INNOVATIVE ENERGY SOLUTIONS, INC. - SB-2 - 20041227 - BUSINESS
DESCRIPTION OF BUSINESS
Business Development
We were incorporated as Innovative Energy Solutions, Inc., "IESI Nevada", on
December 5, 2003 in the state of Nevada as a start-up company, for the purpose
of becoming a diversified, full-service energy company. We are in good standing
and there are 75,000,000 authorized common shares and 10,000,000 authorized
preferred shares. We currently have three business divisions: the Hydrogen
Generation division, the Heat Generation division and the Heat Pipe division
which includes the Waste Heat Recovery division.
Since our inception we raised $3,761,410 in short-term demand notes of which
$1,164,500 was paid back to 14 Note-holders during October 2004. As of September
30, 2004 we had issued 8,160,000 preferred shares and 6,147,330 common shares
and had entered into some material transactions which are detailed in our
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION within our Results of
Operation section.
As a result of our material transactions we acquired the following:
(1) An 80,000 square foot building and 18.7 acres of land in Piedmont,
Alabama.
(2) Two patents comprising our Hydrogen Generation Technology.
(4) Intellectual property for oil refining and hydrogen generation
(5) An Exclusive Distribution Agreement to sell Heat Pipe Heat Exchangers
which we acquire directly from a Korean manufacturer.
We also entered into four, five year, employment contracts requiring us to pay
$53,750 a month and two, three year, employment contracts requiring us to pay
$10,000 a month.
Business Description
Industry Background
Our business is to offer cost savings to targeted industries by implementing
applications of our Hydrogen or Heat Pipe Technologies. We believe that our
technologies can recapture hydrogen or heat as by-products more efficiently than
current applications used in certain industries. We have identified oil and gas
refineries and fertilizer plants as our initial potential customers.
1. HYDROGEN PRODUCTION
In refineries, hydrogen is produced as a by-product of naphtha reforming, and
any supplemental hydrogen is produced from steam reforming of natural gas. The
chemical industry also uses hydrogen, mostly to manufacture ammonia and other
nitrogen-based fertilizers. Hydrogen for the chemical industry is also produced
from steam reforming of natural gas, although some chemical plants use coal
gasification (i.e., partial oxidation) to produce hydrogen. According to the
U.S. Department of Energy, most modern applications for capturing by-products do
not run off pure hydrogen, but a mix of natural gas, methanol and gasoline. In
total, about 95 percent of U.S. hydrogen production for supplemental refinery
needs and the chemical industry is produced from natural gas using steam
reforming technology.
In the chemical industry, a vast quantity of hydrogen is produced annually as a
by-product of its processes which also produce chlorine, acetylene and cyanide.
The purity of the products range between 60-95% pure. Due to lack of consumers
much of the hydrogen produced is used in heating or burnt off . Chlorine is
produced by the electrolysis of brine to create chlorine, caustic soda and
hydrogen in a mercury fuel cell. Currently worldwide, one million tons of
hydrogen is produced through electrolysis of which 0.03 million tons are
produced in Britain. However, the process does leave the hydrogen contaminated
with caustic soda and mercury which have to be removed. Despite this, the
hydrogen is at least 95% pure before being cleaned of impurities. Once clean,
the hydrogen can achieve purities of 99.9%. The chlorine and hydrogen must be
kept separate as both are highly explosive and approximately 15% of the hydrogen
produced is vented.
The common used method domestically for hydrogen production is Steam Methane
Reforming, "SMR". Popular methods in other parts of the world are Gasification,
Pyrolysis and Electrolysis.
SMR accounts for approximately 95% of the hydrogen produced in the U.S.A.
Operating costs are largely dependant upon the volatile price of natural gas.
SMR is one of the simplest and most economical routes to producing hydrogen. SMR
hydrogen production is usually carried out on a packed bed reactor and is a
four-stage process. Feedstock purification is followed by steam reforming, in
which the natural gas and superheated steam are passed over a catalyst typically
at 850 - 900(0)C. The carbon is oxidized to carbon monoxide and the hydrogen is
released. The carbon monoxide then undergoes `water-gas shift' where it reacts
with the steam to produce hydrogen and carbon dioxide. Purification of hydrogen
is the last step in the process most commonly in a pressure swing absorption
(PSA) plant. The steam reformation process is a highly endothermic reaction and
the conversion requires high temperature, steam and a highly active nickel
catalyst. The conversion reduces as the pressure is increased in most cases. In
addition, large amounts of carbon dioxide are formed in the furnace combustion
process and usually vented into the atmosphere. If carbon dioxide levels are to
be reduced then this technology must be coupled with carbon sequestration. It is
estimated that carbon dioxide sequestration will increase costs by 20-30%. The
conversion efficiencies in this system can reach 65% - 75% in large production
plants.
Gasification and Partial Oxidation, "POX", are very similar in their process
which is becoming increasingly popular, and one of the oldest methods of
producing hydrogen. The feedstock is usually heated to 1400(0)C in the presence
of air or oxygen causing decomposition and producing hydrogen, carbon monoxide
and residue. This process is then followed by shift reaction. This method of
hydrogen production can use any form of hydrocarbon feedstock providing it can
be compressed or pumped. It involves partial oxidation and shift conversion
followed by cleaning of the hydrogen.
The drawback of POX is that it requires expensive pure oxygen. The conversion of
the POX system is approximately 50% efficient in large production plants. It is
common for coal to be ground and mixed with water to create a sludge/slurry
before Gasification using pure oxygen, the result is syngas, which needs to be
quenched and scrubbed of soot. To reduce emissions, CO2 capture could be used,
estimated to add 25 - 30% to the cost of production. However for a CO2 neutral
process, biomass is a potential feedstock in the production of renewable
hydrogen.
Pyrolysis was developed by Kvaerner in Sweden as the Kvaerner carbon black and
hydrogen process using an industrial scale plasma reactor. This is the only
method that does not produce carbon dioxide providing the material is decomposed
at high enough temperatures in the absence of oxygen. The added value to
hydrogen produced is the carbon black. The carbon black can be sold to companies
who use it in their products (e.g. paint, ink, rubber, tire, batteries, dyes and
plastics) making the overall process more economical. For example, if methane
were "cracked" in the presence of carbon soot or graphite (the catalyst) at high
temperature, the resulting emissions and byproducts would be hydrogen and carbon
black which could be sequestered or sold.
The electrolysis of water using any renewable energy that produces electricity
(such as solar, wind or tidal) can be used to generate hydrogen sustainably.
Electrolysis is 70% - 75% efficient in large production plants and by increasing
the temperature it is possible to increase the efficiency of the electrolysis of
water to 88% - 95%. The Lawrence Livermore Laboratory is currently carrying out
work in this area.
Water can be changed into hydrogen and oxygen using an electrolyser.
Electrolyser technology is well developed and works by disassociating water into
diatomical molecules. Electrolysis is the cleanest reaction for producing
hydrogen. There is a range of electrolyser products on the market; of these, the
two that seem to be most promising are the liquid alkaline electrolyser and the
Proton Exchange Membrane (PEM) electrolyser. The liquid alkaline electrolyser is
the preferred electrolyser at this time especially for large-scale producers.
The technology is easily scaled up and is easier to thermally manage due to the
movement of the liquid in the cells. While the proton exchange membrane is
considered the long-term option, currently it is ideal for small to medium size
applications such as home or vehicle use.
The production of hydrogen through the electrolysis of hydrogen bromide requires
half the voltage of that required to electrolyze water. The reaction to extract
the hydrogen is also reversible. The splitting of hydrogen bromide can be
promoted by heat and light.
2. HEAT PIPES
A heat pipe is a simple device that can quickly transfer heat from one point to
another. They are often referred to as the "superconductors" of heat as they
possess an extra- ordinary heat transfer capacity and rate with almost no heat
loss.
The idea of heat pipes was first suggested by R.S.Gaugler in 1942. However, it
was not until 1962, when G.M.Grover invented it that its remarkable properties
were appreciated and serious development began.
A heat pipe is comprised of three basic components:
1. A hermetically sealed evacuated tube
2. A mesh or sintered powder wick
3. A working fluid in both the liquid and vapor phase.
A Heat Pipe functions when one end of the tube is heated and the liquid within
the tube turns to vapor; thus, absorbing the latent heat of vaporization. Then,
the hot vapor flows to the colder end of the tube where it condenses and gives
out the latent heat. The re-condensed liquid then flows back through the wick to
the hot end of the tube. Since the latent heat of evaporation is usually very
large, considerable quantities of heat can be transported with a very small
temperature difference from one end to the other.
The function of the tube is to isolate the working fluid from the outside
environment. It has to therefore be leak-proof, maintain the pressure
differential across its walls, and enable transfer of heat to take place from
and into the working fluid. The material should be non-porous to prevent the
diffusion of vapor. A high thermal conductivity ensures minimum temperature drop
between the heat source and the wick.
The purpose of the wick is to generate capillary pressure to transport the
working fluid from the condenser to the evaporator. It must also be able to
distribute the liquid around the evaporator section to any area where heat is
likely to be received by the heat pipe. Often these two functions require wicks
of different forms. The selection of the wick for a heat pipe depends on many
factors, several of which are closely linked to the properties of the working
fluid. The most common types of wicks that are used are as follows:
1. The Sintered Powder Wick will provide high power handling, low
temperature radients and high capillary forces for anti-gravity
applications. Very tight bends in the heat pipe can be achieved with
this type of structure.
2. The Grooved Tube Wick is a small capillary driving force generated by
the axial grooves for adequate low power heat pipes when operated
horizontally, or with gravity assistance. The tube can be readily bent.
When used in conjunction with screen mesh, the performance can be
considerably enhanced.
3. The Screen Mesh Wick is used in the majority of the products and
provides readily variable characteristics in terms of power transport
and orientation sensitivity, according to the number of layers and mesh
counts used.
A first consideration in the identification of a suitable working fluid is the
operating vapor temperature range. Within the approximate temperature band,
several possible working fluids may exist, and a variety of characteristics must
be examined in order to determine the most acceptable of these fluids for the
application considered. The prime requirements are:
1. Compatibility with wick and wall materials
2. Good thermal stability
3. Wet-ability of wick and wall materials
4. Vapor pressure not too high or low over the operating temperature range
5. High latent heat
6. High thermal conductivity
7. Low liquid and vapor viscosities
8. High surface tension
9. Acceptable freezing or pour point
The selection of the working fluid must also be based on thermodynamic
considerations which are concerned with the various limitations to heat flow
occurring within the heat pipe like, viscous, sonic, capillary, entrainment and
nucleate boiling levels.
In heat pipe design, a high value of surface tension is desirable in order to
enable the heat pipe to operate against gravity and to generate a high capillary
driving force. In addition to high surface tension, it is necessary for the
working fluid to wet the wick and the container material i.e. contact angle
should be zero or very small.
The vapor pressure over the operating temperature range must be sufficiently
great to avoid high vapor velocities, which tend to setup large temperature
gradient and cause flow instabilities. A high latent heat of vaporization is
desirable in order to transfer large amounts of heat with minimum fluid flow,
and hence to maintain low pressure drops within the heat pipe.
The thermal conductivity of the working fluid should preferably be high in order
to minimize the radial temperature gradient and to reduce the possibility of
nucleate boiling at the wick or wall surface. The resistance to fluid flow will
be minimized by choosing fluids with low values of vapor and liquid viscosities.
Common fluids used in temperatures ranging from zero to 130 degrees centigrade
would be acetone and methanol. Fluids commonly used in temperatures from 1,000
to 2,300 degrees centigrade are lithium and silver.
Application of Heat Pipe technology can be as pervasive as inventors can
retrofit the basic technology to any given situation. A few applications where
Heat Pipe technology has been successfully used has been in spacecraft,
electrical components, thawing permafrost during pipeline construction and high
temperature furnaces.
Principal Products
1. HYDROGEN PRODUCTION
Our technology allows for the delivery of high purity hydrogen directly to a
compressor without the usual requirements for membranes or dryers. The capital
costs to facilitate production are significantly less than SMR.
Unlike SMR, our hydrogen-producing technology does not require a fossil fuel
source such as natural gas. It uses water as the fuel source for the production
of hydrogen. Only small amounts of electricity are required as part of the
process.
A detailed description of how our technology will work in a prototype unit is
explained in our PCT Patent No. KR2003/002395.
On September 13, 2004, we acquired intellectual property from an individual
pertaining to deep oil refining and a compatible hydrogen generation technology
for 50,000 restricted common shares valued at $200,000. The intellectual
property has documented processes to remove contaminants from crude oil at costs
less than that currently experienced in the oil industry. We plan to patent
these technologies and then create demonstration units to facilitate a marketing
plan.
2. WASTE HEAT RECOVERY HEAT PIPES
Our patented heat pipe technology recovers the waste heat from flue gases now
vanishing into the atmosphere and converts them into useable energy. This is why
we have targeted oil refineries, paper mills and steel mills and other potential
customers. Our patents enable us to custom design applications for each client
depending on their budget and technical objectives.
Energy generation can be achieved by capturing waste heat. High temperature
waste heat can be converted to steam to drive a standard steam-driven electrical
generator. In many cases, this can even eliminate the customer's reliance on
purchased electrical power; and any excess electricity created may then be sold
into an energy-distribution system, or grid.
The recovered heat can be utilized in several different applications depending
on process requirements. A few examples are, heat for buildings, the pre-heating
of combustion air, preheating of water, and heat converted to steam to power a
standard steam-driven electrical generator. All of these processes reduce boiler
and/or burner run-time which save money.
3. HEAT PIPE HEAT EXCHANGER
We have an Exclusive Distributorship Agreement ("Agreement"), with Sun woo
Energy Technology Inc. and Koo Hyo Hwea who is the owner and inventor of the
Heat Pipe Heat Exchanger, "HPHE" to sell the HPHE in the American continent. The
HPHE can be applied anywhere waste exhaust gas heat is an operating cost concern
and has specific application for domestic use on hot water heaters, furnaces,
woodstoves, fireplaces and swimming pool heaters.
The HPHE is divided into two sections, evaporation and condensation. Hot waste
exhaust air from a heating system flows into the evaporation section of
exchanger. Simultaneously, fresh air is drawn into the condensation section by a
motor fan. As exhaust air passes through a heat pipe in the evaporation section,
exhaust heat energy is absorbed as working fluid in the heat pipe and then
vaporizes. The absorbed heat is released into a fresh air supply in the
condensation section. The vapor condenses back into the fluid and flows down
into evaporation section by the gravity. Heated fresh air is collected for
desired usages. Un-recovered heat is emitted as exhaust gas from the evaporation
section.
Sun woo Energy Technology Inc. was founded two decades ago and is owned by Hyo
Hwea Koo in South Korea. Hyo Hwea invented innovative heat pipe technology and
applied the technology to several energy-saving products and successfully
commercialized them in Korea. His customer base for many years have been
greenhouse growers in Korea that have been benefited from being able to reduce
their heating costs. In 2002, Sun woo Energy Technology Ltd. sold over 2,000
units of heat pipe heat exchangers in Korea. The Ministry of Agriculture in
Korea recognizes performance and energy saving efficiency of the products, and
subsidizes the purchase of heat pipe heat exchanger by 50 to 80% for
agricultural industry customers. Also, the Korea Housing Corporation approved
the installation of heat pipe floor heating system to its subsidized apartments
and condominium complexes.
Tests on the HPHE performed by the National Agricultural Mechanization Research
Institute in Korea (KIST) have indicated a heat recovery efficiency of
approximately 85% which has generally translated into a 15% savings in heating
costs.
Distribution Methods
1. HYDROGEN PRODUCTION
When our prototype units have been proven we will be seeking out traditional
high volume users of hydrogen such as refiners and fertilizer plants. We will
negotiate long-term contracts for hydrogen which will offer significant savings
to these end users. Our prospective clients will receive invitations to see
first hand the prototype units in operation.
We plan to negotiate license agreements with ongoing royalties by geographic
regions. It is not contemplated that we will sell any of our technologies but
will focus on the selling of licenses and entering into long-term contracts for
the supply of hydrogen. By providing hydrogen at lower costs than today's
conventional means we may be able to stimulate economic activity that was
previously cost prohibitive.
2. HEAT GENERATION, HYDROGEN GENERATION AND HEAT PIPE TECHNOLOGY
Our initial focus will be on serving the needs of heavy industry in the refining
and Petro-chemical industries. These are industries which are known for being
high users of energy and creating vast amounts of waste heat.
From a geographic standpoint we will initially focus on Alberta, Canada. Alberta
is currently experiencing high levels of economic growth and is expected to
outpace its national average for years to come. In addition, Alberta is Canada's
leader in terms of the oil and gas industry which stands to benefit a great deal
from the Company's heat pipe technology, heat generation and hydrogen generation
technology.
We are preparing marketing materials and an informative website to develop leads
to the key players in our targeted industries. We plan to attend technical trade
shows across the U.S.A to increase the awareness of our technology. Our
advertising program will plan to implement the printing of ads in appropriate
publications. Our management will also liaise with government
environmental agencies to expound the benefits of our heat pipe technology and
its positive impact on energy conservation and greenhouse gases.
In addition to sales we believe that there are opportunities for us to license
our heat pipe technology. The boiler market represents an opportunity for our
heat pipe technology to have an immediate impact. The size of the boiler market
is immense with annual sales well in excess of $20 billion in North America. We
plan to negotiate with the major boiler manufacturers to carry a line of our
product. This could allow us to take advantage of the existing sales
infrastructure and distribution networks that these manufacturers already have
in place. Other areas of the market which we plan to aggressively try to license
include the in-floor heating market and ramp heating. Construction companies
specializing in these fields will also be targeted and presented with licensing
opportunities.
3. HEAT PIPE EXCHANGER
We plan to act in the capacity of a distributor and market the Heat Pipe Heat
Exchanger units to retailers of home products and home repair stores. We are
currently preparing our marketing materials and will begin soliciting retailers
once our marketing materials are completed.
Status of Prototype Products and Inventory
1. Hydrogen Production
On September 7, 2004 we paid $250,817 to HY-EN Research Ltd. to build a Hydrogen
Generation demonstration unit for demonstration. When we receive the unit, we
plan to demonstrate it to large energy companies in Canada that have already
expressed serious interest in observing the working model. We expect to receive
the unit prior to December 31, 2004.
2. Heat Generation
We plan to sell energy in various forms and this energy is generated from our
heat generation units: These units generate steam that can be used for process
steam in industrial plants, in addition this same steam can be used for
generating electricity on a large scale, that is when this steam is introduced
via a turbine and generator assembly we generate electricity. The same heat
generator can used to generate hot water for the purpose of heating large
commercial buildings and or high-rise buildings.
3.Heat Pipe Exchanger
On May 10, 2004 we entered into an Exclusive Distributorship Agreement with Sun
woo Energy Technology, Inc., "Sun woo", to purchase 1,000 Heat Pipe Heat
Exchangers by May 10, 2005 and to pay $4,000 Canadian dollars a month starting
in May 2004 for 24 months for the distributor fee.
As of September 30, 2004, we purchased from Sun woo 200 Heat Pipe Heat
Exchangers for domestic application for $23,253 and paid the distributor fees
for May and June totaling $ 6,160. These Heat Pipe Heat Exchangers are
considered inventory and are ready for sale.
We intend to sell the Heat Pipe Heat Exchangers at twice our cost to retailers
that will ultimately sell the units to homeowners that could apply them to their
hot water heaters, fireplaces, wood stoves or furnaces.
Competition
1. Hydrogen Production
Most of the hydrogen produced today is consumed on site, such as at oil
refineries, and is not sold on the open market. For large-scale production,
hydrogen generally costs $0.32/lb if consumed on site. This cost is rising
dramatically because of the rising cost of natural gas. When hydrogen is sold on
the market, the cost of liquefying the hydrogen and transporting it to the user
must be added to the production cost. The cost of transportation can increase
the selling price to $1.00-1.40/lb for delivered liquid hydrogen. Some users who
require relatively small amounts of very pure hydrogen may use electrolysis to
produce high-purity hydrogen at
their facilities. The cost of this hydrogen, which depends on the cost of the
electricity used to split the water, is typically $1.00-$2.00/lb.
In view of these various methods of extracting and using hydrogen, our
technology is proprietary and not used by any known competitor. We believe this
will enable us to market the production of cost efficient hydrogen. Our
technology will allow for the delivery of pure hydrogen directly to a compressor
without the requirements for membranes or dryers and pressure swing absorbers
(PSA). The capital costs to facilitate production are 80% less than steam
methane reforming, which now produces over 90% of the current world supply of
hydrogen.
2. Waste heat recovery
To date, we have been unable to identify a competitor that is marketing heat
pipe for recovery of heat in industrial processes. Several companies are in the
business of selling traditional economizers but these products cannot achieve
the increase in temperatures, nor the efficiency that is experienced with the
Company's heat pipe technology.
We believe that we will be successful by confining our target market to the oil
refining and the Urea Ammonia fertilizer industries.
3. Heat Pipe Heat Exchanger
Our assessment of competitive products to the Heat Pipe Heat Exchanger has not
been completed because we are still preparing our marketing materials and
planning our distribution methods. We plan to initially concentrate our
marketing efforts in Canada where we believe the competitive markets will vary
significantly depending on the availability of competitive products and the need
for them.
Manufacturing
We have not yet completed our manufacturing plan for our Hydrogen and Heat
Generation Technologies. Once our demonstration models are received we plan to
demonstrate their operations to potential buyers. It may be possible that
potential customers may enter into a joint venture with us for the manufacturing
of the units.
Heat Pipe Heat Exchanger
Sun woo Energy Technology Inc. is required under its Agreement with us to
manufacture and provide us with the HPHE units for us to sell. Sun woo is
currently manufacturing and marketing its proprietary line of heat pipe products
in Korea.
Customer Dependence
We do not plan for our revenue to be dependent on less than five customers once
we are able to manufacture and market our Hydrogen and Heat Generation
Technologies, our technologies have world wide applications.
Heat Pipe Heat Exchanger
We have not established a prospective customer base for the Heat Pipe Heat
Exchanger because we have not completed our marketing and distribution plan. We
anticipate distributing to retail chains; thereby, potentially becoming
dependent on a few customers for the majority of the Heat Pipe Heat Exchanger
sales.
Patents
1. Hydrogen Technology
1. Korean Patent Application No. 10-2002-0026277 "Energy Generating Device"
This patent has only been filed in Korean and has not been translated into
English. The patent basically describes how the manufactured prototype Hydrogen
Energy unit works.
2. Korean Patent Application No. 10-2002-0069231 "Apparatus for Generating
Hydrogen Gas" Worldwide Patent Cooperation Treaties (PCT) Patent No.
