------
Balance June 30, 1999 .............. 2,578,118 $258 $1,449,547 $ (1,391,305) $ 0 $ 58,500
========= ==== ========== ============ ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
1. MERGER WITH SOLAR COMMUNICATION GROUP, INC./DISCONTINUED OPERATIONS
On December 11, 1998 the Company entered into an agreement with Solar
Communication Group, Inc. of Millville, New Jersey. Under the terms of this
agreement, the Company agreed to increase its number of authorized shares to
70,000,000. The Company would then acquire all of the outstanding shares of
Solar in exchange for 59,500,000 of its shares, with the current shareholders
of the Company retaining their existing shares in the Company. The current
owners of Solar would then become the majority shareholders of the Company;
this is a process that is sometimes referred to as a "reverse merger". The
consummation of the merger is subject to a number of conditions, including the
completion of customary due diligence, the receipt of all necessary
governmental, regulatory, shareholder and third party approvals as well as the
registration of the shares of the Company's common stock to be issued in
conjunction with the merger with the SEC and with all appropriate state
regulatory authorities.
On May 17, 1999 the Company transferred substantially all of its assets
and liabilities into a wholly-owned subsidiary, Panama Industries Ltd. On May
28, 1999, the Company then paid out the shares of Panama Industries, via a
spin-off, to the shareholders of the Company on a one-for-one basis, equal to
the number of shares of Thermaltec common stock held. These shares were paid to
an escrow agent, who is holding the shares for distribution to the shareholders
of record as of May 28, 1999. As a result of these transactions, the Company
was left as an inactive corporation. The shareholders were then left with one
share of Thermaltec International stock and one share of Panama Industries
stock, for each share of Thermaltec International stock previously held.
In accordance with Accounting Principles Board Opinion No. 30, the operations
of the Company are presented as a discontinued operation; all prior periods
have been restated for comparison purposes. The balance sheets as of September
30, 1998 and 1997 have not been restated. The summary Income Statement
information for the Company for the periods presented are:
<TABLE>
<CAPTION>
For the year ending For the nine months ending
------------------------------- -------------------------------
9/30/97 9/30/98 6/30/98 6/30/99
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales ................ $ 442,264 $ 275,846 $ 247,463 $ 172,143
Income Taxes ......... 967 959 959 --
Net Loss ............. $ (259,719) $ (402,684) $ (339,332) $ (173,926)
========== ========== ========== ==========
</TABLE>
The assets and liabilities of the discontinued operations which were part
of the entities that were spun off consisted of the following as of May 28,
1999:
Accounts Receivable ...................... $ 78,418
Inventory ................................ 57,848
Prepaid and Other Current Assets ......... 5,323
Property and equipment ................... 103,898
Other Assets ............................. 45,387
----------
Total Assets ........................... 290,874
----------
Accounts Payable ......................... 104,451
----------
Notes Payable ............................ 45,766
Shareholder Loans ........................ 105,662
Other Accrued Liabilities ................ 138,012
----------
Total Liabilities ...................... 392,892
----------
Net Liabilities Disposed of .............. $ (103,017)
==========
Panama Industries, as the successor company to Thermaltec International,
will engage in the business of expanding its metallurgical activities in Latin
America and in acquiring existing technologies and companies in North America
and in Europe.
F-7
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION/REPORTING
ENTITIES
The consolidated financial statements of Thermaltec International Corp.
and Subsidiaries (the "Company") include the following entities:
THERMALTEC INTERNATIONAL CORP.
Thermaltec International Corp.("TTI") was incorporated in 1994 under the
laws of the state of Delaware. TTI was organized for the purpose of engaging in
the sale of thermal sprayed coatings to individual customers in the United
States and other countries. TTI also serves as the parent company which acts as
a holding company for its subsidiaries and provides administrative support to
the operations of the Company.
THERMALTEC DE COSTA RICA, S.A.
Thermaltec de Costa Rica, S.A. ("TCR") is a wholly-owned subsidiary
located in San Jose, Costa Rica. TCR began operations during fiscal 1995, and
provides thermal spray coatings to businesses and individuals throughout Costa
Rica. This entity was spun off with Panama Industries.
METAL COATINGS, INC.
Metal Coatings, Inc.("MCI") was a majority-owned subsidiary located in San
Juan, Puerto Rico. MCI began significant operations during fiscal 1997, and
provided thermal spray coatings to businesses and individuals throughout Puerto
Rico. On May 31, 1998 the operations of MCI ceased, and the remaining assets
and liabilities were assumed by TTI.
THERMALTEC DOMINICANA, S.A.
Thermaltec Dominicana, S.A.("TDR") was a majority-owned subsidiary located
in Santo Domingo in the Dominican Republic. TDR began significant operations in
October 1996 and provided thermal spray coatings, as a market test, to
businesses and individuals in the Santo Domingo metropolitan area. In February
1998, the operations of TDR ceased and the assets and liabilities were assumed
by TTI.
PANAMA INDUSTRIES,LTD.
Panama Industries was incorporated in March 1998, but was not consolidated
into the group until May of 1999. This entity was spun off with Thermaltec de
Costa Rica.
PRINCIPLES OF CONSOLIDATION
All material intercompany transactions have been eliminated in the
consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION/REPORTING
ENTITIES -- (Continued)
REVENUE RECOGNITION
Revenues from contracts with terms greater than one month are recognized
on the percentage-of-completion method, measured by the percentage of cost
incurred to date to estimated total cost for each contract. On short-term
contracts with terms of less than one month, the completed contract method is
utilized as it approximates the percentage-of-completion method.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company includes cash
on deposit, money market funds and amounts held by brokers and funds held in
escrow in cash accounts to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable have been adjusted for all known uncollectible
contracts; an allowance for doubtful contracts has not been provided, as the
amount is not considered material.
INVENTORIES
Inventories and prepaid supplies consist of various materials and supplies
utilized on construction contracts and are valued at the lower of cost
(first-in,first-out) or market.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment is stated at cost. Major expenditures for property
and those which substantially increase useful lives are capitalized.
Maintenance, repairs, and minor renewals are expensed as incurred. When assets
are retired or otherwise disposed of, their costs and related accumulated
depreciation are removed from the accounts and resulting gains or losses are
included in income. Depreciation is provided by both straight-line and
accelerated methods over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Organization Costs are being amortized on a straight-line basis over sixty
months.
EARNINGS (LOSS) PER SHARE
The Company has adopted SFAS No. 128, "Earnings per Share", which requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings per
share ("Diluted EPS") by all publicly traded entities, as well as entities that
have made a filing or are in the process of filing with a regulatory agency in
preparation for the sale of securities in a public market.
Basic EPS is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding during
the period. The computation of Diluted EPS gives effect to all dilutive
potential common shares during the period. The computation of Diluted EPS does
not assume conversion, exercise or contingent exercise of securities that would
have an antidilutive effect on earnings.
F-9
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION/REPORTING
ENTITIES -- (Continued)
INCOME TAXES
The Company has adopted Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes". The Company files a consolidated Federal tax
return, which includes all of the subsidiaries. Accordingly, Federal Income
taxes are provided on the taxable income of the consolidated group. State
income taxes are provided on a separate company basis, if and when taxable
income, after utilizing available carryforward losses, exceeds certain levels.
DEFERRED INCOME TAXES
Deferred tax assets arise principally from net operating losses and
capital losses available for carryforward against future years' taxable income.
FOREIGN EXCHANGE
The Company and its subsidiaries treat the U.S. Dollar as their functional
currency. Accordingly, gains and losses resulting from the translation of
accounts designated in other than the functional currency are reflected in the
determination of net income and have been immaterial.
RECLASSIFICATIONS
Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation in the
current-year financial statements.
INTERIM FINANCIAL INFORMATION
The financial information presented for the nine month periods ended June
30, 1998 and June 30, 1999 is unaudited but, in the opinion of management,
reflects all of the adjustments necessary for a fair presentation of such
financial statements. The results of operations for the nine month period ended
June 30, 1999 are not necessarily indicative of the operating results to be
expected for the year ended September 30, 1999.
REPORTING COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" for the nine months ended June 30, 1999;
all prior periods have been restated for purposes of comparison. This Statement
establishes standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. This
statement requires the classification of items of comprehensive income by their
nature in a financial statement and the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet.
3. SUPPLEMENTAL CASH FLOW INFORMATION
For the period Ended:
---------------------------------------
September 30
------------------------- June 30
1997 1998 1999
----------- ----------- -----------
Cash paid for:
Interest Expense ......... $ 10,070 $ 23,695 $ 22,564
Income taxes ............. $ 967 $ 959 --
Additionally, the Company had a non-cash operating, investing and
financing activity of $103,017 when it spun off the net assets and liabilities
to its subsidiary.
F-10
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
4. INVENTORY
SEPTEMBER 30
------------------------- JUNE 30
1997 1998 1999
----------- ----------- --------
Inventory consists of the following:
Raw Materials ..................... $ 30,182 $ 28,209 $ --
Machinery held for Resale ......... --__ 36,879 --
-------- -------- ----
Total Inventory ................ $ 30,182 $ 65,088 $ --
======== ======== ====
5. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30
Estimated useful --------------------------- June 30
Life-years 1997 1998 1999
------------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Machinery, equipment and furniture ..................... 5-10 $ 176,121 $ 145,523 $ --
Leasehold improvements ................................. 5-31.5 51,104 40,120 --
--------- --------- ----
227,225 185,643 --
Less accumulated depreciation and amortization ......... 46,284 65,926 --
--------- --------- ----
Net property and equipment ............................. $ 180,941 $ 119,717 $ --
========= ========= ====
</TABLE>
Depreciation for the years ended September 30, 1998 and 1997 was $ 30,597
and $ 26,362, respectively: for the nine months ended June 30, 1999,
depreciation was $ 11,871.
6. LINE OF CREDIT
The Company has a line of credit with Fleet Bank for $ 25,000, payable on
demand. The line is secured by substantially all of the Company's assets. As of
June 30, 1999, this liability had been transferred to Panama Industries.
7. DEBT
<TABLE>
<CAPTION>
September 30
LONG-TERM DEBT: ------------------------- June 30
1997 1998 1999
----------- ----------- --------
<S> <C> <C> <C>
Various equipment notes with terms expiring Decem-
ber,1999 Through July,2000. The loans provide for
monthly payments Of principal and interest. Inter-
est rates range from 15-18%. ..................... $ 57,882 $ 40,282 --
Less current maturities ........................ 17,137 19,518 --
-------- -------- --
Long term debt ................................. 40,745 20,764 --
======== ======== ==
SHORT-TERM DEBT: ..................................
Current maturities of equipment notes .......... 17,137 19,518 --
Bank line of credit (Fleet Bank) ............... 24,977 24,977 --
-------- -------- --
Short-term debt ................................ 42,114 44,495 --
======== ======== ==
</TABLE>
As of June 30,1999, all long-term debt had been transferred to Panama
Industries.
8. SHAREHOLDER LOAN
This amount represents the total due to the majority shareholder of
$ 105,642 and $ 103,667 as of September 30, 1998 and 1997, respectively. This
loan has no maturity and bears no interest.
F-11
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
9. SALES TO MAJOR CUSTOMERS
During 1998, one customer accounted for approximately 10% of the Company's
sales and 7% of accounts receivable. During 1997, one customer accounted for
approximately 32% of sales and 47% of the Company's accounts receivable
balance. During the nine months ended June 30, 1999, one customer accounted for
8% of sales.
10. COMMITMENTS AND CONTINGENCIES LEASES
TCR is currently obliged under a lease through January 2000 for its office
space and shop space in Costa Rica. The lease calls for an annual rent of
$ 12,960, due in monthly payments. This lease has been transferred to Panama
Industries.
TTI was obliged under a lease for its office space in West Babylon, NY,
which expired July, 1998 for a minimum annual rental of $ 13,200.
Total rental expense under cancellable and noncancellable operating leases
was $ 24,920 and $ 13,900 for the years ended September 30, 1998 and 1997,
respectively: for the nine months ended June 30, 1999, total rental expense was
$ 17,711.
All future minimum lease obligations under noncancellable leases have been
transferred to Panama Industries.
11. COMMON STOCK
<TABLE>
<CAPTION>
September 30,
--------------------------- June 30,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Common stock is as follows:
Common stock, $.0001 par value, 10,000,000
shares authorized.
Shares issued and outstanding ............ 2,050,751 2,397,351 2,578,118
Par Value ................................ $ 205 $ 239 $ 258
</TABLE>
Common Stock:
For the year ended September 30, 1998, the Company completed the issuance
of 271,600 shares of common stock at various prices of $ 0.75 to $ 1.50 per
share and carried with them a warrant granting the right to purchase, for each
share purchased, an additional share of Thermaltec common stock at a price of
$ 1.00 per share. The warrants expire on June 2, 2000. At June 30, 1999 a total
of 78,200 warrants had been exercised for an equal number of shares. Of the
proceeds, $ 58,200 has been paid to an escrow agent to be paid to the Company
after the completion of the merger with Solar Communications.
During the year ended September 30, 1998, the Company issued 17,000 shares
of common stock at the price of $ 1.00 per share.
During the nine months ended June 30, 1999, the Company issued 71,401
shares in exchange for services.
On July 7, 1999 the Company approved an increase in the number of
authorized shares outstanding to 100,000,000. At the same time, the Company
also approved an option plan, under which 10,000,000 of the above shares were
reserved for issuance in exchange for options of the Solar Communications
Group, subsequent to and contingent upon, the completion of the merger.
12. INCOME TAXES
No provision for income taxes was recorded during the years ended
September 30, 1998 and 1997 or for the nine months ended June 30, 1999, due to
net losses being incurred. At June 30, 1999, the Company had net operating loss
carryforwards for tax purposes of approximately $ 1,130,000, which would expire
in 2013.
F-12
<PAGE>
THERMALTEC INTERNATIONAL, CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
12. INCOME TAXES -- (Continued)
The Company's effective tax rate in 1997,1998 and 1999 differs from the
federal statutory rate as a result of a full valuation allowance being provided
against gross deferred tax assets.
Deferred tax assets consist of the following components at:
September 30:
---------------------------
1997 1998
------------ ------------
Net operating loss carryforwards ......... $ 252,200 $ 382,000
Less: valuation allowance ................ 252,200 382,000
--------- ---------
Total deferred ........................... $ -- $ --
========= =========
At September 30, 1998 and 1997 and at June 30, 1999, the Company provided
a full valuation allowance against the gross deferred tax asset since, in
management's judgment, it is more likely than not, such benefits will not be
realized.
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Solar Communications Group, Inc.:
We have audited the accompanying balance sheets of Solar Communications Group,
Inc. (a development stage enterprise) as of September 30, 1997 and 1998, and
the related statements of operations, changes in stockholders' equity (deficit)
and cash flows for the period October 7, 1996 (Date of Inception) to September
30, 1997 and for the year ended September 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solar Communications Group,
Inc. as of September 30, 1997 and 1998 and the results of its operations and
its cash flows for the period October 7, 1996 (Date of Inception) to September
30, 1997 and for the year ended September 30, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage enterprise and has
suffered recurring losses and net cash outflows from operations since inception
that raise substantial doubt about its ability to continue as a going concern.
As such, the Company is dependent upon future capital infusions from existing
and/or new investors to fund operations. Management's plans with regard to
these matters are also described in Note 2. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Withum, Smith & Brown
Red Bank, New Jersey
July 1, 1999
F-14
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
------------------------ --------------
1997 1998 1999
--------- ------------ --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................ $ -- $ 250 $ 8,425,839
Prepaid expenses ......................................... -- -- 72,098
Due from related parties ................................. -- -- 700
Other current assets ..................................... -- -- 39,192
------ --------- ------------
Total Current Assets .................................. -- 250 8,537,829
Property and Equipment, Net ................................. -- -- 725,331
------ --------- ------------
TOTAL ASSETS .......................................... $ -- $ 250 $ 9,263,160
====== ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable ......................................... $ -- $ -- $ 116,082
Accrued expenses ......................................... 200 400 503,367
Due to related parties ................................... -- 73,762 --
Loans payable ............................................ -- -- 215,500
Loans payable - related parties .......................... -- -- 110,000
------ --------- ------------
Total Current Liabilities ............................. 200 74,162 944,949
Commitments and Contingencies
Stockholders' Equity (Deficit):
Common stock, no par value; authorized; 1,000 shares at
September 30, 1997 and 1998 and 10,000 shares at
June 30, 1999 (unaudited), issued and outstanding;
1,000 shares at September 30, 1997 and 1998 and
4,718.40 shares at June 30, 1999 (unaudited) ............ 250 250 170,985
Common stock subscribed, 1,000 shares at June 30, 1999
(unaudited) ............................................. -- -- 10,000,000
Stock subscription receivable ............................ (250) -- --
Deficit accumulated during the development stage ......... (200) (74,162) (1,852,774)
------ --------- ------------
Total Stockholders' Equity (Deficit) .................. (200) (73,912) 8,318,211
------ --------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) ............................................ $ -- $ 250 $ 9,263,160
====== ========= ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-15
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
October 7, 1996 For the
(Date of Inception) Year Ended
to September 30, September 30,
1997 1998
--------------------- ---------------
<S> <C> <C>
Revenues ............................... $ -- $ --
Operating Expenses:
General and Administrative
Expenses ........................... 200 200
General and Administrative
Expenses-Related Parties ........... -- 73,762
------- ----------
Total Operating Expenses ......... 200 73,962
------- ----------
Net Loss ............................... $ (200) $ (73,962)
======= ==========
Basic and Diluted Net Loss Per Common
Share ................................. $ (.05) $ (17.26)
======== ==========
Weighted Average Number of Shares of
Common Stock and Common
Stock Subscribed Outstanding .......... 4,284 4,284
======== ==========
<CAPTION>
For the Nine Month Cumulative From
Periods Ended June 30, Inception to
1998 1999 June 30, 1999
------------- ---------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues ............................... $ -- $ -- $ --
Operating Expenses:
General and Administrative
Expenses ........................... -- 1,710,811 1,711,211
General and Administrative
Expenses-Related Parties ........... 49,175 67,801 141,563
---------- ------------ ------------
Total Operating Expenses ......... 49,175 1,778,612 1,852,774
---------- ------------ ------------
Net Loss ............................... $ (49,175) $ (1,778,612) $ (1,852,774)
========== ============ ============
Basic and Diluted Net Loss Per Common
Share ................................. $ (11.48) $ (376.90)
========== ============
Weighted Average Number of Shares of
Common Stock and Common
Stock Subscribed Outstanding .......... 4,284 4,719
========== ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-16
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 7, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1998
AND FOR THE NINE MONTH PERIOD ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
Common Stock Subscribed
Shares Amount Shares Amount
------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Balance, October 7, 1996
(Inception) ......................... -- $ -- -- $ --
Issuance of common stock to
founders for stock subscription
receivable, October 8, 1996 ......... 1,000.00 250 -- --
Net loss ............................. -- -- -- --
-------- --------- -- ------------
Balance, September 30, 1997 .......... 1,000.00 250 -- --
Collection of stock subscription
receivable .......................... -- -- -- --
Net loss ............................. -- -- -- --
-------- --------- -- ------------
Balance, September 30, 1998 .......... 1,000.00 250 -- --
Issuance of common stock to
founders, October 1998
(unaudited) ......................... 3,284.40 -- -- --
Issuance of common stock for
services rendered, December
1998, $393.04 per share
(unaudited) ......................... 184.00 72,386 -- --
Issuance of common stock for the
conversion of related party debt,
December 1998, $393.04 per
share (unaudited) ................... 250.00 98,349 -- --
Issuance of common stock
subscribed for cash, February and
March 1999, $10,000 per share
(unaudited) ......................... -- -- 30.00 300,000
Issuance of common stock
subscribed for cash, April, May
and June 1999, $10,000 per share
(unaudited) ......................... -- -- 970.00 9,700,000
Net loss (unaudited) ................. -- -- -- --
-------- --------- -------- ------------
Balance, June 30, 1999 (unaudited) 4,718.40 $ 170,985 1,000.00 $ 10,000,000
======== ========= ======== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Stock During the Total
Subscription Development Stockholders'
Receivable Stage Equity (Deficit)
-------------- ----------------- -----------------
<S> <C> <C> <C>
Balance, October 7, 1996
(Inception) ......................... $ -- $ -- $ --
Issuance of common stock to
founders for stock subscription
receivable, October 8, 1996 ......... (250) -- --
Net loss ............................. -- (200) (200)
------- ------------- ------------
Balance, September 30, 1997 .......... (250) (200) (200)
Collection of stock subscription
receivable .......................... 250 -- 250
Net loss ............................. -- (73,962) (73,962)
------- ------------- ------------
Balance, September 30, 1998 .......... -- (74,162) (73,912)
Issuance of common stock to
founders, October 1998
(unaudited) ......................... -- -- --
Issuance of common stock for
services rendered, December
1998, $393.04 per share
(unaudited) ......................... -- -- 72,386
Issuance of common stock for the
conversion of related party debt,
December 1998, $393.04 per
share (unaudited) ................... -- -- 98,349
Issuance of common stock
subscribed for cash, February and
March 1999, $10,000 per share
(unaudited) ......................... -- -- 300,000
Issuance of common stock
subscribed for cash, April, May
and June 1999, $10,000 per share
(unaudited) ......................... -- -- 9,700,000
Net loss (unaudited) ................. -- (1,778,612) (1,778,612)
------- ------------- ------------
Balance, June 30, 1999 (unaudited) $ -- $ (1,852,774) $ 8,318,211
======= ============= ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-17
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
October 7, 1996 For the
(Date of Inception) Year Ended
To September 30, September 30,
1997 1998
--------------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss ................................ $ (200) $ (73,962)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........ -- --
Common stock issued for services ..... -- --
Changes in assets and liabilities:
Prepaid expenses .................... -- --
Other current assets ................ -- --
Accounts payable .................... -- --
Accrued expenses .................... 200 200
------- ----------
Net Cash Used in Operating
Activities ....................... -- (73,762)
Cash Flows From Investing Activities:
Purchase of property and
equipment ........................... -- --
Net change in due from related
parties ............................. -- --
------- ----------
Net Cash Used in Investing
Activities ....................... -- --
Cash Flows From Financing Activities:
Collection of stock subscription
receivable .......................... -- 250
Net change in due to related parties -- 73,762
Proceeds from loans payable .......... -- --
Proceeds from loans payable --
related parties ..................... -- --
Proceeds from common stock
subscribed .......................... -- --
------- ----------
Net Cash Provided By
Financing Activities ............. -- 74,012
------- ----------
Net Increase in Cash .................... -- 250
Cash -- Beginning of Period ............. -- --
------- ----------
Cash -- End of Period ................... $ -- $ 250
======= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Nine Month
Periods Ended Cumulative from
June 30, Inception to
1998 1999 June 30, 1999
------------- ----------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ................................ $ (49,175) $ (1,778,612) $ (1,852,774)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........ -- 18,947 18,947
Common stock issued for services ..... -- 72,386 72,386
Changes in assets and liabilities:
Prepaid expenses .................... -- (72,098) (72,098)
Other current assets ................ -- (39,192) (39,192)
Accounts payable .................... -- 116,082 116,082
Accrued expenses .................... -- 502,967 503,367
---------- ------------- -------------
Net Cash Used in Operating
Activities ....................... (49,175) (1,179,520) (1,253,282)
Cash Flows From Investing Activities:
Purchase of property and
equipment ........................... -- (744,278) (744,278)
Net change in due from related
parties ............................. -- (700) (700)
---------- ------------- -------------
Net Cash Used in Investing
Activities ....................... -- (744,978) (744,978)
Cash Flows From Financing Activities:
Collection of stock subscription
receivable .......................... -- -- 250
Net change in due to related parties 49,175 24,587 98,349
Proceeds from loans payable .......... -- 215,500 215,500
Proceeds from loans payable --
related parties ..................... -- 110,000 110,000
Proceeds from common stock
subscribed .......................... -- 10,000,000 10,000,000
---------- ------------- -------------
Net Cash Provided By
Financing Activities ............. 49,175 10,350,087 10,424,099
---------- ------------- -------------
Net Increase in Cash .................... -- 8,425,589 8,425,839
Cash -- Beginning of Period ............. -- 250 --
---------- ------------- -------------
Cash -- End of Period ................... $ -- $ 8,425,839 $ 8,425,839
========== ============= =============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-18
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 1 -- Organization, Business and Pending Merger:
Solar Communications Group, Inc. (the Company) is a corporation involved
in the installation and implementation of computer hardware and software inside
rooms of nationwide hotels.