KR2003/002395
The apparatus for generating hydrogen gas includes: an operation fluid supply
unit for supplying an operation fluid which is water after highly purifying
water and pressuring the water with a predetermined pressure; a body having a
passage where the operation fluid flows; a dielectric implant for passing the
operation fluid through a passage slot and generating an electric impulse with a
high potential by a cavitation emission, the dielectric implant implanted in the
passage of the body; a separation means for separating ions of the operation
fluid based on electric polarities of the ions by supplying a magnetic field to
a flow of the operation fluid ionized by the electric impulse; and a collecting
means for separately collecting the ions separated by the separation means and
obtaining hydrogen gas.
2. Heat Pipe Technology
The following patents are for our Heat Pipe Technology and have only been filed
in Romania.
1. Patent No. 117284 "Heat pipes steam generator"
The patent refers to a heat pipe steam generator used for heat recovery from hot
exhaust with high ash content. According to the patent the steam generator is
made of a casing with a bundle of heat pipes inside. It is only due to the usage
of heat pipes that a special trap could be designed to allow separation of ash
particles and at the same time to allow the cleaning of the bundle of heat
pipes.
2. Patent No. 112313 "Gas to water heat pipe heat exchanger"
The heat pipe heat exchanger is designed for hot water preparation using the
exhaust heat from different industrial or domestic boilers. According to the
patent the heat exchanger is made of a curved cap where there is the
condensation area of the heat pipes bundle, every heat pipe being installed in a
tubular plate by means of a special threaded bush, the whole heat pipe bundle
being provided in the condensation area with baffles and flow turbulators. The
vaporization part of the heat pipe bundle is placed in the exhaust flow by means
of a properly designed casing.
3. Patent No. 112312 "Gas to gas heat pipe heat exchanger"
The heat pipe heat exchanger is designed for preheating air using the exhaust
heat from different industrial or domestic boilers. According to the patent, the
heat exchanger is made of a bundle of heat pipes placed in a properly designed
casing and fastened in a tubular plate by means of special pieces.
4. Patent No. 110986 " Procedure and installation for ammonia heat pipe filling"
The patent refers to the procedure and the corresponding installation for
ammonia heat pipe manufacture containing vacuum devices, Dewar vessels, heating
devices and different valves and tubing's.
5. Patent No. 114038 "Heat pipe, procedure of manufacture and installation to
apply the procedure "
The patent refers to a heat pipe, a manufacture procedure and an installation to
apply the procedure. The heat pipe is made of a tube having a special cap at one
end with a central hole that can be closed by a ball and a screw. After
introducing a proper quantity of working fluid inside the tube, the heat pipe is
heated in a specially designed oven at a temperature at least equal to the
working temperature in order to evacuate air and any other non-condensable gases
from the tube.
The patent refers to a water to gas type of heat pipe heat exchanger used in hot
exhaust heat recovery from different industrial ovens. The exchanger is made of
a casing having at its superior part a tubular plate which divides the casing
into two annular spaces, one for the
water flow and the other for the exhaust flow. These two annular spaces contain
concentrical rows with heat pipes properly fastened in the tubular plate.
Exhaust enters the exchanger on radial direction and leaves it on axial
direction. Water enters the exchanger on axial direction, flows through paths
created concentrically by means of proper baffles and leaves the exchanger on
the same axial direction.
The patent refers to a heat exchanger made of one or several multitubular heat
pipes arranged in series or in parallel. The primary fluid is simultaneously
brought to all the multitubular heat pipes through a central tube and the
secondary fluid is brought to the heat exchanger through a forked tube and
successively goes from one multitubular heat pipe to another.
8. Patent No. 114040 "Heat pipe heat exchanger"
The patent refers to a heat exchanger made of two separate units consisting of
tubular plates and bundles of heat pipes properly fitted on them. These units
are properly put together having a sealing material between the tubular plates.
9. Patent No. 114039 "Multitubular heat pipe"
The patent refers to a multitubular heat pipe designed for the heat exchange
between two fluids that must be safely isolated from each other. The
multitubular heat pipe is made of a cylindrical casing with a vaporization and a
condensation unit on the inside, the two units being separated by some
intermediary areas created by a deflector. Vapor coming from the vaporization
unit goes to the corresponding intermediary area and, through a central tube, it
reaches a distribution space from where it goes back through the bundle of tubes
of the condensation unit. The resulting condensate is gathered at the lower part
of the condensation unit.
10. Patent No. 114810 "Process and installation for pipe cleaning"
The patent refers to a pipe cleaning installation and process meant for usage in
the heat pipe manufacturing. According to the patent, the pipe cleaning
installation and process ensure elimination of water and chemicals from the
micro-pores of tube wall through washing in alcohol vapor. The flow of all
chemicals through the pipes is ensured by vacuum.
11. Patent No. 102341 "Process and installation for heat pipe manufacture"
The patent refers to a process of and an installation for filling and closing
aluminum heat pipes. According to the patent, the working fluid is anhydrated
through heating before being used for filling the heat pipe. The closing
procedure contains special parameters to ensure a perfect sealing of the
aluminum filling tube.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
We do not depend on any one or a few major customers.
Government Approval, Regulations and Compliance
There are no issues pertaining to Government Approval, Regulations or Compliance
with any of the technologies and equipment we build since all the components we
use to construct the Company's equipment are already certified by UNDERWRIGHTS
LABORATORIES (UL), CANADIAN UNDERWRIGHTS LABORATORIES(CUL), CANADIAN STANDARD
ASSOCATION (CSA), AND CENTRELEC (CE)
EMPLOYEES
We do not have any employees; however we have four full-time officers which have
employment agreements from July 1, 2004 through June 30, 2009 and two employment
agreements with individuals from July 1, 2004 through June 30, 2007. The company
also employs six other individuals for ongoing operations of the company.
RESEARCH AND DEVELOPMENT COSTS FOR THE PAST TWO YEARS
NONE
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
Environmental regulations have had no materially adverse effect on our
operations to date, but no assurance can be given that environmental regulations
will not, in the future, result in a curtailment of service or otherwise have a
materially adverse effect on our business, financial condition or results of
operation. Public interest in the protection of the environment has increased
dramatically in recent years. The trend of more expansive and stricter
environmental legislation and regulations could continue. To the extent that
laws are enacted or other governmental action is taken that imposes
environmental protection requirements that result in increased costs, our
business and prospects could be adversely affected.
BANKRUPTCY
We have not been involved in any bankruptcy, receivership or similar
proceedings.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet financing arrangements
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements and Associated Risks
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on our expectation and are subject
to a number of risks and uncertainties, including but not limited to factors
discussed elsewhere in this prospectus and in other documents filed by us with
the Securities and Exchange Commission from time to time. Many of these factors
are beyond our control. Actual results could differ materially from the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this
prospectus will, in fact, occur.
Critical Accounting Policies
Our discussion and analysis of our financial condition and our plan of operation
and the results of our operations are based upon our financial statements and
the data used to prepare them. The Company's financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States. On an ongoing basis we endeavor and plan to re-evaluate our
judgments and estimates including those related to product variables, overhead
costs, inventories, long-lived assets, income taxes and contingencies. We base
our estimates and judgments on our brief historical experience, knowledge of
current conditions and our beliefs of what could occur in the future considering
available information. Actual results may differ from these estimates under
different assumptions and conditions.
PLAN OF OPERATION
Our business is to offer cost savings to targeted industries by implementing
applications of our Hydrogen or Heat Pipe Technologies. We believe that our
technologies can generate the lowest cost hydrogen in the world or waste heat
recovery as a clean energy by-products more efficiently than current
applications used in certain industries. We have identified oil and gas
refineries and fertilizer plants as our initial potential customers and we are
currently negotiating with some major corporations in those industries.
During May and June of 2004 we acquired two patents comprising our Hydrogen
Technology and eleven patents comprising our Heat Pipe Technology. Also during
May 2004 we entered into an Exclusive Distributorship Agreement Sun woo to
purchase 1,000 Heat Pipe Heat Exchangers. We are currently developing our
marketing plan to sell the units to retailers for twice our cost. Their
application is for hot water heaters, fireplaces, wood stoves or furnaces.
We plan to sell energy in various forms and this energy is generated from our
heat generation units: These units generate steam that can be used for process
steam in industrial plants, in addition this same steam can be used for
generating electricity on a large scale, that is when this steam is introduced
via a turbine and generator assembly we generate electricity. The same heat
generator can used to generate hot water for the purpose of heating large
commercial buildings and or high-rise buildings. The energy generated from our
processes is clean with no emissions or pollution which would create negative
impacts for the environment.
In addition to our Hydrogen and Heat Pipe technologies, we plan to lease our oil
remediation equipment for $25,000 to $30,000 a month. Our cost for the equipment
was $632,478; therefore, we estimate that we will need to lease the equipment
for approximately two and one-half years to recover our cost in the equipment.
In the event that we have expressed interest from potential customers to
purchase manufactured Hydrogen Generation or Heat Pipe Units to be retrofitted
to specification, we may enter into a joint venture with a group of potential
customers to manufacture the units in demand. We estimate that we may need
approximately $15 million in cash to develop our own manufacturing and marketing
divisions if we do not enter into joint ventures.
We do not anticipate any significant future research and production costs
because our demonstration units are expected to be received before December 31,
2004.
Our monthly operating costs approximate $275,000 a month. We will need to raise
approximately $3 million in cash from debt and or equity financings to meet
these monthly obligations over the next twelve months.
We currently have two demonstration units and one commercially viable unit
completed for our heat generation technology located in Edmonton, Alberta
Canada. We are demonstrating our heat generation units by appointment and plan
to lease the commercially viable unit to an end-user for $60,000 a month. The
anticipated life of the unit is indeterminable since the only moving parts are
the pumps which are estimated to need replacement every five years. The unit is
designed to replace a 200 to 400 horse power boiler.
We believe that we will need approximately $5 million to construct an assembly
plant in addition to an anticipated $10 million bond from the city of Piedmont,
Alabama. Our financing plan is use about an additional $2 million for the
marketing and assembly costs to eventually lease units on a unit by unit basis.
Once demand for the units is sufficient, we will plan to set up an assembly
plant in Piedmont, Alabama. We plan to raise the necessary financing through
private equity and debt placements.
We have not assigned a depreciable life to our intellectual property but will
evaluate it for impairment annually.
We account for non-monetary asset transactions based upon the fair values of the
assets involved. All non-monetary transactions with unaffiliated third parties
are valued at arms length. All non-monetary transactions with related parties
are valued at the predecessors depreciable cost basis for the asset received.
In the event that we are successful in selling a Hydrogen Generation or Heat
Pipe application, our operating costs will increase to meet the demand and we
will be required to hire additional skilled administrative and technical
persons.
Results of Operations
We were incorporated as Innovative Energy Solutions, Inc., "IESI Nevada", on
December 5, 2003 in the state of Nevada as a start-up company, for the purpose
of becoming a diversified, full-service energy company. The Company is in good
standing and there are 75,000,000 authorized common shares and 10,000,000
authorized preferred shares. We currently have two business divisions: the
Hydrogen Generation division, and the Heat Generation division which includes
the Waste Heat Recovery division.
On December 21, 2003 we issued 10 shares of our common stock to Ron Foster who
became the sole shareholder and director.
On December 22, 2003, the first meeting of the Board of Directors was held in
which three additional directors were appointed to serve along with Ron Foster.
The directors approved our By-Laws, appointed officers, approved salaries for
the officers and approved the 2004 Incentive and Non-Statutory Incentive Stock
Option Plan.
Also on December 22, 2003, we held our first annual shareholder meeting with Ron
Foster being the sole shareholder. At the shareholder meeting, all four
nominated directors were elected until their successors are elected and the 2004
Incentive and Non-Statutory Incentive Stock Option Plan was approved.
On May 5, 2004 we issued 2,160,000 preferred shares to one of our directors and
assumed a $1,100,000 debt for 18.7 acres of land consisting of an 80,000 square
foot commercial building in Piedmont, Alabama at a deemed value of $4,724,455.
We acquired the land because of expressed interest from the city of Piedmont for
a $10 million Industrial Development Bond issue to finance a manufacture
facility for our heat pipe and hydrogen units.
On May 15, 2004 we authorized the issuance of 6,000,000 restricted common shares
to all of the 25 shareholders of Innovative Energy Solutions, Inc, an Alberta,
Canada Corporation, and "IESI Canada" and issued a note to IESI Canada for
$800,000. On September 22, 2004 we amended the agreement to pay IESI Canada
$629,089 in cash instead of $800,000. The transaction was valued at the cost
basis of IESI Canada for each transferred item as follows:
(a) A Licensing Agreement dated October 24, 2003 from Hyunik Yang and HY-EN
Research Ltd to IESI Canada. These Agreements conveyed the marketing rights to
the Hydrogen Technology. IESI Canada's cost for the Licensing Agreement was
$986,880.
(b) Memorandum of Understanding & Temporary Licensing Agreement dated May 13,
2004 from Delta-Enviro Tech, Inc. to IESI Canada. These Agreements gave an
exclusive marketing agreement to Delta-Enviro Tech, Inc. for the Mid-East Arabic
world for both the Heat Pipe and Hydrogen Technology. IESI Canada had no costs
attributable to the Agreement.
(c) Licensing Agreement with Intellectual Property Assignments dated September
8, 2003 from Transterm Corporation and Dumitru Fetcu to IESI Canada. These
Agreements conveyed ownership of eleven patents and all marketing rights to the
Heat Pipe Technology. The written agreement confirmed a previous verbal
agreement between IESI Canada and Mr. Fetcu during March of 2004. IESI Canada
had issued Mr. Fetcu and Transterm Corporation 375,000 of their common shares
which they mutually agreed to a value of $937,500.
(d) Equipment which has its application to cleaning up oil slurry. IESI
Canada's cost for the equipment was $629,089.
We subsequently entered into the following agreements:
(a) Exclusive Distributorship Agreement dated May 10, 2004 with Sun woo Energy
Technology Inc. and Koo Hyo Hwea to purchase 1,000 Heat Pipe Heat
Exchangers annually. The Heat Pipe Heat Exchangers are an essential
component necessary to manufacture Heat Pipes.
(b) Exclusive Agent Agreement with David Bednar, an individual, dated May 15,
2004 to market applications for the Hydrogen Technology relating to ammonia
and its derivative products that could be used in the fertilizer or
explosives industries for five years.
(c) Research and Development and Intellectual Property Assignment Agreement
dated June 26, 2004 with Dr. Hyunik Yang which conveyed ownership of the
Hydrogen Technology.
(d) Exclusive Licensing Agreement dated June 26, 2004 with WHMIS, Inc. for
marketing their environmental remediation technology.
(e) Acquisition of intellectual property for new oil deep refining and hydrogen
generation from Evgeny Krasailnikov on September 13, 2004 for 50,000
restricted common shares.
The transaction with IESI Canada was instrumental toward enabling us to acquire
the intellectual property rights for the Hydrogen Technology without
encumbrances and obligations to any third parties. After having acquired the
intellectual property rights on the Hydrogen and Heat Pipe Technologies, we
cancelled the October 24, 2003 Licensing Agreement with Hyunik Yang and HY-EN
Research Ltd for marketing the Hydrogen Technology and the March 17, 2004
Licensing Agreement with Transterm for marketing the Heat Pipe Technology since
these redundantly became our direct responsibility.
Our acquisition on June 26, 2004 was for two patents with the intellectual
property and marketing rights which comprised our Hydrogen Generation
technology. The intellectual property rights obtained covered North and South
America, the Caribbean, Cuba, Scandinavia, Europe (excluding Russia), the Middle
East and Africa. The seller of the patents was the inventor, Dr. Hyunik Yank of
the Republic of South Korea.
The cost of the patents was $15 million which was paid to the seller with 6
million of our preferred shares valued at $2.50 per share. The preferred shares
have a direct lien on the two patents with the intellectual property and
marketing rights in the event of the Dissolution, Bankruptcy or Receivership of
IESI, Nevada.
On June 18, 2004 the Company entered into an Executive Employment Agreement with
Stephen P. Monaco to employ Mr. Monaco in the position of Vice President and
Chief Marketing Officer with a salary of $150,000, payable in accordance with
the Company's customary payroll practice. On June 21, 2004 the Company entered
into an Executive Employment Agreement with Patrick J. Cochrane to employ Mr.
Cochrane in the position of Chief Executive Officer with a salary of $180,000,
payable in accordance with the Company's customary payroll practice. On June 21,
2004 the Company entered into an Executive Employment Agreement with Terry
Dingwall to employ Mr. Dingwall in the position of President with a salary of
$150,000, payable in accordance with the Company's customary payroll practice.
On June 21, 2004 the Company entered into an Executive Employment Agreement with
Ronald C. Foster to employ Mr. Foster in the position of Secretary and Vice
president of Business Development with a salary of $165,000, payable in
accordance with the Company's customary payroll practice. On July 1, 2004 the
Company entered into an Employment Agreement with Trevor Park for one year at a
base salary of $60,000 per year. On July 1, 2004 the Company entered into an
Employment Agreement with Alain Liberty for one year at a base salary of $60,000
per year.
On September 1, 2004 we entered into a Purchase Agreement with HY-EN Research
Ltd. to purchase two heat generators for $90,000 each. We paid for the first
heat generator on September 3, 2004 and made a partial payment of $49,073 for
the second unit on September 28, 2004. We are obligated to pay the remaining
$40,927 on second unit on or before November 15, 2004. We also spent an
additional $49,685 on additional parts which will be needed above the contracted
cost for the second unit.
On September 7, 2004 we paid $250,817 to HY-EN Research Ltd. to build a Hydrogen
Generation demonstration unit for demonstration. When we receive the unit, we
plan to demonstrate it to large energy companies in Canada that have already
expressed serious interest in observing the working model. We expect to receive
the unit prior to December 31, 2004.
On September 13, 2004 we acquired intellectual property for new oil deep
refining and hydrogen generation from Evgeny Krasailnikov for 50,000 restricted
common shares valued at $4.00 per common share. We intend to obtain PCT patents
on the technologies and subsequently raise sufficient capital to build a
demonstrator unit for the oil refining technology. The hydrogen generation
technology will be used to enhance the current hydrogen technology owned by us.
Liquidity
Since our inception, we raised $3,761,410 in cash from short term notes that are
payable on demand with interest at 3% per annum. On October 13, 2004 we repaid
14 Note-holders their principal without interest in the amount of $1,164,500.
As of September 30, 2004 we used $2,146,810 of our debt proceeds from the
Note-holders as detailed in the USE OF PROCEEDS section of this Prospectus.
At the end of the quarter ended September 30 2004, the Company had not realized
any revenue whatsoever from sales and had $1,614,626 in cash with negative
working capital of $2,909,368.
The following should be read in conjunction with our Consolidated Financial
Statements and the related notes included elsewhere in this Prospectus.
DESCRIPTION OF PROPERTY
The Company also owns an 80,000 square foot building on 18.7 acres of land at
376 Alabama Highway 278 Bypass in Piedmont, Alabama 36272. The building is
encumbered with a $1.1 million note to a director which due in one balloon
payment on or before April 1, 2005 with accrued
interest at 3% per annum.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 5, 2004 we issued 2,160,000 preferred shares to Ron Foster, an officer
and director and issued a $1,100,000 note to Mr. Foster for 18.7 acres of land
consisting of an 80,000 square foot commercial building in Piedmont, Alabama at
a deemed value of $4,724,455. The transaction was valued at the seller's
depreciated cost basis. The preferred stock issued was valued at $3,624,455
because the Company's accounting policy for valuing non-monetary transactions
with a related party required the transaction be valued at the predecessors
depreciable cost basis. We acquired the land because of expressed interest from
the city of Piedmont for a $10 million Industrial Development Bond issue to
finance a manufacture facility for our heat pipe and hydrogen units.
On May 15, 2004 we authorized the issuance of 6,000,000 restricted common shares
to all of the 25 shareholders of Innovative Energy Solutions, Inc, an Alberta,
Canada Corporation, and "IESI Canada" and issued a note to IESI Canada for
$800,000. On September 22, 2004 we amended the agreement to pay IESI Canada
$629,089 in cash instead of $800,000.
Three of our directors received 75% of the issued shares or 4,500,000 restricted
common shares of the total 6,000,000 restricted shares issued as follows:
NAME Number of Shares
Patrick J. Cochrane 2,000,000
Fred Dornan 2,000,000
Terry Dingwall 500,000
The acquired assets were valued at the cost basis of IESI Canada and allocated
as follows:
Patents for Heat Pipe Technology $ 937,500
Licensing Agreement for Hydrogen Technology 986,880
Oil Reclamation Equipment 632,478
-----------
TOTAL $ 2,556,858
On June 18, 2004 we entered into an Executive Employment Agreement with Stephen
P. Monaco to employ Mr. Monaco in the position of Vice President and Chief
Marketing Officer with a salary of $150,000, payable in accordance with our
customary payroll practice.
On June 21, 2004 we entered into an Executive Employment Agreement with Patrick
J. Cochrane to employ Mr. Cochrane in the position of Chief Executive Officer
with a salary of $180,000, payable in accordance with our customary payroll
practice.
On June 21, 2004 we entered into an Executive Employment Agreement with Terry
Dingwall to employ Mr. Dingwall in the position of President with a salary of
$150,000, payable in accordance with our customary payroll practice.
On June 21, 2004 we entered into an Executive Employment Agreement with Ronald
C. Foster to employ Mr. Foster in the position of Secretary and Vice president
of Business Development with a salary of $165,000, payable in accordance with
our customary payroll practice.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public market for our common stock. [See Footnote 2 to
the Calculation of Registration Fee Table]. Although we hope to be quoted on the
OTC Bulletin Board, our common stock is not currently listed or quoted on any
quotation service. There can be no assurance that our common stock will ever be
quoted on any quotation service or that any market for our stock will ever
develop or, if developed, will be sustained.
DIVIDEND POLICY
We have not declared any dividends since our inception and we do not plan to
issue dividends in the foreseeable future. We are a development stage company
which plans to reinvest any profits that we may receive into future operations.
EXECUTIVE COMPENSATION
Compensation of Directors
Directors are currently not compensated for serving on our Board of Directors.
All officers were not compensated prior to July 1, 2004. On July 1, 2004 we
entered into employment contracts with all of our officers.
The following table sets forth the compensation we paid for services to our
officers from inception December 5, 2003 through September 30, 2004:
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------- ----------------------
Awards Payouts
---------------------
Securities
Name and Other Underlying
Principal Annual Options/ LTIP All Other
Position Year Salary($) Bonus($) Compensation(#) SARs (#) Payouts Compensation
------------------------------------------------------------------------------------------------------------------------
Patrick Cochrane (1) 2004 $ 45,000 - - - - -
CEO and
Director
Terry Dingwall (2) 2004 $ 37,500 - - - - -
President and
Director
Ron Foster (3) 2004 $ 41,250 - - - - -
Vice President of
Business Development and
Director
Stephen Monaco (4) 2004 $ 37,500 - - - - -
Vice President of
Marketing
(1) Mr. Cochrane has an Employment Agreement for $15,000 a month from July 1,
2004 through June 30, 2009.
(2) Mr. Dingwall has an Employment Agreement for $12,500 a month from July 1,
2004 through June 30, 2009.