The Company provides quality communications alternatives to the business
community. The Company has developed an Internet access solution, known as
PCRoomLink(TM), for the hospitality industry. PCRoomLink's computer-equipped
rooms permit a hotel patron, with or without a laptop computer, to obtain
high-speed Internet access in the privacy of his/her hotel room.
The Company is a development stage enterprise, which has a very limited
history of operations and has not generated any revenues from operations. The
Company's business model is untested. It may take the Company longer than
anticipated to implement its business model, and some aspects of the Company's
business model may not prove to be feasible or possible.
On June 17, 1999, the Company executed a merger agreement with Thermaltec
International Corp. Pursuant to the merger, the Company will be merged into
Thermaltec International Corp. (TTI) with the shareholders of the Company
receiving over 95% of the issued and outstanding shares of TTI's common stock.
In preparation for the merger, TTI has transferred substantially all of its
assets and liabilities into a wholly owned subsidiary, Panama Industries, Ltd.
(PI). The assets not transferred will consist primarily of cash. Shares of PI
will be distributed, on a pro rata basis, to TTI shareholders of record as of
May 28, 1999, immediately prior to the closing date of the merger. TTI's
current shareholders will also retain their shares in TTI.
The completion of the merger is contingent upon the receipt by the Company
of certain regulatory approvals, approval of the merger by the shareholders of
TTI and the Company, and satisfaction of certain other customary closing
conditions.
Note 2 -- Basis of Preparation:
Since inception, the Company has suffered recurring losses and net cash
outflows from operations. The Company expects to continue to incur substantial
losses to complete the development of its business model and will also incur
substantial marketing and staffing costs in the near future. Since its
inception, the Company has funded operations through debt issuance and, more
recently, private placements of equity in order to meet its strategic
objectives. Management is actively pursuing other financing options, which
include securing additional equity financing, and believes that sufficient
funding will be available to meet its planned business objectives including
anticipated cash needs for working capital, for a reasonable period of time.
However, there can be no assurance that the Company will be able to obtain
sufficient funds to continue the development of, and if successful, to commence
the installation and implementation of its computer systems in the hotels.
As a result of the foregoing, there exists substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments relating to the recoverability of the carrying
amounts of recorded assets or the amount of liabilities that might result from
the outcome of this uncertainty.
Note 3 -- Summary of Significant Accounting Policies:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
F-19
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 3 -- Summary of Significant Accounting Policies: -- (Continued)
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid investments with
original maturities of less than three months. At June 30, 1999, cash
equivalents amounted to approximately $6,472,000.
Prepaid Expenses
Prepaid expenses are comprised of certain prepaid general and
administrative expenses which will benefit future periods.
Development Stage Enterprise
The accompanying statements have been prepared in accordance with the
provision of Statement of Financial Accounting Standard (SFAS) No. 7,
"Accounting and Reporting by Development Stage Enterprises".
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets which range from three to seven years. Gains and losses on
depreciable assets retired or sold are recognized in the statement of
operations in the year of disposal. Repairs and maintenance expenditures are
expensed as incurred.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes". SFAS No. 109 requires recognition of
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse. A valuation allowance is provided if it is
more likely than not that some or all of the deferred tax assets will not be
realized.
New Accounting Standards
The Company will adopt Statement of Financial Accounting Standard (FAS)
No. 130, "Reporting Comprehensive Income" in fiscal 1999. This statement
establishes standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement requires the
classification of items of comprehensive income by their nature in a financial
statement and the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
the balance sheet. The Company believes that adoption of this statement will
not have a material effect on its financial statements.
The Company will also adopt FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in fiscal 1999. This statement supersedes
FAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers. This
statement establishes standards for reporting information about operating
segments in annual financial statements. Operating segments are defined as
components of an enterprise evaluated regularly by the Company's senior
management in deciding how to allocate resources and in assessing performance.
The Company believes that adoption of this statement will not have a material
effect on its financial statements.
F-20
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 3 -- Summary of Significant Accounting Policies: -- (Continued)
New Accounting Standards -- (Continued)
In 1998, the FASB issued Statement of Financial Accounting Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). SFAS No. 133 modifies the accounting for derivative and hedging
activities and is effective for fiscal years beginning after December 15, 1999.
The Company believes that the adoption of SFAS No. 133 will not have a material
impact on the Company's financial statements.
Concentration of Credit Risk
The Company maintains cash balances, at times, with financial institutions
in excess of amounts insured by the Federal Deposit Insurance Corporation.
Management monitors the soundness of these institutions and considers the
Company's risk negligible.
Advertising Costs
All advertising costs are expensed the first time the advertising takes
place. Advertising costs were approximately $231,000 for the nine month period
ended June 30, 1999.
Financial Instruments
The carrying values of accounts payable and accrued expenses approximate
their fair values. The fair value of the Company's loans payable is assumed to
approximate its book value.
Net Loss Per Common Share
The Company has adopted SFAS No. 128, "Earnings per Share" ("FAS 128"),
which requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have publicly
traded common stock or potential common stock (options, warrants, convertible
securities or contingent stock arrangements). FAS 128 also requires
presentation of earnings per share by an entity that has made a filing or is in
the process of filing with a regulatory agency in preparation for the sale of
securities in a public market.
Basic EPS is computed by dividing income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS gives effect to all dilutive potential common shares
outstanding during the period. The computation of Diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would have an
antidilutive effect on earnings. Refer to Note 11 for the Company's methodology
for determining net loss per share.
Stock-Based Compensation
The Company has adopted the provisions of Statement No 123, Accounting for
Stock-Based Compensation. As permitted by the Statement, the Company has chosen
to account for stock-based compensation using the intrinsic value method.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation plans for any period.
Interim Financial Information
The financial information presented for the nine month periods ended June
30, 1998 and 1999 and the cumulative amounts from the date of inception is
unaudited but, in the opinion of management, reflects all
F-21
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 3 -- Summary of Significant Accounting Policies: -- (Continued)
Interim Financial Information -- (Continued)
adjustments (which consist of normal accruals) necessary for a fair
presentation of such financial statements. The results of operations for the
nine month period ended June 30, 1999 are not necessarily indicative of the
operating results to be expected for the year ended September 30, 1999.
Note 4 -- Property and Equipment, Net:
Property and equipment consist of the following:
September 30, June 30,
1997 1998 1999
------ ------ ------------
(Unaudited)
Office equipment ........................ $ -- $ -- $189,468
Hotel installations in progress ......... -- -- 554,810
---- ---- --------
-- -- 744,278
Less accumulated depreciation ........... -- -- 18,947
---- ---- --------
Property and Equipment, Net ............. $ -- $ -- $725,331
==== ==== ========
Depreciation expense amounted to $18,947 for the nine month period ended
June 30, 1999.
Note 5 -- Income Taxes:
The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $74,000 at September 30, 1998,
which expire beginning in the year 2017. Due to the uncertainty of their
realization, no income tax benefits have been recorded by the Company for these
net operating loss carryforwards as valuation allowances have been established
for any such benefits. The use of these net operating loss carryforwards may be
subject to limitations under section 382 of the Internal Revenue Code
pertaining to changes in stock ownership.
The increase in the valuation allowance amounted to $29,600 for the year
ended September 30, 1998.
Deferred tax assets for federal and state income taxes consist of the
following:
September 30,
1997 1998
------ ------------
Net operating loss carryforwards ......... $ -- $ 29,600
Valuation allowance ...................... -- (29,600)
---- ---------
Net deferred tax assets .................. $ -- $ --
==== =========
Note 6 -- Loans Payable:
The Company has various loans from individuals. These loans are
non-interest bearing and contain no terms of repayment. They are expected to be
repaid or converted into shares of common stock of the Company at $10,000 per
share, within the current year.
Note 7 -- Related Party Transactions:
Since its inception, the Company has had related party transactions with
two related parties (Cam-Comm, Inc. and JMR Marketing Corporation). Each of
these related parties is owned in whole or in part by the Company's Chairman
and Chief Executive Officer. The Company has obtained goods and services for
these related entities, due to the inability to obtain such goods and services
on commercially viable terms.
F-22
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 7 -- Related Party Transactions: -- (Continued)
The amounts due from (to) related parties are as follows:
<TABLE>
<CAPTION>
Due From Due to
Related Parties Related Parties
----------------- ----------------
<S> <C> <C>
Balance, October 7, 1996 (date of inception) ........................ $ -- $ --
Company expenses paid by related party .............................. -- --
---- ---------
Ending balance, September 30, 1997 .................................. -- --
Company expenses paid by a related party ............................ -- 73,762
---- ---------
Ending balance, September 30, 1998 .................................. -- 73,762
Company advances to a related party ................................. 700 --
Company expenses paid by a related party ............................ -- 24,587
Conversion of related party debt through the issuance of common stock -- (98,349)
---- ---------
Ending balance, June 30, 1999 (Unaudited) ........................... $700 $ --
==== =========
</TABLE>
In addition, the Company had loans payable to executive officers of the
Company amounting to $110,000 at June 30, 1999.
All of the above receivables, payables or loan payables are non-interest
bearing. There are no fixed terms of repayment. However, repayment is expected
to occur within the next year.
Note 8 -- Commitments:
Leases
The Company leases office space, telephone and computer equipment from
related parties (Cam Comm, Inc. and JMR Marketing Corporation) on a month to
month basis.
On June 24, 1999, the Company entered into a non-cancelable lease for
office space for one six month period, which commences on July 1, 1999 and
terminates on December 31, 1999.
The above leases are classified as operating leases. Lease expense for the
nine month period ended June 30, 1999 was $ 35,797.
Note 9 -- Stockholders' Equity:
Common Stock Issued for Services Rendered
During the nine month period ended June 30, 1999, the Company issued
common stock for services received which were valued in the amount of $72,386.
These services were provided by non-related party consultants and related
primarily to computer software consulting.
Common Stock Subscribed
The Company has entered into common stock purchase and subscription
agreements, which provide for the issuance of 1,000 shares of common stock at
$10,000 per share. These stock subscription agreements were part of the
Company's overall $12,000,000 private placement equity funding, which was
completed on July 7, 1999.
F-23
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 9 -- Stockholders' Equity: -- (Continued)
Change in Authorized Shares
On June 30, 1999, the Board of Directors of the Company approved an
amendment to the Certificate of Incorporation of the Company which authorized
an increase in the number of authorized shares of common stock from 5,000 to
10,000.
Note 10 -- Stock Option Plans:
In May 1999, the shareholders of the Company adopted the 1999 Incentive
and Non-Qualified Stock Option Plan. Under the plan, 1,000 shares of common
stock are reserved and available for issuance. The plan provides for grants to
employees and non-employee consultants to purchase shares of Company common
stock at prices not less than the fair market value at the time of the grant.
Options generally become 50% exercisable six months from the date of the grant,
with an additional 50% exercisable at the end of the following six month
period, except as otherwise provided by the Stock Option Committee of the Board
of Directors. The options generally expire ten years from the date of grant.
Summarized information relative to the Company's stock option plans as of
June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price Per Share
----------- ----------------
<S> <C> <C>
Outstanding at September 30, 1998 ................ -- $ --
Granted ......................................... 384.90 10,000
Exercised ....................................... -- --
Canceled ........................................ ( 2.50) 10,000
------- -------
Outstanding at June 30, 1999 (unaudited) ......... 382.40 $10,000
------- -------
</TABLE>
The fair value of the stock options granted during the nine month period
ended June 30, 1999 was not material because no vesting of such options
occurred during this period.
The following table summarizes information on stock options outstanding at
June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ --------------------
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
at Contractual Average at Average
June 30, Life Exercise June 30, Exercise
Exercise Price 1999 (years) Price 1999 Price
- ----------------- ------------- ------------- ---------- -------------------- ---------
<S> <C> <C> <C> <C> <C>
$10,000 ......... 382.40 9.9 $10,000 -- --
====== === ======= == ==
</TABLE>
Note 11 -- Net Loss Per Share:
Basic EPS and Diluted EPS for the period October 7, 1996 (Date of
Inception) to September 30, 1997, for the year ended September 30, 1998 and for
the nine month periods ended June 30, 1998 and 1999 have been computed by
dividing the net loss for each respective period by the weighted average shares
outstanding (including the shares to be issued under the common stock
subscription agreements) during that period. During all such periods, there
were no potentially diluted securities outstanding, or the effect of such
securities would be antidilutive. Hence, Basic EPS and Diluted EPS are the
same.
F-24
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE NINE MONTH PERIODS ENDED
JUNE 30, 1998 AND JUNE 30, 1999 AND CUMULATIVE FROM INCEPTION
TO JUNE 30, 1999 IS UNAUDITED)
Note 11 -- Net Loss Per Share: -- (Continued)
In addition, the weighted average share calculations reflect the 3,284.40
shares issued for nominal consideration as outstanding for all periods
presented in accordance with the SEC's Staff Accounting Bulletin 98.
Note 12 -- Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
For the Period
October 7, 1996 For the For the Nine
(Date of Inception) Year Ended Month Periods Cumulative
to September 30, September 30, Ended June 30, from Inception
1997 1998 1998 1999 to June 30, 1999
--------------------- --------------- ------------- ------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest ...................... $-- $-- $-- $ -- $ --
Income taxes .................. $-- $-- $-- $500 $500
</TABLE>
Disclosure of non-cash investing and financing activities:
During the period October 7, 1996 (date of inception) to September 30,
1997, the Company issued shares of common stock for a stock subscription
receivable of $250.
In December 1998, the Company issued shares of common stock to satisfy a
related party obligation in the amount of $98,349.
Note 13 -- Subsequent Events (Unaudited):
On July 7, 1999, the Company issued a majority of the shares relating to
the common stock subscribed as of June 30, 1999.
In addition, on July 7, 1999, the Company entered into a stock purchase
and subscription agreement for 200 shares at $10,000 per share. This agreement
is part of the $12,000,000 private placement equity funding.
F-25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements
give effect to the proposed merger of Solar Communications Group, Inc. into
Thermaltec International Corp. accounted for as a reverse merger. The pro forma
financial statements are presented for illustrative purposes only, and
therefore, are not necessarily indicative of the operating results and
financial position that might have been achieved had the transactions occurred
as of an earlier date, nor are they necessarily indicative of operating results
and financial position which may occur in the future.
The condensed historical statements of operations for periods presented are
derived from the historical financial statements of Solar Communications Group,
Inc. and Thermaltec International Corp., and should be read in conjunction with
their financial statements which are included elsewhere herein. The historical
financial statements have been prepared in accordance with generally accepted
accounting principles and, in the opinions of the respective managements' of
Solar Communications Group, Inc. and Thermaltec International Corp. include all
adjustments necessary for a fair presentation of financial information for such
periods.
A pro forma condensed consolidated balance sheet is provided as of June 30,
1999, giving effect to the transaction as though it had been consummated on
that date. Pro forma condensed consolidated statements of operations are
provided for the nine month period ended June 30, 1999 and 1998 and years ended
September 30, 1998 and 1997 giving effect to the transaction as though it had
occurred at the beginning of the earliest period presented.
F-26
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
Historical
----------------------------------
Solar Thermaltec Pro forma
Communications International -------------------------------
Group, Inc. Corp. Adjustments Consolidated
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 8,425,839 $ 58,500 $ -- $ 8,484,339
Prepaid expenses .............................. 72,098 -- -- 72,098
Due from related parties ...................... 700 -- -- 700
Other current assets .......................... 39,192 -- -- 39,192
------------ ------------ ---------- ------------
Total Current Assets ....................... 8,537,829 58,500 -- 8,596,329
Property and Equipment, Net .................... 725,331 -- -- 725,331
------------ ------------ ---------- ------------
TOTAL ASSETS ................................... $ 9,263,160 $ 58,500 $ -- $ 9,321,660
============ ============ ========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities:
Accounts payable .............................. $ 116,082 $ -- $ -- $ 116,082
Accrued expenses .............................. 503,367 -- -- 503,367
Loans payable ................................. 215,500 -- -- 215,500
Loans payable -- related parties .............. 110,000 -- -- 110,000
------------ ------------ ---------- ------------
Total Current Liabilities .................. 944,949 -- -- 944,949
Stockholders' Equity (Deficit):
Common stock .................................. 170,985 258 (B) (165,293) 5,950
Common stock subscribed ....................... 10,000,000 -- (B) (10,000,000) --
Additional paid in capital .................... -- 1,449,547 (B) 8,773,988 10,223,535
Retained earnings (accumulated deficit) ....... (1,852,774) (1,391,305)(B) 1,391,305 (1,852,774)
------------ ------------ ---------- ------------
Total Stockholders' Equity (Deficit) ....... 8,318,211 58,500 -- 8,376,711
------------ ------------ ---------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) ................ $ 9,263,160 $ 58,500 $ -- $ 9,321,660
============ ============ ========== ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-27
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Historical
----------------------------------
Solar Thermaltec Pro forma
Communications International -------------------------------
Group, Inc. Corp. Adjustments Consolidated
---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Sales .............................................. $ -- $ -- $ -- $ --
Cost of Sales ...................................... -- -- -- --
------- ---------- --------- ------------
Gross Profit ....................................... -- -- -- --
General and Administrative Expenses ................ 200 -- -- 200
------- ---------- --------- ------------
Income (Loss) from Continuing Operations ........... (200) -- -- --
Income (Loss) from Discontinued Operations ......... -- (259,719)(A) (259,719) --
------- ---------- --------- ------------
Net Loss ........................................... $ (200) $ (259,719) $(259,719) $ (200)
======= ========== ========= ============
Basic and Diluted Loss Per Share-Continuing
Operations ........................................ $ (0.05) $ -- $ NIL
======= ========== ============
Basic and Diluted Loss per Share-Discontinued
Operations ........................................ $ -- $ (0.13) $ --
======= ========== ============
Weighted Average Number of Shares Outstanding 4,284 2,046,750 59,500,000
======= ========== ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------- -------------------------------
Solar Thermaltec
Communications International
Group, Inc. Corp. Adjustments Consolidated
---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales ............................... $ -- $ -- $ -- $ --
Cost of Sales ....................... -- -- -- --
--------- --------- ----------- ----------
Gross Profit ........................ -- -- -- --
Operating Expenses:
General and Administrative
Expenses ......................... 200 -- -- 200
General and Administrative
Expenses-Related Parties ......... 73,762 -- -- 73,762
--------- --------- ----------- ----------
Total Operating Expenses ......... 73,962 -- -- 73,962
--------- --------- ----------- ----------
Income (Loss) from
Continuing Operations .............. (73,962) -- -- (73,962)
--------- --------- ----------- ----------
Income (Loss) from
Discontinued Operations ............ -- (402,684)(A) (402,684) --
--------- --------- ----------- ----------
Net Loss ............................ $ (73,962) $(402,684) $ (402,684) $ (73,962)
========= ========= =========== ==========
Basic and Diluted Loss Per Share-
Continuing Operations .............. $ -- $ -- $ NIL
========= ========= ==========
Basic and Diluted Loss per Share-
Discontinued Operations ............ $ -- $ (0.19) $ --
========= ========= ==========
Weighted Average Number of
Shares Outstanding ................. 4,284 2,105,489 59,500,000
========= ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------- -----------------------------
Solar Thermaltec
Communications International
Group, Inc. Corp. Adjustments Consolidated
---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales ............................... $ -- $ -- $ -- $ --
Cost of Sales ....................... -- -- -- --
---------- ---------- ---------- -----------
Gross Profit ........................ -- -- -- --
Operating Expenses:
General and Administrative
Expenses ......................... -- -- -- --
General and Administrative
Expenses-Related Parties ......... 49,175 -- -- 49,175
---------- ---------- ---------- -----------
Total Operating Expenses ......... 49,175 -- -- 49,175
---------- ---------- ---------- -----------
Income (Loss) from Continuing
Operations ......................... (49,175) -- -- (49,175)
---------- ---------- ---------- -----------
Income (Loss) from Discontinued
Operations ......................... -- (339,332)(A) (339,332) --
---------- ---------- ---------- -----------
Net Loss ............................ $ (49,175) $ (339,332) $ (339,332) $ (49,175)
========== ========== ========== ===========
Basic and Diluted Loss per Share-
Continuing Operations .............. $ (11.48) $ -- $ --
========== ========== ===========
Basic and Diluted Loss per Share-
Discontinued Operations ............ $ -- $ (0.16) $ NIL
========== ========== ===========
Weighted Average Number of
Shares Outstanding ................. 4,284 2,073.251 59,500,000
========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------- -------------------------------
Solar Thermaltec
Communications International
Group, Inc. Corp. Adjustments Consolidated
---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Sales ............................... $ -- $ -- $ -- $ --
Cost of Sales ....................... -- -- -- --
------------- ----------- ----------- -----------
Gross Profit ........................ -- -- -- --
Operating Expenses:
General and Administrative
Expenses ......................... 1,710,811 -- -- 1,710,811
General and Administrative
Expenses-Related Parties ......... 67,801 -- -- 67,801
------------- ----------- ----------- -----------
Total Operating Expenses ......... 1,778,612 -- -- 1,778,612
------------- ----------- ----------- -----------
Income (Loss) from Continuing
Operations ......................... (1,778,612) -- -- (1,778,612)
Income (Loss) from Discontinued
Operations ......................... -- (173,926)(A) (173,926) --
------------- ----------- ----------- -----------
Net Loss ............................ $ (1,778,612) $ (173,926) $ (173,926) $(1,778,612)
============= =========== ===========
Basic and Diluted Loss per Share-
Continuing Operations .............. $ (376.90) $ -- $ --
============= =========== ===========
Basic and Diluted Loss per Share-
Discontinued Operations ............ $ -- $ (0.07) $ (0.04)
============= =========== ===========
Weighted Average Number of
Shares Outstanding ................. 4,719 2,449,971 59,500,000
============= =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Proposed Merger with Solar Communications Group, Inc.:
On June 17, 1999, Thermaltec International, Corp. (TTI) executed a merger
agreement with Solar Communications Group, Inc. (SCG) of Millville, New Jersey.