(3) Mr. Foster has an Employment Agreement for $13,750 a month from July 1, 2004
through June 30, 2009.
(4) Mr. Monaco has an Employment Agreement for $12,500 a month from July 1, 2004
through June 30, 2009.
There are no annuity, pension or retirement benefits currently proposed to be
paid to Officers, Directors, or employees in the event of retirement at normal
retirement date pursuant to any existing plan provided by the Registrant.
We have a stock option plan in place.
Equity Compensation Plan Information
------------------------------------
Plan Category Number of Securities to Weighted average Number of securities
be issued upon exercise of exercise price of remaining available for
outstanding options, outstanding options, future issuance
warrants and rights warrants and rights
(a) (b) (c)
---------------------------- -------------------------- -------------------- -----------------------
Equity compensation plans 91,000 $ 2.50 2,409,000
approved by security holders
Equity compensation plans none
not approved by security
holders
(a) Options are issued to consultants expiring between January 11, 2009 through
June 29, 2009.
(b) All outstanding issued options have a strike price at $2.50 per share.
(c) The Company's stock option plan is authorized to issue 2,500,000 shares.
The following table sets forth certain information concerning grants of non-plan
options to the Named Executive Officers during the period from inception
(December 5, 2003) to September 30, 2004:
OPTION GRANTS FOR PERIOD ENDED SEPTEMBER 30, 2004
Individual Grants
Number of Percent of
Securities Total Options
Underlying granted Exercise or
Options Granted to Employees Base Price Expiration
Name (shares)(a) in Fiscal Year ($/share) Date
----------------------------------------------------------------------------------------------
Patrick Cochrane 0 - - -
CEO and
Director
Terry Dingwall 0 - - -
President and
Director
Ronald Foster 0 - - -
Vice President of
Business Development
Director
Stephen Monaco 0 - - -
Vice President of Marketing
Fred Dornan 0 - - -
Director
(a) No options have been granted to any of our officers or directors from
inception through September 30, 2004.
SHARES ELIGIBLE FOR FUTURE SALE.
Upon completion of the offering, we will have 941,604 shares of common stock
outstanding and eligible for future sale. A current shareholder who is an
"affiliate" which is defined in Rule 144 as a person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, Innovative Energy Solutions, Inc., will be required to
comply with the resale limitations of Rule 144.
Sales by affiliates will be subject to the volume and other limitations of Rule
144, including certain restrictions regarding the manner of sale, notice
requirements, and the availability of current public information about. The
volume limitations generally permit an affiliate to sell, within any three month
period, a number of shares that does not exceed the greater of one percent of
the outstanding shares of common stock or the average weekly trading volume
during the four calendar weeks preceding his sale. A person who ceases to be an
affiliate at least three months before the sale of restricted securities
beneficially owned for at least two years may sell the restricted securities
under Rule 144 without regard to any of the Rule 144 limitations.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for Innovative
Energy Solutions, Inc. by The O'Neal Law Firm, P.C., 668 North 44th Street,
Suite 233, Phoenix, Arizona 85008.
SECURITIES ACT INDEMNIFICATION DISCLOSURE
IESI Nevada's By-Laws allow for the indemnification of company officers and
directors in regard to their carrying out the duties of their offices. We have
been advised that in the opinion of the Securities and Exchange Commission
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act, and is, therefore
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or other controlling
persons in connection with the securities registered, we will, unless in the
opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
EXPERTS
The financial statements of Innovative Energy Solutions, Inc. as of June 30,
2004 , included in this prospectus have been audited by Epstein, Weber and
Conover independent certified public accountants, as stated in the opinion,
which has been rendered upon the authority of said firm as experts in accounting
and auditing.
TRANSFER AGENT
Our transfer agent is Transfer Online, Inc. located at 317 SW Alder Street, 2nd
Floor in Portland, Oregon 97504. Their phone number is 503-227-2950 and fax
number is 503-227-6874.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
We have had no change of, nor disagreement with, our independent registered
public accounting firm since our inception.9
ADDITIONAL INFORMATION
We have filed with the SEC the registration statement on Form SB-2 under the
Securities Act for the common stock offered by this prospectus. This prospectus,
which is a part of the registration statement, does not contain all of the
information in the registration statement and the exhibits filed with it,
portions of which have been omitted as permitted by SEC rules and regulations.
For further information concerning us and the securities offered by this
prospectus, we refer to the registration statement and to the exhibits filed
with it. Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily complete. In each
instance, we refer you to the copy of the contracts and/or other documents filed
as exhibits to the registration statement, and these statements are qualified in
their entirety by reference to the contract or document.
The registration statement, including all exhibits, may be inspected without
charge at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the SEC's regional offices located at the Woolworth Building,
233 Broadway, New York, New York 10279 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may also
be obtained from the SEC's Public Reference at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, upon the payment of prescribed fees. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330.
The registration statement, including all exhibits and schedules and amendments,
has been filed with the SEC through the Electronic Data Gathering, Analysis and
Retrieval system, and are publicly available through the SEC's Web site located
at http://www.sec.gov.
PART II - FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Innovative Energy Solutions, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheet of Innovative Energy
Solutions, Inc. and Subsidiary (a development stage company) as of June 30, 2004
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the period from December 5, 2003 (date of inception)
to June 30, 2004. 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 the standards of the Public Company
Accounting Standards Board (United States). 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 our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innovative Energy Solutions,
Inc. and Subsidiary (a development stage company) as of June 30, 2004, and the
results of its operations and cash flows from December 5, 2003 (date of
inception) to June 30, 2004, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company continues to incur
significant operating losses, but continues to raise capital to fund operations
and is in the process of attempting to acquire additional assets which will
generate sales volume with operating margins sufficient to achieve
profitability. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans with regard to these matters
are discussed in Note 1. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2004
ASSETS
CURRENT ASSETS
Cash $ 1,192,970
Accounts receivable, stockholder 5,921
Advances due from related entity 161,000
Prepaid expenses 70,750
------------
Total current assets 1,430,641
PROPERTY AND EQUIPMENT
Land, building and equipment, net 5,312,287
OTHER ASSETS
Intellectual property 16,924,380
------------
Total assets $ 23,667,308
============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,849
Accrued interest 16,933
Loan payable, related entity 167,906
Note payable, stockholder 1,100,000
Notes payable, third parties 2,167,385
------------
Total current liabilities 3,461,073
------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000 shares 8,160
authorized, 8,160,000 issued and outstanding
Common stock, $.001 par value, 75,000,000 shares 6,000
authorized, 6,000,010 issued and outstanding
Additional paid-in capital 20,371,972
Deficit accumulated during development stage (179,897)
------------
Total stockholders' equity 20,206,235
------------
Total liabilities and stockholders' equity $ 23,667,308
============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FROM DECEMBER 5, 2003 (INCEPTION) TO JUNE 30, 2004
OPERATING EXPENSES
Legal and accounting $ 48,229
Consulting 16,275
Depreciation 44,646
Other 53,814
------------
Total operating expenses 162,964
------------
Net loss from operations (162,964)
OTHER EXPENSE
Interest expense 16,933
------------
Net loss $ (179,897)
============
NET LOSS PER SHARE:
Basic and diluted $ (0.12)
============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 1,445,036
============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM DECEMBER 5, 2003 (INCEPTION) TO JUNE 30, 2004
Deficit
Accumulated
Preferred Stock Common Stock Additional During Total
---------------------- --------------------- Paid-In Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
---------- --------- --------- --------- ------------ ----------- -------------
Issuance of common stock - $ 0 10 $ 0 $ 25 $ 0 $ 25
on December 21, 2003
Issuance of preferred stock 2,160,000 2,160 - - 3,622,295 0 3,624,455
on March 24, 2004
Issuance of common stock - - 6,000,000 6,000 1,750,857 0 1,756,857
on May 15, 2004
Issuance of preferred stock 6,000,000 6,000 - - 14,994,000 0 15,000,000
on June 26, 2004
Issuance of stock options - - - - 4,795 0 4,795
Net loss for the period - - - - 0 (179,897) (179,897)
ended June 30, 2004 - - - - 0 0
---------- --------- --------- --------- ------------ ----------- -------------
Balances as of June 30, 2004 8,160,000 $ 8,160 6,000,010 $ 6,000 $ 20,371,972 $ (179,897) $ 20,206,235
========== ========= ========= ========= ============ =========== =============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOW
FROM DECEMBER 5, 2003 (INCEPTION) TO JUNE 30, 2004
OPERATING ACTIVITIES
Net loss for the period $ (179,897)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock compensation expense 4,795
Depreciation expense 44,646
Changes in assets and liabilities:
Increase in accounts receivable, stockholder (5,921)
Increase in prepaid expenses (70,750)
Increase in accounts payable 8,848
Increase in accrued interest 16,934
-------------
Total adjustments (6,243)
-------------
Net cash used in operating activities (181,345)
-------------
INVESTING ACTIVITIES
Advances to related entity (161,000)
-------------
Net cash used in investing activities (161,000)
-------------
FINANCING ACTIVITIES
Borrowings on notes payable, third parties 2,167,385
Payments on loan payable, related entity (632,095)
Issuance of common stock 25
-------------
Net cash provided by financing activities 1,535,315
-------------
INCREASE IN CASH 1,192,970
CASH, BEGINNING OF PERIOD 0
-------------
CASH, END OF PERIOD $ 1,192,970
=============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of 2,160,000 preferred shares for purchase of land and building
from related entity $ 3,624,455
=============
Assumption of mortgage and taxes for purchase of land and building
from related entity $ 1,100,000
=============
Issuance of 6,000,000 preferred shares for purchase of intellectual property $ 15,000,000
=============
Issuance of 6,000,000 common shares for purchase of intellectual property
from related entity $ 1,756,857
=============
Assumption of loan payable for purchase of intellectual property
from related entity $ 800,000
=============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FROM INCEPTION (December 5, 2003) to June 30, 2004
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION
The Company incorporated as Innovative Energy Solutions, Inc. on December 5,
2003 in the state of Nevada as a start-up company, for the purpose of becoming a
diversified, full-service energy company. The Company is in good standing and
there are 75,000,000 authorized common shares and 10,000,000 authorized
preferred shares. The Company is seeking to obtain and develop innovative
intellectual property which can either produce energy at a low cost or save
energy for the end user. Once developed, the Company plans to have demonstrator
units built to prove the application of its designs. Once proven, the Company
plans to arrange a manufacturing and assembly plan in conjunction with a
marketing plan to sell the product.
On December 21, 2003 the Company issued 10 shares of its common stock to Ron
Foster ("Foster") who became the sole shareholder and director.
On December 22, 2003, the first meeting of the Board of Directors was held in
which three additional directors were appointed to serve along with Ron Foster.
The directors approved its By-Laws, appointed officers, approved salaries for
the officers and approved the 2004 Incentive and Non-Statutory Incentive Stock
Option Plan.
On March 24, 2004 the Company issued 2,160,000 preferred shares to Foster and
issued a $1,100,000 note for 5,000 shares of SBI Communications, Inc., an entity
wholly owned by Foster, and whose only asset was 18.7 acres of land and an
80,000 square foot commercial building in Piedmont, Alabama. The transaction was
valued at the seller's depreciated cost basis of $4,724,455. The preferred stock
issued was valued at $3,624,455 because the Company's accounting policy for
valuing non-monetary transactions with a related party required the transaction
be valued at the predecessors depreciable cost basis. The property was acquired
with the intent to be used for assembly of the Company's planned products for
sale.
On May 10, 2004 the Company entered into an Exclusive Distributorship Agreement
with Sunwoo Energy Technology Inc. and Koo Hyo Hwea to purchase 1,000 Heat Pipe
Heat Exchangers annually. The Company plans to sell the Heat Pipe Exchangers to
retailers and end users.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to Innovative Energy Solutions, Inc, an
Alberta, Canada Corporation, "IESI Canada", for equipment, intellectual property
and a licensing agreement valued at the cost basis of the seller which was
$2,556,858. Three of the Company's directors were shareholders of IESI Canada
and received 4,500,000 of the total 6,000,000 common shares issued. See the
Company's accounting policy for Non-monetary transactions.
On June 26, 2004 the Company acquired the rights to two patents which comprised
its Hydrogen Generation technology. The cost of the patents was $15 million
which was paid to a third party seller in an arms length non-monetary
transaction by the Company issuing 6,000,000 preferred shares valued at $2.50
per share. The preferred shares have a direct lien on the two patents with the
intellectual property and marketing rights in the event of the Dissolution,
Bankruptcy or Receivership of IESI, Nevada. The value of the shares issued in
this transaction was determined on the basis of cash sales of the Company's
capital stock occurring shortly after June 30, 2004 in accordance with the
Company's accounting policy for non-monetary transactions. The Company has
constructed a working demonstration unit based upon the patents and intends to
commercialize the technology within the next two years.
GOING CONCERN AND PLAN OF OPERATIONS
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and extinguishment of liabilities in the normal course of
business.
As shown in the accompanying financial statements, the Company had a net loss of
$179,897 since its inception and had a deficit in working capital of $2,030,432
as of June 30, 2004. The ability of the Company to continue as a going concern
is dependent on obtaining additional capital and financing and operating at a
profitable level.
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION - continued
The Company intends to seek additional capital either through debt or equity
offerings or a combination thereof, and to seek acquisitions which will generate
sales volume with operating margins sufficient to achieve profitability. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
PRICIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company which
owns all of the intellectual property and its wholly owned subsidiary SBI
Communications, Inc. which owns the land and building in Piedmont, Alabama. All
intercompany transactions are eliminated in consolidation.
CASH
Cash includes all short-term highly liquid investments that is readily
convertible to known amounts of cash and have original maturities of three
months or less. At times cash deposits may exceed government insured limits.
INTELLECTUAL PROPERTY
Intellectual properties have been acquired through the issuance of shares of the
Company's common and preferred stock. These intellectual properties are valued
at the estimated fair market value of the stock issued at the time of purchase,
or in the case of intellectual properties acquired from an affiliate or entity
under common control, the historical cost basis. The value of the common and
preferred stock is determined by the value assigned in third party transactions
and private placements occurring in July 2004. All stock issued in those
transactions contains regulatory restrictions, and in some cases contractual
restrictions, on transferability. Management has not assigned a defined life to
the intellectual properties and periodically analyzes the values of the
intellectual properties for impairment.
PROPERTY & EQUIPMENT
Property and equipment are stated at cost. Assets are depreciated using the
straight-line method for both financial statement and tax purposes based on the
following estimated useful lives:
Machinery and office equipment 7 years
Building 30 years
Maintenance and repairs are charged to expense when incurred.
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.
FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash, accounts receivable,
obligations under accounts payable, accrued expenses and notes payable. The
carrying amounts of cash, accounts receivable, accounts payable, accrued
expenses and notes payable approximate fair value because of the short term
maturity of those instruments.
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION - continued
NON-MONETARY TRANSACTIONS
The accounting for non-monetary assets is based on the fair values of the assets
involved. All non-monetary transactions with unaffiliated third parties are
valued at arms length. All non-monetary transactions with related parties are
valued at the predecessors depreciable cost basis for the asset received.
Cost of a non-monetary asset acquired in exchange for another non-monetary asset
is recorded at the fair value of the asset surrendered to obtain it. The fair
value of the asset received is used to measure the cost if it is more clearly
evident than the fair value of asset surrendered.
All non-monetary transactions involving the issuance of the Company's preferred
stock are valued the same as transactions involving the Company's common stock
since all preferred stock can convert to common stock on an equal share for
share basis.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the cost of long-lived
assets, primarily intellectual property and patents, may be impaired, the
Company performs a recoverability evaluation. If an evaluation is required, the
discounted estimated future cash flows associated with the assets is compared to
the assets' carrying amount to determine whether a write-down to fair value is
required.
The Company has adopted SFAS No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets" which requires that long-lived assets to be held and used
be reviewed by the Company for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
The Company evaluates its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted cash flows
expected to be generated by the asset. If assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amounts exceed the fair values of the assets. Assets to be disposed of are
reported at the lower of the Company's carrying values or fair values, less
costs of disposal.
STOCK OPTION PLAN
On December 22, 2003 the Company adopted its 2004 Incentive and Non-statutory
Stock Option Plan (the Plan) allowing for the issuance of incentive stock
options and non-statutory stock options to purchase an aggregate 2,500,000
shares of common stock to directors, officers, employees and consultants of the
Company. The Plan is administered by the Board of Directors.
The Plan provides that incentive stock options be granted at an exercise price
equal to the fair market value of the common shares of the Company on the date
of the grant and must be at least 110% of fair market value when granted to a
10% or more shareholder. The exercise term of all stock options granted under
the Plan may not exceed ten years, and no later than three months after
termination of employment, except the term of incentive stock options granted to
a 10% or more shareholder which may not exceed five years.
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation", ("SFAS 123") as amended by SFAS No. 148 "Accounting
for Stock-Based Compensation - Transition and Disclosure", established
accounting and disclosure requirements using a fair-value based method of
accounting for stock-based employee compensation. The Company periodically
issues options to consultants. The estimated value of these options is
determined in accordance with SFAS No. 123 and expensed as the granted options
vest to the grantees. In accordance with SFAS 123, the Company has elected to
account for stock based compensation using the intrinsic value method prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION - continued
From time to time, the Company issues stock options to executives, key employees
and members of the Board of Directors. Generally, when the Company grants stock
options to employees, there is no intrinsic value of those options on the date
of grant. Accordingly, no compensation cost has been recognized for stock
options granted to employees. There were no options granted to employees in the
period ended June 30, 2004 and therefore no pro-forma presentation is relevant.
The fair values of the options granted in the period end June 30, 2004, were
estimated at the date of grant using the minimum value method with the following
assumptions:
Dividend yield None
Volatility None
Risk free interest rate 3.75%
Expected asset life 5-10 years
The status of outstanding options granted pursuant to the 2004 Plan was as
follows:
Wtd. Average Weighted
Number of Exercise Average Fair
Shares Price Value
--------- ------------ ------------
Options outstanding at
June 30, 2004
(705,000 exercisable) 705,000 $ 5.19 $ .42
======== ============ ============
The Company's weighted average remaining contractual life of options outstanding
at June 30, 2004 was approximately 98 months.
These options were all granted in the period ended June 30, 2004 in connection
with the execution of licensing agreements and a consulting agreement.
The amount of expense recorded on the accompanying consolidated statement of
operations was $4,795.
As of June 30, 2004, there are a total of 95,000 shares granted at an exercise
price of $2.50, 90,000 at $3.50, 90,000 at $4.50, 90,000 at $5.50 and 340,000 at
$6.50.
The Company accounts for stock awards issued to nonemployees in accordance with
the provisions of SFAS 123 and Emerging Issues Task Force ("EITF") Issue No.
96-18 ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES
FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING GOODS OR SERVICES. Under SFAS 123
and EITF 96-18, stock awards to non-employees are accounted for at their fair
value as determined under the intrinsic value method.
INCOME TAXES
The Company has adopted the provisions of SFAS No. 109, "Accounting for Income
Taxes". SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
Company's financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences is expected to
reverse.
LOSS PER SHARE
(Loss) per common share is computed based on the Company's weighted average
number of common shares outstanding during each period. Convertible equity
instruments such as options are not considered in the calculation of net loss
per share, as their inclusion would be anti-dilutive.
Note 2 - LAND, BUILDING & EQUIPMENT
The Company purchased an 80,000 square foot industrial building on 18.7 acres of
land zoned for industrial use in Piedmont, Alabama on March 24, 2004 for a total
of $4,724,455, which was the seller's historical cost basis, of which $4,002,233
was allocated to the building. The property was acquired from an entity
considered to be under common control. The building is being depreciated on a
straight-line basis over 30 years from January 1, 1995 which is when the seller
originally acquired the building. Depreciation expense for the period ended June
30, 2004 was $33,352.
On May 15, 2004, the Company acquired equipment at the seller's historical cost
basis of $632,478 for oil remediation and clean up which it intends to lease.
The property was acquired from an entity considered to be under common control.
The equipment will be depreciated on a straight-line basis over 7 years.
Depreciation expense for the period ended June 30, 2004 was $11,294.
June 30, 2004
-------------
Oil remediation equipment $ 632,478
Building 4,002,233
Less: Accumulated depreciation (44,646)
Impairment loss --
-------------
Building & Equipment, net $ 4,590,065
18.7 Acres of Land, Piedmont, AL 722,222
-------------
LAND, BUILDING & EQUIPMENT, NET $ 5,312,287
=============
Depreciation expense was $44,646 since inception.
Note 3 - INTELLECTUAL PROPERTY
Since its inception, the Company has entered into numerous agreements to acquire
certain rights to various complex intellectual scientific properties.
Intellectual property on the accompanying balance sheet consists of the
following:
June 30, 2004
-------------
Patents acquired June 26, 2004 (see note 1) $ 15,000,000
Licensing agreement (see note 11) 986,880
Patents (see note 11) 937,500
-------------
Total $ 16,924,380
=============
The Company has not assigned a defined life to the intellectual property and
periodically analyzes its investment for impairment. The stages of development
in which the intellectual property is in make estimation of value or
determination of impairment a difficult task. There have been no substantive
revenues generated or value derived from the technology since its acquisition.
The Company has determined that there is no evidence that the book value of the
intellectual property is impaired. Management will determine the commercial
applications for these technologies over the next year and estimates the amount
and probability that they will produce adequate cash flow to support carrying
values.
Note 4 - NOTES PAYABLE, THIRD PARTIES
Since its inception the Company raised $2,167,385 under 182 individual note
agreements payable on demand with an interest rate of 3% per annum. Accrued
interest under these note agreements at June 30, 2004 was $8,074. It is
management's belief that the creditors have the desire and intent to convert
this debt into shares of the Company stock.
Note 5 - LOAN PAYABLE, RELATED ENTITY
On May 15, 2004 the Company incurred an $800,000 non-interest bearing debt
obligation to IESI Canada as part of a transaction in which the Company acquired
equipment, intellectual property and a licensing agreement. At June 30, 2004 the
Company owed IESI Canada $167,906 under the original agreement. As noted in
footnote 12, the remaining balance was forgiven.
Note 6 - NOTE PAYABLE, STOCKHOLDER
The Company issued a note for $1,100,000 to a director and significant
shareholder resulting from the acquisition of land and a building in Piedmont,
Alabama. The note is due in one balloon payment on or before April 1, 2005 with
accrued interest at 3% per annum. Accrued interest on the loan at June 30, 2004
was $8,860.
Note 7 - INCOME TAXES
The Company has not provided any current or deferred income tax provision or
benefit for any period presented because it has experienced operating losses
since inception and any benefit is offset by an equal valuation allowance. The
Company has provided a full valuation allowance because of the uncertainty
regarding the utilization of the net operating loss carry forwards. Differences
between financial reporting and tax purposes are minor, and no deferral has been
recorded for these amounts.