Pursuant to the merger, SCG will be merged into TTI with the shareholders
of SCG receiving over 95% of the issued and outstanding shares of TTI common
stock. In preparation for the merger, TTI has transferred substantially all of
its assets and liabilities into a wholly-owned subsidiary, Panama Industries,
Ltd. (PI). Shares of PI will be distributed, on a pro rata basis, to TTI
shareholders of record as of May 28, 1999, immediately prior to the closing
date of the merger. TTI's current shareholders will also retain their shares in
TTI. It is anticipated that TTI will issue 59,500,00 shares of TTI common stock
to SCG stockholders.
Completion of the merger is contingent upon the receipt by SCG of certain
regulatory approvals, approval of the merger by the shareholders of TTI and
SCG, and satisfaction of certain other customary closing conditions.
Note 2 -- Basis of Presentation:
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only, giving effect to the consolidation of
Thermaltec International, Corp. and Solar Communications Group, Inc. as
accounted for as a reverse merger, whereby, for accounting purposes, Solar
Communications Group, Inc. will be treated as the acquirer in the transaction.
The pro forma periods are dated in terms of Thermaltec International
Corp.'s historical financial reporting periods. A pro forma condensed
consolidated balance sheet is provided as of June 30, 1999, giving effect to the
merger transaction as though it had been consummated on that date. Pro forma
condensed consolidated statements of operations are provided for the years ended
September 30, 1997 and 1998 and for the nine month periods ended June 30, 1998
and 1999. The pro forma condensed consolidated statement of operations for the
year ended September 30, 1997 includes the results of Solar Communications
Group, Inc. for the period from October 7, 1996 (Date of Inception) to September
30, 1997.
Note 3 -- Pro Forma Adjustments:
The pro forma condensed consolidated financial statements have been
adjusted for the items set forth below, the amounts of which are noted in the
adjustment column of the pro forma condensed consolidated financial statements:
(A) To eliminate the income statement accounts of Thermaltec International
Corp. for all periods presented. Because the transaction is being accounted for
as a reverse merger, the historical financial statements of Solar Communication
Group, Inc. prior to the merger are deemed to be the historical financial
statements of Thermaltec International Corp.
(B) Adjustment to reflect the proposed merger between Solar Communications
Group, Inc. and Thermaltec International Corp. The merger is being accounted
for as a reverse merger and will involve the issuance by Thermaltec
International Corp. of 59,500,000 shares to Solar Communications Group, Inc.
stockholders.
F-32
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 16, 1999, by and
between SOLAR COMMUNICATIONS GROUP, INC., a New Jersey corporation ("Solar
Communications Group"), THERMALTEC INTERNATIONAL, CORP., a Delaware corporation
("Thermaltec"), and ANDREW B. MAZZONE, the principal stockholder of Thermaltec
("Mazzone").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Solar Communications Group and
Thermaltec deem it advisable and in the best interests of their respective
stockholders to consummate, and have approved, the transaction provided for
herein in which Solar Communications Group would merge with and into Thermaltec,
with Thermaltec being the surviving corporation (the "Merger"); and
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 Effective Time of the Merger. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date (as defined
in Section 1.02), (i) a certificate of merger (the "DE Certificate of Merger")
shall be duly prepared and executed by Thermaltec (and, if required, executed by
Solar Communications Group) and thereafter delivered to the Secretary of State
of the State of Delaware for filing, as provided in the Delaware General
Corporation Law, as amended (the "GCL"), and (ii) a certificate of merger (the
"NJ Certificate of Merger") shall be duly prepared and executed by Solar
Communications Group (and, if required, executed by Thermaltec) and thereafter
delivered to the Department of Revenue of the State of New Jersey for filing, as
provided in the New Jersey Business Corporation Act (the "BCA"). The Merger
shall become effective upon the filing of the DE Certificate of Merger with the
Secretary of State of the State of Delaware and the filing of the NJ Certificate
of Merger with the Department of Revenue of the State of New Jersey or at such
later time as may be agreed to in writing by Thermaltec and Solar Communications
Group (the "Effective Time"). The DE Certificate of Merger and the NJ
Certificate of Merger are, at times, collectively referred to herein as the
"Merger Filings."
<PAGE>
SECTION 1.02 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 AM, Philadelphia local time, on a date to be specified by
the parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections
7.01, 7.02 (other than the delivery of the officers' certificate referred to
therein) and 7.03 (other than the delivery of the officers' certificate referred
to therein) (the "Closing Date"), at the offices of Archer & Greiner, A
Professional Corporation, One Centennial Square, Haddonfield, NJ 08033, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 1.03 Effects of the Merger.
(a) At the Effective Time (i) the separate corporate
existence of Solar Communications Group shall cease and Solar
Communications Group shall be merged with and into Thermaltec
(Solar Communications Group and Thermaltec are sometimes
referred to herein as the "Constituent Corporations" and
Thermaltec, as the surviving corporation after the Merger, is
sometimes referred to herein as the "Surviving Corporation"),
(ii) the Certificate of Incorporation of Solar Communications
Group as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended, and (iii) the Bylaws of
Solar Communications Group as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving
Corporation, until thereafter amended.
(b) At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable
provisions of the GCL and the BCA. Without limiting the
generality of the foregoing and subject thereto, at and after
the Effective Time, the Surviving Corporation shall possess
all the rights, privileges, powers and franchises and be
subject to all the restrictions, disabilities and duties of
each of the Constituent Corporations; and all rights,
privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and
all debts due to either of the Constituent Corporations on
whatever account, as well as for stock subscriptions and all
other things in action or belonging to each of the Constituent
Corporations, 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
effectively the property of the Surviving Corporation as they
were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any
property of either of the Constituent Corporations existing as
of the Effective Time shall be preserved unimpaired, and all
debts, liabilities and duties of the Constituent Corporations
existing as of the Effective Time shall thenceforth attach to
the Surviving Corporation, and may be enforced against it to
the same extent as if said debts and liabilities had been
incurred by it.
SECTION 1.04 Directors and Officers of the Surviving Corporation. The
directors and officers of Solar Communications Group at the Effective Time
shall, from and after the Effective Time, be the directors and officers of the
Surviving Corporation,
2
<PAGE>
until their respective successors have been duly elected or appointed (as
applicable) and qualified, or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of the Common Stock, no par value per share, of Solar Communications
Group (the "Solar Communications Group Common Stock"):
(a) Exchange Ratio for Existing Solar Communications
Group Common Stock. Subject to Section 2.02(d), each issued
and outstanding share of Solar Communications Group Common
Stock (other than shares to be canceled in accordance with
Section 2.01(b) and any Dissenting Shares (as defined and to
the extent provided in Section 2.04)) shall be converted into
the right to receive, from Thermaltec, that number (the
"Conversion Number") of fully paid and nonassessable shares of
the Common Stock, par value $.0001 per share, of Thermaltec
(the "Thermaltec Common Stock") obtained by dividing (i)
64,500,000 by (ii) the sum of (A) the difference between (1)
the number of shares of Solar Communications Group Common
Stock then outstanding and (2) the aggregate number of shares
to be canceled pursuant to Section 2.01(b) hereof and
Dissenting Shares, plus (B) the number of shares of Solar
Communications Group Common Stock then reserved for issuance
pursuant to options issued and then outstanding under the 1999
Option Plan (as such term is defined in Section 2.03 hereof).
The shares of Thermaltec Common Stock to be issued in the
Merger are sometimes hereinafter referred to as the
"Conversion Shares." All such shares of Solar Communications
Group Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the
Conversion Shares.
(b) Cancellation of Treasury Stock and
Thermaltec-Owned Stock. All shares of Solar Communications
Group Common Stock that are owned by Solar Communications
Group as treasury stock and any shares of Solar Communications
Group Common Stock owned by Thermaltec, or any direct or
indirect wholly-owned subsidiary of Thermaltec or Solar
Communications Group, immediately prior to the Effective Time
shall be canceled and retired and shall cease to exist and no
stock of Thermaltec or other consideration shall be delivered
in exchange therefor.
SECTION 2.02 Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Thermaltec shall mail to
each holder of record of a certificate or certificates which
3
<PAGE>
immediately prior to the Effective Time represented
outstanding shares of Solar Communications Group Common Stock
(the "Certificates") whose shares were converted pursuant to
Section 2.01 into the right to receive shares of Thermaltec
Common Stock from the Surviving Corporation (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to Thermaltec and
shall be in such form and have such other provisions as Solar
Communications Group and Thermaltec may reasonably specify)
and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing the
Conversion Shares. Upon surrender of a Certificate for
cancellation to Thermaltec or to such other agent or agents as
may be appointed by Thermaltec, together with such letter of
transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of
Thermaltec Common Stock representing the Conversion Shares
which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Solar Communications Group Common
Stock which is not registered in the transfer records of Solar
Communications Group, a certificate representing the proper
number of shares of Thermaltec Common Stock may be issued to a
transferee if the Certificate representing such Solar
Communications Group Common Stock is presented to Thermaltec,
accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only
the right to receive upon such surrender a certificate
representing the appropriate number of Conversion Shares.
(b) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the
Effective Time with respect to Thermaltec Common Stock with a
record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the
Conversion Shares represented thereby. Subject to the effect
of applicable abandoned property, escheat or similar laws,
following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing
whole Conversion Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole
Conversion Shares, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to
such whole Conversion Shares.
(c) No Further Ownership Rights in Solar
Communications Group Common Stock. All Conversion Shares
issued upon the surrender for exchange of shares of Solar
Communications Group Common Stock, all in accordance with the
terms hereof (together with any dividends or distributions
paid pursuant to Section 2.02(b)), shall be deemed to have
4
<PAGE>
been issued and conferred in full satisfaction of all rights
pertaining to such shares of Solar Communications Group Common
Stock, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of
the shares of Solar Communications Group Common Stock which
were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(d) No Fractional Conversion Shares. No certificate
or script representing fractional Conversion Shares of
Thermaltec Common Stock shall be issued upon the surrender for
exchange of Certificates. Fractional Conversion Shares of
Thermaltec Common Stock issuable upon the surrender for
exchange of Certificates shall be rounded to the nearest whole
number.
SECTION 2.03 Stock Options. At the Effective Time, all options to
purchase Solar Communications Group Common Stock then outstanding under Solar
Communications Group's 1999 Stock Option Plan (the "1999 Option Plan") shall be
assumed by Thermaltec in accordance with Section 6.14 hereof (each an "Solar
Communications Group Option" and, collectively, the "Solar Communications Group
Options").
SECTION 2.04 Solar Communications Group Appraisal Rights.
(a) Notwithstanding any provision of this Agreement
to the contrary, any shares of Solar Communications Group
Common Stock held by a holder who has demanded and perfected
appraisal rights for such shares in accordance with the BCA
and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights ("Dissenting Shares"),
shall not be converted into or represent a right to receive
Thermaltec Common Stock pursuant to Section 2.01, but the
holder thereof shall only be entitled to such rights as are
granted by the BCA.
(b) Notwithstanding the provisions of subsection (a),
if any holder of shares of Solar Communications Group Common
Stock who demands appraisal of such shares under the BCA shall
effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of
the Effective Time or the occurrence of such event, such
holder's shares of Solar Communications Group Common Stock
shall automatically be converted into and represent only the
right to receive, upon surrender of the certificate
representing such shares of Solar Communications Group Common
Stock, shares of Thermaltec Common Stock issuable pursuant to
Section 2.01 in exchange for such outstanding shares of Solar
Communications Group Common Stock and any dividends or other
distributions pursuant to Section 2.02(b).
(c) Solar Communications Group shall give Thermaltec
(i) prompt notice of any written demands for appraisal of any
shares of Solar Communications Group Common Stock, withdrawals
of such demands, and any other instruments served pursuant to
the BCA and received by Solar Communications Group and (ii)
the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the
BCA. Solar Communications Group shall not, except with the
prior written consent of Thermaltec, voluntarily make any
payment with respect to any demands for appraisal of Solar
Communications Group Common Stock or offer to settle or settle
any such demands.
5
<PAGE>
SECTION 2.05 Thermaltec Appraisal Rights.
(a) Notwithstanding any provision of this Agreement
to the contrary, any shares of Thermaltec Common Stock held by
a holder who has demanded and perfected appraisal rights for
such shares in accordance with the GCL and who, as of the
Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Thermaltec Dissenting Shares"), shall
entitle the holder thereof only to such rights as are granted
by the GCL.
(b) Notwithstanding the provisions of subsection (a),
if any holder of shares of Thermaltec Common Stock who demands
appraisal of such shares under the GCL shall effectively
withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the later of the Effective
Time or the occurrence of such event, such holder's shares of
GCL Common Stock shall remain outstanding.
(c) Thermaltec shall give Solar Communications Group
(i) prompt notice of any written demands for appraisal of any
shares of Thermaltec Common Stock, withdrawals of such
demands, and any other instruments served pursuant to the GCL
and received by Thermaltec and (ii) the opportunity to
participate in all negotiations and proceedings with respect
to demands for appraisal under the GCL. Thermaltec shall not,
except with the prior written consent of Solar Communications
Group, voluntarily make any payment with respect to any
demands for appraisal of Thermaltec Common Stock or offer to
settle or settle any such demands.
SECTION 2.06 Tax Consequences. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368- 3(a) of the
United States Income Tax regulations.
SECTION 2.07 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Constituent Corporations, the officers
and directors of the Constituent Corporations are fully authorized in the names
of their respective corporations to take, and will take, all such lawful and
necessary action.
6
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMALTEC AND MAZZONE
As used in this Agreement, any reference to any event, change or effect
being material or having a material adverse effect on or with respect to
Thermaltec or Solar Communications Group, means such event, change or effect is
materially adverse to the consolidated condition (financial or otherwise),
properties, assets (including intangible assets), liabilities (including
contingent liabilities), businesses or results of operations of Thermaltec or
Solar Communications Group, as the case may be, and its Subsidiaries taken as a
whole. As used in this Agreement, the word "Subsidiary" or "Subsidiaries" means,
with respect to any party, any corporation(s) or other organization(s), whether
incorporated or unincorporated, in which such party, directly or indirectly,
holds an equity, partnership or other ownership interest.
Thermaltec and Mazzone hereby jointly and severally represent and
warrant to Solar Communications Group that, except as set forth in this
Agreement:
SECTION 3.01 Organization; Subsidiaries.
(a) Thermaltec is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and
corporate authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its
business as now being conducted. Thermaltec is duly qualified
or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such
qualification or licensing necessary.
(b) Thermaltec does not have any Subsidiaries, other
than Panama Industries, Ltd., a Delaware corporation. All of
the stock of Panama Industries Ltd. owned by Thermaltec will
be transferred to Thermaltec's shareholders, as a dividend, on
or before the Effective Time.
(c) Thermaltec has made available to Solar
Communications Group a true and correct copy of its
Certificate of Incorporation and Bylaws, each as amended to
date, and each such instrument is in full force and effect.
Thermaltec is not in violation of any provision of its
Certificate of Incorporation or Bylaws or other governing
instrument.
SECTION 3.02 Capitalization.
(a) As of the date hereof, the authorized capital
stock of Thermaltec consists of 10,000,000 shares of
Thermaltec Common Stock. The Board of Directors of Thermaltec
has approved an amendment to the Certificate of Incorporation
of Thermaltec (the "Proposed Thermaltec Amendment") which
would authorize an increase in the number of authorized shares
of Thermaltec Common Stock from 10,000,000 to 100,000,000 and
is currently seeking shareholder approval of
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such Proposed Thermaltec Amendment. As of the date hereof,
2,578,118 shares of Thermaltec Common Stock are issued and
outstanding. All the outstanding shares of Thermaltec Common
Stock are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect
thereto. No bonds, debentures, notes or other indebtedness
having the right to vote (or convertible into securities
having the right to vote) ("Voting Debt") of Thermaltec is
issued or outstanding. Other than as described in this Section
3.02, as of the date hereof, there are no existing options,
warrants, calls, subscriptions or other rights or other
agreements or commitments of any character relating to the
issued or unissued capital stock or Voting Debt of Thermaltec
or obligating Thermaltec to issue, transfer or sell or cause
to be issued, transferred or sold any shares of capital stock
or Voting Debt of, or other equity interests in, Thermaltec or
securities convertible into or exchangeable for such shares or
equity interests or obligating Thermaltec to grant, extend or
enter into any such option, warrant, call, subscription or
other right, agreement or commitment. There are no outstanding
contractual obligations of Thermaltec to repurchase, redeem or
otherwise acquire any shares of capital stock of Thermaltec.
(b) As of the date hereof, Thermaltec has issued and
outstanding warrants to purchase a total of 193,400 shares of
Thermaltec Common Stock (collectively, the "Warrants"). The
certificates for the Warrants, in the form attached hereto as
Exhibit 3.02, constitute the entire agreement between
Thermaltec and the holders of the Warrants with respect to the
Warrants, and there has been no change in or modification or
alteration of such terms, nor has there been any amendment,
modification or entering into of any other agreement which
would affect the terms of the Warrants or the related rights
and obligations of the holders of the Warrants or the Company.
Among other terms, the Warrants are currently exercisable at a
price of $1.00 per share and currently expire on June 2, 2000.
The issuance of the Warrants and/or the issue and sale of
shares of Thermaltec Common Stock upon exercise thereof
complied or will comply with all applicable federal and state
securities laws.
(c) All outstanding shares of Thermaltec Common
Stock, all outstanding securities exchangeable or convertible
into or exerciseable for Thermaltec Common Stock, and any
other outstanding securities of Thermaltec were issued in
compliance with all applicable state and federal securities
laws.
(d) As of the date of this Agreement, no person or
entity holds the right to require the registration or
qualification under applicable securities laws of any
securities of Thermaltec, and there is no voting trust, proxy,
rights plan, antitakeover plan, or other agreement or
understanding to which Thermaltec is a party or by which it is
bound with respect to any class of equity security of
Thermaltec.
(e) The Thermaltec Common Stock to be issued pursuant
to the Merger has been duly authorized and will, when issued
and delivered in accordance with this Agreement, be validly
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issued, fully paid and non-assessable and will not be subject
to any restrictions on resale under the Securities Act of
1933, as amended (the "Securities Act").
SECTION 3.03 Authority. Thermaltec has all requisite corporate power
and corporate authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger and of the other transactions
contemplated hereby (including authorization by the Board of Directors to
solicit stockholder vote on such transactions) have been duly authorized by all
necessary corporate action on the part of Thermaltec and no other corporate
proceedings on the part of Thermaltec are necessary to authorize this Agreement
or to consummate the transactions so contemplated (other than, with respect to
the Merger, the approval and adoption of this Agreement and the Merger by the
holders of Thermaltec Common Stock pursuant to the GCL). The vote required by
Thermaltec's stockholders to approve and adopt this Agreement and approve the
Merger is a majority of the outstanding shares of Thermaltec Common Stock.
Thermaltec's Board of Directors has unanimously approved this Agreement and the
Merger. This Agreement has been duly executed and delivered by Thermaltec and
constitutes a valid and binding obligation of Thermaltec, enforceable against
Thermaltec in accordance with its terms.
SECTION 3.04 Consents and Approvals; No Violations.
(a) Neither the execution, delivery or performance of
this Agreement by Thermaltec nor the consummation by
Thermaltec of the transactions contemplated hereby nor
compliance by Thermaltec with any of the provisions hereof
will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws of
Thermaltec, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other
instrument or obligation to which Thermaltec is a party or by
which it or any of its properties or assets may be bound, or
(iii) violate any order, writ, injunction, judgment, decree,
statute, rule or regulation applicable to Thermaltec or any of
its properties or assets.
(b) No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or commission or other
federal, state, county, local, or foreign governmental
authority or instrumentality ("Governmental Entity") or any
third party, is required to be obtained or made by Thermaltec
in connection with the execution and delivery of this
Agreement or the consummation of the Merger, except for (i)
the Merger Filings with the Secretary of State of the State of
Delaware and the Department of Revenue of the State of New
Jersey; (ii) the filing of the Proxy Statement/Prospectus (as
defined in Section 3.19) with the Securities and Exchange
Commission (the "SEC") in accordance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), if
required by the terms and provisions of the Exchange Act;
(iii) the filing of a Registration Statement (the
"Registration Statement") on Form S-4 (or any similar
successor form thereto) with the SEC in
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accordance with the Securities Act; and (iv) such consents,
approvals, orders, authorizations, registrations,
declarations, and filings as may be required under applicable
federal, foreign, and state securities (or related) laws, and
the securities or antitrust laws of any foreign country.
SECTION 3.05 Financial Statements. Thermaltec has delivered to Solar
Communications Group a true and complete copy of Thermaltec's audited financial
statements as of and for the periods ended September 30, 1998 (the "Balance
Sheet Date") and September 30, 1997, including the notes thereto, and
Thermaltec's unaudited financial statements as of and for the period ended March
31, 1999, including the notes thereto (such audited and unaudited financial
statements are referred to collectively herein as the "Thermaltec Documents").
The Thermaltec Documents, at the time delivered, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Thermaltec
Documents have been prepared on a consistent basis during the periods involved
and fairly present the financial position of Thermaltec as at the dates thereof
and the results of its operations and cash flows for the periods then ended.
SECTION 3.06 Absence of Certain Changes. Since the Balance Sheet Date,
except as expressly contemplated herein, there has been no adverse change in the
business, operations, condition (financial or otherwise), results of operations,
assets or liabilities of Thermaltec. Since the Balance Sheet Date, except as
expressly contemplated herein or with respect to the transactions contemplated
hereby, Thermaltec has conducted its business consistent with past practices and
Thermaltec has not (a) incurred loss of, or significant injury to, any assets of
Thermaltec as a result of any fire, explosion, flood, windstorm, earthquake,
labor trouble, riot, accident, act of God or public enemy or armed forces, or
other occurrence; (b) issued or committed to issue any capital stock, bonds or
other corporate securities or debt instruments, or granted any options, warrants
or other rights calling for the issuance thereof; (c) borrowed any funds; (d)
incurred or, to Thermaltec's knowledge, become subject to, any obligation or
liability (absolute or contingent, matured or unmatured); (e) declared or made
payment of, or set aside for payment, any dividends or distributions of any
assets, or purchased, redeemed or otherwise acquired any of its capital stock,
any securities convertible into capital stock, or any other securities; (f)
mortgaged, pledged or subjected to any liens, mortgages, security interests or
encumbrances of any kind, other than for taxes not yet due and payable, any of
its assets; (g) sold, exchanged, transferred or otherwise disposed of any of its
assets, or canceled any debts or claims, except in each case in the ordinary
course of business; (h) acquired any assets except in the ordinary course of
business; (i) written down the value of any assets or written off as
uncollectible any notes or accounts receivables, except write-downs and
write-offs in the ordinary course of business, none of which, individually or in
the aggregate, are material; (j) entered into any transactions other than in the
ordinary course of business; (k) increased the rate of compensation payable, or
to become payable, by it to any of its officers, employees, agents, or
independent contractors over the rate being paid to them on the Balance Sheet
Date, except for increases in the ordinary course of business consistent with
past practices; (l) made or permitted any amendment or termination of any
agreement to which it is a party; (m) through negotiation or otherwise, made any
commitment or incurred any
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liability to any labor organization; (n) made any accrual or arrangement for or
payment of bonuses or special compensation of any kind to any director, officer
or employee; (o) made any material change in any method of accounting or
accounting practice; or (p) entered into any binding obligation to do any of the
foregoing.
SECTION 3.07 No Liabilities. As of the Closing Date, Thermaltec shall
not have any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of Thermaltec
(including the notes thereto).