For the period
ended June 30,
--------------
2004
Current income tax benefit $ -0-
Deferred income tax benefit 72,000
--------------
Total current and deferred income tax benefit 72,000
--------------
Valuation allowance (72,000)
--------------
Benefit of income taxes $ -0-
==============
Income tax expense does not differ from amounts computed by applying the U.S.
Federal, statutory income tax rate of 34%. There is no statutory state income
tax rate. The realized net operating loss expires, as follows:
Expiration Federal
---------- -------------
2023 $ 179,897
-------------
Total net operating loss available $ 179,897
=============
Note 8 - COMMITMENTS
The Company has contractual obligations under the intellectual property
assignments for the Heat Pipe and Hydrogen Technologies to use its best efforts
and to devote such time as necessary to commercialize, promote and fully exploit
the technologies. In addition, it is obligated to devote such time as is
necessary to develop and provide sufficient funding for research and
development.
On May 10, 2004 the Company entered into an Exclusive Distributorship Agreement
with Sunwoo Energy Technology, Inc. to market and distributes Heat Pipe
Exchangers for domestic use. The Company must purchase 1,000 units annually from
Sunwoo in order to maintain its exclusivity and pay approximately $3,200 a month
as a distributorship fee for 24 months. As of June 30, 2004, the Company owed
$6,160 in distributor fees and had not ordered any units.
Note 8 - COMMITMENTS-continued
On June 30, 2004 the Company entered into an Exclusive Licensing Agreement with
WHMIS Inc. to commercialize any or all of its technologies which; (1)make
inexpensive distillation columns for waste oil processing plants, and; (2) to
produce low cost petroleum products from waste oil, plastic and tires and; (3)
converts waste oil to diesel fuel. The Company must pay a minimum annual royalty
of $25,000 commencing during the fiscal year ended June 30, 2006 with an annual
5% escalation or a royalty of 2% of the net sales of the products sold or used
annually beginning in the fiscal year of June 30, 2006.
Note 9 - STOCKHOLDERS' EQUITY
At June 30, 2004, the Company had 10,000,000 shares of $0.001 par value
preferred stock authorized and 8,160,000 shares of preferred stock issued and
outstanding. It also had 75,000,000 common shares of $.001 par value common
stock authorized and 6,000,010 common shares issued and outstanding.
Preferred Stock
On March 24, 2004 the Company issued 2,160,000 preferred shares to a director
and controlling shareholder at that time, and assumed a $1,100,000 debt for 18.7
acres of land consisting of an 80,000 square foot commercial building in
Piedmont, Alabama at the seller's historical depreciated cost basis of
$4,724,455.
On June 26, 2004 the Company acquired two patents with the intellectual property
and marketing rights which comprised its Hydrogen Generation technology. The
cost of the patents was $15 million which was paid to the seller with 6,000,000
preferred shares valued at $2.50 per share. The preferred shares have a direct
lien on the two patents with the intellectual property and marketing rights in
the event of the Dissolution, Bankruptcy or Receivership of IESI, Nevada.
The rights of preferred stockholders shall rank, as to dividends and upon
liquidation, senior and prior to the Corporation's common stock and to all other
classes or class of stock issued by the Corporation, except as otherwise
approved by the affirmative vote or consent of the holders of a majority of the
shares of the Preferred stock. Each share of preferred stock is entitled to one
vote. Any preferred stock issued may be cancelled and reissued as common stock
on a one share for one share basis unless the articles of incorporation
designate different rights and privileges.
The Board of Directors may establish one or more classes or series of common and
preferred stock by filing a certificate of amendment to a certificate of
designation with the Secretary of State. The amendment must state that no shares
of the newly formed class or series has been issued and must state the voting
powers, designations, preferences, limitations, restrictions and relative rights
of the class or series, as amended.
Common Stock
On December 21, 2003 the Company authorized issuance of 10 common shares to a
director for $25 of cash.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to IESI Canada, for equipment, intellectual
property and a licensing agreement. The shares were issued directly to the
shareholders of IESI Canada of which three of the shareholders were also
directors of the Company.
Note 10 - LOSS PER SHARE
At June 30, 2004, there were 705,000 outstanding options. Outstanding options
were not considered in the calculation for diluted earnings per share because
the effect of their inclusion would be anti-dilutive. A reconciliation of the
numerator and denominator of the basic and diluted per share calculations for
the loss from continuing operations is as follows:
Note 10 - LOSS PER SHARE-continued
2004
----------------------------------
Wtd. Avg.
Loss Shares Per share
---------- --------- ---------
Net (Loss) $ (179,897)
BASIC LOSS PER SHARE
Loss available to common
stockholders $ (179,897) 1,445,036 $ (.12)
Effect of dilutive securities N/A
DILUTED LOSS PER SHARE $ (.12)
Note 11 - RELATED PARTY TRANSACTIONS
On March 24, 2004 the Company issued 2,160,000 preferred shares to a director
and assumed a $1,100,000 debt for 18.7 acres of land consisting of an 80,000
square foot commercial building in Piedmont, Alabama at a deemed value of
$4,724,455. The transaction was valued in accordance with the Company's
accounting policy for non-monetary transactions.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to Innovative Energy Solutions, Inc, an
Alberta, Canada Corporation, "IESI Canada", for equipment, intellectual property
and licensing agreements. The transaction was valued in accordance with the
Company's accounting policy for non-monetary transactions. Three of the
Company's directors were also shareholders of IESI Canada and received 4,500,000
of the total 6,000,000 common shares issued. The Company received the following
in the transaction:
(a) A Licensing Agreement dated October 24, 2003 from Hyunik Yang and HY-EN
Research Ltd to IESI Canada valued at the seller's historical cost of $986,880;
and
(b) Eleven Romanian patents comprising the Heat Pipe Technology valued at the
sellers cost of $937,500; and
(c) Equipment intended to be used for oil remediation valued at the sellers cost
of $632,478.
At June 30, 2004, the Company had advanced IESI Canada $161,000 which was
subsequently converted into an 8% per annum interest bearing note receivable.
Note 12 - SUBSEQUENT EVENTS
On July 1, 2004 the Company entered into a three year consulting agreement to
assist in the commercializing of the intellectual property purchased from WHMIS
Inc. The agreement requires to Company to pay $100,000 Canadian dollars annually
to the consultant for three years until June 30, 2007.
On July 1, 2004, the Company entered into four employment agreements with
officers of the Company. The employment agreements obligate the Company to pay
$53,250 a month until their expiration on June 30, 2009. The Company also
entered into three employment agreements with consultants which obligate the
Company to pay approximately $16,700 month until their expiration on June 30,
2007.
On July 13, 2004, IESI Canada agreed to repay advances from the Company of up to
$236,000 from the Company at 8% per annum before December 31, 2004.
On September 22, 2004, the Company amended its original intellectual property
and licensing acquisition agreement with IESI Canada. The amendment changed the
cash obligation of the Company to IESI Canada from $800,000 to $629,089. This
amendment eliminated the remaining loan payable of $167,906 to IESI Canada at
June 30, 2004.
On October 13, 2004, the Company paid with cash, 14 demand notes held by note
holders without interest for the face amount of their notes in full which
amounted to $1,164,500.
Note 12 - SUBSEQUENT EVENTS-continued
Also from July 1, 2004 through December 16, 2004, the Company raised $2,130,825
from 271 note holders bearing interest at 3% per annum which are due and payable
upon demand.
On October 28, 2004, the Company advanced $50,000 to IESI Canada which brought
its total non-interest bearing advances receivable to $100,000 while its
interest bearing note remained at $236,000.
From July 1, 2004 through October 31, 2004, the Company issued a total of
147,320 restricted common shares of which 97,320 common shares were issued to 10
individuals for consulting services and 50,000 shares to an individual for
intellectual property.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
As of September 30, 2004
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,614,626
Accounts receivable, stockholder 17,352
Advances due from related entity 50,000
Note receivable, related entity 236,000
Note receivable, third party note holder 125,000
Inventories 23,253
Prepaid expenses and other current assets 69,888
------------
Total current assets 2,136,119
PROPERTY AND EQUIPMENT
Land, building and equipment, net 5,702,737
OTHER ASSETS
Intangible assets 16,953,468
------------
Total assets $ 24,792,324
============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,160
Accrued interest 52,917
Note payable, stockholder 1,100,000
Notes payable, third parties 3,886,410
------------
Total current liabilities 5,045,487
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000 shares
authorized, 8,160,000 issued and outstanding 8,160
Common stock, $.001 par value, 75,000,000 shares
authorized, 6,147,330 issued and outstanding 6,147
Additional paid-in capital 20,820,293
Deficit accumulated during development stage (1,087,763)
------------
Total stockholders' equity 19,746,837
------------
Total liabilities and stockholders' equity $ 24,792,324
============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
From
For the three December 5, 2003
months ended (inception) to
September 30, 2004 September 30, 2004
------------------ ------------------
OPERATING EXPENSES
Legal and accounting $ 96,483 $ 144,712
Contract services 191,250 191,250
Consulting 316,231 332,506
Depreciation 56,021 100,667
Other 216,184 269,998
------------------ ------------------
Total operating expenses 876,169 1,039,133
Net loss from operations (876,169) (1,039,133)
OTHER (INCOME) EXPENSE
Interest expense 35,985 52,918
Other (4,288) (4,288)
------------------ ------------------
Net other expense 31,697 48,630
Net loss $ (907,866) $ (1,087,763)
================== ==================
NET LOSS PER SHARE:
Basic and diluted $ (0.15) $ (0.37)
================== ==================
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 6,098,023 2,957,668
================== ==================
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM DECEMBER 5, 2003 (INCEPTION) TO SEPTEMBER 30, 2004
(UNAUDITED)
Deficit
Accumulated
Preferred Stock Common Stock Additional During Total
---------------------- --------------------- Paid-In Development Stockholders'
Shares Amount Shares Amount Capital Stage Equity
---------- --------- --------- --------- ------------ ----------- -------------
Issuance of common stock - $ 0 10 $ 0 $ 25 $ 0 $ 25
on December 21, 2003
Issuance of preferred stock 2,160,000 2,160 - 0 3,622,295 0 3,624,455
on March 24, 2004
Issuance of common stock - 0 6,000,000 6,000 1,750,857 0 1,756,857
on May 15, 2004
Issuance of preferred stock 6,000,000 6,000 - 0 14,994,000 0 15,000,000
on June 26, 2004
Issuance of stock options - 0 - 0 4,795 0 4,795
Net loss for the period ended - 0 - 0 0 (179,897) (179,897)
ended June 30, 2004
---------- --------- --------- --------- ------------ ----------- -------------
Balances as of June 30, 2004 8,160,000 8,160 6,000,010 6,000 20,371,972 (179,897) 20,206,235
Issuance of common stock for - 0 97,320 97 246,316 0 246,413
consulting services
Issuance of common stock - 0 50,000 50 199,950 0 200,000
on September 13, 2004
Issuance of stock options - 0 - 0 2,055 0 2,055
Net loss for the three months - 0 - 0 0 (907,866) (907,866)
ended September 30, 2004
---------- --------- --------- --------- ------------ ----------- -------------
Balances as of
September 30, 2004 8,160,000 $ 8,160 6,147,330 $ 6,147 $ 20,820,293 $(1,087,763) $ 19,746,837
========== ========= ========= ========= ============ =========== =============
The accompanying notes are an integral part of these financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
From
December 5,
For the three 2003
months ended (inception) to
September 30, September 30,
2004 2004
------------- ---------------
OPERATING ACTIVITIES
Net loss for the period $ (907,866) $ (1,087,763)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock compensation expense 2,055 6,850
Depreciation expense 56,021 100,667
Issuance of common stock for consulting services 246,413 246,413
Changes in assets and liabilities:
Increase in accounts receivable, stockholder (11,431) (17,352)
Decrease (increase) in prepaid expenses 862 (69,888)
Increase in inventories (23,253) (23,253)
Increase in accounts payable 318 6,160
Increase in accrued interest 35,983 52,917
------------- ---------------
Total adjustments 304,913 295,664
------------- ---------------
Net cash used in operating activities (600,898) (785,249)
INVESTING ACTIVITIES
Purchases of property and equipment (446,471) (446,471)
Advances and note receivable, related entity (125,000) (286,000)
------------- ---------------
Net cash used in investing activities (571,471) (732,471)
FINANCING ACTIVITIES
Issuance of common stock 0 25
Payments on loan payable, related entity 0 (629,089)
Borrowings on notes payable, third parties 1,594,025 3,761,410
------------- ---------------
Net cash provided by financing activities 1,594,025 3,132,346
INCREASE IN CASH 421,656 1,614,626
CASH, BEGINNING OF PERIOD 1,192,970 0
------------- ---------------
CASH, END OF PERIOD $ 1,614,626 $ 1,614,626
============= ===============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of 2,160,000 preferred shares for purchase of land and building
from related entity $ 0 $ 3,624,455
============= ==============
Assumption of mortgage and taxes for purchase of land and building
from related entity $ 0 $ 1,100,000
============= ==============
Issuance of 6,000,000 preferred shares for purchase of intellectual property $ 0 $ 15,000,000
============= ==============
Issuance of 6,000,000 common shares for purchase of intellectual property
from related entity $ 0 $ 1,756,857
============= ==============
Assumption of loan payable for purchase of intellectual property
from related entity $ 0 $ 800,000
============= ==============
Issuance of 50,000 common shares for purchase of intellectual property $ 200,000 $ 200,000
============= ==============
Forgiveness of loan payable for purchase of intellectual property from $ 170,912 $ 170,912
============= ==============
related entity
Assumption of marketable security in exchange for note payable, third party $ 125,000 $ 125,000
============= ==============
See accompanying notes to these consolidated financial statements.
INNOVATIVE ENERGY SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FROM INCEPTION (December 5, 2003) to September 30, 2004
UNAUDITED
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION
The Company incorporated as Innovative Energy Solutions, Inc. on December 5,
2003 in the state of Nevada as a start-up company, for the purpose of becoming a
diversified, full-service energy company. The Company is in good standing and
there are 75,000,000 authorized common shares and 10,000,000 authorized
preferred shares. The Company is seeking to obtain and develop innovative
intellectual property which can either produce energy at a low cost or save
energy for the end user. Once developed, the Company plans to have demonstrator
units built to prove the application of its designs. Once proven, the Company
plans to arrange a manufacturing and assembly plan in conjunction with a
marketing plan to sell the product.
On December 21, 2003 the Company issued 10 shares of its common stock to Ron
Foster ("Foster") who became the sole shareholder and director.
On December 22, 2003, the first meeting of the Board of Directors was held in
which three additional directors were appointed to serve along with Ron Foster.
The directors approved its By-Laws, appointed officers, approved salaries for
the officers and approved the 2004 Incentive and Non-Statutory Incentive Stock
Option Plan.
On March 24, 2004 the Company issued 2,160,000 preferred shares to Foster and
issued a $1,100,000 note for 5,000 shares of SBI Communications, Inc., an entity
wholly owned by Foster, and whose only asset was 18.7 acres of land and an
80,000 square foot commercial building in Piedmont, Alabama. The transaction was
valued at the seller's depreciated cost basis of $4,724,455. The preferred stock
issued was valued at $3,624,455 because the Company's accounting policy for
valuing non-monetary transactions with a related party required the transaction
be valued at the predecessors depreciable cost basis. The property was acquired
with the intent to be used for assembly of the Company's planned products for
sale.
On May 10, 2004 the Company entered into an Exclusive Distributorship Agreement
with Sunwoo Energy Technology Inc. and Koo Hyo Hwea to purchase 1,000 Heat Pipe
Heat Exchangers annually. The Company plans to sell the Heat Pipe Exchangers to
retailers and end users.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to Innovative Energy Solutions, Inc, an
Alberta, Canada Corporation, "IESI Canada", for equipment, intellectual property
and a licensing agreement valued at the cost basis of the seller which was
$2,556,858. Three of the Company's directors were shareholders of IESI Canada
and received 4,500,000 of the total 6,000,000 common shares issued. See the
Company's accounting policy for Non-monetary transactions.
On June 26, 2004 the Company acquired the rights to two patents which comprised
its Hydrogen Generation technology. The cost of the patents was $15 million
which was paid to a third party seller in an arms length non-monetary
transaction by the Company issuing 6,000,000 preferred shares valued at $2.50
per share. The preferred shares have a direct lien on the two patents with the
intellectual property and marketing rights in the event of the Dissolution,
Bankruptcy or Receivership of IESI, Nevada. The value of the shares issued in
this transaction was determined on the basis of cash sales of the Company's
capital stock occurring shortly after June 30, 2004 in accordance with the
Company's accounting policy for non-monetary transactions. The Company has
constructed a working demonstration unit based upon the patents and intends to
commercialize the technology within the next two years.
GOING CONCERN AND PLAN OF OPERATIONS
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and extinguishment of liabilities in the normal course of
business.
As shown in the accompanying financial statements, the Company had a net loss of
$1,087,763 since its inception and has a deficit in working capital of
$2,909,368 as of September 30, 2004. The ability of the Company to continue as a
going concern is dependent on obtaining additional capital and financing and
operating at a profitable
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION-continued
level. The Company intends to seek additional capital either through debt or
equity offerings, or a combination thereof, and to seek acquisitions which will
generate sales volume with operating margins sufficient to achieve
profitability. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
PRICIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company which
owns all of the intellectual property and its wholly owned subsidiary SBI
Communications, Inc. which owns the land and building in Piedmont, Alabama. All
intercompany transactions are eliminated in consolidation.
CASH
Cash includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less. At times cash deposits may exceed government insured limits.
INVENTORY
Inventory consists of heat pipe exchangers for domestic use and a heat generator
for commercial use which is held for resale, and is stated at the lower of cost
or market. The cost of inventory approximates the first-in, first-out ("FIFO")
method. Management performs periodic assessments to determine the existence of
obsolete, slow-moving and nonsalable inventory and records necessary provisions
to reduce such inventory to net realizable value.
INTELLECTUAL PROPERTY
Intellectual properties have been acquired through the issuance of shares of the
Company's common and preferred stock. These intellectual properties are valued
at the estimated fair market value of the stock issued at the time of purchase,
or in the case of intellectual property acquired from an affiliate or entity
under common control, the historical cost basis. The value of the common and
preferred stock is determined by the value assigned in third party transactions
and private placements occurring in July 2004. All stock issued in those
transactions contains regulatory restrictions, and in some cases contractual
restrictions, on transferability. Management has not assigned a defined life to
the intellectual properties and periodically analyzes the values of the
intellectual properties for impairment.
PROPERTY & EQUIPMENT
Property and equipment are stated at cost. Assets are depreciated using the
straight-line method for both financial statement and tax purposes based on the
following estimated useful lives:
Machinery and office equipment 5 to 7 years
Building 30 years
Maintenance and repairs are charged to expense when incurred.
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.
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION-continued
FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash, accounts receivable and
obligations under accrued expenses and notes payable. The carrying amounts of
cash, accounts receivable, accrued expenses and notes payable approximate fair
value because of the short term maturity of those instruments.
NON-MONETARY TRANSACTIONS
The accounting for non-monetary assets is based on the fair values of the assets
involved. All non-monetary transactions with unaffiliated third parties are
valued at arms length. All non-monetary transactions with related parties are
valued at the predecessors depreciable cost basis for the asset received.
Cost of a non-monetary asset acquired in exchange for another non-monetary asset
is recorded at the fair value of the asset surrendered to obtain it. The fair
value of the asset received is used to measure the cost if it is more clearly
evident than the fair value of asset surrendered.
All non-monetary transactions involving the issuance of the Company's preferred
stock are valued the same as transactions involving the Company's common stock
since all preferred stock can convert to common stock on an equal share for
share basis.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that the cost of long-lived
assets, primarily intellectual property and patents, may be impaired, the
Company performs a recoverability evaluation. If an evaluation is required, the
discounted estimated future cash flows associated with the assets are compared
to the assets' carrying amount to determine whether a write-down to fair value
is required.
The Company has adopted SFAS No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets" which requires that long-lived assets to be held and used
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
The Company evaluates its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted cash flows
expected to be generated by the asset. If assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amounts exceed the fair values of the assets. Assets to be disposed of are
reported at the lower of the Company's carrying values or fair values, less
costs of disposal.
STOCK OPTION PLAN
On December 22, 2003 the Company adopted its 2004 Incentive and Non-statutory
Stock Option Plan (the Plan) allowing for the issuance of incentive stock
options and non-statutory stock options to purchase an aggregate 2,500,000
shares of common stock to directors, officers, employees and consultants of the
Company. The Plan is administered by the Board of Directors.
The Plan provides that incentive stock options be granted at an exercise price
equal to the fair market value of the common shares of the Company on the date
of the grant and must be at least 110% of fair market value when granted to a
10% or more shareholder. The exercise term of all stock options granted under
the Plan may not exceed ten years, and no later than three months after
termination of employment, except the term of incentive stock options granted to
a 10% or more shareholder which may not exceed five years.
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation", ("SFAS 123") as amended by SFAS No. 148 "Accounting
for Stock-Based Compensation - Transition and Disclosure", established
accounting and disclosure requirements using a fair-value based method of
accounting for stock-based employee
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION-continued
compensation. The Company periodically issues options to consultants. The
estimated value of these options is determined in accordance with SFAS No. 123
and expensed as the granted options vest to the grantees. In accordance with
SFAS 123, the Company has elected to account for stock based compensation using
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees."
From time to time, the Company issues stock options to executives, key employees
and members of the Board of Directors. Generally, when the Company grants stock
options to employees, there is no intrinsic value of those options on the date
of grant. Accordingly, no compensation cost has been recognized for stock
options granted to employees. There were no options granted to employees in the
period ended September 30, 2004, and therefore no pro-forma presentation is
relevant.
The fair values of the options granted in the period end September 30, 2004,
were estimated at the date of grant using the minimum value method with the
following assumptions:
Dividend yield None
Volatility None
Risk free interest rate 3.75%
Expected asset life 5-10 years
The status of outstanding options granted pursuant to the 2004 Plan was as
follows:
Wtd. Average Weighted
Number of Exercise Average Fair
Shares Price Value
--------- ------------ ------------
Options outstanding at
September 30, 2004
(705,000 exercisable) 705,000 $5.19 $.42
========= ============ ============
The Company's weighted average remaining contractual life of options outstanding
at September 30, 2004 was approximately 95 months.
These options were all granted in the period ended June 30, 2004 in connection
with the execution of licensing agreements and a consulting agreement.
The amount of expense recorded on the accompanying consolidated statement of
operations was $4,795 for the period ended June 30, 2004 and $2,055 for the
period ended September 30, 2004.
As of September 30, 2004, there are a total of 95,000 shares granted at an
exercise price of $2.50, 90,000 at $3.50, 90,000 at $4.50, 90,000 at $5.50 and
340,000 at $6.50.
The Company accounts for stock awards issued to nonemployees in accordance with
the provisions of SFAS 123 and Emerging Issues Task Force ("EITF") Issue No.
96-18 ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES
FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING GOODS OR SERVICES. Under SFAS 123
and EITF 96-18, stock awards to non-employees are accounted for at their fair
value as determined under the intrinsic value method.
INCOME TAXES
The Company has adopted the provisions of SFAS No. 109, "Accounting for Income
Taxes". SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION-continued
LOSS PER SHARE
(Loss) per common share is computed based on the weighted average number of
common shares outstanding during each period. Convertible equity instruments
such as options are not considered in the calculation of net loss per share, as
their inclusion would be anti-dilutive.
Note 2 - NOTE RECEIVABLE
The Company has a note receivable from IESI Canada for $236,000 which accrues
interest at 8% per annum and is due and payable in full on or before January 8,
2005. There was $4,138 of accrued interest receivable on the note at September
30, 2004.
Note 3 - NOTE RECEIVABLE, THIRD PARTY NOTEHOLDER
The Company has a $125,000 receivable secured by marketable securities at
September 30, 2004.
During the quarter ended September 30, 2004, the Company received 141,177 common
shares of Whistler Investments Inc. from a note-holder as collateral for the
Company's $125,000 note obligation to the note-holder. The Company plans to sell
the common shares during January of 2005 if the note-holder does not tender
$125,000 of cash prior to December 31, 2004. In the event the shares are sold,
the Company will return all cash in excess of $125,000 to the note-holder.
The estimated fair value of the 141,177 common shares of Whistler Investments
Inc. held by the Company was $446,119 which was estimated based on the quoted
trading price of the security at September 30, 2004.
Note 4 - INTELLECTUAL PROPERTY
Since its inception, the Company has entered into numerous agreements to acquire
certain rights to various complex intellectual scientific properties.
Intellectual property on the accompanying balance sheet consists of the
following:
September 30,
2004
-------------
Patents acquired June 26, 2004 (see note 1) $ 15,000,000
Licensing agreement (see note 12) 986,880
Patents (see note 12) 937,500
Other intellectual property (below) 200,000
Reduction in purchase price (see note 12) (170,912)
-------------
Total $ 16,953,468
=============
On September 13, 2004, the Company acquired intellectual property from an
individual pertaining to deep oil refining and a compatible hydrogen generation
technology for 50,000 restricted common shares valued at $200,000.
The Company has not assigned a definite life to the intellectual property and
periodically analyzes its investment for impairment. The stages of development
in which the intellectual property is in make estimation of value or
determination of impairment a difficult task. There have been no substantive
revenues generated or value derived from the technology since its acquisition.
The Company has determined that there is no evidence that the book value of the
intellectual property is impaired. Management will determine the commercial
applications for these technologies over the next year and estimates the amount
and probability that they will produce adequate cash flow to support carrying
values.
Note 5 - LAND, BUILDING & EQUIPMENT
The Company purchased an 80,000 square foot industrial building on 18.7 acres of
land zoned for industrial use in Piedmont, Alabama on March 24, 2004 for a total
of $4,724,455, which was the seller's historical cost basis, of which $4,002,233
was allocated to the building. The property was acquired from an entity
considered to be under common control. The building is being depreciated on a
straight-line basis over 30 years from January 1, 1995 which is when the seller
originally acquired the building. Depreciation expense for the three month
period ended September 30, 2004 was $33,352 and accumulated depreciation was
$66,704.
On May 15, 2004, the Company acquired equipment at the seller's historical cost
basis of $632,478 for oil remediation and clean up which it intends to lease.
The equipment will be depreciated on a straight-line basis over 7 years.
Depreciation expense for the three month period ended September 30, 2004 was
$22,589 and accumulated depreciation was $33,883.
During the three months ended September 30, 2004, the Company purchased office
equipment totaling $6,896 which was depreciated on a straight line basis over
five years. Depreciation expense for the three month period ended September 30,
2004 was $80.
September 30,
2004 June 30, 2004
------------- --------------
Computers & office equipment $ 6,896 $ 0
Oil remediation equipment 632,478 632,478
Building 4,002,233 4,002,233
Less: Accumulated depreciation (100,667) (44,646)
Impairment loss -- --
------------- --------------
Building & Equipment, net $ 4,540,940 $ 4,590,065
18.7 Acres of Land, Piedmont, AL 722,222 722,222
Demonstration units 439,575 0
------------- --------------
LAND, BUILDING & EQUIPMENT, NET $ 5,702,737 $ 5,312,287
============= ==============
Depreciation expense for the three months ended September 30, 2004 was $56,021
and accumulated depreciation was $100,667 since inception.
Note 6 - NOTES PAYABLE, THIRD PARTIES
Since its inception the Company raised $3,886,410 under 393 individual note
agreements payable upon demand with an interest rate of 3% per annum. Accrued
interest under these note agreements at September 30, 2004 was $35,740. It is
management's belief that the creditors have the desire and intent to convert
this debt into shares of the Company stock.
Note 7 - NOTE PAYABLE, STOCKHOLDER
The Company issued a note for $1,100,000 to a director and significant
shareholder resulting from the acquisition of land and a building in Piedmont,
Alabama. The note is due in one balloon payment on or before April 1, 2005 with
accrued interest at 3% per annum. Accrued interest on the loan at September 30,
2004 was $17,178.
Note 8 - INCOME TAXES
The Company has not provided any current or deferred income tax provision or
benefit for any period presented because it has experienced operating losses
since inception and any benefit is affected by an equal valuation allowance. The
Company has provided a full valuation allowance because of the uncertainty
regarding the utilization of the net operating loss carry forwards. Differences
between financial reporting and tax purposes are minor, and no deferral has been
recorded for these amounts.
For the period
ended
September 30,
--------------
2004
Current income tax benefit $ -0-
Deferred liability for amortization difference (76,000)
Deferred asset for net operating loss 511,000
--------------
Total net deferred income asset (long-term) 435,000
--------------
Valuation allowance (435,000)
--------------
Benefit of income taxes $ -0-
==============
Income tax expense does not differ from amounts computed by applying the U.S.
Federal, statutory income tax rate of 34%. There is no statutory state income
tax rate. The realized net operating loss expires, as follows:
Expiration Federal
---------- -----------
2023 $ 1,277,696
-----------
Total net operating loss available $ 1,277,696
===========
Note 9 - COMMITMENTS
The Company has contractual obligations under the intellectual property
assignments for the Heat Pipe and Hydrogen Technologies to use its best efforts
and to devote such time as necessary to commercialize, promote and fully exploit
the technologies. In addition, it is obligated to devote such time as is
necessary to develop and provide sufficient funding for research and
development.
On May 10, 2004 the Company entered into an Exclusive Distributorship Agreement
with Sunwoo Energy Technology, Inc. to market and distributes Heat Pipe
Exchangers for domestic use. The Company must purchase 1,000 units annually from
Sunwoo in order to maintain its exclusivity and pay approximately $3,200 a month
as a distributorship fee for 24 months. As of September 30, 2004, the Company
had made three distributor fee payments totaling $9,297 and owed an additional
$6,160. It also purchased 200 units for $23,253 during the quarter ended
September 30, 2004.
On June 30, 2004 the Company entered into an Exclusive Licensing Agreement with
WHMIS Inc. to commercialize any or all of its technologies which; (1)make
inexpensive distillation columns for waste oil processing plants, and; (2) to
produce low cost petroleum products from waste oil, plastic and tires and; (3)
converts waste oil to diesel fuel. The Company must pay a minimum annual royalty
of $25,000 commencing during the fiscal year ended June 30, 2006 with an annual
5% escalation or a royalty of 2% of the net sales of the products sold or used
annually beginning in the fiscal year of June 30, 2006.
The Company is obligated under seven employment agreements which require monthly
payments of approximately $69,950 through June 30, 2007 and then monthly
payments of $53,250 through June 30, 2009.
Note 10 - STOCKHOLDERS' EQUITY
At September 30, 2004, the Company had 10,000,000 shares of $0.001 par value
preferred stock authorized and 8,160,000 shares of preferred stock issued and
outstanding. It also had 75,000,000 common shares of $.001 authorized and
6,147,330 common shares issued and outstanding.
Note 10 - STOCKHOLDERS' EQUITY-continued
Preferred Stock
On March 24, 2004 the Company issued 2,160,000 preferred shares to a director
and controlling shareholder at that time, and assumed a $1,100,000 debt for 18.7
acres of land consisting of an 80,000 square foot commercial building in
Piedmont, Alabama at the seller's historical depreciated cost basis of
$4,724,455.
On June 26, 2004 the Company acquired two patents with the intellectual property
and marketing rights which comprised its Hydrogen Generation technology. The
cost of the patents was $15 million which was paid to the seller with 6,000,000
preferred shares valued at $2.50 per share. The preferred shares have a direct
lien on the two patents with the intellectual property and marketing rights in
the event of the Dissolution, Bankruptcy or Receivership of IESI, Nevada.
The rights of preferred stockholders shall rank, as to dividends and upon
liquidation, senior and prior to the Corporation's common stock and to all other
classes or class of stock issued by the Corporation, except as otherwise
approved by the affirmative vote or consent of the holders of a majority of the
shares of the Preferred stock. Each share of preferred stock is entitled to one
vote. Any preferred stock issued may be cancelled and reissued as common stock
on a one share for one share basis unless the articles of incorporation
designate different rights and privileges.
The Board of Directors may establish one or more classes or series of common and
preferred stock by filing a certificate of amendment to a certificate of
designation with the Secretary of State. The amendment must state that no shares
of the newly formed class or series has been issued and must state the voting
powers, designations, preferences, limitations, restrictions and relative rights
of the class or series, as amended.
Common Stock
On December 21, 2003 the Company authorized issuance of 10 common shares to a
director for $25 of cash.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to IESI Canada, for equipment, intellectual
property and a licensing agreement. The shares were issued directly to the
shareholders of IESI Canada of which three of the shareholders were also
directors of the Company.
On July 9, 2004, the Company issued 95,245 restricted common shares for
consulting services to eight persons at a deemed value of $238,113.
On August 2, 2004, Company issued 1,875 restricted common shares for consulting
services to one person at a deemed value of $7,500.
On September 1, 2004, Company issued 200 restricted common shares for consulting
services to one person at a deemed value of $800.
On September 13, 2004, Company issued 50,000 restricted common shares for
consulting services to one person at a deemed value of $200,000.
Note 11 - LOSS PER SHARE
At September 30, 2004, there were 705,000 outstanding options. Outstanding
options were not considered in the calculation for diluted earnings per share
because the effect of their inclusion would be antidilutive. A reconciliation of
the numerator and denominator of the basic and diluted per share calculations
for the loss from continuing operations is as follows:
Note 11 - LOSS PER SHARE-continued
2004
----------------------------------
Loss Shares Per share
---------- --------- ---------
Net (Loss) $ (907,866)
BASIC LOSS PER SHARE
Loss available to common
stockholders $ (907,866) 6,098,023 $ (.15)
Effect of dilutive securities N/A
DILUTED LOSS PER SHARE $ (.15)
Note 12 - RELATED PARTY TRANSACTIONS
On March 24, 2004 the Company issued 2,160,000 preferred shares to a director
and assumed a $1,100,000 debt for 18.7 acres of land consisting of an 80,000
square foot commercial building in Piedmont, Alabama at a deemed value of
$4,724,455. The transaction was valued in accordance with the Company's
accounting policy for non-monetary transactions.
On May 15, 2004 the Company authorized the issuance of 6,000,000 restricted
common shares and $800,000 of debt to Innovative Energy Solutions, Inc, an
Alberta, Canada Corporation, "IESI Canada", for equipment, intellectual property
and licensing agreements. The transaction was valued in accordance with the
Company's accounting policy for non-monetary transactions. Three of the
Company's directors were also shareholders of IESI Canada and received 4,500,000
of the total 6,000,000 common shares issued. The Company received the following
in the transaction:
(a) A Licensing Agreement dated October 24, 2003 from Hyunik Yang and HY-EN
Research Ltd to IESI Canada valued at the seller's historical cost of $986,880;
and
(b) Eleven Romanian patents comprising the Heat Pipe Technology valued at the
sellers cost of $937,500; and
(c) Equipment intended to be used for oil remediation valued at the sellers cost
of $632,478.
On July 13, 2004 the Company received a $236,000 note from IESI Canada for
advances. The note accrues interest at 8% per annum and is due and payable in
full on or before January 8, 2005. During the quarter ended September 30, 2004,
the Company advanced an additional $50,000 to IESI Canada without interest which
is due and payable upon the Company's demand.
On September 22, 2004, the Company amended its original intellectual property
and licensing acquisition agreement with IESI Canada. The amendment changed the
cash obligation of the Company to IESI Canada from $800,000 to $629,088. This
amendment eliminated the remaining loan payable of $167,906 to IESI Canada at
June 30, 2004.
Note 13 - SUBSEQUENT EVENTS
On October 13, 2004, the Company paid with cash, 14 demand notes held by note
holders without interest for the face amount of their notes in full which
amounted to $1,164,500.
Also during October 2004, the Company raised $25,800 from five note holders
bearing interest at 3% per annum which are due and payable upon demand.
On October 28, 2004, the Company advanced $50,000 to IESI Canada which brought
its total non-interest bearing advances receivable to $100,000 while its
interest bearing note remained at $236,000.
PART III
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.138 of the Nevada Revised Statute permits a corporation to include in
its Articles of Incorporation provisions eliminating or limiting the personal
liability of directors for monetary damages in an action brought by or in the
right of the corporation for breach of a director's fiduciary duties, subject to
certain limitations. Section 78.7502 of the Nevada Revised Statute requires a
corporation to indemnify its directors and other agents to the extent they incur
expenses in successfully defending lawsuits brought against them by reason of
their status as directors or agents. Section 78.7502(3) also permits a
corporation to indemnify its directors and other agents to a greater extent than
specifically required by law.
Our Articles of Incorporation, as amended, eliminate the personal liability of
directors of our company for monetary damages to the fullest extent permissible
under Nevada law. Article VI of our Bylaws requires that we, to the maximum
extent permitted by Nevada law, indemnify each of our agents against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact such person is
or was our agent. The term "agent" includes any person who (i) is or was a
director, officer, employee or other agent of our company, (ii) is or was
serving at our request , as a director, officer, employee or agent of another
business entity or (iii) was a director, officer, employee or agent of a
corporation which was a predecessor corporation of our company or of another
enterprise at the request of such predecessor corporation.
The effect of these provisions in our Articles of Incorporation and Bylaws is to
eliminate the rights of our company and shareholders (through shareholders
derivative suits on behalf of our company) to recover monetary damages against a
director except as limited by Nevada law. These provisions do not limit or
eliminate the rights of our company or any shareholders to seek non-monetary
relief. In any proceeding arising by reason of the fact a person is or was an
agent of our company, the agent will be indemnified if he or she acted in good
faith and in a manner the person reasonably believed to be in the best interests
of the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe the conduct of the person was unlawful. There can be no
indemnification with respect to any matter as to which the agent is adjudged to
be liable to our company, unless and only to the extent that the court in which
such proceeding was brought determines upon application that, in view of all of
the circumstances of the case, the agent is fairly and reasonably entitled to
indemnity for expenses as the court shall deem proper.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
NATURE OF EXPENSE AMOUNT
----------------- ------------
SEC registration fee $ 298.25
Accounting fees and expenses $ 50,000.00
Legal fees and expenses $ 15,000.00
Printing and related expenses $ 5,000.00
TOTAL $ 70,298.25
* Estimated.
Page II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 9, 2004, pursuant to action of our Board of Directors, 45,000 shares of
our common stock were issued to Ron Johnson pursuant to Johnson having
contributed special financial marketing services in lieu of cash consideration
to our company as part of Johnson's consulting agreement
with us. The share issuance was exempt under Section 4(2) of the Securities Act.
Mr. Johnson had access to information about our company and the shares contain
the appropriate legend restricting their transferability absent registration or
an available exemption.
On July 9, 2004, pursuant to action of our Board of Directors, 25,120 shares of
our common stock were issued to Patrick Starr pursuant to Starr having
contributed special financial marketing services in lieu of cash consideration
to our company as part of Starr's consulting agreement with us. The share
issuance was exempt under Section 4(2) of the Securities Act. Mr. Starr had
access to information about our company and the shares contain the appropriate
legend restricting their transferability absent registration or an available
exemption.
On July 9, 2004, pursuant to action of our Board of Directors, 13,525 shares of
our common stock were issued to two individuals as directed by 114238 Alberta
Limited pursuant to that entity's having contributed special financial marketing
services in lieu of cash consideration to our company as part of 114238
Alberta's consulting agreement with the Company. The share issuance was exempt
under Section 4(2) of the Securities Act. 114238 Alberta had access to
information about our company and the shares contain the appropriate legend
restricting their transferability absent registration or an available exemption.
On July 9, 2004, pursuant to action of our Board of Directors, 3,400 shares of
our common stock were issued to Jason Park pursuant to Park's having contributed
special financial marketing services in lieu of cash consideration to our
company as part of Park's consulting agreement with us. The share issuance was
exempt under Section 4(2) of the Securities Act. Mr. Park had access to
information about our company and the shares contain the appropriate legend
restricting their transferability absent registration or an available exemption.
On July 9, 2004, pursuant to action of our Board of Directors, 7,600 shares of
our common stock were issued to Roy Ferguson pursuant to Ferguson's having
contributed special financial marketing services in lieu of cash consideration
to our company as part of Ferguson's consulting agreement with us. The share
issuance was exempt under Section 4(2) of the Securities Act. Mr. Ferguson had
access to information about our company and the shares contain the appropriate
legend restricting their transferability absent registration or an available
exemption.
On July 9, 2004, pursuant to action of our Board of Directors, 600 shares of the
our common stock were issued to Richard Dureault pursuant to Dureault's having
contributed special financial marketing services in lieu of cash consideration
to our company as part of Dureault's consulting agreement us. The share issuance
was exempt under Section 4(2) of the Securities Act. Mr. Dureault had access to
information about our company and the shares contain the appropriate legend
restricting their transferability absent registration or an available exemption.
On August 2, 2004, pursuant to action of our Board of Directors, 1,875 shares of
our common stock were issued to 114238 Alberta Limited pursuant to that entity's
having contributed special financial marketing services in lieu of cash
consideration to our company as part of 114238 Alberta's consulting agreement
with us. The share issuance was exempt under Section 4(2) of the Securities Act.
114238 Alberta had access to information about our company and the shares
contain the appropriate legend restricting their transferability absent
registration or an available exemption.
On September 1, 2004, pursuant to action of our Board of Directors of the
Company, 200 shares of our common stock were issued to Roy Ferguson pursuant to
Ferguson's having contributed special financial marketing services in lieu of
cash consideration to our company as part of Ferguson's consulting agreement
with us. The share issuance was exempt under Section 4(2) of the Securities Act.
Mr. Ferguson had access to information about our company and the shares contain
the appropriate legend restricting their transferability absent registration or
an available exemption.
On September 13, 2004, pursuant to action of our Board of Directors of the
Company, 50,000 shares of our common stock were issued to Evgeny Krasailnikov
pursuant to the acquisition of intellectual property pertaining to removing
contaminants from crude oil and hydrogen generation. The share issuance was
exempt under Section 4(2) of the Securities Act. Mr. Krasailnikov had access to
information about our company and the shares contain the appropriate legend
restricting their transferability absent registration or an available exemption.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit # Description of Document
3.1 Articles of Incorporation and Amendment # 1 to Articles of
Incorporation
3.2 By-Laws of the Corporation
4.1 Rights of common stockholders
5.1 Opinion on legality from The O'Neal Law Firm, P.C.
10.1 Executive Employment Agreement for Ronald C. Foster dated June 21,
2004
10.2 Executive Employment Agreement for Terry Dingwall dated June 21,
2004
10.3 Executive Employment Agreement for Stephen P. Monaco dated June 18,
2004
10.4 Executive Employment Agreement for Patrick J. Cochrane dated June
21, 2004
10.5 Employment Agreement for Trevor Park dated July 1, 2004
10.6 Employment Agreement for Alain Liberty dated July 1, 2004
10.7 2004 Incentive and Nonstatutory Stock Option Plan
10.8 Purchase Agreement for Patents, Licenses Trademarks, Assignments and
all other intellectual properties with Innovative Energy Solutions,
Inc., a Alberta, Canada Corporation dated May 15, 2004.
10.9 Employment Agreement for Norman Arrison dated July 1, 2004
10.10 Research & Development And Intellectual Property Assignment
Agreement from Dr. Hyunik Yang dated June 26, 2004.
10.11 Exclusive Distributorship Agreement from Sun woo Energy Technology,
Inc. and Koo Hyo Hwea dated May 10, 2004.
10.12 Purchase Agreement dated March 25,2004 with SBI COmmunications, Inc.
23.1 Consent of Epstein Weber & Conover, PLC, Certified Public
Accountants
ITEM 28. UNDERTAKINGS
The undersigned Registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the
Securities Act of 1933;
(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 the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or preceding) 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 and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on this Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Las Vegas, Nevada, on December 23, 2004, 2004
INNOVATIVE ENERGY SOLUTIONS, INC.
BY:/s/ PATRICK J. COCHRANE
----------------------------
PATRICK J. COCHRANE,
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ PATRICK J. COCHRANE CHIEF EXECUTIVE OFFICER December 23, 2004
---------------------------- (PRINCIPAL EXECUTIVE OFFICER)
PATRICK J. COCHRANE
/S/ TERRY DINGWALL PRESIDENT, DIRECTOR December 23, 2004
----------------------------
TERRY DINGWALL
/S/ RONALD FOSTER TREASURER December 23, 2004
---------------------------- AND DIRECTOR
RONALD FOSTER (PRINCIPAL FINANCIAL OFFICER)
/S/ FRED DORNAN DIRECTOR December 23, 2004
----------------------------
FRED DORNAN
EXHIBIT 5.1
Legal Opinion and Consent of Counsel
THE O'NEAL LAW FIRM, P.C.
668 North 44th Street, Suite 233
Phoenix, Arizona 85008
(602) 267-3855
(602) 267-7400 (fax)
OPINION OF COUNSEL AND CONSENT OF COUNSEL
TO: Board of Directors
Innovative Energy Solutions, Inc.
RE: Registration Statement on Form SB-2
Gentlemen:
As counsel to Innovative Energy Solutions, Inc., a Nevada
corporation (the "Company"), we have participated in the preparation of the
Company's Registration Statement on Form SB-2 filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, relating
to the registration of 941,604 shares of the Company's $0.001 par value common
stock on behalf of the Company's existing shareholders. As counsel to the
Company, we have examined such corporate records, certificates and other
documents of the Company, and made inquiries of such officers of the Company, as
we have deemed necessary or appropriate for purposes of this opinion. We have
also examined the applicable laws of the State of Nevada, provisions of the
Nevada Constitution, and reported judicial decisions interpreting such laws.
Based upon such examinations, we are of the opinion that the shares of the
Company's common stock to be offered pursuant to the Registration Statement have
been validly issued, fully paid and are non-assessable shares of the shares of
the common stock of the Company. We hereby consent to the inclusion of this
Opinion as an exhibit to the Registration Statement on Form SB-2 filed by the
Company and the reference to our firm contained therein under "Legal Matters".