SECTION 3.08 Assets. As of the Closing Date, Thermaltec will not own
any assets of any nature, except for those assets required to be retained by
Thermaltec pursuant to Section 6.12 hereof.
SECTION 3.09 Employee Benefit Plans.
(a) Definitions. For purposes of this Section 3.09,
the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any person or
entity under common control with Thermaltec within
the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated
Omnibus Budget Reconciliation Act of 1985, as
amended;
(iii) "DOL" shall mean the United States
Department of Labor;
(iv) "Employee" shall mean any current,
former, or retired employee, officer, or director of
Thermaltec or any Affiliate;
(v) "Employee Agreement" shall mean each
management, employment, severance, consulting,
relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between
Thermaltec or any Affiliate and any Employee or
consultant;
(vi) "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended;
(vii) "FMLA" shall mean the Family Medical
Leave Act of 1993, as amended;
(viii) "International Employee Plan" shall
mean each Thermaltec Employee Plan that has been
adopted or maintained by Thermaltec, whether
informally or formally, for the benefit of Employees
outside the United States;
(ix) "IRS" shall mean the Internal Revenue
Service;
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(x) "Multiemployer Plan" shall mean any
"Pension Plan" (as defined below) which is a
"multiemployer plan," as defined in Section 3(37) of
ERISA;
(xi) "PBGC" shall mean the Pension Benefit
Guaranty Corporation;
(xii) "Pension Plan" shall mean each
Thermaltec Employee Plan which is an "employee
pension benefit plan," within the meaning of Section
3(2) of ERISA; and
(xiii) "Thermaltec Employee Plan" shall mean
any plan, program, policy, practice, contract,
agreement or other arrangement providing for
compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or
otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the
meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be
contributed to, by Thermaltec or any Affiliate for
the benefit of any Employee;
(b) Schedule. Schedule 3.09 attached hereto contains
an accurate and complete list of each Thermaltec Employee Plan
and each Employee Agreement. Except as expressly provided
herein, Thermaltec does not have any plan or commitment to
establish any new Thermaltec Employee Plan, to modify any
Thermaltec Employee Plan or Employee Agreement, or to enter
into any Thermaltec Employee Plan or Employee Agreement, nor
does it have any intention or commitment to do any of the
foregoing.
(c) Documents. Thermaltec has provided to Solar
Communications Group (i) correct and complete copies of all
documents embodying each Thermaltec Employee Plan and each
Employee Agreement, including all amendments thereto and
written interpretations thereof; (ii) the most recent annual
actuarial valuations, if any, prepared for each Thermaltec
Employee Plan; (iii) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in
connection with each Thermaltec Employee Plan or related
trust; (iv) if the Thermaltec Employee Plan is funded, the
most recent annual and periodic accounting of Thermaltec
Employee Plan assets; (v) the most recent summary plan
description together with the summary of material
modifications thereto, if any, required under ERISA with
respect to each Thermaltec Employee
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Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and rulings relating to Thermaltec Employee
Plans and copies of all applications and correspondence to or
from the IRS or the DOL with respect to any Thermaltec
Employee Plan; (vii) all material written agreements and
contracts relating to each Thermaltec Employee Plan,
including, but not limited to, administrative service
agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee
or Employees relating to any Thermaltec Employee Plan and any
proposed Thermaltec Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material
liability to Thermaltec; (ix) all COBRA forms and related
notices; and (x) all registration statements and prospectuses
prepared in connection with each Thermaltec Employee Plan.
(d) Employee Plan Compliance. (i) Thermaltec has
performed all obligations required to be performed by it
under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to each
Thermaltec Employee Plan, and each Thermaltec Employee Plan
has been established and maintained in accordance with its
terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to
ERISA and the Code; (ii) each Thermaltec Employee Plan
intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination letter from the IRS
with respect to each such Plan as to its qualified status
under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or
has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a
determination letter and make any amendments necessary to
obtain a favorable determination; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code
or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any
Thermaltec Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Thermaltec, threatened
or reasonably anticipated (other than routine claims for
benefits) against any Thermaltec Employee Plan or against the
assets of any Thermaltec Employee Plan; (v) each Thermaltec
Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its
terms, without liability to Solar Communications Group,
Thermaltec or any of its Affiliates (other than ordinary
administration expenses typically incurred in a termination
event); (vi) there are no audits, inquiries or proceedings
pending or, to the knowledge of Thermaltec or any Affiliates,
threatened by the IRS or DOL with respect to any Thermaltec
Employee Plan; and (vii) neither Thermaltec nor any Affiliate
is subject to any penalty or tax with respect to any
Thermaltec Employee Plan under Section 402(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) Pension Plans. Thermaltec does not now, nor has
it ever, maintained, established, sponsored, participated in,
or contributed to, any Pension Plan which is subject to Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any
Multiemployer Plan.
(g) No Post-Employment Obligations. No Thermaltec
Employee Plan provides, or has any liability to provide,
retiree life insurance, retiree health or other retiree
employee welfare benefits to any person for any reason, except
as may be required by COBRA or other applicable statutes, and
Thermaltec has
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never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to
Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree
life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(h) FMLA. Neither Thermaltec nor any Affiliate has,
prior to the Effective Time violated any of the health care
continuation requirements of COBRA, the requirements of FMLA
or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby
will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event
under any Thermaltec Employee Plan, Employee
Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may
be made by Thermaltec or its Affiliates with respect
to any Employee as a result of the transactions
contemplated by this Agreement will be characterized
as an "excess parachute payment," within the meaning
of Section 28OG(b)(1) of the Code.
(j) Employment Matters. Thermaltec (i) is in
compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case,
with respect to Employees; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) is not liable
for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other
benefits or obligations for Employees. There are no pending,
threatened or reasonably anticipated claims or actions against
Thermaltec under any worker's compensation policy or long-term
disability policy. To Thermaltec's knowledge, no employee of
Thermaltec has violated any employment contract, nondisclosure
agreement or noncompetition agreement by which such employee
is bound due to such employee being employed by Thermaltec and
disclosing to Thermaltec or using trade secrets or proprietary
information of any other person or entity.
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(k) Labor. No work stoppage or labor strike against
Thermaltec is pending, threatened or reasonably anticipated.
Thermaltec does not know of any activities or proceedings of
any labor union to organize any Employees. There are no
actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of Thermaltec, threatened or reasonably
anticipated relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would,
individually or in the aggregate, result in any liability to
Thermaltec. Thermaltec has not engaged in any unfair labor
practices within the meaning of the National Labor Relations
Act. Thermaltec is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement
or union contract with respect to Employees, and no collective
bargaining agreement is being negotiated by Thermaltec.
(l) International Employee Plans. Each International
Employee Plan has been established, maintained and
administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such
International Employee Plan. Furthermore, no International
Employee Plan has unfunded liabilities, that as of the
Effective Time, will not be offset by insurance or fully
accrued. Except as required by law, no condition exists that
would prevent Solar Communications Group or Thermaltec from
terminating or amending any International Employee Plan at any
time for any reason.
SECTION 3.10 Litigation. There is no suit, claim, action, proceeding,
claim, arbitration, or investigation pending or, to the best knowledge of
Thermaltec, threatened against, Thermaltec (or any of its officers, directors or
employees in their capacity as such) before any Governmental Entity. Thermaltec
is not aware of any basis for any such action, suit, proceeding, claim,
arbitration or investigation. Thermaltec has never been subject to an audit,
compliance review, investigation, or like contract review by the GSA office of
the Inspector General or other Governmental Entity or agent thereof in
connection with any government contract (a "Government Audit"). To the best of
Thermaltec's knowledge, no Government Audit is threatened or reasonably
anticipated, and in the event of such Government Audit, to the best of
Thermaltec's knowledge, no basis would exist for a finding of noncompliance with
any provision of any government contract or a refund of any amounts paid or owed
by any Governmental Entity pursuant to such government contract. Thermaltec is
not subject to any outstanding order, writ, judgment, injunction or decree.
SECTION 3.11 Compliance with Applicable Law. Thermaltec currently
holds, and at all relevant times has held, all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of its business (the "Thermaltec Permits"). Thermaltec has
complied, and currently is in compliance, with all the terms of each Thermaltec
Permit. The business of Thermaltec is not being, and has never been, conducted
in violation of any law, ordinance or regulation of any Governmental Entity. As
of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to Thermaltec is pending or, to the best knowledge of
Thermaltec, threatened, nor has any Governmental Entity indicated an intention
to conduct the same.
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SECTION 3.12 Proprietary Information of Third Parties. To the best of
Thermaltec's knowledge, no third party has claimed that any person employed by
Thermaltec has (a) violated or may be violating any of the terms or conditions
of his or her employment, non-competition or non-disclosure agreement or
utilized or may be utilizing any trade secret or proprietary information or
documentation of such third party, or (b) interfered or may be interfering in
the employment relationship between such third party and any of its present or
former employees. No third party has requested information from Thermaltec which
suggests that such a claim might be contemplated. To the best of Thermaltec's
knowledge, (i) no person employed by Thermaltec has employed or proposes to
employ any trade secret or any information or documentation proprietary to any
former employer, (ii) no person employed by Thermaltec has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of Thermaltec, and (iii) there is no reason to believe there will be any such
employment or violation.
SECTION 3.13 Title to Properties. Thermaltec has good, clear and
marketable title to all of its properties and assets, and all such properties
and assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances (including without
limitation, easements and licenses), except for liens for or current taxes not
yet due and payable. To the best of Thermaltec's knowledge, there are no
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted or planned to be instituted, which would adversely affect the
use or operation of any of such properties and assets for Solar Communications
Group's intended uses and purposes, or the value of such properties, and
Thermaltec has not received notice of any special assessment proceedings which
would affect such properties and assets.
SECTION 3.14 Leasehold Interests. Thermaltec is not a lessee of any
property, real or personal.
SECTION 3.15 Taxes. Thermaltec has filed all tax returns, Federal,
state, county and local, required to be filed by it, those returns accurately
and completely reflect Thermaltec's tax obligations with respect to the periods
covered thereby, and Thermaltec has paid all taxes shown to be due by such
returns as well as all other taxes, interest, penalties, assessments and other
amounts asserted to be due or payable by any taxing authority, including without
limitation all taxes which Thermaltec is obligated to withhold from amounts paid
or owing to employees, creditors and third parties. Adequate reserves have been
established by Thermaltec for all taxes accrued but not yet payable. The tax
returns of Thermaltec have never been audited by the Internal Revenue Service or
any other taxing authority. No deficiency assessment with respect to, or
proposed adjustment of, Thermaltec's Federal, state, county or local taxes is
pending or, to the best of Thermaltec's knowledge, threatened. There is no tax
lien, whether imposed by any Federal, state, county or local taxing authority,
outstanding against any assets, properties or business of Thermaltec.
SECTION 3.16 Other Agreements. Thermaltec is not a party to or
otherwise bound by any written or oral contract or instrument or other
restriction. Thermaltec is not a party to or otherwise bound by any written or
oral:
(a) distribution, joint marketing, dealer,
manufacturer's representative or sales agency contract or
agreement;
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(b) sales contract which entitles any customer to a
rebate or right of set-off, to return any product to
Thermaltec after acceptance thereof or to delay the acceptance
thereof;
(c) development agreement;
(d) contract or other commitment with any supplier;
(e) contract for the future purchase of fixed assets
or for the future purchase of materials, supplies or
equipment;
(f) agreement or indenture relating to the borrowing
of money or to the mortgaging or pledging of, or otherwise
placing a lien or security interest on, any asset of
Thermaltec;
(g) any agreement of indemnification or guaranty;
(h) voting trust or agreement, stockholders'
agreement, pledge agreement, buy-sell agreement or first
refusal or preemptive rights agreement relating to any
securities of Thermaltec;
(i) agreement, or group of related agreements with
the same party or any group of affiliated parties, under which
Thermaltec has advanced or agreed to advance money or has
agreed to lease any property as lessee or lessor;
(j) agreement or obligation (contingent or otherwise)
to issue, sell or otherwise distribute or to repurchase or
otherwise acquire or retire any share of Thermaltec capital
stock or any of Thermaltec's other equity securities (other
than pursuant to an exercise of the Warrants in accordance
with the terms thereof);
(k) assignment, license or other agreement with
respect to any form of intangible property;
(l) agreement under which it has granted any person
any registration rights;
(m) agreement under which it has limited or
restricted Thermaltec's right to compete with any person in
any respect;
(n) other contract or group of related contracts with
the same party involving more than $500; or
(o) other contract, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed
with the SEC as an exhibit to a registration statement on Form
S-1 if Thermaltec were registering securities under the
Securities Act.
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Thermaltec, and to the best of Thermaltec's knowledge, each other party thereto
have in all material respects performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
material default (with due notice or lapse of time or both) under any agreement,
contract, instrument or commitment to which Thermaltec is or was a party.
Thermaltec has no present expectation or intention of not fully performing all
its obligations under each current agreement, contract, instrument or commitment
to which it is a party, and Thermaltec has no knowledge of any breach or
anticipated breach by the other party to any such agreement, contract,
instrument or commitment. Thermaltec is in full compliance with all of the terms
and provisions of its Articles of Incorporation and Bylaws, as amended.
SECTION 3.17 SEC Filings. Thermaltec has filed all forms, reports, and
documents required to be filed by Thermaltec with the SEC and has made available
to Solar Communications Group such forms, reports, and documents in the form
filed with the SEC. All such required forms, reports and documents (including
those that Thermaltec may file subsequent to the date hereof) are referred to
herein as the "Thermaltec SEC Reports." As of their respective filing dates, the
Thermaltec SEC Reports (a) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Thermaltec
SEC Reports and (b) did not at the time they were filed (or if amended or
superceded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 3.18 Change of Control Payments. Thermaltec is not a party to
any plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to any person, including without limitation any
current or former officer or director of Thermaltec, as a result of or in
connection with the Merger.
SECTION 3.19 Statements; Proxy Statement/Prospectus. The information
supplied by Thermaltec for inclusion in the Registration Statement (as defined
in Section 3.04) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading. The information supplied by Thermaltec for inclusion in the proxy
statement/prospectus (such proxy statement/prospectus as amended or supplemented
being referred to herein as the "Proxy Statement/Prospectus") to be sent to (a)
the stockholders of Thermaltec in connection with the meeting of Thermaltec's
stockholders to consider the approval and adoption of this Agreement and the
approval of the Merger (the "Thermaltec Stockholders' Meeting") and (b) to the
stockholders of Solar Communications Group in connection with the meeting of
Solar Communications Group's stockholders to consider the approval and adoption
of this Agreement and the approval of the Merger (the "Solar Communications
Group Stockholders' Meeting") shall not, on the date the Proxy
Statement/Prospectus is first mailed to Solar Communications Group's
stockholders or Thermaltec's stockholders or at the time of the Thermaltec
Stockholders' Meeting or Solar Communications Group Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication
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with respect to the solicitation of proxies for the Thermaltec Stockholders'
Meeting or the Solar Communications Group Stockholders' Meeting which has become
false or misleading. The Proxy Statement/Prospectus will, to the extent required
by applicable law, comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act, and the rules and
regulations thereunder. If, at any time prior to the Effective Time, any event
relating to Thermaltec or any of its affiliates, officers, or directors should
be discovered by Thermaltec which is required to be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement/Prospectus,
Thermaltec shall promptly inform Solar Communications Group.
SECTION 3.20 Environmental Matters. Thermaltec has not caused or
allowed, or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise. Thermaltec, the
operation of its business, and any real property that Thermaltec owns, and to
the best of Thermaltec's knowledge, any real property which Thermaltec leases or
otherwise occupies or uses (collectively, the "Premises") are in compliance in
all material respects with all applicable Environmental Laws (as defined below)
and orders or directives of any governmental authorities having jurisdiction
under such Environmental Laws, including, without limitation, any Environmental
Laws or orders or directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. Thermaltec has not
received any citation, directive, letter or other communication, written or
oral, or any notice of any proceeding, claim or lawsuit, from any person arising
out of the ownership or occupation of the Premises, or the conduct of its
operations, and Thermaltec is not aware of any basis therefor. Thermaltec has
obtained and is maintaining in full force and effect all necessary permits,
licenses and approvals required by all Environmental Laws applicable to the
Premises and the business operations conducted thereon (including operations
conducted by tenants on the Premises), and is in compliance in all respects with
all such permits, licenses and approvals. Thermaltec has not caused or allowed a
release, or a threat of release, of any Hazardous Substance unto, at or near the
Premises, and, to the best of Thermaltec's knowledge, neither the Premises nor
any property at or near the Premises has ever been subject to a release, or a
threat of release, of any Hazardous Substance. For the purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal, state or local
law or ordinance or regulation pertaining to the protection of human health or
the environment, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq.,the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. For purposes of this Agreement, the term "Hazardous Substances" shall
include oil and petroleum products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or toxic under any
Environmental Laws.
SECTION 3.21 Foreign Corrupt Practices Act. Thermaltec has not taken
any action which would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules and regulations thereunder. To
the best of Thermaltec's knowledge, there is not now, and there has never been,
any employment by Thermaltec of, or beneficial ownership in Thermaltec by, any
governmental or political official in any country in the world.
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SECTION 3.22 Products. Thermaltec has no knowledge of any defects in
the design of, or technology embodied in, any product which Thermaltec currently
markets or has marketed in the past that impairs or is likely to impair the
stated use of the product or, in connection with such stated use, is reasonably
likely to injure any consumer of the product or any third party.
SECTION 3.23 Intellectual Property. Thermaltec owns all right, title
and interest in or has license rights to all patents, trademarks, service marks,
trade names, mask works, copyrights, trade secrets, know-how, technology and
other intellectual property and proprietary rights material to the conduct of
its business as presently and previously conducted (the "Thermaltec Intellectual
Property"). Thermaltec is not aware of any infringement of the Thermaltec
Intellectual Property by any third party. Thermaltec has not received any claim
or notice stating that it has infringed upon or violated any of the patents,
trademarks, service marks, trade names, mask works, copyrights, trade secrets,
proprietary rights or other intellectual property of any other person.
Thermaltec has taken all reasonable measures to protect the secrecy,
confidentiality, and value of the Thermaltec Intellectual Property.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SOLAR COMMUNICATIONS GROUP
The representations and warranties of Solar Communications Group in
this Article IV, together with the information contained in the Solar
Communications Group Disclosure Schedule, are being made and given as of the
date hereof.
Solar Communications Group represents and warrants to Thermaltec that,
except as set forth in this Agreement:
SECTION 4.01 Organization. Solar Communications Group is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has all requisite corporate power and corporate
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not have a material adverse effect
on Solar Communications Group. Solar Communications Group is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not in the
aggregate have a material adverse effect on Solar Communications Group. Solar
Communications Group does not have any Subsidiaries.
SECTION 4.02 Capitalization. As of the date hereof, the authorized
capital stock of Solar Communications Group consists of 5,000 shares of Solar
Communications Group Common Stock of which 4,532.65 shares are issued and
outstanding. The Board of Directors of Solar Communications Group has approved
an amendment to the Certificate of Incorporation of Solar Communications Group
(the "Proposed Amendment") which would authorize an increase in the number of
authorized shares of Solar Communications Group Common Stock from 5,000 to
10,000 and is currently seeking shareholder approval of such Proposed Amendment.
As of the date hereof, 1,000 shares of Solar Communications Group Common Stock
are reserved for issuance under the 1999 Option Plan, of which options to
purchase 426.5 shares of Common Stock are outstanding. All the outstanding
shares of Solar Communications Group's capital stock are, and all shares of
Solar Communications Group Common
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Stock which may be issued pursuant to the 1999 Option Plan will be, when issued
in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable and free of any preemptive rights in
respect thereto. As of the date hereof, no Voting Debt of Solar Communications
Group is issued or outstanding.
Except as set forth above, the issuance of options or shares of Solar
Communications Group Common Stock pursuant to the 1999 Option Plan, and the
planned issuance by Solar Communications Group of up to 1,417.35 additional
shares of Solar Communications Group Common Stock prior to the Merger, and
except for this Agreement, as of the date hereof, there are no existing options,
warrants, calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or unissued capital stock or
Voting Debt of Solar Communications Group or obligating Solar Communications
Group to issue, transfer or sell or cause to be issued, transferred or sold any
shares of capital stock or Voting Debt of, or other equity interests in, Solar
Communications Group, or securities convertible into or exchangeable for such
shares or equity interests or obligating Solar Communications Group to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement or commitment. There are no outstanding contractual obligations
of Solar Communications Group to repurchase, redeem or otherwise acquire any
shares of capital stock of Solar Communications Group.
SECTION 4.03 Authority. Solar Communications Group has the requisite
corporate power and corporate authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Solar Communications Group and no
other corporate proceedings on the part of Solar Communications Group are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (except for the approval of Solar Communications Group's
stockholders required pursuant to the provisions of the BCA). This Agreement has
been duly executed and delivered by Solar Communications Group, and, assuming
this Agreement constitutes a valid and binding obligation of Thermaltec and
Mazzone, constitutes a valid and binding obligation of Solar Communications
Group, enforceable against it in accordance with its respective terms.
SECTION 4.04 Consents and Approvals; No Violations.
(a) Except as contemplated by this Agreement, neither
the execution, delivery or performance of this Agreement by
Solar Communications Group nor the consummation by Solar
Communications Group of the transactions contemplated hereby
nor compliance by Solar Communications Group with any of the
provisions hereof will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or
by-laws of Solar Communications Group, (ii) result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which Solar Communications
Group is a party or by which it or any of its properties or
assets may be bound, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Solar Communications Group or any of its properties or assets,
except in the case of (ii) and (iii) for violations, breaches
or defaults which would not, individually or in the aggregate,
have a material adverse effect on Solar Communications Group
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(b) No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with
any Governmental Entity or any third party, is required to be
obtained or made by Solar Communications Group in connection
with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the Merger Filings
with the Secretary of State of the State of Delaware and the
Department of Revenue of the State of New Jersey; and (ii)
such other consents, authorizations, filings, approvals, and
registrations which if not obtained or made would not be
material to Solar Communications Group or Thermaltec or
adversely effect the ability of the parties hereto to
consummate the Merger.