Sincerely,
/s/ THE O'NEAL LAW FIRM, P.C.
Phoenix, Arizona
DATED: December 23, 2004.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
WE CONSENT TO THIS REGISTRATION STATEMENT INNOVATIVE ENERGY SOLUTIONS,
INC. ON FORM SB-2 OF OUR REPORT DATED OCTOBER 22, 2004, WITH RESPECT TO OUR
AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS OF INNOVATIVE ENERGY SOLUTIONS,
INC. AS OF JUNE 30, 2004 AND THE PERIOD FROM DECEMBER 5, 2003 (DATE OF
INCEPTION) TO JUNE 30, 2004 INCLUDED IN THE PROSPECTUS, WHICH IS PART OF THIS
REGISTRATION STATEMENT, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
The name of the Corporation is to be Innovative Energy Solutions, Inc.
ARTICLE II
REGISTERED AGENT
The address of the initial resident office of the Corporation will be at
4535 West Sahara, Ave. , Las Vegas, Nevada 89703. The name of the initial
resident agent at such address is Eastbiz.com, Inc.
ARTICLE III
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is seventy-five million (75,000,000) shares having a
par value of one tenth of one cent ($.001) each.
ARTICLE IV
INCORPORATING DIRECTOR
The incorporating director shall be Ronald Foster at 103 Firetower Rd.,
Leesburg, Georgia 31763.
IN WITNESS WHEREOF, the above-named incorporator has hereunto set his hand and
seal this 5th day of December, 2003.
Ronald Foster
Ronald Foster, Incorporator
Filed # C30068-03
August 2, 2004
AMENDMENT # 1 TO
ARTICLES OF INCORPORATION
OF
INNOVATIVE ENERGY SOLUTIONS, INC.
ARTICLE III
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is eighty-five million (85,000,000) shares of which
seventy-five million (75,000,000) shares shall be designated common stock,
having a par value of one tenth of one cent ($.001) each, and of which ten
million (10,000,000) shares shall be designated preferred stock of the
Corporation, having a par value of one cent ($.001) each.
The undersigned affirmatively declare that to the date of this certificate, no
stock of the corporation has been issued.
Ronald Foster
Ronald Foster, Incorporator
BY-LAWS
OF
A Nevada Corporation
ARTICLE I - OFFICES
The registered office of the Corporation in the State of Nevada shall be
located in the City and State designated in the Articles of Incorporation. The
Corporation may also maintain offices at such other places within or without
the State of Nevada as the Board of Directors may, from time to time,
determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings: (Chapter 78.310)
The annual meeting of the shareholders of the Corporation shall be held at the
time fixed, from time to time, by the Directors.
Section 2 - Special Meetings: (Chapter 78.310)
Special meetings of the shareholders may be called by the Board of Directors or
such person or persons authorized by the Board of Directors and shall be held
within or without the State of Nevada.
Section 3 - Place of Meetings: (Chapter 78.310)
Meetings of shareholders shall be held at the registered office of the
Corporation, or at such other places, within or without the State of Nevada as
the Directors may from time to time fix. If no designation is made, the
meeting shall be held at the Corporation's registered office in the state of
Nevada.
Section 4 - Notice of Meetings: (Section 78.370)
(a) Written or printed notice of each meeting of shareholders, whether annual
or special, signed by the president, vice president or secretary, stating the
time when and place where it is to be held, as well as the purpose or purposes
for which the meeting is called, shall be served either personally or by mail,
by or at the direction of the president, the secretary, or the officer or
the person calling the meeting, not less than ten or more than sixty days
before the date of the meeting, unless the lapse of the prescribed time shall
have been waived before or after the taking of such action, upon each
shareholder of record entitled to vote at such meeting, and to any other
shareholder to whom the giving of notice may be required by law. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail, addressed to the shareholder as it appears on the share transfer records
of the Corporation or to the current address, which a shareholder has delivered
to the Corporation in a written notice.
*Unless otherwise stated herein all references to Sections in these Bylaws
refer to those sections contained in Title 78 of the Nevada Private
Corporations Law.
(b) Further notice to a shareholder is not required when notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to him or her during the period
between those two consecutive annual meetings; or all, and at least two
payments sent by first-class mail of dividends or interest on securities during
a 12-month period have been mailed addressed to him or her at his or her
address as shown on the records of the Corporation and have been returned
undeliverable.
Section 5 - Quorum: (Section 78.320)
(a) Except as otherwise provided herein, or by law, or in the Articles of
Incorporation (such Articles and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation"), a quorum shall be
present at all meetings of shareholders of the Corporation, if the holders of a
majority of the shares entitled to vote on that matter are represented at the
meeting in person or by proxy.
(b) The subsequent withdrawal of any shareholder from the meeting, after the
commencement of a meeting, or the refusal of any shareholder represented in
person or by proxy to vote, shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(c) Despite the absence of a quorum at any meeting of shareholders, the
shareholders present may adjourn the meeting.
Section 6 - Voting and Acting: (Section 78.320 & 78.350)
(a) Except as otherwise provided by law, the Articles of Incorporation, or
these Bylaws, any corporate action, the affirmative vote of the majority of
shares entitled to vote on that matter and represented either in person or by
proxy at a meeting of shareholders at which a quorum is present, shall be the
act of the shareholders of the Corporation.
(b) Except as otherwise provided by statute, the Certificate of Incorporation,
or these bylaws, at each meeting of shareholders, each shareholder of the
Corporation entitled to vote thereat, shall be entitled to one vote for each
share registered in his name on the books of the Corporation.
(c) Where appropriate communication facilities are reasonably available, any or
all shareholders shall have the right to participate in any shareholders'
meeting, by means of conference telephone or any means of communications by
which all persons participating in the meeting are able to hear each other.
Section 7 - Proxies: (Section 78.355)
NV Bylaws-#
Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so either in person or by proxy, so long as such proxy is
executed in writing by the shareholder himself, his authorized officer,
director, employee or agent or by causing the signature of the stockholder to
be affixed to the writing by any reasonable means, including, but not limited
to, a facsimile signature, or by his attorney-in-fact there unto duly
authorized in writing. Every proxy shall be revocable at will unless the proxy
conspicuously states that it is irrevocable and the proxy is coupled with an
interest. A telegram, telex, cablegram, or similar transmission by the
shareholder, or a photographic, photostatic, facsimile, shall be treated as a
valid proxy, and treated as a substitution of the original proxy, so long as
such transmission is a complete reproduction executed by the shareholder. If
it is determined that the telegram, cablegram or other electronic transmission
is valid, the persons appointed by the Corporation to count the votes of
shareholders and determine the validity of proxies and ballots or other persons
making those determinations must specify the information upon which they
relied. No proxy shall be valid after the expiration of six months from the
date of its execution, unless otherwise provided in the proxy. Such instru-
ment shall be exhibited to the Secretary at the meeting and shall be filed with
the records of the Corporation. If any shareholder designates two or more
persons to act as proxies, a majority of those persons present at the meeting,
or, if one is present, then that one has and may exercise all of the powers
conferred by the shareholder upon all of the persons so designated unless the
shareholder provides otherwise.
Section 8 - Action without a Meeting: (Section 78.320)
Unless otherwise provided for in the Articles of Incorporation of the
Corporation, any action to be taken at any annual or special shareholders'
meeting, may be taken without a meeting, without prior notice and without a
vote if written consents are signed by a majority of the shareholders of the
Corporation, except however if a different proportion of voting power is
required by law, the Articles of Incorporation or these Bylaws, than that
proportion of written consents is required. Such written consents must be
filed with the minutes of the proceedings of the shareholders of the
Corporation.
(a) The first Board of Directors and all subsequent Boards of the Corporation
shall consist of a minimum of one (1) and a maximum of nine (9 ) Directors,
unless and until otherwise determined by vote of a majority of the entire Board
of Directors. The Board of Directors or shareholders all have the power, in
the interim between annual and special meetings of the shareholders, to
increase or decrease the number of Directors of the Corporation. A Director
need not be a shareholder of the Corporation unless the Certificate of
Incorporation of the Corporation or these Bylaws so require.
(b) Except as may otherwise be provided herein or in the Articles of
Incorporation, the members of the Board of Directors of the Corporation shall
be elected at the first annual shareholders' meeting and at each annual meeting
thereafter, unless their terms are staggered in the Articles of Incorporation
of the Corporation or these Bylaws, by a plurality of the votes cast at a
meeting of shareholders, by the holders of shares entitled to vote in the
election.
(c) The first Board of Directors shall hold office until the first annual
meeting of shareholders and until their successors have been duly elected and
qualified or until there is a decrease in the number of Directors.
Thereinafter, Directors will be elected at the annual meeting of shareholders
and shall hold office until the annual meeting of the shareholders next succeed-
ing his election, unless their terms are staggered in the Articles of
Incorporation of the Corporation (so long as at least one - fourth in number of
the Directors of the Corporation are elected at each annual shareholders'
meeting) or these Bylaws, or until his prior death, resignation or removal. Any
Director may resign at any time upon written notice of such resignation to the
Corporation.
(d) All Directors of the Corporation shall have equal voting power unless the
Articles of Incorporation of the Corporation provide that the voting power of
individual Directors or classes of Directors are greater than or less than that
of any other individual Directors or classes of Directors, and the different
voting powers may be stated in the Articles of Incorporation or may be
dependent upon any fact or event that may be ascertained outside the Articles
of Incorporation if the manner in which the fact or event may operate on those
voting powers is stated in the Articles of Incorporation. If the Articles of
Incorporation provide that any Directors have voting power greater than or less
than other Directors of the Corporation, every reference in these Bylaws to a
majority or other proportion of Directors shall be deemed to refer to majority
or other proportion of the voting power of all the Directors or classes of
Directors, as may be required by the Articles of Incorporation.
Section 2 - Duties and Powers: (Section 78.120)
The Board of Directors shall be responsible for the control and management of
the business and affairs, property and interests of the Corporation, and may
exercise all powers of the Corporation, except such as those stated under
Nevada state law, are in the Articles of Incorporation or by these Bylaws,
expressly conferred upon or reserved to the shareholders or any other person or
persons named therein.
(a) A regular meeting of the Board of Directors shall be held either within or
without the State of Nevada at such time and at such place as the Board shall
fix.
(b) No notice shall be required of any regular meeting of the Board of
Directors and, if given, need not specify the purpose of the meeting; provided,
however, that in case the Board of Directors shall fix or change the time or
place of any regular meeting when such time and place was fixed before such
change, notice of such action shall be given to each director who shall not
have been present at the meeting at which such action was taken within the time
limited, and in the manner set forth in these Bylaws with respect to special
meetings, unless such notice shall be waived in the manner set forth in these
Bylaws.
Section 4 - Special Meetings; Notice: (Section 78.310)
(a) Special meetings of the Board of Directors shall be held at such time and
place as may be specified in the respective notices or waivers of notice
thereof.
(b) Except as otherwise required statute, written notice of special meetings
shall be mailed directly to each Director, addressed to him at his residence or
usual place of business, or delivered orally, with sufficient time for the
convenient assembly of Directors thereat, or shall be sent to him at such place
by telegram, radio or cable, or shall be delivered to him personally or given
to him orally, not later than the day before the day on which the meeting is to
be held. If mailed, the notice of any special meeting shall be deemed to be
delivered on the second day after it is deposited in the United States mails,
so addressed, with postage prepaid. If notice is given by telegram, it shall
be deemed to be delivered when the telegram is delivered to the Telegraph
Company. A notice, or waiver of notice, except as required by these Bylaws,
need not specify the business to be transacted at or the purpose or purposes of
the meeting.
(c) Notice of any special meeting shall not be required to be given to any
Director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairperson:
The Chairperson of the Board, if any and if present, shall preside at all
meetings of the Board of Directors. If there shall be no Chairperson, or he or
she shall be absent, then the President shall preside, and in his absence, any
other director chosen by the Board of Directors shall preside.
Section 6 - Quorum and Adjournments: (Section 78.315)
(a) At all meetings of the Board of Directors, or any committee thereof, the
presence of a majority of the entire Board, or such committee thereof, shall
constitute a quorum for the transaction of business, except as otherwise
provided by law, by the Certificate of Incorporation, or these Bylaws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum may adjourn the same from time to
time without notice, whether or not a quorum exists. Notice of such adjourned
meeting shall be given to Directors not present at time of the adjournment and,
unless the time and place of the adjourned meeting are announced at the time of
the adjournment, to the other Directors whom were present at the adjourned
meeting.
Section 7 - Manner of Acting: (Section 78.315)
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by law, by the Articles of Incorporation, or
these bylaws, action approved by a majority of the votes of the Directors
present at any meeting of the Board or any committee thereof, at which a quorum
is present shall be the act of the Board of Directors or any committee thereof.
(c) Any action authorized in writing made prior or subsequent to such action, by
all of the Directors entitled to vote thereon and filed with the minutes of the
Corporation shall be the act of the Board of Directors, or any committee
thereof, and have the same force and effect as if the same had been passed by
unanimous vote at a duly called meeting of the Board or committee for all
purposes.
(c) Where appropriate communications facilities are reasonably available, any
or all directors shall have the right to participate in any Board of Directors
meeting, or a committee of the Board of Directors meeting, by means of
conference telephone or any means of communications by which all persons
participating in the meeting are able to hear each other.
Section 8 - Vacancies: (Section 78.335)
(a) Unless otherwise provided for by the Articles of Incorporation of the
Corporation, any vacancy in the Board of Directors occurring by reason of an
increase in the number of directors, or by reason of the death, resignation,
disqualification, removal or inability to act of any director, or other cause,
shall be filled by an affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board or by a sole remaining
Director, at any regular meeting or special meeting of the Board of Directors
called for that purpose except whenever the shareholders of any class or
classes or series thereof are entitled to elect one or more Directors by the
Certificate of Incorporation of the Corporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the Directors elected by such class or classes or series thereof then in
office, or by a sole remaining Director so elected.
(b) Unless otherwise provided for by law, the Articles of Incorporation or
these Bylaws, when one or more Directors shall resign from the board and such
resignation is effective at a future date, a majority of the directors, then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote otherwise to take effect when such resignation
or resignations shall become effective.
Section 9 - Resignation: (Section 78.335)
A Director may resign at any time by giving written notice of such resignation
to the Corporation.
Section 10 - Removal: (Section 78.335)
Unless otherwise provided for by the Articles of Incorporation, one or more or
all the Directors of the Corporation may be removed with or without cause at
any time by a vote of two-thirds of the shareholders entitled to vote thereon,
at a special meeting of the shareholders called for that purpose, unless the
Articles of Incorporation provide that Directors may only be removed for cause,
provided however, such Director shall not be removed if the Corporation states
in its Articles of Incorporation that its Directors shall be elected by cumula-
tive voting and there are a sufficient number of shares cast against his or her
removal, which if cumulatively voted at an election of Directors would be suffi-
cient to elect him or her. If a Director was elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove that Director.
Section 11 - Compensation: (Section 78.140)
The Board of Directors may authorize and establish reasonable compensation of
the Directors for services to the Corporation as Directors, including, but not
limited to attendance at any annual or special meeting of the Board.
Section 12 - Committees: (Section 78.125)
Unless otherwise provided for by the Articles of Incorporation of the
Corporation, the Board of Directors, may from time to time designate from among
its members one or more committees, and alternate members thereof, as they deem
desirable, each consisting of one or more members, with such powers and
authority (to the extent permitted by law and these Bylaws) as may be provided
in such resolution. Unless the Articles of Incorporation or Bylaws state
otherwise, the Board of Directors may appoint natural persons who are not
Directors to serve on such committees authorized herein. Each such committee
shall serve at the pleasure of the Board and, unless otherwise stated by law,
the Certificate of Incorporation of the Corporation or these Bylaws, shall be
governed by the rules and regulations stated herein regarding the Board of
Directors.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office: (Section
78.130)
(a) The Corporation's officers shall have such titles and duties as shall be
stated in these Bylaws or in a resolution of the Board of Directors which is
not inconsistent with these Bylaws. The officers of the Corporation shall
consist of a president, secretary and treasurer, and also may have one or more
vice presidents, assistant secretaries and assistant treasurers and such other
officers as the Board of Directors may from time to time deem advisable. Any
officer may hold two or more offices in the Corporation.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
duly elected and qualified, subject to earlier termination by his or her death,
resignation or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such resignation
to the Corporation.
Section 3 - Removal:
Any officer elected by the Board of Directors may be removed, either with or
without cause, and a successor elected by the Board at any time, and any
officer or assistant officer, if appointed by another officer, may likewise be
removed by such officer.
Section 4 - Vacancies:
(a) A vacancy, however caused, occurring in the Board and any newly created
Directorships resulting from an increase in the authorized number of
Directors may be filled by the Board of Directors.
Section 5 - Bonds:
The Corporation may require any or all of its officers or Agents to post a
bond, or otherwise, to the Corporation for the faithful performance of their
positions or duties.
Section 6 - Compensation:
The compensation of the officers of the Corporation shall be fixed from time to
time by the Board of Directors.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock: (Section 78.235)
(a) The shares of the Corporation shall be represented by certificates or shall
be uncertificated shares.
(b) Certificated shares of the Corporation shall be signed, (either manually or
by facsimile), by officers or agents designated by the Corporation for such
purposes, and shall certify the number of shares owned by him in the
Corporation. Whenever any certificate is countersigned or otherwise
authenticated by a transfer agent or transfer clerk, and by a registrar, then a
facsimile of the signatures of the officers or agents, the transfer agent or
transfer clerk or the registrar of the Corporation may be printed or
lithographed upon the certificate in lieu of the actual signatures. If the
Corporation uses facsimile signatures of its officers and agents on its stock
certificates, it cannot act as registrar of its own stock, but its transfer
agent and registrar may be identical if the institution acting in those dual
capacities countersigns or otherwise authenticates any stock certificates in
both capacities. If any officer who has signed or whose facsimile signature
has been placed upon such certificate, shall have ceased to be such officer
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(c) If the Corporation issues un-certificated shares as provided for in these
Bylaws, within a reasonable time after the issuance or transfer of such un-
certificated shares, and at least annually thereafter, the Corporation shall
send the shareholder a written statement certifying the number of shares owned
by such shareholder in the Corporation.
(d) Except as otherwise provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of the holders
of certificates representing shares of the same class and series shall be
identical.
Section 2 - Lost or Destroyed Certificates: (Section 104.8405)
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed if the owner:
(a) So requests before the Corporation has notice that the shares have been
acquired by a bona fide purchaser,
(b) Files with the Corporation a sufficient indemnity bond; and
(c) Satisfies such other requirements, including evidence of such loss,
theft or destruction, as may be imposed by the Corporation.
(a) Transfers or registration of transfers of shares of the Corporation shall
be made on the stock transfer books of the Corporation by the registered holder
thereof, or by his attorney duly authorized by a written power of attorney; and
in the case of shares represented by certificates, only after the surrender to
the Corporation of the certificates representing such shares with such shares
properly endorsed, with such evidence of the authenticity of such endorsement,
transfer, authorization and other matters as the Corporation may reasonably
require, and the payment of all stock transfer taxes due thereon.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as other-
wise expressly provided by law.
Section 4 - Record Date: (Section 78.215 & 78.350)
(a) The Board of Directors may fix, in advance, which shall not be more than
sixty days before the meeting or action requiring a determination of
shareholders, as the record date for the determination of shareholders entitled
to receive notice of, or to vote at, any meeting of shareholders, or to consent
to any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or allotment of any
rights, or for the purpose of any other action. If no record date is fixed,
the record date for shareholders entitled to notice of meeting shall be at the
close of business on the day preceding the day on which notice is given, or, if
no notice is given, the day on which the meeting is held, or if notice is
waived, at the close of business on the day before the day on which the meeting
is held.
(b) The Board of Directors may fix a record date, which shall not precede the
date upon which the resolution fixing the record date is adopted for
shareholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of shareholders entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action.
(c) A determination of shareholders entitled to notice of or to vote at a
shareholders'meeting is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date for the adjourned meeting.
Section 5 - Fractions of Shares/Scrip: (Section 78.205)
The Board of Directors may authorize the issuance of certificates or payment of
money for fractions of a share, either represented by a certificate or un-
certificated, which shall entitle the holder to exercise voting rights, receive
dividends and participate in any assets of the Corporation in the event of
liquidation, in proportion to the fractional holdings; or it may authorize the
payment in case of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize
the issuance, subject to such conditions as may be permitted by law, of scrip
in registered or bearer form over the manual or facsimile signature of an
officer or agent of the Corporation or its agent for that purpose, exchangeable
as therein provided for full shares, but such scrip shall not entitle the
holder to any rights of shareholder, except as therein provided. The scrip may
contain any provisions or conditions that the Corporation deems advisable. If
a scrip ceases to be exchangeable for full share certificates, the shares that
would otherwise have been issuable as provided on the scrip are deemed to be
treasury shares unless the scrip contains other provisions for their
disposition.
Section 6 - Class or Series of Stock: (Section 78.195 - 78.196)
The Company shall be formed with one class or series of common and one class or
series of preferred stock.
Common stock: The rights of common stockholders shall be that they are entitled
to vote on matters pertaining to the corporation. Any preferred stock issued
may be cancelled and reissued as common stock on a one share for one share
basis unless the articles of incorporation designate different rights and
privileges. Each share of common stock is entitled to one vote.
Preferred stock: The rights of preferred stockholders shall rank, as to
dividends and upon liquidation, senior and prior to the Corporation's common
stock and to all other classes or class of stock issued by the Corporation,
except as otherwise approved by the affirmative vote or consent of the holders
of a majority of the shares of the Preferred stock. Each share of preferred
stock is entitled to one vote. Any preferred stock issued may be cancelled and
reissued as common stock on a one share for one share basis unless the articles
of incorporation designate different rights and privileges.
The Board of Directors may establish one or more classes or series of common
and preferred stock by filing a certificate of amendment to a certificate of
designation with the Secretary of State. The amendment must state that no
shares of the newly formed class or series has been issued and must state the
voting powers, designations, preferences, limitations, restrictions and
relative rights of the class or series, as amended.
ARTICLE VI - DIVIDENDS (Section 78.215 & 78.288)
(a) Dividends may be declared and paid out of any funds available therefore, as
often, in such amounts, and at such time or times as the Board of Directors may
determine and shares may be issued pro rata and without consideration to the
Corporation's shareholders or to the shareholders of one or more classes or
series.
(b) Shares of one class or series may not be issued as a share dividend to
shareholders of another class or series unless:
(i) So authorized by the Articles of Incorporation;
(ii) A majority of the shareholders of the class or series to be issued
approve the issue; or
(iii) There are no outstanding shares of the class or series of shares
that are authorized to be issued.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change by the Board of Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL (Section 78.065)
The corporate seal, if any, shall be in such form as shall be prescribed and
altered, from time to time, by the Board of Directors. The use of a seal or
stamp by the Corporation on corporate documents is not necessary and the lack
thereof shall not in any way affect the legality of a corporate document.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All Bylaws of the Corporation shall be subject to alteration or repeal, and new
Bylaws may be made, by a majority vote of the shareholders at the time entitled
to vote in the election of Directors even though these Bylaws may also be
altered, amended or repealed by the Board of Directors.
Section 2 - By Directors: (Section 78.120)
The Board of Directors shall have power to make, adopt, alter, amend and repeal
from time to time, Bylaws of the Corporation.
ARTICLE X - WAIVER OF NOTICE: (Section 78.375)
Whenever any notice is required to be given by law, the Articles of
Incorporation or these Bylaws, a written waiver signed by the person or persons
entitled to such notice, whether before or after the meeting by any person,
shall constitute a waiver of notice of such meeting.
ARTICLE XI - INTERESTED DIRECTORS: (Section 78.140)
No contract or transaction shall be void or void able if such contract or
transaction is between the corporation and one or more of its Directors or
Officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
Officers, are directors or officers, or have a financial interest, when such
Director or Officer is present at or participates in the meeting of the Board,
or the committee of the shareholders which authorizes the contract or
transaction or his, her or their votes are counted for such purpose, if:
(a) The material facts as to his, her or their relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee and are noted in the minutes of such meeting, and
the Board or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested Directors, even though
the disinterested Directors be less than a quorum; or
(b) The material facts as to his, her or their relationship or
relationships or interest or interests and as to the contract or transaction
are disclosed or are known to the shareholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by vote of
the shareholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee of the shareholders; or
(d) The fact of the common directorship, office or financial interest is
not disclosed or known to the Director or Officer at the time the transaction
is brought before the Board of Directors of the Corporation for such action.
Such interested Directors may be counted when determining the presence of a
quorum at the Board of Directors' or committee meeting authorizing the contract
or transaction.
ARTICLE XII - ANNUAL LIST OF OFFICERS, DIRECTORS AND REGISTERED AGENT:
(Section 78.150 & 78.165)
The Corporation shall, within sixty days after the filing of its Articles of
Incorporation with the Secretary of State, and annually thereafter on or before
the last day of the month in which the anniversary date of incorporation occurs
each year, file with the Secretary of State a list of its president, secretary
and treasurer and all of its Directors, along with the post office box or street
address, either residence or business, and a designation of its resident agent
in the state of Nevada. An officer of the Corporation shall certify such list.
Filed # C30068-03
August 2, 2004
AMENDMENT # 1 TO
ARTICLES OF INCORPORATION
OF
INNOVATIVE ENERGY SOLUTIONS, INC.
ARTICLE III
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is eighty-five million (85,000,000) shares of which
seventy-five million (75,000,000) shares shall be designated common stock,
having a par value of one tenth of one cent ($.001) each, and of which ten
million (10,000,000) shares shall be designated preferred stock of the
Corporation, having a par value of one cent ($.001) each.
The undersigned affirmatively declare that to the date of this certificate, no
stock of the corporation has been issued.
Ronald Foster
Ronald Foster, Incorporator
BY-LAWS Section 6 - Class or Series of Stock: (NRS Section 78.195 - 78.196)
The Company shall be formed with one class or series of common and one class or
series of preferred stock.
Common stock: The rights of common stockholders shall be that they are entitled
to vote on matters pertaining to the corporation. Any preferred stock issued
may be cancelled and reissued as common stock on a one share for one share
basis unless the articles of incorporation designate different rights and
privileges. Each share of common stock is entitled to one vote.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 21st day
of June 2004, by and between Ronald C. Foster ("Executive"), who resides at 301
Firetower Road, Leesburg, GA 31763, United States, and Innovative Energy
Solutions, Inc. ("iESi", or "Company."), 41 North Mojave Road, Las Vegas,
Nevada 89101, United States, effective July 1, 2004 ("Effective Date").
R E C I T A L S
Company wishes to retain the services of Executive pursuant to this
Employment Agreement, the terms and provisions of which are set forth below.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. POSITION AND DUTIES.
During the Term (as defined in Section 5) Executive will continue
to be employed by Company as its Secretary and Vice President of Business
Development, and shall perform those duties as described in Job Description,
(attached as Exhibit A), and as determined from time to time determined by the
Board of Directors of Company ("Board") in accordance with the policies,
practices and bylaws of Company. During the Term, the Board may, in its sole
discretion, appoint Executive as a member of the Board.
Executive shall serve Company faithfully, loyally, honestly, and
to the best of Executive's ability. Executive will devote Executive's best
efforts and substantially all of the Executive's business time to the
performance of Executive's duties for, and in the business and affairs of,
Company.
Subject to Section 7, the Board reserves the right, in its sole
discretion, to change or modify Executive's position, title, and duties during
the Term of this Agreement.
2. BASE SALARY.
Commencing on the Effective Date and during the remaining Term of
this Agreement, Executive's annual base salary will be One Hundred Sixty-five
Thousand U.S. Dollars ($165,000), payable in accordance with Company's
customary payroll practice. Executive's base salary will be reviewed annually
by the Board in accordance with Company's compensation review policies and
practices, all as determined by Company in its discretion.
However, Executive agrees that Company shall have no obligation to
pay any salary to Executive until such time as the Company has received
unrestricted equity investments from persons other than the Company's
incorporators of $1,500,000 (One Million Five Hundred Thousand U.S. Dollars) or
more and those funds are on hand and available in the Company's bank account
for payment at the direction of the Board (the "Outside Funds"). Within ten
(10) business days after the Outside Funds are on hand as aforesaid, Company
shall pay to Executive all earned but unpaid salary attributable to Executive's
employment with Company from the Effective Date until the date of payment, and
shall thereafter pay, so long as this Agreement continues, payable in
accordance with Company's customary payroll practice.
3. INCENTIVE COMPENSATION.
Company has or will develop a performance-based compensation
program for members of its senior executive management team that is
discretionary in nature and based on among other things the financial
performance of Company and the Executive's value in achieving this performance.
Executive shall be eligible to participate in any and all performance-based
incentive compensation program that the Board has established or may in the
future establish for Executive, as well as any performance-based incentive
compensation program established from time to time for other members of
Company's senior management.
4. OTHER AGREEMENTS.
Other Agreements. Company and Executive may, from time to time, enter into one
or more agreements relating to specific benefit and/or compensation programs
including without limitation, a change of control agreement, stock option
agreements, stock purchase agreements, and stock grant agreements. Nothing in
this Agreement is intended to alter or modify any of such agreements, which are
now referred to as "Ancillary Agreements."
5. TERM AND TERMINATION.
This Agreement will continue in full force and effect until
terminated by the parties. This Agreement may be terminated in any of the
following ways: (a) it may be negotiated and replaced by a written agreement
signed by both parties; (b) Company may elect to terminate this Agreement, with
or without "Cause," as defined below; (c) Executive may elect to terminate this
Agreement with or without "Good Reason," as defined below; or (d) either party
may serve notice on the other of its or his desire to terminate this Agreement
at the end of the Term.
The "Term" of this Agreement shall begin on the Effective Date and
shall expire by its terms in sixty (60) months, on June 30, 2009, unless sooner
terminated in accordance with the provisions of this Agreement. Thereafter,
the "Term" of this Agreement shall renew automatically for additional twelve
(12) month periods unless terminated accordance with the provisions of this
Agreement.
6. TERMINATION BY COMPANY.
A. Termination for Cause. Company may terminate this Agreement and
Executive's employment for Cause at any time upon written notice. For purposes
of this Agreement, "Cause" shall be limited to discharge resulting from a
determination by Company that within the period of time contemplated by this
agreement the Executive has: (i) been convicted of a felony involving
dishonesty, fraud, theft or embezzlement; (ii) failed or refused, in a material
respect, to follow reasonable policies or directives established by Company and
after written notice thereof from Company, and a reasonable opportunity by
Executive to cure such failures or refusals after having been given reasonable
written notice of such failures or refusals; (iii) willfully and persistently
failed to attend to the material duties or obligations imposed upon Executive
under this Agreement after reasonable written notice from Company and a
reasonable opportunity by Executive to cure such failure; (iv) performed an act
or failed to act, which, if Executive were prosecuted and convicted, would
constitute a felony involving $1,000 or more of money or property of Company,
or (v) committed other acts constituting intentional misconduct or dishonesty
that in the reasonable discretion of the Board are likely to have a material
adverse effect on the Company.
If this Agreement and Executive's employment are terminated by
Company for Cause, Executive shall receive no Severance Benefits.
B. Termination Without Cause. Company also may terminate this
Agreement and Executive's employment at any time or elect to not renew this
Agreement at the end of any Term without Cause by giving at least 60 days prior
written notice to Executive. In the event (i) this Agreement and Executive's
employment are terminated by Company, or (ii) Company elects not to renew this
Agreement at the end of any Term, without Cause, Executive shall be entitled to
receive Severance Benefits pursuant to Section 9.
7. TERMINATION BY EXECUTIVE.
Executive may terminate this Agreement and his employment with or
without "Good Reason" in accordance with the provisions of this Section 7.
A. Termination For Good Reason. Executive may terminate this Agreement
and Executive's employment for "Good Reason" by giving written notice to
Company within 60 days (or such longer period as may be agreed to in writing by
Company) of Executive's reason(s) for believing that "Good Reason" for his
termination of employment exists.
Executive shall have "Good Reason" to terminate his Agreement and
Executive's employment upon the occurrence of any of the following events: (i)
the assignment to Executive of any duties that are inconsistent with, or the
reduction of powers or functions associated with, Executive's position, duties,
or responsibilities with Company, or an adverse change in Executive's titles,
authority, or reporting responsibilities, or in conditions of Executive's
employment, (ii) the Executive's base salary is reduced or the potential
incentive compensation (or bonus) to which Executive may become entitled to at
any level of performance by the Executive or Company is reduced, (iii) the
failure of Company to cause any successor to expressly assume and agree to be
bound by the terms of this Agreement, (iv) any purported termination by Company
of Executive's employment for grounds other than for "Cause," (v) Company
relieving the Executive of Executive's duties other than for "Cause," or (vi)
Executive is required to relocate.
If Executive terminates this Agreement and his employment for Good
Reason, Executive shall be entitled to receive Severance Benefits pursuant to
Section 9.
B. Termination Without Good Reason. Executive also may terminate this
Agreements and Executive's employment without Good Reason at any time by giving
60 days notice to Company. If Executive terminates this Agreement and
Executive's employment without Good Reason, Executive shall not be entitled to
receive Severance Benefits pursuant to Section 9.
8. DEATH OR DISABILITY
This Agreement will terminate automatically on Executive's death.
Any salary or other amounts due to Executive for services rendered prior to
Executive's death shall be paid to Executive's surviving spouse, or if
Executive does not leave a surviving spouse, to Executive's estate. No other
benefits shall be payable to Executive's estate or heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other
benefit plans maintained in whole or in part by Company for the benefit of
Executive, his estate or heirs.
In the Executive becomes "Disabled," Executive's employment
hereunder and Company's obligation to pay Executive's salary shall continue for
a period of eighteen (18) months from the date of such Disability, at which
time Executive's employment hereunder shall automatically cease and terminate.
Executive shall be considered "Disabled" or to be suffering from a "Disability"
for purposes of this Section 8 if, in the reasonable, good faith judgment of a
licensed physician selected by the Board, Executive is unable for a period of
ninety (90) consecutive business days to perform the essential functions of
Executive position required under this Agreement, with or without reasonable
accommodations, because of a physical or mental impairment. Any dispute
relating to the existence of a Disability shall be resolved by the opinion of
the licensed physician selected by the Board, provided, however, that if
Executive does not accept the opinion of the licensed physician selected by
Company, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by Executive; provided further, however, that if Company
does not accept the opinion of the licensed physician selected by Executive,
the dispute shall be finally resolved by the opinion of a licensed physician
selected by the licensed physicians selected by Company and Executive,
respectively.
9. SEVERANCE BENEFITS
If this Agreement and Executive's employment are terminated
without Cause pursuant to Section 6(B) hereof or if Executive elects to
terminate this Agreement for Good Reason pursuant to Section 7(A) hereof,
Executive shall receive the "Severance Benefits" as provided by this Section.
The Severance Benefits shall be payable in a single lump sum within ten (10)
days following termination of employment and shall equal the greater of (i) sum
of (a) the Executive's base salary for the unexpired Term, and (b) the average
of incentive compensation paid to the Executive for the two (2) years prior to
the date of termination multiplied by a fraction, the numerator of which is the
number of months remaining from the date of termination to the end of the Term
and the denominator of which is twelve (12), and (ii) the sum of (x)
Executive's base salary for a twenty-four (24) month period as in effect on the
date of termination and (y) the average on an annual basis of incentive
compensation paid to the Executive for the two years prior to the date of
termination. In addition, the Executive shall continue to receive life,
disability, accident and group health insurance benefits substantially similar
to those which he was receiving immediately prior to his termination of
employment until the earlier of the end of the period of eighteen (18) months
following his termination of employment or the day on which he becomes eligible
to receive any substantially similar continuing health care benefits under any
Plan or program of any other employer. If a particular insurance benefit may
not be continued for any reason, Company shall pay Executive the amount
necessary to permit Executive to purchase the same insurance benefits as were
provided by Company, such payment to be made to Executive in a single lump sum.
The benefits provided pursuant to this Section shall be provided on
substantially the same terms and conditions as they were provided prior to the
termination of employment, except that the full cost of such benefits shall be
paid by the Company. The Executive's right to receive continued coverage under
the Company's group health plans pursuant to Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as it may be amended or
replaced from time to time, shall commence following the expiration of his
right to receive continued benefits under this Agreement.
Executive shall have no duty to mitigate damages in order to
receive the benefits provided by this Section.
If Company terminates the Agreement and Executive's employment for
Cause, or if Executive voluntarily terminates this Agreement and Executive's
employment without Good Reason prior to the end of the Term, no Severance
Benefits shall be paid to Executive. No Severance Benefits are payable in the
event of Executive's death or disability while in the active employ of Company.
10.BENEFITS
Executive will be entitled to participate in all employee benefit
plans, including, but not limited to, retirement plans, stock option plans,
life insurance plans, and health and dental plans available to other Company
employees, subject to restrictions (including waiting periods) specified in the
applicable Plan. Executive is entitled to six (6) weeks of paid vacation per
calendar year, with such vacation to be scheduled and taken in accordance with
Company's standard vacation policies. In addition to the compensation and
benefits provided above, the Company shall, upon receipt of appropriate
documentation, reimburse Executive for his reasonable travel, lodging,
entertainment, promotion, and other ordinary and necessary business expenses
consistent with Company policies.
11.CONFIDENTIALITY AND NON-DISCLOSURE
During the course of Executive's employment, Executive has and
will become exposed to a substantial amount of confidential and proprietary
information, including, but not limited to trade secrets, intellectual
property, patent applications, copyright applications, technical drawings,
financial information, annual report, audited and unaudited financial reports,
strategic plans, business plans, marketing strategies, new business strategies,
personnel and compensation information, and other such reports, documents or
information. In the event Executive's employment is terminated by either party
for any, reason, Executive will return to Company and Executive will not take,
any copies of such documents, computer print-outs, computer tapes, floppy
disks, CD ROMs, DVDs, etc., in any form, format or manner whatsoever, nor will
Executive disclose the same in whole or in part to any person or entity, in any
manner either directly or indirectly. Excluded from this Agreement is
information that is already disclosed to third parties and is in the public
domain or that Company consents to be disclosed, with such consent to be in
writing. The provisions of this Section 11 shall survive the termination of
this Agreement.
12.COVENANT-NOT-TO-COMPETE
A. Interests to be Protected. The parties acknowledge that during the
Term, Executive will perform essential for Company, its employees and
shareholders, and for customers of Company. Therefore, Executive will be given
an opportunity to meet, work with and develop close working relationships with
Company's clients on a first-hand basis and will gain valuable insight as to
the clients' operations, personnel and need for services. In addition,
Executive will be to, have access to, and be required to work with, a
considerable amount of Company's confidential and proprietary information,
including but not limited to information concerning Company's methods of
operation, financial information, strategic planning, operational budgets and
strategies, payroll data, management systems programs, computer systems,
marketing plans and strategies, merger and acquisition strategies and customer
lists.
The parties also expressly recognize and acknowledge that the
personnel of Company have been trained by, and are valuable to Company, and
that if Company must hire new personnel or retrain existing personnel to fill
vacancies Company will incur substantial expense in recruiting and training
such personnel. The parties expressly recognize that should Executive compete
with Company in any manner whatsoever, it would seriously impair the goodwill
and diminish the value of Company's business.
The parties acknowledge that this covenant has an extended
duration; however, they agree that this covenant is reasonable and that it is
necessary for the protection of Company, its shareholders and employees.
For these and other reasons, and the fact that there are many
other employment opportunities available to Executive if Executive should
terminate, the parties are in full and complete agreement that the following
restrictive covenants (which together are referred to as the
"Covenant-Not-To-Compete") are fair and reasonable and are freely, voluntarily
and knowingly entered into. Further, each party has been given the opportunity
to consult with independent legal counsel before entering into this Agreement.
B. Devotion to Employment. Executive shall devote substantially all of
Executive's business time and best efforts to the performance of Executive's
duties on behalf of Company. During the term of employment, Executive shall
not at any time or place or to any extent whatsoever, either directly or
indirectly, engage in any activity competitive with or adverse to Company's
business, practice or affairs, whether alone or as partner, officer, director,
employee, shareholder of any corporation or as a trustee, fiduciary, consultant
or other representative. This is not intended to prohibit Executive from
engaging in nonprofessional activities such as personal investments or
conducting private business affairs which may include other boards of
directors' activity, as long as they do not conflict with Company.
Participation to a reasonable extent in civic, social or community activities
is encouraged.
C. Non-Solicitation of Customer or Suppliers. During the term of
Executive's employment with Company and for a period of twelve (12) months
after the expiration or termination of employment with Company for Cause or
without Good Reason (if initiated by Executive), Executive shall not, directly
or indirectly, for Executive, or on behalf of, or in conjunction with, any
other person(s), company, partnership, corporation, or governmental entity, in
any manner whatsoever, call upon, contact encourage, handle or solicit, or
cause others to solicit, any person or other entity that is, or was within the
twelve (12) month period immediately prior to the date of Executive's
termination, a customer or supplier of Company or any of its subsidiaries or
affiliates, for the purpose of soliciting, selling or purchasing from such
customer or supplier the same, similar, or related services or products that
are provided by, or purchased by, Company or any of its subsidiaries or
affiliates. Notwithstanding the foregoing, the obligations of Executive under
this Section 12(C), shall terminate only if the employment of Executive is
terminated by Company without Cause or if Executive terminates his employment
for Good Reason. If Executive violates Executive's obligations under this
Section 12(C), then the time periods hereunder shall be extended by the period
of time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
D. Non-Solicitation of Employees. During the term of Executive's
employment with Company and for a period of twelve (12) months after the
termination of employment with Company, regardless of who initiates the
termination, Executive shall not, directly or indirectly, for Executive, or on
behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, in any manner whatsoever, seek to hire,
and/or hire any person who, on the date hereof, or on the date of Executive's
termination, is an employee of Company or any of its subsidiaries or
affiliates, and that receives annual compensation in excess of $25,000, for
employment or as an independent contractor with any person or entity (other
than Company or any of its subsidiaries or affiliates), unless first authorized
in writing by Company, which authorization may be withheld in the sole and
absolute discretion of Company. If Executive violates Executive's obligations
wider this Section 12(D), then the time periods hereunder shall be extended by
the period of time equal to that period beginning when the activities
constituting such violation commenced and ending when the activities
constituting such violation terminated.
E. Competing Business. During the term of Executive's employment and
for a period of twelve (12) months after the termination of employment with
Company for Cause or without Good Reason (if initiated by Executive), Executive
shall not, directly or indirectly, (including, without limitation, as a
partner, director, officer or employee of, or lender or consultant to, any
other personal entity, or shareholder (other than as the holder of less than
five percent of the stock of a corporation the securities of which are traded
on a national securities exchange or in the over-the-counter market), for
Executive, or on behalf of, or in conjunction with, any other person(s),
company, partnership, corporation, or governmental entity, in any manner
whatsoever, or in any other capacity, within, into or from the Restricted
Territory (as defined below) engage or cause others to engage in the same or
similar business as Company and its subsidiaries (i.e., Motorsports internet-
related business), or any aspect thereof, unless first authorized in writing by
Company, which authorization may be withheld in the sole and absolute
discretion of Company. For purposes of this Section 12(E), the term
"Restricted Territory" shall mean any geographical service area where Company
or any of its subsidiaries and affiliates is engaged in business, sells
products or performs services or was considering engaging in business at any
time, prior to the termination or at the time of termination. Notwithstanding
the foregoing, the obligations of Executive under this Section 12(E), shall
terminate only if Executive is terminated by Company without Cause or if
Executive terminates his employment for Good Reason. If Executive violates
Executive's obligations under this Section 12(E), then the time periods
hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminated.
F. Judicial Amendment. If the scope of any provision of this Section
12 is found by a court of competent jurisdiction to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the
maximum extent permitted by law. The parties agree that the scope of any
provision of this Agreement may be modified by a judge in any proceeding to
enforce this Agreement, so that such provision can be enforced to the maximum
extent permitted by law. If any provision of this Agreement is found to be
invalid or unenforceable for any reason, it shall not affect the validity of
the remaining provisions of this Agreement.
G. Injunctive Relief Damages and Forfeiture. Due to the nature of
Executive's position with Company, and with full realization that a violation
of this Agreement will cause immediate and irreparable injury and damage, which
is not readily measurable, and to protect Company's interests, Executive
understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Company may seek to
enforce this Agreement with an action for injunctive relief to cease or prevent
any actual or threatened violation of this Agreement on the part of Executive.
H. Survival. The provisions of this Section 12, shall survive the
termination of this Agreement.
13.AMENDMENTS
This Agreement constitutes the entire agreement between the
parties as to the subject matter hereof. Accordingly, there are no side
agreements or verbal agreements other than those that are stated in this
agreement. Any amendment, modification or change in said Agreements must be
done so in writing and signed by both parties.
14.SEVERABILITY
In the event a court or arbitrator declares that any provision of
this Agreement is invalid or unenforceable, it shall not affect or invalidate
any of the remaining provisions. Further, the court shall have the authority
to re-write that portion of the Agreement it deems unenforceable, to make it
enforceable.
15.GOVERNING LAW
The law of the State of Nevada shall govern the interpretation and
application of all of the provisions of this Agreement.
16.SUCCESSORS AND ASSIGNS
It is expressly understood that this Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation or organization with which or into which the
Company may be merged or acquired by or which may succeed to its assets or
business, provided, however, that the obligations of the Executive are personal
and shall not be assigned by him.