SECTION 4.05 Absence of Certain Changes. Since September 30, 1998 (the
"Reference Date"), there has been no material adverse change in the business,
operations, condition (financial or otherwise), results of operations, assets or
liabilities of Solar Communications Group Since the Reference Date, except as
described herein or with respect to the transactions contemplated hereby, Solar
Communications Group has conducted its business consistent with past practices
and there has been no material change other than in the ordinary course of
business, and Solar Communications Group has not (a) as of the date hereof,
incurred loss of, or significant injury to, any assets of Solar Communications
Group as a result of any fire, explosion, flood, windstorm, earthquake, labor
trouble, riot, accident, act of God or public enemy or armed forces, or other
occurrence materially adversely affecting the property or business of Solar
Communications Group; (b) issued any capital stock, bonds or other corporate
securities or debt instruments, or granted any options, warrants or other rights
calling for the issuance thereof (other than as disclosed in Section 4.02
hereof); (c) other than in the ordinary course of business, borrowed any funds
in an aggregate amount exceeding $50,000; (d) incurred or, to Solar
Communications Group's knowledge, become subject to, any material obligation or
liability (absolute or contingent, matured or unmatured), except for current
liabilities incurred in the ordinary course of business; (e) declared or made
payment of, or set aside for payment, any dividends or distributions of any
assets, or purchased, redeemed or otherwise acquired any of Solar Communications
Group capital stock, any securities convertible into capital stock, or any other
securities; (f) mortgaged, pledged or subjected to any material liens,
mortgages, security interests or encumbrances of any kind, other than for taxes
not yet due and payable or liens or encumbrances that are not material to Solar
Communications Group, any of its assets; (g) sold, exchanged, transferred or
otherwise disposed of any of its material assets, or canceled any material debts
or claims, except in each case in the ordinary course of business; (h) acquired
a material amount of assets except in the ordinary course of business; (i)
written down the value of any assets or written off as uncollectible any notes
or accounts receivables, except write-downs and write-offs in the ordinary
course of business, none of which, individually or in the aggregate, are
material; (j) entered into any material transactions other than in the ordinary
course of business; (k) increased the rate of compensation payable, or to become
payable, by it to any of its officers, employees, agents, or independent
contractors over the rate being paid to them on the Reference Date, except for
increases in the ordinary course of business consistent with past practices; (l)
made or permitted any material amendment or termination of any material
agreement to which it is a party; (m) through negotiation or otherwise, made any
commitment or incurred any liability to any labor organization; (n) made any
accrual or arrangement for or payment of bonuses or special compensation of any
kind to any director, officer or employee; (o) made any material change in any
method of accounting or accounting practice; or (p) entered into any binding
obligation to do any of the foregoing.
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SECTION 4.06 No Undisclosed Liabilities. Except as and to the extent
set forth in Solar Communications Group's audited financial statements as of,
and for the two (2) years ended September 30, 1998, Solar Communications Group
did not have any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of Solar
Communications Group (including the notes thereto). Since the Reference Date,
Solar Communications Group has not incurred any liabilities outside of the
ordinary course of business of any nature, whether or not accrued, contingent or
otherwise, which would have, individually or in the aggregate, a material
adverse effect on Solar Communications Group
SECTION 4.07 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of Solar Communications Group,
threatened against Solar Communications Group before any Governmental Entity
which, individually or in the aggregate, is reasonably likely to have a material
adverse effect on Solar Communications Group or a material adverse effect on the
ability of Solar Communications Group to consummate the transactions
contemplated by this Agreement. Solar Communications Group is not subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, in the future would have
a material adverse effect on Solar Communications Group or a material adverse
effect on the ability of Solar Communications Group to consummate the
transactions contemplated hereby.
SECTION 4.08 Compliance with Applicable Law. Solar Communications Group
holds all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of Solar Communications
Group business (the "Solar Communications Group Permits"), except for failures
to hold such permits, licenses, variances, exemptions, orders and approvals
which would not, individually or in the aggregate, have a material adverse
effect on Solar Communications Group Solar Communications Group is in compliance
with the terms of the Solar Communications Group Permits, except where the
failure so to comply would not have a material adverse effect on Solar
Communications Group. The business of Solar Communications Group is not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
material adverse effect on Solar Communications Group. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Solar Communications Group is pending or, to the best knowledge of Solar
Communications Group, threatened, nor has any Governmental Entity indicated an
intention to conduct the same.
SECTION 4.09 Vote Required. The affirmative vote of the Board of
Directors of Solar Communications Group and a majority of the outstanding shares
of the Solar Communications Group Common Stock are the only votes by Solar
Communications Group necessary to approve the transactions contemplated hereby.
SECTION 4.10 Taxes. Solar Communications Group has filed all tax
returns, Federal, state, county and local, required to be filed by it, those
returns accurately and completely reflect Solar Communications Group's tax
obligations with respect to the periods covered thereby, and Solar
Communications Group has paid all taxes shown to be due by such returns as well
as all other taxes, interest, penalties, assessments and other amounts asserted
to be due or payable by any taxing authority, including without limitation all
taxes which Solar Communications Group is obligated to withhold from amounts
paid or owing to employees, creditors and third parties. Adequate reserves have
been established by Solar Communications Group for all taxes accrued but not yet
payable. The tax returns of Solar Communications Group have never been audited
by the Internal Revenue Service or any other taxing authority. No deficiency
assessment with respect to or proposed adjustment of
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Solar Communications Group's Federal, state, county or local taxes is pending
or, to the best of Solar Communications Group's knowledge, threatened. There is
no tax lien, whether imposed by any Federal, state, county or local taxing
authority, outstanding against the assets, properties or business of Solar
Communications Group.
SECTION 4.11 No Reliance on Forecasts. In the negotiation and
consideration of the transactions contemplated by this Agreement, Thermaltec and
Thermaltec's Board of Directors have not relied on any information or documents
concerning Solar Communications Group and its business or financial results
except: (a) representations and warranties made by Solar Communications Group in
this Agreement, and (b) disclosure of financial results made pursuant to this
Agreement. In the course of negotiations, Solar Communications Group and
Thermaltec exchanged information concerning hypothetical situations, based on
various assumptions, of the results of operations of the combined companies and
possible market prices for the Thermaltec Common Stock following the Effective
Time. Solar Communications Group makes no representation or warranty regarding
any such hypothetical situations provided by it, including those that may
contain forecasts or projections of Solar Communications Group's future
operating results, and Thermaltec disclaims reliance on any such hypothetical
situations provided by Solar Communications Group or third parties.
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ARTICLE V
COVENANTS
Section 5.01 Covenants of Thermaltec and Solar Communications Group.
During the period from the date of this Agreement and continuing until the
Effective Time, Thermaltec and Solar Communications Group each agree (except as
expressly contemplated or permitted by this Agreement, or to the extent that the
other party shall otherwise consent in writing):
(a) Ordinary Course. Except as contemplated by this
Agreement, each party shall carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use
commercially reasonable efforts to preserve intact their
present business organizations, keep available the services of
their present officers and employees and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and
ongoing business shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Stock. No party shall, nor
shall any party propose to, (i) declare or pay any dividends
on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii)
repurchase, redeem or otherwise acquire any shares of capital
stock of such party. Notwithstanding anything to the contrary
contained herein, Thermaltec shall prior to the Effective
Time, as contemplated by Section 6.12 hereof, declare and pay
a dividend to the Thermaltec shareholders of record (with an
adequate reserve to be established pursuant to the terms and
provisions of the Warrants) of all of the outstanding stock of
the entity which is the transferee of Thermaltec's assets and
liabilities pursuant to Section 6.12 hereof.
(c) Issuance of Securities. Except for the issuance
of shares of Thermaltec Common Stock pursuant to the exercise
of a Warrant, Thermaltec shall not issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any
shares of its capital stock of any class, any Voting Debt or
any securities convertible into, or any rights, warrants,
calls, subscriptions or options to acquire, any such shares,
Voting Debt or convertible securities.
(d) Governing Documents. Except for the Proposed
Amendment and the Proposed Thermaltec Amendment, neither
Thermaltec nor Solar Communications Group shall amend or
propose to amend its Certificate of Incorporation or By-laws.
(e) No Dispositions. Other than transactions in the
ordinary course of business consistent with prior practice, no
party shall sell, lease, license, encumber or otherwise
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dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets which are material,
individually or in the aggregate, to Thermaltec or to Solar
Communications Group.
(f) Indebtedness. No party shall incur any
indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of such party or
guarantee any debt securities of others, other than in each
case in the ordinary course of business consistent with prior
practice.
(g) Other Actions. Notwithstanding the fact that such
action might otherwise be permitted pursuant to this Section
5.01, no party shall take any action, or by inaction permit an
event to occur, which would or is reasonably likely to result
in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the
Merger set forth in Article VII not being satisfied. Solar
Communications Group or Thermaltec, as the case may be, shall
promptly give written notice to the other party upon becoming
aware of any fact which, if known on the date hereof would
have been required to be set forth or disclosed pursuant to
this Agreement, and any impending or threatened breach in any
material respect of any of the representations and warranties
contained in this Agreement and with respect to the latter
shall use all reasonable efforts to remedy the same.
(h) Advice on Changes; Filings. Each of Solar
Communications Group and Thermaltec shall confer on a regular
and frequent basis with the other, report on operational
matters and promptly advise the other orally and in writing of
any change or event having, or which, insofar as can
reasonably be foreseen, could have, a material adverse effect
on such party. Each of Solar Communications Group and
Thermaltec shall promptly provide the other (or its counsel)
copies of all filings made by such party with any Federal,
state or foreign Governmental Entity in connection with this
Agreement or the transactions contemplated hereby.
(i) Benefit Plans; Employment Arrangements. Except as
contemplated by this Agreement, Thermaltec shall not enter
into, adopt, amend (except as may be required by law) or
terminate any Thermaltec Benefit Plan, or other employee
benefit plan or any compensatory or benefit agreement,
arrangement, plan or policy between Thermaltec and one or more
of its directors or officers. Thermaltec shall not, except for
normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense,
increase in any manner the compensation or fringe benefits of
any director, officer, employee or consultant or pay any
benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the
granting of stock appreciation rights or performance units) or
enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
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(j) No Solicitations. No party shall nor shall any
party authorize or permit any of their respective officers,
directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained
by them to solicit, initiate or encourage submission of
proposals or offers from any person relating to any
acquisition or purchase of all or a substantial portion of the
assets of, or any material equity interest in, such party or
any merger, consolidation, amalgamation or other business
combination with such party.
Section 5.02. Additional Covenants of Thermaltec. During the period
from the date of this Agreement and continuing until the Effective Time,
Thermaltec agrees that it will not, without the prior written consent of Solar
Communications Group, acquire or agree to acquire, in consideration for the
payment of any Thermaltec Common Stock or other capital stock of Thermaltec, by
merger or consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, in each
case which are material, individually or in the aggregate, to Thermaltec.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Access to Information. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which such party is
subject (from which such party shall use reasonable efforts to be released),
Thermaltec and Solar Communications Group shall each afford to the officers,
employees, accountants, counsel and other representatives of the other, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, each of Thermaltec and Solar Communications Group shall furnish promptly
to the other (i) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws, if applicable, and (ii) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Unless otherwise required by law, the parties will
hold any such information which is nonpublic in confidence until such time as
such information otherwise becomes publicly available through no wrongful act of
either party, and in the event of termination of this Agreement for any reason
each party shall promptly return all nonpublic documents obtained from any other
party, and any copies made of such documents, to such other party.
SECTION 6.02 Thermaltec Stockholders Meeting. As soon as reasonably
practicable following the date of this Agreement, Thermaltec shall take all
action reasonably necessary in accordance with the GCL, its Certificate of
Incorporation and By-laws, to cause its stockholders, by resolution, a meeting
or otherwise, to approve and adopt this Agreement and the Merger.
SECTION 6.03 Solar Communications Group Stockholders Meeting. As soon
as reasonably practicable following the date of this Agreement, Solar
Communications Group shall take all action reasonably necessary in accordance
with the BCA, its Certificate of Incorporation and By-laws, to cause its
stockholders, by resolution, a meeting or otherwise, to approve and adopt this
Agreement and the Merger.
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SECTION 6.04 Legal Conditions to Merger. Each of Thermaltec and Solar
Communications Group will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
the Merger (which actions shall include, without limitation, approvals or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon either of them in connection with the Merger. Each of Thermaltec
and Solar Communications Group will promptly take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained by Solar Communications Group and Thermaltec in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
SECTION 6.05 Affiliates. Solar Communications Group will advise all
persons who are, at the time this Agreement is submitted for approval to the
stockholders of Solar Communications Group, "affiliates" of Solar Communications
Group for purposes of Rule 145 under the Securities Act ("Rule 145") of resale
restrictions imposed by the federal securities laws, including Rule 145, on
shares of Thermaltec Common Stock received by them pursuant to the Merger. Solar
Communications Group shall obtain from each such person a letter stating that
such persons are aware of such restrictions.
SECTION 6.06 Employee Benefit Plans. Thermaltec shall, as soon as
reasonably practicable following the date of this Agreement, terminate each of
its Employee Benefit Plans.
SECTION 6.07 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
SECTION 6.08 Brokers or Finders. Each of Solar Communications Group and
Thermaltec represents, as to itself and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement, and
each of Solar Communications Group and Thermaltec agree to indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or its affiliate.
SECTION 6.09 Indemnification. From and after the Effective Time,
neither Solar Communications Group nor the Surviving Corporation shall assume,
be subject to or otherwise responsible for any of the debts, liabilities or
obligations of Thermaltec existing or arising at or prior to the Effective Time.
Mazzone, as the chief executive officer and principal shareholder of Thermaltec,
hereby agrees to personally indemnify and hold harmless Solar Communications
Group and the Surviving Corporation, and their respective officers, directors,
shareholders, employees, agents, representatives, successors and assigns
(collectively, the "Indemnified Persons"), from and against, any loss, cost,
damage or expense (including reasonable attorneys' fees) arising from or related
to any Covered Claim. For purposes of this Agreement, the term "Covered Claim"
shall mean any claim, litigation, lawsuit or proceeding relating to or arising
from (i) any misrepresentation or breach of any covenant, warranty or agreement
made by Thermaltec or Mazzone in this Agreement or any document delivered in
connection with the Merger, (ii) the conduct of Thermaltec's business at or
prior to the Effective Time, or (iii) any debt, liability or obligation of
Thermaltec existing or arising at or prior to the Effective Time.
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Mazzone shall, at or prior to the Effective Time, provide Solar
Communications Group with collateral (collectively, the "Collateral"),
consisting of (a) either real estate or marketable securities (other than
securities issued by Thermaltec) having a fair market value of not less than
$250,000.00 (after deducting the aggregate outstanding balance of all
indebtedness or other obligations the repayment or performance of which is
secured by a lien on or security interest in such real estate or marketable
securities) and otherwise acceptable to Solar Communications Group in its sole
discretion, pursuant to the terms and provisions of a mortgage and security
agreement or pledge and security agreement, as appropriate, in form and
substance acceptable to Solar Communications Group in its sole discretion (the
"Security Documents"), and (b) a pledge of all of the outstanding securities
issued by Thermaltec and owned by Mazzone on the date hereof (the "Pledged
Thermaltec Securities"), pursuant to the terms and provisions of a pledge and
security agreement in form and substance acceptable to Solar Communications
Group in its sole discretion (the "Pledge Agreement"). The Pledged Thermaltec
Securities shall consist of at least 1,425,000 shares of TI Common Stock. The
Collateral shall secure the payment and performance of Mazzone's indemnification
obligations hereunder with respect to any Covered Claim for which Thermaltec,
Solar Communications Group or the Surviving Corporation first receives notice
prior to the second anniversary of the Effective Time (hereinafter, a "Timely
Covered Claim").
Notwithstanding anything to the contrary contained herein, at any time
after the first anniversary of the Effective Time but prior to the second
anniversary of the Effective Time, Mazzone may submit a written request to the
Surviving Corporation for the release of a portion of the Collateral and, if at
the time such request is submitted the Surviving Corporation has previously
completed a Public Offering (as such term is defined hereinafter) and there is
no Timely Covered Claim which is then outstanding and unresolved, the Surviving
Corporation shall be obligated to release one-half of the Pledged Thermaltec
Securities to Mazzone. Such released shares shall be subject, in all respects,
to the terms and provisions of the Lock-up Agreement required to be delivered by
Mazzone pursuant to Section 7.02(p) hereof. If there is no Timely Covered Claim
outstanding and unresolved on the second anniversary of the Effective Date, all
Pledged Thermaltec Securities then being held pursuant to the provisions of this
Agreement shall be released to Mazzone.
For purposes of this Agreement, the term "Public Offering" shall mean
the consummation of an underwritten public offering of the common stock and/or
the preferred stock of the Surviving Corporation, registered under the
Securities Act, which results in receipt by the Surviving Corporation of
proceeds of at least Ten Million Dollars ($10,000,000.00).
Furthermore, notwithstanding anything to the contrary contained
herein, the aggregate amount for which Mazzone shall be liable with respect to
all Covered Claims is Two Million Dollars ($2,000,000.00).
SECTION 6.10 Further Assurances. Solar Communications Group and
Thermaltec agree to execute and deliver all such other instruments and take all
such other action as any party may reasonably request from time to time, before
the Effective Time and without payment of further consideration, in order to
effectuate the transactions provided for in this Agreement. The parties shall
cooperate fully with each
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other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations under this
Agreement.
SECTION 6.11 Additional Agreements; Best Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of the stockholders of
Thermaltec and Solar Communications Group described herein.
SECTION 6.12 Transfer of Assets and Liabilities. Prior to the Effective
Time, Thermaltec shall take all necessary steps to transfer all of its assets
and liabilities to another entity, except for (a) cash in an amount of not less
than $100.00 plus an amount equal to (i) $1.00, multiplied by (ii) the
difference between 251,600 and the number of Warrants outstanding at the
Effective Time, and (b) certain net operating loss tax carryforwards in an
amount of not less than $800,000.00. It is the intention of the parties that, at
the Effective Time, Thermaltec shall be a corporate shell only, with no assets
(other than the cash and net operating loss tax carryforwards described in the
immediately preceding sentence) and no liabilities.
SECTION 6.13 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations. As promptly as practicable after the execution
of this Agreement, Solar Communications Group and Thermaltec will prepare, and
file with the SEC (if required by the provisions of the Securities Act), the
Proxy Statement/Prospectus, and Solar Communications Group and Thermaltec will
prepare and file with the SEC the Registration Statement in which the Proxy
Statement/Prospectus will be included as a prospectus (if required by the
provisions of the Securities Act). Each of Solar Communications Group and
Thermaltec will respond to any comments of the SEC, will use its respective
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing,
and each of Thermaltec and Solar Communications Group will cause, if required by
the provisions of the Securities Act, the Proxy Statement/Prospectus to be
mailed to its stockholders at the earliest practicable time after the
Registration Statement is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Solar Communications Group
and Thermaltec will prepare and file any other filings required to be filed by
it under the Exchange Act, the Securities Act or any other federal, foreign or
Blue Sky or related laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each of Solar
Communications Group and Thermaltec will notify the other promptly upon the
receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Registration Statement, the Proxy
Statement/Prospectus, or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement/Prospectus, the Merger or any Other Filing. Each
of Solar Communications Group and Thermaltec will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this
Section 6.13 to comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Proxy
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Statement/Prospectus, the Registration Statement or any Other Filing, Solar
Communications Group or Thermaltec, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the SEC or its staff or
any other government officials, and/or mailing to stockholders of Thermaltec
and/or Solar Communications Group, such amendment or supplement.
SECTION 6.14 Stock Options and Employee Benefits.
(a) At the Effective Time, the Surviving Corporation
will assume the 1999 Option Plan, including without
limitation, to the extent required by the Board of Directors
of Solar Communications Group, any options reserved for future
issuance thereunder. At the Effective Time, each option
outstanding under the 1999 Option Plan (the "Solar
Communications Group Options"), whether or not exercisable,
will be assumed by the Surviving Corporation. Each Solar
Communications Group Option so assumed by the Surviving
Corporation under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the
1999 Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights or
vesting provisions), except that (i) each Solar Communications
Group Option will be exercisable (or will become exercisable
in accordance with its terms) for that number of whole shares
of Thermaltec Common Stock equal to the product of the number
of shares of Solar Communications Group Common Stock that were
issuable upon exercise of such Solar Communications Group
Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounded down to the nearest whole number
of shares of Thermaltec Common Stock and (ii) the per share
exercise price for the shares of Thermaltec Common Stock
issuable upon exercise of such assumed Solar Communications
Group Option will be equal to the quotient determined by
dividing the exercise price per share of Solar Communications
Group Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that each Solar Communications
Group Option assumed by the Surviving Corporation shall
qualify following the Effective Time as an incentive stock
option, as defined in Section 422 of the Code, to the extent
such Solar Communications Group Option qualified as an
incentive stock option immediately prior to the Effective
Time, and the provisions of this Section 6.14 shall be applied
consistent with such intent.
(c) Notwithstanding anything to the contrary in this
Section 6.14, in lieu of assuming outstanding options under
the 1999 Option Plan, the Surviving Corporation may, at its
election, cause such outstanding options to be replaced by
issuing substantially equivalent replacement stock options
therefor.
SECTION 6.15 Solar Communications Group Affiliate Agreement. Solar
Communications Group will use its commercially reasonable efforts to deliver or
cause to be delivered to Thermaltec, prior to the Effective Time, from each
person who may be deemed to be, in Solar Communications Group's reasonable
judgement, affiliates of Solar Communications Group with the meaning of Rule 145
promulgated under the Securities Act (each an "Solar Communications Group
Affiliate") an executed affiliate agreement in form acceptable to Solar
Communications Group and Thermaltec in their reasonable discretion (the
"Affiliate Agreements"), each of which will be in full force and effect as of
the Effective Time. Thermaltec will be entitled to place appropriate legends on
the certificates
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evidencing any Thermaltec Common Stock to be received by an Solar Communications
Group Affiliate pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Thermaltec
Common Stock, consistent with the terms of the Affiliate Agreements.
SECTION 6.16 Tax-free Reorganization. No party shall take any action
either prior to or after the Effective Time that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code.
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have
been approved and adopted by the stockholders of Thermaltec in
accordance with the applicable provisions of the GCL and by
the stockholders of Solar Communications Group in accordance
with the applicable provisions of the BCA.
(b) Other Approvals. Other than the Merger Filings,
all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity required to
consummate the Merger shall have been filed, occurred or been
obtained or shall have been waived.
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; there shall not
be pending any action, proceeding or investigation before any
court or administrative agency by any Governmental Entity and
any other person which has a reasonable likelihood of success,
challenging or seeking material damages in connection with, or
material changes in the terms of, the Merger.
(d) Registration Statement. The SEC shall have
declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for
that purpose, and no similar proceeding in respect of the
Proxy Statement/Prospectus, shall have been initiated or
threatened by the SEC.
(e) Tax Opinions. Solar Communications Group shall
have received from Archer & Greiner, P.C., and Thermaltec
shall have received from Aitken, Irvin, Lewin, Berlin, Vrooman
& Cohn, LLP, written opinions to
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the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code. In rendering
such opinions, counsel may rely on (and to the extent
reasonably required, the parties shall make) reasonable
representations related thereto.
SECTION 7.02 Conditions of Obligations of Solar Communications Group.
The obligations of Solar Communications Group to effect the Merger are subject
to the satisfaction of the following conditions unless waived by Solar
Communications Group:
(a) Representations and Warranties. The
representations and warranties of Thermaltec and Mazzone set
forth in this Agreement shall be true and correct in all
material respects as of the date hereof and (except to the
extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as
of the Closing Date, and Solar Communications Group shall have
received a certificate signed on behalf of Thermaltec by the
chief executive officer and the chief financial officer of
Thermaltec, and by Mazzone, to such effect.
(b) Performance of Obligations of Thermaltec.
Thermaltec shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Solar
Communications Group shall have received a certificate signed
on behalf of Thermaltec by the chief executive officer and the
chief financial officer of Thermaltec to such effect.
(c) No Amendments to Resolutions. Neither the Board
of Directors of Thermaltec nor any committee thereof shall
have amended, modified, rescinded or repealed the resolutions
adopted by such Board on May 19, 1999 (accurate and complete
copies of which have been provided to Solar Communications
Group) and shall not have adopted any other resolutions in
connection with this Agreement and the transactions
contemplated hereby inconsistent with such resolutions.
(d) Opinion of Counsel. Solar Communications Group
shall have received the opinion of Aitken, Irvin, Lewin,
Berlin, Vrooman & Cohn, LLP, counsel to Thermaltec, dated the
Closing Date, with respect to such matters as Solar
Communications Group may reasonably request.
(e) Material Adverse Change. Except as expressly
contemplated by this Agreement, no material adverse change
shall have occurred subsequent to the Balance Sheet Date in
the financial position, results of operations, assets,
liabilities or prospects of Thermaltec, nor shall any event or
circumstance have occurred which would result in a material
adverse change in the financial position, results of
operations, assets, liabilities or aspects of Thermaltec.
(f) Uniform Commercial Code Searches. Thermaltec
shall have delivered to Solar Communications Group certified
copies of Requests for Information or Copies (Form UCC-11) or
equivalent reports, federal and state tax lien searches,
judgment searches and pending suit searches from such
jurisdictions as may be requested by Solar Communications
Group, listing all effective financing statements, judgments,
tax
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liens, judgments and pending suits which name Thermaltec
(under its present name or any previous name or any trade
name) as debtor, together with copies of such financing
statements, judgments, tax liens, etc. Such searches shall
indicate the existence of no liens, claims, judgments or
security interests, or pending suits.
(g) Closing Balance Sheet. Solar Communications Group
shall have received a balance sheet (the "Closing Balance
Sheet")from Thermaltec, dated as of the date of Closing, and
certified as being true, complete and accurate in all respects
by the chief financial officer of Thermaltec, which shows that
the total liabilities of Thermaltec do not exceed $-0- in the
aggregate.
(h) Completion of Due Diligence. Solar Communications
Group shall satisfactorily complete a due diligence audit of
the business, financial condition and affairs of Thermaltec,
including without limitation confirmation that the September
30, 1998 year-end results of Thermaltec previously provided by
Thermaltec to Solar Communications Group are true and correct
in all material respects.
(i) Audited Financial Statements. Solar
Communications Group shall receive audited financial
statements for the last two (2) fiscal years of Thermaltec,
prepared by Caprarao, Centofranchi, Kramer & Co. P.C., at
Thermaltec's sole cost and expense, in accordance with
generally accepted accounting principles and otherwise in form
and substance acceptable to Solar Communications Group in its
reasonable discretion.
(j) Thermaltec Common Stock. The shares of Thermaltec
Common Stock to be issued to holders of Solar Communications
Group Common Stock in the Merger shall be validly issued,
fully paid, nonassessable, free of preemptive rights and free
and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature
whatsoever.
(k) Capitalization. At the Closing Date, Thermaltec
shall have (i) not more than 2,578,118 shares of Thermaltec
Common Stock issued and outstanding (plus any shares of
Thermaltec Common Stock issued pursuant to an exercise of the
Warrants between the date hereof and the Effective Date), and
(ii) not granted any options or warrants to purchase, or
issued any other securities convertible into, or entered into
any agreements (other than this Agreement and the certificates
evidencing the Warrants) to issue, any of its securities,
other than as disclosed or provided in this Agreement.
Thermaltec shall immediately notify Solar Communications Group
in writing of the exercise of any Warrant occurring between
the date hereof and the Effective Date.
(l) Security Documents. Solar Communications Group
shall receive a fully executed copy of each Security Document.
(m) Pledge Agreement. Solar Communications Group
shall receive a fully executed copy of the Pledge Agreement,
together with all instruments required to be delivered to
Solar Communications Group pursuant to the terms and
provisions of the Pledge Agreement.
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(n) Reporting Company Status. Thermaltec shall have
taken all steps necessary to become a "reporting company"
within the meaning of the Exchange Act.
(o) Equity Contributions. Solar Communications Group
shall have received equity contributions of at least Two
Million Dollars ($2,000,000) from or through Thermaltec and/or
Mazzone, or their respective affiliates, in form and substance
satisfactory to Solar Communications Group in its reasonable
discretion.
(p) Lock-Up Agreements. Mazzone, and such of his
affiliates or affiliates of Thermaltec as may be designated by
Solar Communications Group, prior to the Effective Time, shall
have executed and delivered to Solar Communications Group a
Lock-Up Agreement, in form and substance satisfactory to Solar
Communications Group in its reasonable discretion, whereby
Mazzone and each such affiliate agrees not to sell, encumber
or otherwise transfer (i) more than twenty percent (20%), in
the aggregate, of the shares of common stock or other
securities of Thermaltec owned by Mazzone or such affiliate at
the Effective Time prior to the first anniversary of the
Effective Time, or (ii) more than twenty percent (20%) in the
aggregate, of the shares of common stock or other securities
of Thermaltec owned by Mazzone or such affiliate at the
Effective Time at any time after the first anniversary of the
Effective Time but prior to the second anniversary of the
Effective Time. Any transfer permitted under the terms of any
such Lock-Up Agreement shall only be made in compliance with
all applicable securities laws.
(q) Completion of Other Filings. Solar Communications
Group shall have received evidence of the completion of all
recordings and filings of the Security Documents as may be
necessary or, in the opinion of Solar Communications Group,
desirable to perfect the security interests and liens created
or to be created by the Security Documents. Solar
Communications Group shall have also received evidence of all
other actions necessary or, in the opinion of Solar
Communications Group, desirable to create, perfect and protect
the security interests and liens intended to be created by the
Security Documents.
SECTION 7.03 Conditions of Obligations of Thermaltec. The obligation of
Thermaltec to effect the Merger is subject to the satisfaction of the following
conditions unless waived by Thermaltec:
(a) Representations and Warranties. The
representations and warranties of Solar Communications Group
set forth in this Agreement shall be true and correct in all
material respects as of the date hereof and (except to the
extent such representations speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date,
and Thermaltec shall have received a certificate signed on
behalf of Solar Communications Group by its chief executive
officers and chief financial officers to such effect.
(b) Performance of Obligations of Solar
Communications Group. Solar Communications Group shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing Date, and Thermaltec shall have received a certificate
signed on behalf of Solar Communications Group by its chief
executive officers and chief financial officers to such
effect.
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(c) No Amendments to Resolutions. Neither the Board
of Directors of Solar Communications Group nor any committee
thereof shall have amended, modified, rescinded or repealed
the resolutions adopted by such Board by unanimous written
consent dated May 21, 1999 (accurate and complete copies of
which have been provided to Thermaltec), and shall not have
adopted any other resolutions in connection with this
Agreement and the transactions contemplated hereby which are
inconsistent with such resolutions.
(d) Capitalization. At the Closing Date, Solar
Communications Group shall have (i) (including any shares
issuable pursuant to the exercise of options issued under the
1999 Option Plan) not more than 6,450 shares of Solar
Communications Group Common Stock issued and outstanding, and
(ii) not granted any options or warrants to purchase, or
issued any other securities convertible into, or entered into
any agreements (other than this Agreement) to issue, any of
its securities, other than as disclosed or provided in this
Agreement.
(e) Material Adverse Change. No material adverse
change shall have occurred subsequent to the Reference Date in
the financial position, results of operations, assets,
liabilities or prospects of Solar Communications Group, nor
shall any event or circumstance have occurred which would
result in a material adverse change in the financial position,
results of operations, assets, liabilities or aspects of Solar
Communications Group.
(f) Opinion of Counsel. Thermaltec shall have
received the opinion of Archer & Greiner, A Professional
Corporation, counsel to Solar Communications Group, dated the
Closing Date, with respect to such matters as Thermaltec may
reasonably request.
(g) Equity Contributions. Solar Communications Group
shall have received commitments for equity contributions of at
least Three Million Dollars ($3,000,000), which commitments
shall be subject only to consummation of the Merger and
otherwise in form and substance satisfactory to Thermaltec in
its reasonable discretion.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of Thermaltec or
Solar Communications Group:
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(a) by mutual consent of the Boards of Directors of
Solar Communications Group and Thermaltec; or
(b) (i) by either Solar Communications Group or
Thermaltec if there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of
the other set forth in this Agreement which breach shall not
have been cured, in the case of a representation or warranty,
prior to the Closing or, in the case of a covenant or
agreement, within two (2) business days following receipt by
the breaching party of notice of such breach, or (ii) by
either Solar Communications Group or Thermaltec if any
permanent injunction or other order of a court or other
competent authority preventing the consummation of the Merger
shall have become final and non-appealable; or
(c) by either Solar Communications Group or
Thermaltec if the Merger shall not have been consummated
before December 31, 1999, other than as a result of a breach
by the party attempting to terminate this Agreement; or
(d) by either party if any required approval of the
stockholders of Thermaltec or Solar Communications Group shall
not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of
stockholders or otherwise or at any adjournment of such
meeting; or
(e) by Solar Communications Group if any of the
conditions specified in Sections 7.01 or 7.02 has not been met
or waived at such time as such conditions can no longer be
satisfied; or
(f) by Thermaltec if any of the conditions specified
in Sections 7.01 or 7.03 has not been met or waived at such
time as such conditions can no longer be satisfied.
SECTION 8.02 Effect of Termination. In the event of a termination of
this Agreement by either Thermaltec or Solar Communications Group as provided in
Section 8.01, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Solar Communications Group or Thermaltec
or their respective officers or directors, except (i) with respect to the last
sentence of Section 6.01, and Sections 6.07 and 6.08 and (ii) to the extent that
such termination results from the willful breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 8.03 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Thermaltec or of Solar Communications Group,
but, after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto. Notwithstanding the foregoing, and except as
otherwise provided by law, any amendment, waiver, consent or approval
contemplated by this Agreement to be granted or delivered by Solar
Communications Group or Thermaltec, shall be deemed to have been so granted or
delivered if given or approved by the President or Chief Executive Officer of
such party.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
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the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. Except as
otherwise specifically provided herein, the representations and warranties
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time.
SECTION 9.02 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
personally delivered, or on the day specified for delivery when deposited with a
courier service such as Federal Express for delivery to the intended addressee,
or two days following the day when deposited in the United States mails, by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
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(a) if to Solar Communications Group, to
Solar Communications Group, Inc.
21 East Main Street
Suite 205
Millville, New Jersey 08332
Attention: James M. Rossi, President
Telecopy No.: (609) 825-5959
with a copy to:
Deborah A. Hays, Esquire
Archer & Greiner, A Professional Corporation
One Centennial Square
Haddonfield, New Jersey 08033
Telecopy No.: (609) 795-0574
and
(b) if to Thermaltec or Mazzone, to
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Attention: Andrew B. Mazzone, President
Telecopy No.: (516) 643-2514
with a copy to
Edward A. Vrooman, Esquire
Aitken, Irvin, Lewin, Berlin, Vrooman & Cohn, LLP
2 Gannett Drive
White Plains, New York 10604
Telecopy No.: (914) 694-1647
or to such other address as may be designated by a party to the other parties
hereto in accordance with the notice provisions of this Section 9.02.
SECTION 9.03 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
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followed by the words "without limitation." The phrases, "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date set forth in the first
paragraph of this Agreement.
SECTION 9.04 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.05 Schedules and Exhibits. All Schedules and Exhibits
referred to herein or attached hereto constitute a part of this Agreement.
Disclosure on any Schedule shall be deemed to satisfy the disclosure
requirements of any other Schedule to which such information may also be
applicable, without any necessity to reference such Schedule in any other
Schedule.
SECTION 9.06 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
SECTION 9.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof; provided that issues involving the corporate governance of any of
the parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the District of New Jersey, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of New Jersey for such
persons, and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
SECTION 9.08 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.09 Publicity. Except as otherwise required by law or the
rules of the SEC or the NASD, for so long as this Agreement is in effect,
neither Thermaltec nor Solar Communications Group shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this
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Agreement without the consent of the other party. Any such press release or
public announcement shall be subject to the prior review of the other party,
which shall not be unreasonably delayed.
SECTION 9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.11 Waiver of Jury Trial. Each of Thermaltec, Solar
Communications Group and Mazzone hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this agreement or the actions of
Thermaltec, Solar Communications Group or Mazzone in the negotiation,
administration, performance and enforcement hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Solar Communications Group, Thermaltec and Mazzone
have caused this Agreement to be duly executed as of the date first written
above.
Attest: SOLAR COMMUNICATIONS GROUP, INC.
By
- ------------------------- ---------------------------------
Name: Name:
Title: Secretary Title:
Attest: THERMALTEC INTERNATIONAL, CORP.
By
- ------------------------- ---------------------------------
Name: Name:
Title: Secretary Title:
Witness:
- ------------------------- ----------------------------------
Name: ANDREW B. MAZZONE
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SCHEDULE 3.09
Thermaltec EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS
----------------------------------------------------
None.
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ANNEX B
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Section 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss. 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock"
and"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to ss.ss. 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228 or
ss. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constitutent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled
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to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX C
NEW JERSEY STATUTES
TITLE 14A. CORPORATIONS, GENERAL
CHAPTER 11. RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1. Right of shareholders to dissent
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise provides
(i) a shareholder shall not have the right to dissent from any plan of
merger or consolidation with respect to shares
(A) of a class or series which is listed on a national securities exchange
or is held of record by not less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan of merger or
consolidation; or
(B) for which, pursuant to the plan of merger or consolidation, he will
receive (x) cash, (y) shares, obligations or other securities which, upon
consummation of the merger or consolidation, will either be listed on a national
securities exchange or held of record by not less than 1,000 holders, or (z)
cash and such securities;
(ii) a shareholder of a surviving corporation shall not have the right to
dissent from a plan of merger, if the merger did not require for its approval
the vote of such shareholders as provided in section 14A:10-5.1 or in subsection
14A:10-3(4), 14A:10-7(2) or 14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business as conducted by such corporation, other than a transfer pursuant to
subsection (4) of N.J.S. 14A:10-11, provided that, unless the certificate of
incorporation otherwise provides, the shareholder shall not have the right to
dissent
(i) with respect to shares of a class or series which, at the record date
fixed to determine the shareholders entitled to vote upon such transaction, is
listed on a national securities exchange or is held of record by not less than
1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of its net
assets to shareholders in accordance with their respective interests within one
year after the date of such transaction, where such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which, upon consummation of the
plan of dissolution will either be listed on a national securities exchange or
held of record by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
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14A:11-2. Notice of dissent; demand for payment; endorsement of certificates
(1) Whenever a vote is to be taken, either at a meeting of shareholders or
upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon a
proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraph 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
14A:11-3. "Dissenting shareholder" defined; date for determination of fair
value
(1) A shareholder who has made demand for the payment of his shares in the
manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders at which
the proposed action was approved or as of the day prior to the day specified by
the corporation for the tabulation of consents to such action if no meeting of
shareholders was held; or
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(b) In the case of a merger pursuant to section 14A:10-5.1 or subsection
14A:10-7(4) in which shareholder approval is not required, as of the day prior
to the day on which the board of directors approved the plan of merger; or
(c) In the case of an acquisition of all the shares or all the shares of a
class or series by another corporation pursuant to section 14A:10-9, as of the
day prior to the day on which the board of directors of the acquiring
corporation authorized the acquisition, or, if a shareholder vote was taken
pursuant to section 14A:10-12, as of the day provided in paragraph 14A:11-
3(3)(a).
In all cases, "fair value" shall exclude any appreciation or depreciation
resulting from the proposed action.
14A:11-4. Termination of right of shareholder to be paid the fair value of his
shares
(1) The right of a dissenting shareholder to be paid the fair value of his
shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as provided by
subsection 14A:11-2(6), unless a court having jurisdiction, for good and
sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written consent of the
corporation;
(c) the fair value of the shares is not agreed upon as provided in this
Chapter and no action for the determination of fair value by the Superior Court
is commenced within the time provided in this Chapter;
(d) the Superior Court determines that the shareholder is not entitled to
payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets aside the
corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsections 14A:11-2(3), 14A:11-
2(4) or 14A:11-2(5) without prejudice to any corporate action which has taken
place during the interim period. In such event, he shall be entitled to any
intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5. Rights of dissenting shareholder
(1) A dissenting shareholder may not withdraw his demand for payment of the
fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. Determination of fair value by agreement
(1) Not later than 10 days after the expiration of the period within which
shareholders may make written demand to be paid the fair value of their shares,
the corporation upon which such demand has been made pursuant to subsections
14A:11-2(3), 14A:11- 2(4) or 14A:11-2(5) shall mail to each dissenting
shareholder the balance sheet and the surplus statement of the corporation whose
shares he holds, as of the latest available date which shall not be earlier than
12 months prior to the making of such offer and a profit and loss statement or
statements for not less than a 12- month period ended on the date of such
balance sheet or, if the corporation was not in existence for such 12- month
period, for the portion thereof during which it was in existence. The
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corporation may accompany such mailing with a written offer to pay each
dissenting shareholder for his shares at a specified price deemed by such
corporation to be the fair value thereof. Such offer shall be made at the same
price per share to all dissenting shareholders of the same class, or, if divided
into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares.
14A:11-7. Procedure on failure to agree upon fair value; commencement of action
to determine fair value
(1) If the fair value of the shares is not agreed upon within the 30-day
period limited by subsection 14A:11-6(2), the dissenting shareholder may serve
upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. Action to determine fair value; jurisdiction of court; appointment of
appraiser
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may proceed in the
action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those who have
agreed with the corporation upon the price to be paid for their shares, shall be
made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive
evidence and report to the court on the question of fair value, who shall have
such power and authority as shall be specified in the order of his appointment;
and
(d) The court shall render judgment against the corporation and in favor of
each shareholder who is a party to the action for the amount of the fair value
of his shares.
14A:11-9. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be payable
upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
14A:11-10. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section 14A:11-8
shall be determined by the court and shall be apportioned and assessed as the
court may find equitable upon the parties or any of them. Such expenses shall
include reasonable compensation for and reasonable expenses of the appraiser, if
any, but shall exclude the fees and expenses of counsel for and experts employed
by any party; but if the court finds that the
C-4
<PAGE>
offer of payment made by the corporation under section 14A:11-6 was not made in
good faith, or if no such offer was made, the court in its discretion may award
to any dissenting shareholder who is a party to the action reasonable fees and
expenses of his counsel and of any experts employed by the dissenting
shareholder.
14A:11-11. Disposition of shares acquired by corporation
(1) The shares of a dissenting shareholder in a transaction described in
subsection 14A:11-1(1) shall become reacquired by the corporation which issued
them or by the surviving corporation, as the case may be, upon the payment of
the fair value of shares.
(2) (Deleted by amendment, P.L.1995, c. 279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled.
C-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
For information regarding provisions under which a director or officer of
the Registrant may be insured or indemnified in any manner against any liability
which such person may incur in such person's capacity as such, reference is made
to the Registrant's Certificate of Incorporation and Bylaws, copies of which are
incorporated herein by reference, which provide in general that the Registrant
shall indemnify its officers and directors to the fullest extent authorized by
law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated June 16, 1999 among Solar Communications
Group, Inc., Thermaltec International, Corp., and Andrew B. Mazzone., filed herewith as
Annex A to the joint proxy statement/prospectus
3.1 Certificate of Incorporation, as amended
3.2 Bylaws, as amended
4.1 Specimen Stock Certificate
4.2 Specimen Warrant Certificate
5.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning legality of shares
8.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning tax matters
8.2* Opinion of Archer & Greiner, P.C. concerning tax matters
10.1 Thermaltec 1999 Stock Option Plan
21.1 Subsidiaries of Thermaltec International, Corp.
23.1 Consent of Withum, Smith & Brown
23.2 Consent of Capraro, Centofranchi, Kramer & Co. P.C.
23.3* Consent of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (included in Exhibit 5.1)
23.4* Consent of Archer & Greiner, P.C. (included in Exhibit 8.2)
27.1 Financial Data Schedule for Solar Communications Group, Inc.
27.2 Financial Data Schedule for Thermaltec International, Corp. and Subsidiaries
99.1* Thermaltec Proxy Card
99.2* Solar Communications Group Proxy Card
99.3* Consents of Persons Who Will Become Directors of Thermaltec Following the Merger
</TABLE>
- ------------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being made, a
post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any other material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (b)(1) immediately preceding or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
as amended, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one (1) business day of
receipt of such request, and to send the incorporated documents by
first-class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
II-2
<PAGE>
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duty caused this Pre-Effective Amendment No. 1 to the Registration Statement
on Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in West Babylon, New York, as of September 15, 1999.
THERMALTEC INTERNATIONAL, CORP.
By: /s/ Andrew B. Mazzone
------------------------------------
Andrew B. Mazzone, President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-4 has been
signed by the following persons as of September 15, 1999 in the capacities
indicated:
Signatures Title
---------- -----
/s/ Andrew B. Mazzone President and Sole Director
----------------------------- (CEO and CFO)
ANDREW B. MAZZONE
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated June 16, 1999 among Solar Communications
Group, Inc., Thermaltec International, Corp., and Andrew B. Mazzone., filed herewith as
Annex A to the joint proxy statement/prospectus
3.1 Certificate of Incorporation, as amended
3.2 Bylaws, as amended
4.1 Specimen Stock Certificate
4.2 Specimen Warrant Certificate
5.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning legality of shares
8.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning tax matters
8.2* Opinion of Archer & Greiner, P.C. concerning tax matters
10.1 Thermaltec 1999 Stock Option Plan
21.1 Subsidiaries of Thermaltec International, Corp.
23.1 Consent of Withum, Smith & Brown
23.2 Consent of Capraro, Centofranchi, Kramer & Co. P.C.
23.3* Consent of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (included in Exhibit 5.1)
23.4* Consent of Archer & Greiner, P.C. (included in Exhibit 8.2)
27.1 Financial Data Schedule for Solar Communications Group, Inc.
27.2 Financial Data Schedule for Thermaltec International, Corp. and Subsidiaries
99.1* Thermaltec Proxy Card
99.2* Solar Communications Group Proxy Card
99.3* Consents of Persons Who Will Become Directors of Thermaltec Following the Merger
</TABLE>
- ------------
*To be filed by amendment.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THERMALTEC INTERNATIONAL CORP.
FIRST: The name of the corporation is:
THERMALTEC INTERNATIONAL CORP.
SECOND: Its registered office in the State of Delaware is located at 25
Greystone Manor, Lewes, Delaware 19958-9776, County of Sussex. The registered
agent in charge thereof is Harvard Business Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is 10,000,000 shares having a par value of $0.0001 per
share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the board of directors, and the directors need not be
elected by ballot unless required by the bylaws of the corporation.
SIXTH: This corporation shall be perpetual unless otherwise decided by a
majority of the Board of Directors.
SEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of Delaware, the board of directors is authorized to amend or repeal
the bylaws.
EIGHTH: The corporation reserves the right to amend or repeal any
provision in this Certificate of Incorporation in the manner prescribed by the
laws of Delaware.
NINTH: The incorporator is Harvard Business Services, Inc., whose
mailing address is 25 Greystone Manor, Lewes, DE 19958-9766. The powers of the
incorporator are to file this certificate of incorporation, approve the by-laws
of the corporation and elect the initial directors.
TENTH: To the fullest extent permitted by the Delaware General
Corporation Law a director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
I, Richard H. Bell, for the purpose of forming a corporation under the
laws of the State of Delaware do make and file this certificate, and do certify
that the facts herein stated are true; and have accordingly signed below, this
17th day of November, 1994.
Signed and Attested to by: /s/ Richard H. Bell
-----------------------------------------
Richard H. Bell, President & Secretary
HARVARD BUSINESS SERVICES, INC.
<PAGE>
BY-LAWS
OF
THERMALTEC INTERNATIONAL CORP.
ARTICLE I - OFFICES
Section 1. The registered office of the Corporation in the State of
Delaware Shall at
25 Greystone Manor
Lewes, Delaware 19958
Sussex County
The registered agent in charge thereof shall be
Harvard Business Services, Inc.
Section 2. The Corporation may also have offices at such other places as
the Board of Directors from time to time appoint or the business of the
corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the
corporation, year of its organization and the words "Corporate Seal, Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the registered office
of the corporation in this state or at such place, either within or without this
state, as may be selected from time to time by the Board of Directors.
Section 2. Annual Meetings: The annual meeting of the stockholders shall be
held on the 15th day of MAY in each year if not a legal holiday, and if a legal
holiday, then on the next secular day following at 10 O'Clock A.M. when they
shall elect a Board of Directors and transact such other business as may
properly be brought before the meeting. If the annual meeting for election for
Directors is not held on the date designated therefore, the directors shall
cause the meeting to be held as soon thereafter as convenient.
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<PAGE>
Section 3. Election of Directors: Election of Directors of the corporation
shall be by written Ballot.
Section 4. Special Meetings: Special Meetings of the stockholders may be
called at any time by the President, or the Board of Directors, or stockholders
entitled to cast at least one-fifth of the votes which all stockholders are
entitled to cast at the particular meeting. At any time, upon written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary to fix the date of the meeting, to be held not more than
sixty days after receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
Business transacted at all special meetings shall be confined to the
subjects stated in the call and matters germane thereto, unless all stockholders
entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time and
place and subject thereof, shall be given to each stockholder entitled to vote
thereat, at least 10 days before such meeting, unless a greater period of notice
is required by statute in a particular case.
Section 5. Quorum: A majority of outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. If less than a majority of the outstanding shares
entitled to vote is represented at a meeting, a majority of the shares so
represented may adjourn the meeting at which a quorum shall be present or
represented, any business may be transacted which might have transacted at the
meeting
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<PAGE>
as originally noticed. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
Section 6. Proxies: Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.
Section 7. Notice of Meeting: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Unless otherwise provided by law, written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
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<PAGE>
Section 8. Consent in lieu of Meetings: Any action required to be taken at
any annual or special meeting of stockholders of a corporation, or any action
which may be taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Section 9. List of Stockholders: The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stock holders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
stockholder. No share of stock upon which any installment is due and unpaid
shall be voted at any meeting. The list shall be open to examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at the
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
-4-
<PAGE>
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be managed by
its Board of Directors, 1 minimum and 7 maximum in number. The Directors need
not be residents of this state or stockholders at the annual meeting of
stockholders of the corporation, and each director shall be elected for the term
of one year, and until his successor shall be elected and shall qualify or until
his resignation or removal.
Section 2. Regular Meetings: Regular meetings of the Board shall be held
without notice at the registered office of the corporation, or at such other
time and place as shall be determined by the Board.
Section 3. Special Meetings: Special Meetings of the Board may be called by
the President on a 10 days notice to each Director, either personally or by mail
or by telegram; special meetings shall be called by the President or Secretary
in the like manner and on like notice on the written request of the majority of
the Directors in office.
Section 4. Quorum: A majority of the total number of Directors shall
constitute a quorum for the transaction of business.
Section 5. Consent in Lieu of Meeting: Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee. The Board of
Directors may hold its meetings, and have an office or offices, outside of this
state.
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<PAGE>
Section 6. Conference Telephone: One or more Directors may participate in a
meeting of the Board, of a committee of the Board or of the stockholders by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other;
participation in this manner shall constitute presence in person at such
meeting.
Section 7. Compensation: Directors as such, shall not receive any stated
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allotted for attendance at each regular
or special meeting of the Board PROVIDED, that nothing herein contained shall be
construed to preclude any Director from serving the corporation in an capacity
and receiving compensation thereof.
Section 8. Removal: Any Director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of Directors, except that when cumulative voting
is permitted, if less than the entire Board is to be removed, no Director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors, or if there be classes of Directors, at an election of the class of
Directors of which he is a part.
ARTICLE V - OFFICERS
Section 1. The executive officers of the corporation shall be chosen by the
directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Chairman, one or more Vice Presidents and such other
officers as it shall deem necessary. Any number of officers may be held by the
same person.
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<PAGE>
Section 2. Salaries: Salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 3. Term of office: The officers of the corporation shall hold
office for one year and until their successors are chosen and have qualified.
Any officer or agent elected or appointed by the board may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby.
Section 4. President: The president shall be the chief executive officer of
the corporation; he shall preside at all meetings of the stockholders and
directors; he shall have general and active management of the business of the
corporation, shall see that all orders and resolutions of the board are carried
into effect, subject, however to the right of the Directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the
president, to any other officer or officers of the corporation. He shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation. He shall be EX-OFFICIO a member of all committees, and shall have
general power and duties of supervision and management usually vested in the
office of President of a corporation.
Section 5. Secretary: The secretary shall attend all sessions of the Board
and all meetings of stockholders and act as clerk thereof, and record all the
votes of the corporation and the minutes of all its transactions in a book to be
kept for that purpose, and shall perform like duties for all committees of the
Board of Directors when required. He shall give, or cause to be given, notice of
all meetings of the stockholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, and under whose supervision he shall be. He shall keep in a safe
custody the corporate seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it.
-7-
<PAGE>
Section 6. Treasurer: The treasurer shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall keep the moneys
of the corporation in a separate account to the credit of the corporation. He
shall disburse the funds of the corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and Directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as treasurer and of the financial
condition of the corporation.
ARTICLE VI - VACANCIES
Section 1. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
Vacancies and newly created directorships resulting from any increase in
authorized number of Directors may be filled by a majority of the Directors then
in office, although less than a quorum, or by sole remaining Director. If at any
time, by reason of death or resignation or other cause, the corporation should
have no directors in office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, or
-8-
<PAGE>
other fiduciary entrusted with the responsibility for the person or estate of a
stockholder, may call a special meeting of stockholders in accordance with the
provisions of these By-Laws.
Section 2. Resignations Effective at Future Date: When one or more
Directors shall resign from the Board, effective at some future date, a majority
of Directors then in office, including those who have resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any purpose the
corporations stock ledger, a list of its stockholders, and its other books and
records, and to make copies or extract therefrom. A purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in this state or at its principal place of
business.
-9-
<PAGE>
ARTICLE VIII STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall be numbered
and registered in the share ledger and transfer books of the corporation as they
are used. They shall bear the corporate seal and shall be signed by the
President and Secretary.
Section 2. Transfers: Transfers of shares shall be made on the books of
the corporation upon surrender of the certificates thereof, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer shall be made which is inconsistent with law.
Section 3. Lost Certificate: The corporation may issue a new
certificate of stock in place of any certificate therefore signed by it, alleged
to have been lost, stolen or destroyed, and the corporation may require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the corporation a bond to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4. Record Date: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days prior to any other
action.
-10-
<PAGE>
If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is necessary, shall be on the
day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to
notice of or vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjournment meeting.
Section 5. Dividends: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to time and
to such extent as they deem advisable, in the manner and upon the terms and
conditions provided by statute and the certificate of Incorporation.
Section 6. Reserves: Before payment of any dividend there may be set aside
out of the net profits of the corporation such sums as the Directors, from time
to time, in their absolute discretion, think
-11-
<PAGE>
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purposes as the Directors shall think conducive to the interests of the
corporation, and the Directors may abolish any such reserve in the manner in
which it was created.
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
Section 2. Fiscal Year: The fiscal year shall begin on the first day of
January.
Section 3. Notice: Whenever written notice is required to be given to
any person, it may be given to such person, either personally or by sending a
copy thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. Such notice shall specify the place, day and hour of the meeting and, in
the case of a special meeting of stockholders, the general nature of the
business to be transacted.
Section 4. Waiver of Notice: Whenever any written notice is required by
statute, or by the Certificate or the By-Laws of this corporation a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time
-12-
<PAGE>
stated therein, shall be deemed equivalent to giving of such notice. Except in
the case of a special meeting of stockholders, neither the business to be
transacted at nor the purpose of the meeting need be specified in the waiver of
notice of such meeting. Attendance of a person either in person or by proxy, at
any meeting shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express purpose of objecting to the transaction
of any business because the meeting was not lawfully called or convened.
Section 5. Disallowed Compensation: Any payments made to an officer or
employee of the corporation such as salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer or employee to the corporation to the full extent
of such disallowance. It shall be the duty of the Directors, as a Board, to
enforce payment of each such amount disallowed. In lieu of payment by the
officer or employee, subject to the determination of the Directors,
proportionate amounts may be withheld from future compensation payments until
the amount owed to the corporation has been recovered.
Section 6. Resignations: Any Director or other officer may resign at
anytime, such resignation to be in writing, and to take effect from the time of
its receipt by the corporation, unless some time fixed in the resignation and
then from that date. The acceptance of a resignation shall be required to make
it effective.
-13-
<PAGE>
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and the Board of Directors shall present at each
annual meeting a full complete statement of the business and affairs of the
corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall deem advisable and
need not be verified by certified public accountant.
ARTICLE XI - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of
stockholders entitled to cast at least a majority of votes which all
stockholders are entitled to cast thereon, at any regular or special meeting of
stockholders, duly convened after notice to the stockholders of the purpose.
THERMALTEC INTERNATIONAL, CORP.
By: /s/ Andrew Mazzone
-----------------------------
Andrew Mazzone/Pres/Sec/treas
-14-
<PAGE>
EAGLE LOGO
NUMBER SHARES
THERMALTEC INTERNATIONAL, CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
Authorized Capital Stock 10,000,000 Shares Par Value $.0001 Per Share
SPECIMEN
This Certifies that _____________________________________________ is the owner
(SEE REVERSE FOR CERTAIN DEFINITIONS)
of _____________________________________________ Shares of the Capital Stock of
THERMALTEC INTERNATIONAL, CORP.
full paid and non-assessable transferable only on the books of the Corporation
in person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers, and its Corporate Seal to be hereunto
affixed this ________________________ day of ______________________ A.D. 19 ___
____________________________________________ _______________________________
M. BURR KEIM, PHILA. SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- Custodian under
TEN ENT--as tenants by the entireties ----------------
JT TEN --as joint tenants with right (Cust) (Minor)
of survivorship and not as Uniform Gifts to Minors Act........
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
| |
| |
|_______________________________________| ______________________________________
________________________________________________________________________________
Shares represented by the written Certificate, and do hereby irrevocably
constitute and appoint________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Date ____________________________ 19 ____
In presence of_______________________________________________________
______________________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
WARRANT CERTIFICATE
THERMALTEC INTERNATIONAL, CORP.
(A Delaware Corporation)
No. W. ___________ WARRANTS
THIS IS TO CERTIFY THAT
IS THE HOLDER OF
WARRANTS OF
- --------------------------------------------------------------------------------
**********THERMALTEC INTERNATIONAL, CORP.**********
- --------------------------------------------------------------------------------
or registered assigns is entitled to purchase fully paid and non-assessable
shares of Common Stock of THERMALTEC INTERNATIONAL CORP., (herein called the
"Company") for each warrant evidenced by this certificate, for $1.00 per share
during the exercise period commencing March 31, 1998 and ending on June 2, 2000
at 4 P.M. eastern daylight savings time upon surrender, and payment of the
purchase price at the Warrant Agent's office, MANHATTAN TRANSFER REGISTRAR Co.
subject to the following conditions:
1). The warrants into shares will not be registered and shall bear restrictive
legends, and must be held for at least one year pursuant to Rule 144 et seq. of
the Securities Act of 1933, as amended.
2). Adjustment in the exercise price and number of shares issuable will only be
made for splits, but not for a merger, or any other business combination which
may affect Warrant holder's interests. The exercise price shall be in cash,
certified check or Bank Draft.
3). Warrant exercise requires appropriate completion of the "Election to
Purchase" printed on the back of this certificate. If the exercised shares are
less than the total number of shares permitted to be purchased contained in this
certificate, the holder will be issued a new certificate giving credit for the
unexercised portion of the Warrants.
4). This certificate contains all the Warrant terms to the Warrant holder. No
fractional shares will be issued.
5). The holder or their authorized agent is entitled to exchange this
certificate for a new certificate totaling equivalent Warrants in number and
class to the old upon payment of the Warrants in number and class to the old
upon payment of the Warrant Agent's fee.
6). Holders can register or transfer certificates at the Warrant Agent's
principal office after payment of fees and any applicable taxes. New
certificates will be equivalency to the old and totaling the Warrants issued to
the holder or his transferee in exchange for the old, and containing the same
terms and Warrant amounts.
7). Prior to presentment for registration or transfer, the Company and Warrant
Agent may treat the registered Warrant holder as absolute owner of this
certificate for exercise, transfer, or any purpose and neither the Company or
Warrant Agent shall he affected by notice to the contrary.
8). If the certificate is surrendered for Warrant exercise while the Company's
transfer books are closed, share certificates will not be issued until the books
are reopened for transfer.
9). Failure to exercise some or all of the Warrants during the exercise period
shown on the dates shown above, unless extended, will void them.
10). This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: THERMALTEC INTERNATIONAL, CORP.
Countersigned: By: /s/ XXXXXXXXXXXXXX
MANHATTAN TRANSFER REGISTRAR CO. ------------------------------------
(HOLBROOK, N.Y.) President
By: By: /s/ XXXXXXXXXXXXXX
- ---------------------------------- ------------------------------------
Authorized Signature Secretary
SEAL LOGO
<PAGE>
ELECTION TO PURCHASE
(EXERCISE)
TO: THERMATEC INTERNATIONAL, CORP.
c/o Manhattan Transfer Registrar Co.
P.O. Box 361
Holbrook, New York 11741
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for and to purchase thereunder, _____________
Shares of Common Stock (the "Shares") provided for therein and tenders herewith
payment of the purchase price in full to the order of THERMALTEC INTERNATIONAL,
CORP., and requests that certificates for such Shares shall be issued in the
name of
________________________________________________________________________________
(Please Print)
____________________________
| |
| |
|__________________________|
SOCIAL SECURITY NUMBER
and to be delivered to _________________________________________________________
(Name)
at _____________________________________________________________________________
(Street Address) (City) (State) (Zip Code)
and, if said number of Shares shall not be all the Shares purchasable
thereunder, that a new Warrant for the balance remaining of the Shares
purchasable under the within Warrant be registered in the name of, and
delivered, to the undersigned at the address stated below.
Name of Warrantholder:__________________________________________________________
(Please Print)
Address: _______________________________________________________________________
(Street Address)
________________________________________________________________________________
(City) (State) (Zip Code)
Dated: ___________________ Signature:______________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant or with
the name of the assignee appearing in
the assignment form below in every
particular, without alteration or
enlargement or any change whatever.
ASSIGNMENT
For value received _______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE
________________________________
| |
| |
|______________________________| _______________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
the within Warrant, together with all right, title and interest therein, and do
hereby irrevocably constitute and appoint
_____________________________________________________________________ Attorney.
to transfer said Warrant on the books of the within named Company, with full
power of substitution in the premises.
Dated: ___________________ Signature: ______________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant in
every particular, without alteration
or enlargement or any change whatever.
Transfer Agent and Warrant Agent: Signature(s) Guaranteed:
Manhattan Transfer Registrar Co.
P.O. Box 361
Holbrook, New York 11741
(516) 585-7341
<PAGE>
THERMALTEC INTERNATIONAL, CORP.
1999 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
EFFECTIVE JULY 7, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. Name and Purpose of Plan.........................................1
2. Definitions......................................................1
3. Administration...................................................5
4. Eligibility......................................................6
5. Allotment of Shares..............................................6
6. Effective Date and Term of Plan..................................6
7. Terms and Conditions of Options..................................7
8. Fair Market Value of Common Stock...............................11
9. Rights as a Stockholder.........................................11
10. Forfeiture......................................................11
11. Time of Granting Options........................................12
12. Modification, Extension, Renewal of Option......................12
13. Power of Board if Change of Control.............................12
14. Amendment of Plan..............................................13
15. Conditions Upon Issuance of Shares..............................13
16. Taxes, Fees, Expenses and Withholding...........................14
17. Notices.........................................................14
18. No Enlargement of Employee Rights...............................14
19. Information to Optionees........................................15
20. Availability of Plan...........................................15
<PAGE>
TABLE OF CONTENTS
Page
21. Invalid Provisions..............................................15
22. Applicable Law..................................................15
23. Board Action....................................................15
24. Miscellaneous...................................................16
2
<PAGE>
THERMALTEC INTERNATIONAL, CORP.
1999 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. Name and Purpose of Plan
The Plan will be known as The Thermaltec International, Corp.1999
Incentive and NonQualified Stock Option Plan. The purpose of the Plan is to
provide a means by which certain employees and directors of, and others
providing services to or having a relationship with, the Company and its
subsidiaries (as such term is defined in Section 424(f) of the Code) may be
given an opportunity to purchase shares of the Common Stock. The Plan is
intended to promote the interests of the Company by encouraging stock ownership
on the part of such individuals, by enabling the Company and its subsidiaries to
secure and retain the services of highly qualified persons, and by providing
such individuals with an additional incentive to advance the success of the
Company and its subsidiaries.
2. Definitions
As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean, whether now or hereafter existing,
a person or entity that, directly or indirectly, controls, is controlled by, or
is under common control with, the Company, except that, when used in connection
with an Incentive Stock Option, "Affiliate" shall mean a Subsidiary.
(b) "Board" shall mean the Board of Directors of the Company,
as constituted from time to time.
(c) "Change of Control" shall mean the happening of an event
(excluding a Public Offering) that shall be deemed to have occurred upon the
earliest to occur of the following events:
(i) the date the stockholders of the Company (or the
Board, if stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or liquidated, or
(ii) the date the stockholders of the Company (or the
Board, if stockholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets of the
Company, or
(iii) the date the stockholders of the Company (or
the Board, if stockholder action is not required) and the stockholders of the
other constituent corporations (or their respective boards of directors, if and
to the extent that stockholder action is not required) have approved a
definitive agreement to merge or consolidate the Company with or into another
<PAGE>
corporation, other than, in either case, a merger or consolidation of the
Company in which holders of shares of the Company's voting capital stock
immediately prior to the merger or consolidation will have at least fifty
percent (50%) of the ownership of voting capital stock of the surviving
corporation immediately after the merger or consolidation (on a fully diluted
basis), which voting capital stock is to be held in the same proportion (on a
fully diluted basis) as such holders' ownership of voting capital stock of the
Company immediately before the merger or consolidation, or
(iv) the date any entity, person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than
(A) the Company, (B) any of its Subsidiaries, (C) any of the holders of the
capital stock of the Company, as determined on the date that this Plan is
adopted by the Board, (D) any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its Subsidiaries or (E) any Affiliate of
any of the foregoing, shall have acquired beneficial ownership of, or shall have
acquired voting control over more than fifty percent (50%) of the outstanding
shares of the Company's voting capital stock (on a fully diluted basis), unless
the transaction pursuant to which such person, entity or group acquired such
beneficial ownership or control resulted from the original issuance by the
Company of shares of its voting capital stock and was approved by at least a
majority of directors who shall have been members of the Board for at least
twelve (12) months prior to the date of such approval, or
(v) the first day after the date of this Plan when
directors are elected such that there shall have been a change in the
composition of the Board such that a majority of the Board shall have been
members of the Board for less than twelve (12) months, unless the nomination for
election of each new director who was not a director at the beginning of such
twelve (12) month period was approved by a vote of at least sixty percent (60%)
of the directors then still in office who were directors at the beginning of
such period, or
(vi) the date upon which the Board determines (in its
sole discretion) that based on then current available information, the events
described in clause (iv) are reasonably likely to occur.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(e) "Committee" shall mean the Committee appointed by the
Board in accordance with Section 3 of the Plan, if one is appointed.
(f) "Common Stock" shall mean the common stock of the Company,
no par value per share.
(g) "Company" shall mean Thermaltec International, Corp., a
Delaware corporation, and any successor in interest that agrees to assume and
maintain the Plan.
2
<PAGE>
(h) "Consultant" shall mean (i) any person associated with the
Company who is engaged by the Company to render services and is compensated by
the Company for such services, including but not limited to, an advisor or
independent contractor; and (ii) any director of the Company whether or not
compensated for such services in his capacity as a director.
(i) "Disability" or "Disabled" with respect to an Optionee
shall mean the earlier of (i) when the Optionee is determined to be disabled
within the meaning of any long-term disability policy or program sponsored by
the Company covering the Optionee, as in effect as of the date of such
determination; (ii) if no such policy or program shall be in effect, when the
Optionee is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than twelve (12) months (the determination of whether an
Optionee is Disabled pursuant to this clause (ii) shall be determined by the
Board, whose determination shall be conclusive); (iii) if an Optionee is bound
by the terms of an employment agreement between the Optionee and the Company,
whether the Optionee is "Disabled" for purposes of the Plan shall be determined
in accordance with the procedures set forth in said employment agreement, if
such procedures are therein provided; and (iv) an Optionee bound by such an
employment agreement shall not be determined to be Disabled under the Plan any
earlier than he or she would be determined to be disabled under his or her
employment agreement.
(j) "Employee" shall mean any person, including but not
limited to, officers and directors, employed by the Company or any Subsidiary of
the Company. The payment of directors' fees by the Company shall not be
sufficient to constitute "employment" by the Company.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Fair Market Value" shall mean, as of any date, the fair
market value of a share of Common Stock as determined pursuant to Section 8
hereof.
(m) "Incentive Stock Option" shall mean any Option that is
intended to be and is designated as an Incentive Stock Option within the meaning
of Section 422 of the Code.
(n) "Non-Qualified Stock Option" shall mean any Option that is
not intended to qualify as an Incentive Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option as the case may be, granted pursuant to the Plan.
(p) "Option Agreement" shall mean the written agreement by and
between the Company and an Optionee under which the Optionee may purchase Shares
pursuant to the exercise of an Option.
3
<PAGE>
(q) "Optionee" shall mean any Employee or Consultant to whom
an Option is granted.
(r) "Plan" shall mean this The Thermaltec International, Corp.
1999 Incentive and Non-Qualified Stock Option Plan, as amended from time to
time.
(s) "Public Offering" shall mean the consummation of a firm
commitment underwritten public offering of equity securities of the Company
registered under the Securities Act.
(t) "Sale of the Company" shall mean the earliest of: (i) the
closing of a sale, transfer or other disposition of all or substantially all of
the shares of the capital stock then outstanding of the Company (except if such
transferee is then an Affiliate); (ii) the closing of a sale, transfer or other
disposition of all or substantially all of the assets of the Company (except if
such transferee is then an Affiliate); or (iii) the merger or consolidation of
the Company with or into another corporation (except an Affiliate), other than a
merger or consolidation of the Company in which the holders of shares of the
Company's voting capital stock outstanding immediately before such merger or
consolidation hold greater than fifty percent (50%) of the surviving entity's
voting capital stock after such consolidation or merger.
(u) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(v) "Securities Broker" means a registered securities broker
acceptable to the Committee who agrees to effect the cashless exercise of an
Option.
(w) "Share" or "Shares" shall mean a share or shares of Common
Stock.
(x) "Stock Purchase and Restriction Agreement" shall mean an
agreement in such form or forms as the Board (subject to the terms and
conditions of this Plan) may from time to time approve, which an Optionee may be
required to execute as a condition of purchasing Shares upon the exercise of an
Option.
(y) "Subsidiary" shall mean, whether now or hereafter
existing, a subsidiary or parent corporation of the Company as such term is
defined in Sections 424(e), (f) and (g) of the Code.
4
<PAGE>
3. Administration
The Plan shall be administered by a Committee consisting of not less
than two (2) members (the "Committee"). Until such time as the Company's
directors, officers and principal stockholders are subject to the reporting
requirements of Section 16 of the Exchange Act, one member of the Committee
shall be the President of the Company and the other members of the Committee
shall be appointed from time to time by the Board from among its members. If at
any time the Company's directors, officers and principal stockholders become
subject to the reporting requirements of Section 16 of the Exchange Act, the
members of the Committee shall consist solely of non-employee directors. The
Committee shall have the power in its sole discretion:
(a) to select the Optionees to whom Options may from time to
time be granted;
(b) to determine the Fair Market Value of the Common Stock
based upon a review of the relevant information and in accordance with the terms
and provisions of the Plan;
(c) to determine the number of Shares underlying, exercise
price and other terms and provisions of each Option granted under the Plan, and
the terms and provisions of each Option Agreement and each other agreement that
in the sole discretion of the Committee may be required (all of which agreements
need not be identical with the terms of other Options, Option Agreements or
other agreements);
(d) to determine the circumstances under which the vesting or
exercise date of an Option will be accelerated;
(e) to construe the provisions of the Plan, and to adopt,
amend and rescind rules and regulations governing the administration of the Plan
and to interpret any agreement entered into with respect to the grant or
exercise of an Option;
(f) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted by the Committee or to take such other actions as may be necessary or
appropriate with respect to the Company's rights pursuant to Options or
agreements relating to the granting or exercise thereof;
(g) to terminate the Plan in the event of a Change of Control;
and
(h) to make such other determinations and establish such other
procedures as it deems necessary or advisable for the administration of the
Plan.
All decisions, determinations and interpretations of the Committee
pursuant to the provisions of the Plan shall be final and binding on all
Optionees and any other holders of Options. All power and authority granted
hereunder to the Committee may, at the discretion of the Board, be exercised by
the Board. The members of the Board or the Committee shall not be
5
<PAGE>
liable for any action or determination made in good faith with respect to the
Plan or any Option granted pursuant thereto.
4. Eligibility
(a) Options may be granted at any time and from time to time to any
Employee or Consultant who shall be selected by the Committee. Any grant of
Options may include or exclude any Employee or Consultant as the Committee shall
determine in its sole discretion. Consultants who are not also Employees of the
Company are eligible to be granted NonQualified Stock Options under the Plan but
are not eligible to be granted Incentive Stock Options under the Plan.
(b) The Plan will not confer upon any Optionee any right with respect
to the continuation of any employment, consulting or any other relationship with
the Company nor will it interfere in any way with such Optionee's right or the
Company's right to terminate the Optionee's employment, consulting or other
relationship with the Company at any time, whether with or without cause.
5. Allotment of Shares
Subject to the provisions of Section 7(h) of the Plan, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is Ten
Million (10,000,000) Shares. The Shares may be authorized, but unissued or
reacquired, Common Stock. Shares that, by reason of the expiration of an Option
or otherwise, are no longer subject to purchase pursuant to an Option granted
under the Plan may be re-optioned under the Plan.
6. Effective Date and Term of Plan
(a) The Plan shall become effective on the date that it is adopted by
the Board; provided that it shall become limited to a non-qualified stock option
plan if it is not approved by the holders of a majority of the Company's
outstanding voting stock within one year (365 days) of its adoption by the
Board. The Board may grant Options hereunder prior to approval of the Plan, or
any material amendments thereto, by the holders of a majority of the Company's
outstanding voting stock; provided that any and all Options so granted shall be
converted into Non-Qualified Stock Options if the Plan, or a material amendment,
is not approved by such stockholders within 365 days of its adoption or material
amendment.
(b) The Plan shall terminate on the tenth (10th) anniversary of its
effective date, but the Board may terminate the Plan at any time prior thereto.
Termination of the Plan shall not alter or impair, without the consent of the
Optionee, any of the rights or obligations of any Option theretofore granted
under the Plan.
6
<PAGE>
7. Terms and Conditions of Options
Each Option granted under the Plan shall be authorized by the Committee
and shall be evidenced by an Option Agreement which shall state or incorporate
by reference all other terms and conditions of the Plan including, without
limitation, the following terms and conditions:
(a) Number of Shares. The Option Agreement shall state the
number of Shares subject to the Option.
(b) Option Exercise Price. (i) The per Share exercise price
for the Shares to be issued pursuant to the exercise of an Incentive Stock
Option shall be stated in the Option Agreement and shall not be less than the
Fair Market Value per share of the Common Stock on the date such Option is
granted, without regard to any restriction other than a restriction that by its
terms will never lapse; provided, however, that any Incentive Stock Option
granted under this Plan to an Employee who, at the time such Option is granted,
owns more than ten percent (10%) of the current total combined voting power of
all classes of the capital stock of the Company, shall have an exercise price
per Share of not less than one hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the date such Option is granted.
(ii) The per Share exercise price for the Shares to
be issued pursuant to the exercise of a Non-Qualified Stock Option shall be
stated in the Option Agreement and shall be determined by the Committee but
shall be at least $0.01 per Share.
(c) Consideration. The consideration to be paid for the Shares
to be issued upon the exercise of an Option, including the method of payment,
shall be determined by the Committee and may consist entirely of: (i) cash; (ii)
check; (iii) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
Shares as to which the Option is exercised; (iv) delivery to the Company of
Shares having a Fair Market Value on the date of exercise equal to the exercise
price for the total Shares as to which the Option is exercised; (v) to the
extent permitted under the Exchange Act, the delivery of a properly executed
exercise notice together with irrevocable instructions to a Securities Broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price; or (vi) such other consideration and method of payment
as the Committee may from time to time determine. Optionees should be aware that
any "cashless exercise" of an Incentive Stock Option may negate the tax
treatment that is ordinarily afforded to the Incentive Stock Options for those
Incentive Stock Options which are sold to affect the cashless exercise. The
Company shall not provide tax advice to any Optionee, and shall not be liable
for any taxes payable by an Optionee, with respect to an Option exercise or the
sale of any Shares received upon the exercise of an Option. Optionees should
consult their individual tax advisors prior to exercising any Option or selling
any Shares received upon the exercise of an Option.
(d) Form of Option. The Option Agreement shall state whether
the Option granted thereunder is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option and shall, subject to the terms of the Option
Agreement, constitute a binding determination as to the form of Option granted
hereunder.
7
<PAGE>
(e) Vesting of Options. Subject to the provisions of the Plan
and except to the extent that the Committee provides otherwise, each Option
shall vest at a rate of twenty percent (20%) of the Shares subject to the Option
per year (the total number of Shares so vested being the "Vested Amount") during
the consecutive five (5) year period commencing on the date of grant. Options
that are not vested may not be exercised.
(f) Exercise of Option. (i) Except as otherwise provided by
the Committee, any Option granted hereunder shall be exercisable, in whole or in
part, in accordance with the vesting schedule set forth in Section 7(e) above
and shall be exercisable at such times and under such further conditions as may
be determined by the Committee and set forth in the Option Agreement.
(ii) An Option shall be deemed to be exercised when
written notice of such exercise has been received by the Company at its
principal executive office in accordance with the terms of the Option Agreement
by the person entitled to exercise the Option, and full payment for the Shares
with respect to which the Option is being exercised has been received by the
Company, accompanied by an executed Stock Purchase and Restriction Agreement (if
required by the Committee or the terms of the Plan and/or Option Agreement) and
any other agreements required by the Committee or the terms of the Plan and/or
Option Agreement.
(iii) An Optionee shall have no right to vote or
receive dividends and shall have no other rights as a stockholder with respect
to the Shares, notwithstanding the exercise of the Option, until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date a stock certificate with respect to the
Shares is issued.
(iv) As soon as practicable after the proper exercise
of an Option in accordance with the provisions of the Plan, the Company shall,
without transfer or issue tax to the Optionee, deliver to the Optionee at the
principal executive office of the Company, or such other place as shall be
mutually agreed upon between the Company and the Optionee, a certificate or
certificates representing the Shares for which the Option shall have been
exercised. The time of issuance and delivery of the certificate(s) representing
the Shares for which the Option shall have been exercised may be postponed by
the Company for such period as may be required by the Company, with reasonable
diligence, to comply with any applicable listing requirements of any national or
regional securities exchange or any law or regulation applicable to the issuance
or delivery of such Shares.
(v) The exercise of an Option in any manner shall
result in a decrease in the number of Shares that thereafter may be available
both for purposes of the Plan and for sale under the Option by the number of
Shares as to which the Option is exercised.
8
<PAGE>
(vi) Options may be exercised in any order elected by
the Optionee, whether or not the Optionee holds any unexercised Options under
this Plan or any other plan of the Company.
(g) Non-Transferability of Option. An Option by its terms
shall not be transferable by the Optionee (including without limitation by sale,
pledge, assignment or otherwise), otherwise than by will or by the laws of
descent and distribution. During the Optionee's lifetime, the Option shall be
exercisable only by the Optionee or, in the event of his or her legal incapacity
or Disability, by the legal guardian or representative of the Optionee.
(h) Adjustment in Event of Recapitalization of the Company.
(i) In the event of a reorganization, recapitalization, stock split, reverse
stock split, or stock dividend, subject to any required action by the
stockholders of the Company, the Board shall make such adjustment as it may deem
equitably required, in the number and kind of shares authorized by and for the
Plan, in the number and kind of shares covered by the Options then outstanding,
and in the price per Share of the Common Stock covered by a then-outstanding
Option. Except as provided herein, no issuance by the Company of shares of stock
of any class or securities convertible into shares of stock of any class will
affect, and no adjustment by reason thereof will be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(ii) No fractional Shares shall be issuable on
account of any action taken pursuant to this subsection (h).
(i) Termination of Options.
(i) Termination in General. Unless sooner terminated
as provided in the Plan, each Option shall be exercisable for the period of time
that shall be determined by the Committee and set forth in the Option Agreement
and shall be void and unexercisable thereafter.
(ii) Termination of Relationship with the Company.
Unless sooner terminated as provided in the Plan or in the applicable Option
Agreement governing the Option, in the event of the termination of an Optionee's
employment with the Company for any reason other than the death or Disability of
the Optionee, such Optionee may, within three (3) months (or such other period
of time as is determined by the Committee) from the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option up to the Vested Amount
as of the date of termination provided that the Optionee was entitled to
exercise the Option on the date of such termination. To the extent the Optionee
was not entitled to exercise the Option on the date of such termination, or if
the Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option will terminate.
Unless otherwise provided in the applicable Option
Agreement, a Non-Qualified Stock Option granted to a director or other
Consultant shall not be affected solely due to the fact that the holder ceases,
for whatever reason (other than death or Disability), to serve on the Board of
Directors or to provide consulting services to the Company, as applicable.
9
<PAGE>
(iii) Death or Disability. Unless sooner terminated
as provided in the Plan or in the applicable Option Agreement governing the
Option, in the event of the termination of an Optionee's employment by the
Company, his serving as a director of the Company, or his serving as any other
Consultant to the Company, as a result of his death or Disability, the vesting
of all Options held by such Optionee on the date of such termination due to
Disability or death shall be accelerated and all Options held by such Optionee
as of the date of such termination due to Disability or death shall be
exercisable for a period of twelve (12) months commencing on the date of such
termination due to Disability or death. Such Options may be exercisable by the
Optionee or his or her legal guardian or representative or, in the case of
death, by his or her executor(s) or administrator(s); provided, however, if such
disabled Optionee shall commence any employment or consulting engagement
(including without limitation any service as a director) during such twelve (12)
month period with or by a competitor of the Company (including, but not limited
to, full or part-time employment or independent consulting work), as determined
solely in the judgment of the Committee, then all Options held by such Optionee
that have not been exercised shall terminate immediately upon the commencement
thereof.
(iv) Maximum Option Term. Notwithstanding anything to
the contrary contained herein, each Option shall expire ten (10) years from the
date it is granted or at the end of such shorter period as may be designated by
the Committee on the date of grant; except, in the case of the grant of an
Incentive Stock Option to an Optionee who owns Common Stock of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its subsidiaries, such Option shall not be
exercisable after the expiration of five (5) years from the date it is granted.
(v) Agreement to Terminate. Options may be terminated
at any time by agreement between the Company and the Optionee.
(j) Miscellaneous Provisions. No Optionee may have Incentive
Stock Options which become exercisable for the first time in any calendar year
(under all stock option plans of the Company and its subsidiary corporations)
with an aggregate Fair Market Value (determined as of the time such Option is
granted) in excess of One Hundred Thousand Dollars ($100,000).
10
<PAGE>
8. Fair Market Value of Common Stock
The Fair Market Value of a Share of Common Stock, as of any date, shall
be determined as follows:
(a) If the Shares of Common Stock are listed on a national or
regional securities exchange or traded through NASDAQ/NMS, then the Fair Market
Value of a share of Common Stock shall be the mean between the highest and
lowest selling prices for a share of Common Stock on the exchange or on
NASDAQ/NMS, as reported in The Wall Street Journal or such other source as the
Committee deems reliable, on the relevant valuation date, or if there is no
trading on that date, the weighted average of the means between the highest and
lowest sales upon the nearest date before and after the relevant valuation date,
within a reasonable period.
(b) If the Shares of Common Stock are traded in the
over-the-counter market, then the Fair Market Value of a share of Common Stock
shall be the mean between the highest and lowest selling prices for a share of
Common Stock on the relevant valuation date as reported in The Wall Street
Journal or such other source as the Committee deems reliable (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System or the NASD OTC Bulletin Board),
or if there is no trading on such date, the weighted average of the means
between the highest and lowest sales upon the nearest date before and after the
relevant valuation date, within a reasonable period.
(c) In the absence of an established market for the Common
Stock, the Fair Market Value of a share of Common Stock shall be determined by
the Board in its sole discretion.
9. Rights as a Stockholder
An Optionee shall have no rights as a stockholder of the Company and
shall not have the right to vote nor receive dividends with respect to any
Shares subject to an Option until such Option has been exercised and a stock
certificate with respect to the Shares purchased upon such exercise of the
Option has been issued to the Optionee.
10. Forfeiture
Notwithstanding any other provision of this Plan or the applicable
Option Agreement, if an Optionee's employment, service as a director or
consulting relationship with the Company (as the case may be) is terminated by
the Company and the Board makes a determination that the Optionee (a) has
engaged in any type of disloyalty to the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in the course of the Optionee's
employment or consulting relationship, (b) has been convicted of a felony or
other crime involving a breach of trust or fiduciary duty owed to the Company,
(c) has made an unauthorized disclosure of trade secrets or confidential
information of the Company, or (d) has breached a confidentiality agreement or
non-competition agreement with the Company in any material respect, then, at the
11
<PAGE>
election of the Board, all unexercised Options held by the Optionee (whether or
not then exercisable) shall immediately terminate. In the event of such an
election by the Board, in addition to immediate termination of all unexercised
Options, the Optionee shall forfeit all Shares for which the Company has not yet
delivered stock certificates to the Optionee and the Company shall refund to the
Optionee the exercise price paid to it upon exercise of the Option with respect
to such Shares. Notwithstanding anything herein to the contrary, the Company may
withhold delivery of stock certificates pending the resolution of any inquiry
that could lead to a finding resulting in forfeiture.
11. Time of Granting Options
The date of grant of an Option shall, for all purposes, be the date on
which the Committee makes the determination to grant the Option or such other
date as is determined by the Committee. Notice of the determination shall be
given to each Optionee to whom an Option is so granted within a reasonable time
after the date of such grant.
12. Modification, Extension, Renewal of Option
Subject to the terms and conditions of the Plan, the Board may modify,
extend or renew an Option, or accept the surrender of an Option (to the extent
not theretofore exercised); provided that no such Incentive Stock Option may be
modified, extended or renewed if such action would cause such Option to cease to
be an "incentive stock option" within the meaning of Section 422 of the Code.
13. Power of Board if Change of Control
Notwithstanding anything to the contrary set forth in this Plan, in the
event of a Change of Control, the Board shall have the right, in its sole
discretion, to accelerate the vesting of all Options that have not vested as of
the date of the Change of Control and/or to establish an earlier date for the
expiration of the exercise of an Option (notwithstanding a later expiration of
exercisability set forth in an Option Agreement). In addition, in the event of a
Change of Control of the Company, the Board shall have the right, in its sole
discretion, subject to and conditioned upon a Sale of the Company: (a) to
arrange for the successor company (or other entity) to assume all of the rights
and obligations of the Company under this Plan; or (b) to terminate this Plan
and (i) to pay all Optionees cash with respect to those Options that are vested
as of the date of the Sale of the Company in an amount equal to the difference
between the Option Price and the Fair Market Value of a Share of Common Stock
(determined as of the date the Plan is terminated) multiplied by the number of
Options that are vested as of the date of the Sale of the Company which are held
by the Optionee as of the date of the Sale of the Company, or (ii) to arrange
for the exchange of all Options for options to purchase common stock in the
successor corporation, or (iii) to distribute to each Optionee other property in
an amount equal to and in the same form as the Optionee would have received from
the successor corporation if the
12
<PAGE>
Optionee had owned the Shares subject to Options that are vested as of the date
of the Sale of the Company rather than the Option at the time of the Sale of the
Company. The form of payment or distribution to the Optionee pursuant to this
Section shall be determined by the Board in its sole discretion.
14. Amendment of Plan
The Board, within its discretion, shall have authority to amend the
Plan and the terms of any Option issued hereunder; provided, that no such action
of the Board, without the approval of the shareholders of the Company and, in
the case of subparagraph (d), the holder of the Option, shall:
(a) materially increase the benefits accruing to Optionees
under the Plan;
(b) increase the number of shares which may be issued under
the Plan;
(c) materially modify the requirements as to eligibility for
participation under the Plan; or
(d) alter or impair any right or obligation under any Option
previously granted under the Plan.
15. Conditions Upon Issuance of Shares
(a) Options granted under the Plan are conditioned upon the Company
obtaining any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and the Shares issuable upon the
exercise thereof.
(b) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(c) As a condition to the exercise of an Option, the Committee may
require the person exercising such Option to execute an agreement with, and/or
may require the person exercising such Option to make any representation and/or
warranty to, the Company as may be, in the judgment of counsel to the Company,
required under applicable law or regulation, including but not limited to, a
representation and warranty that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation and
warranty is appropriate under any of the aforementioned relevant provisions of
law.
13
<PAGE>
16. Taxes, Fees, Expenses and Withholding
(a) The Company shall pay all original issue and transfer taxes (but
not income taxes, if any) with respect to the grant of an Option and/or the
issue and transfer of Shares pursuant to the exercise thereof, and all other
fees and expenses necessarily incurred by the Company in connection therewith,
and will, from time to time, use its best efforts to comply with all laws and
regulations that, in the opinion of counsel for the Company, shall be applicable
thereto.
(b) The granting of Options hereunder and the issuance of Shares
pursuant to the exercise thereof is conditioned upon the Company's reservation
of the right to withhold in accordance with any applicable law, from any
compensation or other amounts payable to the Optionee, any taxes required to be
withheld under federal, state or local law as a result of the grant or exercise
of such Option or the sale of the Shares issued upon exercise thereof. To the
extent that compensation or other amounts, if any, payable to the Optionee is
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Optionee (or such other person entitled herein
to exercise the Option), as a condition to the exercise of an Option, to pay in
cash to the Company an amount sufficient to cover such tax liability or
otherwise to make adequate provision for the Company's satisfaction of its
withholding obligations under federal, state and local law.
17. Notices
Any notice to be given to the Company pursuant to the provisions of
this Plan shall be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to the Optionee at the address given beneath the
signature of the Optionee on his or her Option Agreement, or at such other
address as such Optionee or his or her permitted transferee (upon the transfer
of the Shares) may hereafter designate in writing to the Company. Any such
notice shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, registered or certified, and deposited, postage
and registry or certification fee prepaid, in a post office or branch post
office regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
18. No Enlargement of Employee Rights
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Employee or Consultant, or to be consideration for or a
condition of the employment or service of any Employee or Consultant as the case
may be. Nothing contained in this Plan shall be deemed to give any Employee or
Consultant the right to be retained in the employ or service of the Company, or
to interfere with the right of the Company to discharge or retire any Employee
or Consultant thereof at any time. No Employee or Consultant shall have any
right to or interest in Options authorized hereunder prior to the grant thereof
to such Employee or Consultant, and upon such grant such Employee shall have
only such rights and interests as are expressly provided herein, subject,
however, to all applicable provisions of the Company's Certificate of
Incorporation, as the same may be amended from time to time.
14
<PAGE>
19. Information to Optionees
The Company, upon request, shall provide without charge to each
Optionee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
20. Availability of Plan
A copy of this Plan shall be delivered to the Secretary of the Company
and shall be shown to any eligible person making reasonable inquiry concerning
it.
21. Invalid Provisions
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
22. Applicable Law
This Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey.
23. Board Action
Notwithstanding anything to the contrary set forth in this Plan, any
and all actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (a) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (b) the Company's By-Laws (as the same may be
amended/or restated from time to time), and (c) any other agreement, instrument,
document or writing now or hereafter existing, between or among the Company and
its stockholders or other persons (as the same may be amended from time to
time).
15
<PAGE>
24. Miscellaneous
This Plan is intended to comply with the conditions and requirements
for employee benefit plans under Rule 16b-3, as promulgated under Section 16 of
the Exchange Act, such that Options granted pursuant to the Plan will be
exempted from the provisions of Section 16(b) thereof. To the extent that any
provision of the Plan would cause a conflict with such requirements, such
provision shall be deemed null and void to the extent permitted by applicable
law. This section shall not be applicable if no class of the Company's equity
securities is then registered pursuant to Section 12 of the Exchange Act.
16
<PAGE>
CONSENT OF INDEPENDENT
AUDITORS
We hereby consent to the use in the Registration Statement of Thermaltec
International Corp. on Form S-4 of our report dated July 1, 1999, except for the
first paragraph of Notes 1 and 9 as to which the date is October __, 1999 on the
financial statements of Solar Communications Group, Inc. - Delaware as of
September 30, 1998 and 1997 and for the year ended September 30, 1998 and for
the period October 7, 1996 (date of inception) to September 30, 1997, which
financial statements appear in the Registration Statement. We also consent to
the references to us under the headings "Experts" in such prospectus.
/s/ Withum, Smith & Brown
- --------------------------
Withum, Smith & Brown
Red Bank, New Jersey
September 15, 1999
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm, Capraro, Centofranchi, Kramer &
Co., P.C., under the caption "Experts", and to the use of our report dated
February 19, 1999, on the consolidated balance sheet of Thermaltec International
Corp. and Subsidiaries, as of September 30, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended September 30, 1998 and 1997, in its Registration Statement on
Form S-4 dated September 15, 1999.
/s/ Capraro, Centofranchi, Kramer & Co., P.C.
---------------------------------------------
Capraro, Centofranchi, Kramer & Co., P.C.
South Huntington, New York
September 15, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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