17.INDEMNITY
General. Company shall, to the fullest extent authorized by the Delaware
General Company Law, as amended, indemnify and hold harmless Executive in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative against expenses, liabilities and
losses (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by Executive in
connection therewith.
Expenses. This right to indemnification includes the right to be paid by
Company the expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
Nevada law requires, an advancement of expenses incurred by Executive shall be
made only upon delivery to Executive of an undertaking, by or on behalf of
Executive, to repay all amounts so advanced if it is ultimately determined by
final judicial decision from which there is no further right to appeal that
Executive is not entitled to be indemnified for such expenses. The rights to
indemnification and to the advancement of expenses shall be contract rights and
such rights shall continue as to Executive after his termination of employment
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators.
Claims for Indemnification or Expenses. If a claim under either A or B above
is not paid in full by Company within sixty (60) days after Company receives a
written claim, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, Executive may at any time
thereafter bring suit against Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, Executive shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the Executive to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by Company to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that Executive is not entitled to be indemnified, or to such
advancement of expenses, shall be on Company.
18.DISPUTE RESOLUTION
A. Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement (excepting the confidentiality and non-disclosure
provisions of Section 11 hereof, and the Covenant-Not-To-Compete provisions of
Section 12 hereof), or the statutory rights or obligations of either party
hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section below writing and served upon the other. Any demand for mediation
shall be made in writing party to the dispute, by certified mail, return
receipt requested, at the business address of or at the last known residence
address of Executive respectively. The demand shall set forth with reasonable
specificity the basis of the dispute and the relief sought. The mediation
learning will occur at a time and place convenient to the parties in Las Vegas,
Nevada, Arizona, within thirty (30) days of the date of selection or
appointment of the mediator and shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA").
B. Arbitration. In the event that the dispute is not settled through
mediation, the parties shall then proceed to binding arbitration before a
single independent arbitrator selected pursuant to Section 18(A). The mediator
shall not serve as arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL
EMPLOYMENT DISCRIMINATION TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY,
OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY
INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient to the parties in Las Vegas, Nevada,
within thirty (30) days of selection or appointment of the arbitrator. If
Company has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy
to the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. ** 1-16. If no such policy has been adopted, the
arbitration shall be governed by the National Rules for the Resolution of
Employment Disputes of the AAA. The arbitrator shall issue written findings of
fact and conclusions of law, and an award, within fifteen (15) days of the date
of the hearing unless the parties otherwise agree.
C. Damages. In cases of breach of contract or policy, damages shall be
limited to contract damages. In cases of intentional discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with 42
U.S.C. * 1981(a) and the Civil Rights Act of 1991. In cases of employment
tort, the arbitrator may award punitive damages if proved by clear and
convincing evidence. Any award of punitive damages shall not exceed two times
any compensatory award and in any event, shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000). The arbitrator may award fees to the prevailing
party and assess costs of the arbitration to the non-prevailing party. Issues
of procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. ** 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of
a trial judge sitting without a jury.
D. Selection of Mediators or Arbitrators. The parties shall select the
mediator or arbitrator form a panel list made available by the AAA. If the
parties are unable to agree to a mediator or arbitrator within ten (10) days of
receipt of a demand for mediation or arbitration, the mediator or arbitrator
will be chosen by alternatively striking from a list of five (5) mediators or
arbitrators obtained by Company from AAA. Executive shall have the first
strike.
19.NOTICES
Notices. Any notice delivered under this Agreement shall be deemed duly
delivered four (4) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (1) business day after
it is sent for next-business day delivery via a reputable international
overnight courier service, in each case to the address of the recipient set
forth in the introductory paragraph hereto. Either party may change the address
to which notices are to be delivered by giving notice of such change to the
other party.
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
effective on the date set forth above.
Innovative Energy Solutions, Inc. "Executive"
By: ________________________ _______________________
Patrick J. Cochrane Ronald C. Foster
Chief Executive Officer
#
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 21st day
of June 2004, by and between Terry Dingwall ("Executive"), who resides at 4721
50th Avenue, Rocky Rapids, Alberta, T0E 1Z0, Canada, and Innovative Energy
Solutions, Inc. ("iESi", or "Company."), 41 North Mojave Road, Las Vegas,
Nevada 89101, United States, effective July 1, 2004 ("Effective Date").
R E C I T A L S
Company wishes to retain the services of Executive pursuant to this
Employment Agreement, the terms and provisions of which are set forth below.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. POSITION AND DUTIES.
During the Term (as defined in Section 5) Executive will continue
to be employed by Company as its President and shall perform those duties as
described in Job Description, (attached as Exhibit A), and as determined from
time to time determined by the Board of Directors of Company ("Board") in
accordance with the policies, practices and bylaws of Company. During the
Term, the Board may, in its sole discretion, appoint Executive as a member of
the Board.
Executive shall serve Company faithfully, loyally, honestly, and
to the best of Executive's ability. Executive will devote Executive's best
efforts and substantially all of the Executive's business time to the
performance of Executive's duties for, and in the business and affairs of,
Company.
Subject to Section 7, the Board reserves the right, in its sole
discretion, to change or modify Executive's position, title, and duties during
the Term of this Agreement.
2. BASE SALARY.
Commencing on the Effective Date and during the remaining Term of
this Agreement, Executive's annual base salary will be One Hundred Forty-four
Thousand U.S. Dollars ($144,000), payable in accordance with Company's
customary payroll practice. Executive's base salary will be reviewed annually
by the Board in accordance with Company's compensation review policies and
practices, all as determined by Company in its discretion.
However, Executive agrees that Company shall have no obligation to
pay any salary to Executive until such time as the Company has received
unrestricted equity investments from persons other than the Company's
incorporators of $1,500,000 (One Million Five Hundred Thousand U.S. Dollars) or
more and those funds are on hand and available in the Company's bank account
for payment at the direction of the Board (the "Outside Funds"). Within ten
(10) business days after the Outside Funds are on hand as aforesaid, Company
shall pay to Executive all earned but unpaid salary attributable to Executive's
employment with Company from the Effective Date until the date of payment, and
shall thereafter pay, so long as this Agreement continues, payable in
accordance with Company's customary payroll practice.
3. INCENTIVE COMPENSATION.
Company has or will develop a performance-based compensation
program for members of its senior executive management team that is
discretionary in nature and based on among other things the financial
performance of Company and the Executive's value in achieving this performance.
Executive shall be eligible to participate in any and all performance-based
incentive compensation program that the Board has established or may in the
future establish for Executive, as well as any performance-based incentive
compensation program established from time to time for other members of
Company's senior management.
4. OTHER AGREEMENTS.
Other Agreements. Company and Executive may, from time to time, enter into one
or more agreements relating to specific benefit and/or compensation programs
including without limitation, a change of control agreement, stock option
agreements, stock purchase agreements, and stock grant agreements. Nothing in
this Agreement is intended to alter or modify any of such agreements, which are
now referred to as "Ancillary Agreements."
5. TERM AND TERMINATION.
This Agreement will continue in full force and effect until
terminated by the parties. This Agreement may be terminated in any of the
following ways: (a) it may be negotiated and replaced by a written agreement
signed by both parties; (b) Company may elect to terminate this Agreement, with
or without "Cause," as defined below; (c) Executive may elect to terminate this
Agreement with or without "Good Reason," as defined below; or (d) either party
may serve notice on the other of its or his desire to terminate this Agreement
at the end of the Term.
The "Term" of this Agreement shall begin on the Effective Date and
shall expire by its terms in sixty (60) months, on June 30, 2009, unless sooner
terminated in accordance with the provisions of this Agreement. Thereafter,
the "Term" of this Agreement shall renew automatically for additional twelve
(12) month periods unless terminated accordance with the provisions of this
Agreement.
6. TERMINATION BY COMPANY.
A. Termination for Cause. Company may terminate this Agreement and
Executive's employment for Cause at any time upon written notice. For purposes
of this Agreement, "Cause" shall be limited to discharge resulting from a
determination by Company that within the period of time contemplated by this
agreement the Executive has: (i) been convicted of a felony involving
dishonesty, fraud, theft or embezzlement; (ii) failed or refused, in a material
respect, to follow reasonable policies or directives established by Company and
after written notice thereof from Company, and a reasonable opportunity by
Executive to cure such failures or refusals after having been given reasonable
written notice of such failures or refusals; (iii) willfully and persistently
failed to attend to the material duties or obligations imposed upon Executive
under this Agreement after reasonable written notice from Company and a
reasonable opportunity by Executive to cure such failure; (iv) performed an act
or failed to act, which, if Executive were prosecuted and convicted, would
constitute a felony involving $1,000 or more of money or property of Company,
or (v) committed other acts constituting intentional misconduct or dishonesty
that in the reasonable discretion of the Board are likely to have a material
adverse effect on the Company.
If this Agreement and Executive's employment are terminated by
Company for Cause, Executive shall receive no Severance Benefits.
B. Termination Without Cause. Company also may terminate this
Agreement and Executive's employment at any time or elect to not renew this
Agreement at the end of any Term without Cause by giving at least 60 days prior
written notice to Executive. In the event (i) this Agreement and Executive's
employment are terminated by Company, or (ii) Company elects not to renew this
Agreement at the end of any Term, without Cause, Executive shall be entitled to
receive Severance Benefits pursuant to Section 9.
7. TERMINATION BY EXECUTIVE.
Executive may terminate this Agreement and his employment with or
without "Good Reason" in accordance with the provisions of this Section 7.
A. Termination For Good Reason. Executive may terminate this Agreement
and Executive's employment for "Good Reason" by giving written notice to
Company within 60 days (or such longer period as may be agreed to in writing by
Company) of Executive's reason(s) for believing that "Good Reason" for his
termination of employment exists.
Executive shall have "Good Reason" to terminate his Agreement and
Executive's employment upon the occurrence of any of the following events: (i)
the assignment to Executive of any duties that are inconsistent with, or the
reduction of powers or functions associated with, Executive's position, duties,
or responsibilities with Company, or an adverse change in Executive's titles,
authority, or reporting responsibilities, or in conditions of Executive's
employment, (ii) the Executive's base salary is reduced or the potential
incentive compensation (or bonus) to which Executive may become entitled to at
any level of performance by the Executive or Company is reduced, (iii) the
failure of Company to cause any successor to expressly assume and agree to be
bound by the terms of this Agreement, (iv) any purported termination by Company
of Executive's employment for grounds other than for "Cause," or (v) Company
relieving the Executive of Executive's duties other than for "Cause."
If Executive terminates this Agreement and his employment for Good
Reason, Executive shall be entitled to receive Severance Benefits pursuant to
Section 9.
B. Termination Without Good Reason. Executive also may terminate this
Agreements and Executive's employment without Good Reason at any time by giving
60 days notice to Company. If Executive terminates this Agreement and
Executive's employment without Good Reason, Executive shall not be entitled to
receive Severance Benefits pursuant to Section 9.
8. DEATH OR DISABILITY
This Agreement will terminate automatically on Executive's death.
Any salary or other amounts due to Executive for services rendered prior to
Executive's death shall be paid to Executive's surviving spouse, or if
Executive does not leave a surviving spouse, to Executive's estate. No other
benefits shall be payable to Executive's estate or heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other
benefit plans maintained in whole or in part by Company for the benefit of
Executive, his estate or heirs.
In the Executive becomes "Disabled," Executive's employment
hereunder and Company's obligation to pay Executive's salary shall continue for
a period of eighteen (18) months from the date of such Disability, at which
time Executive's employment hereunder shall automatically cease and terminate.
Executive shall be considered "Disabled" or to be suffering from a "Disability"
for purposes of this Section 8 if, in the reasonable, good faith judgment of a
licensed physician selected by the Board, Executive is unable for a period of
ninety (90) consecutive business days to perform the essential functions of
Executive position required under this Agreement, with or without reasonable
accommodations, because of a physical or mental impairment. Any dispute
relating to the existence of a Disability shall be resolved by the opinion of
the licensed physician selected by the Board, provided, however, that if
Executive does not accept the opinion of the licensed physician selected by
Company, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by Executive; provided further, however, that if Company
does not accept the opinion of the licensed physician selected by Executive,
the dispute shall be finally resolved by the opinion of a licensed physician
selected by the licensed physicians selected by Company and Executive,
respectively.
9. SEVERANCE BENEFITS
If this Agreement and Executive's employment are terminated
without Cause pursuant to Section 6(B) hereof or if Executive elects to
terminate this Agreement for Good Reason pursuant to Section 7(A) hereof,
Executive shall receive the "Severance Benefits" as provided by this Section.
The Severance Benefits shall be payable in a single lump sum within ten (10)
days following termination of employment and shall equal the greater of (i) sum
of (a) the Executive's base salary for the unexpired Term, and (b) the average
of incentive compensation paid to the Executive for the two (2) years prior to
the date of termination multiplied by a fraction, the numerator of which is the
number of months remaining from the date of termination to the end of the Term
and the denominator of which is twelve (12), and (ii) the sum of (x)
Executive's base salary for a twenty-four (24) month period as in effect on the
date of termination and (y) the average on an annual basis of incentive
compensation paid to the Executive for the two years prior to the date of
termination. In addition, the Executive shall continue to receive life,
disability, accident and group health insurance benefits substantially similar
to those which he was receiving immediately prior to his termination of
employment until the earlier of the end of the period of eighteen (18) months
following his termination of employment or the day on which he becomes eligible
to receive any substantially similar continuing health care benefits under any
Plan or program of any other employer. If a particular insurance benefit may
not be continued for any reason, Company shall pay Executive the amount
necessary to permit Executive to purchase the same insurance benefits as were
provided by Company, such payment to be made to Executive in a single lump sum.
The benefits provided pursuant to this Section shall be provided on
substantially the same terms and conditions as they were provided prior to the
termination of employment, except that the full cost of such benefits shall be
paid by the Company. The Executive's right to receive continued coverage under
the Company's group health plans pursuant to Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as it may be amended or
replaced from time to time, shall commence following the expiration of his
right to receive continued benefits under this Agreement.
Executive shall have no duty to mitigate damages in order to
receive the benefits provided by this Section.
If Company terminates the Agreement and Executive's employment for
Cause, or if Executive voluntarily terminates this Agreement and Executive's
employment without Good Reason prior to the end of the Term, no Severance
Benefits shall be paid to Executive. No Severance Benefits are payable in the
event of Executive's death or disability while in the active employ of Company.
10.BENEFITS
Executive will be entitled to participate in all employee benefit
plans, including, but not limited to, retirement plans, stock option plans,
life insurance plans, and health and dental plans available to other Company
employees, subject to restrictions (including waiting periods) specified in the
applicable Plan. Executive is entitled to six (6) weeks of paid vacation per
calendar year, with such vacation to be scheduled and taken in accordance with
Company's standard vacation policies. In addition to the compensation and
benefits provided above, the Company shall, upon receipt of appropriate
documentation, reimburse Executive for his reasonable travel, lodging,
entertainment, promotion, and other ordinary and necessary business expenses
consistent with Company policies.
11.CONFIDENTIALITY AND NON-DISCLOSURE
During the course of Executive's employment, Executive has and
will become exposed to a substantial amount of confidential and proprietary
information, including, but not limited to trade secrets, intellectual
property, patent applications, copyright applications, technical drawings,
financial information, annual report, audited and unaudited financial reports,
strategic plans, business plans, marketing strategies, new business strategies,
personnel and compensation information, and other such reports, documents or
information. In the event Executive's employment is terminated by either party
for any, reason, Executive will return to Company and Executive will not take,
any copies of such documents, computer print-outs, computer tapes, floppy
disks, CD ROMs, DVDs, etc., in any form, format or manner whatsoever, nor will
Executive disclose the same in whole or in part to any person or entity, in any
manner either directly or indirectly. Excluded from this Agreement is
information that is already disclosed to third parties and is in the public
domain or that Company consents to be disclosed, with such consent to be in
writing. The provisions of this Section 11 shall survive the termination of
this Agreement.
(a) No Use of Name. I shall not at any time use the Company's name or any
of the Company trademark(s) or trade name(s) in any advertising or publicity
without the prior written consent of the Company.
12.COVENANT-NOT-TO-COMPETE
A. Interests to be Protected. The parties acknowledge that during the
Term, Executive will perform essential for Company, its employees and
shareholders, and for customers of Company. Therefore, Executive will be given
an opportunity to meet, work with and develop close working relationships with
Company's clients on a first-hand basis and will gain valuable insight as to
the clients' operations, personnel and need for services. In addition,
Executive will be to, have access to, and be required to work with, a
considerable amount of Company's confidential and proprietary information,
including but not limited to information concerning Company's methods of
operation, financial information, strategic planning, operational budgets and
strategies, payroll data, management systems programs, computer systems,
marketing plans and strategies, merger and acquisition strategies and customer
lists.
The parties also expressly recognize and acknowledge that the
personnel of Company have been trained by, and are valuable to Company, and
that if Company must hire new personnel or retrain existing personnel to fill
vacancies Company will incur substantial expense in recruiting and training
such personnel. The parties expressly recognize that should Executive compete
with Company in any manner whatsoever, it would seriously impair the goodwill
and diminish the value of Company's business.
The parties acknowledge that this covenant has an extended
duration; however, they agree that this covenant is reasonable and that it is
necessary for the protection of Company, its shareholders and employees.
For these and other reasons, and the fact that there are many
other employment opportunities available to Executive if Executive should
terminate, the parties are in full and complete agreement that the following
restrictive covenants (which together are referred to as the
"Covenant-Not-To-Compete") are fair and reasonable and are freely, voluntarily
and knowingly entered into. Further, each party has been given the opportunity
to consult with independent legal counsel before entering into this Agreement.
B. Devotion to Employment. Executive shall devote substantially all of
Executive's business time and best efforts to the performance of Executive's
duties on behalf of Company. During the term of employment, Executive shall
not at any time or place or to any extent whatsoever, either directly or
indirectly, without the express written consent of Company, engage in any
outside employment, or in any activity competitive with or adverse to Company's
business, practice or affairs, whether alone or as partner, officer, director,
employee, shareholder of any corporation or as a trustee, fiduciary, consultant
or other representative. This is not intended to prohibit Executive from
engaging in nonprofessional activities such as personal investments or
conducting to a reasonable extent private business affairs which may include
other boards of directors' activity, as long as they do not conflict with
Company. Participation to a reasonable extent in civic, social or community
activities is encouraged.
C. Non-Solicitation of Customer or Suppliers. During the term of
Executive's employment with Company and for a period of twelve (12) months
after the expiration or termination of employment with Company for Cause or
without Good Reason (if initiated by Executive), Executive shall not, directly
or indirectly, for Executive, or on behalf of, or in conjunction with, any
other person(s), company, partnership, corporation, or governmental entity, in
any manner whatsoever, call upon, contact encourage, handle or solicit, or
cause others to solicit, any person or other entity that is, or was within the
twelve (12) month period immediately prior to the date of Executive's
termination, a customer or supplier of Company or any of its subsidiaries or
affiliates, for the purpose of soliciting, selling or purchasing from such
customer or supplier the same, similar, or related services or products that
are provided by, or purchased by, Company or any of its subsidiaries or
affiliates. Notwithstanding the foregoing, the obligations of Executive under
this Section 12(C), shall terminate only if the employment of Executive is
terminated by Company without Cause or if Executive terminates his employment
for Good Reason. If Executive violates Executive's obligations under this
Section 12(C), then the time periods hereunder shall be extended by the period
of time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
D. Non-Solicitation of Employees. During the term of Executive's
employment with Company and for a period of twelve (12) months after the
termination of employment with Company, regardless of who initiates the
termination, Executive shall not, directly or indirectly, for Executive, or on
behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, in any manner whatsoever, seek to hire,
and/or hire any person who, on the date hereof, or on the date of Executive's
termination, is an employee of Company or any of its subsidiaries or
affiliates, and that receives annual compensation in excess of $25,000, for
employment or as an independent contractor with any person or entity (other
than Company or any of its subsidiaries or affiliates), unless first authorized
in writing by Company, which authorization may be withheld in the sole and
absolute discretion of Company. If Executive violates Executive's obligations
wider this Section 12(D), then the time periods hereunder shall be extended by
the period of time equal to that period beginning when the activities
constituting such violation commenced and ending when the activities
constituting such violation terminated.
E. Competing Business. During the term of Executive's employment and
for a period of twelve (12) months after the termination of employment with
Company for Cause or without Good Reason (if initiated by Executive), Executive
shall not, directly or indirectly, (including, without limitation, as a
partner, director, officer or employee of, or lender or consultant to, any
other personal entity, or shareholder (other than as the holder of less than
five percent of the stock of a corporation the securities of which are traded
on a national securities exchange or in the over-the-counter market), for
Executive, or on behalf of, or in conjunction with, any other person(s),
company, partnership, corporation, or governmental entity, in any manner
whatsoever, or in any other capacity, within, into or from the Restricted
Territory (as defined below) engage or cause others to engage in the same or
similar business as Company and its subsidiaries (i.e., Motorsports internet-
related business), or any aspect thereof, unless first authorized in writing by
Company, which authorization may be withheld in the sole and absolute
discretion of Company. For purposes of this Section 12(E), the term
"Restricted Territory" shall mean any geographical service area where Company
or any of its subsidiaries and affiliates is engaged in business, sells
products or performs services or was considering engaging in business at any
time, prior to the termination or at the time of termination. Notwithstanding
the foregoing, the obligations of Executive under this Section 12(E), shall
terminate only if Executive is terminated by Company without Cause or if
Executive terminates his employment for Good Reason. If Executive violates
Executive's obligations under this Section 12(E), then the time periods
hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminated.
F. Judicial Amendment. If the scope of any provision of this Section
12 is found by a court of competent jurisdiction to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the
maximum extent permitted by law. The parties agree that the scope of any
provision of this Agreement may be modified by a judge in any proceeding to
enforce this Agreement, so that such provision can be enforced to the maximum
extent permitted by law. If any provision of this Agreement is found to be
invalid or unenforceable for any reason, it shall not affect the validity of
the remaining provisions of this Agreement.
G. Injunctive Relief Damages and Forfeiture. Due to the nature of
Executive's position with Company, and with full realization that a violation
of this Agreement will cause immediate and irreparable injury and damage, which
is not readily measurable, and to protect Company's interests, Executive
understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Company may seek to
enforce this Agreement with an action for injunctive relief to cease or prevent
any actual or threatened violation of this Agreement on the part of Executive.
H. Survival. The provisions of this Section 12, shall survive the
termination of this Agreement.
13.AMENDMENTS
This Agreement constitutes the entire agreement between the
parties as to the subject matter hereof. Accordingly, there are no side
agreements or verbal agreements other than those that are stated in this
agreement. Any amendment, modification or change in said Agreements must be
done so in writing and signed by both parties.
14.SEVERABILITY
In the event a court or arbitrator declares that any provision of
this Agreement is invalid or unenforceable, it shall not affect or invalidate
any of the remaining provisions. Further, the court shall have the authority
to re-write that portion of the Agreement it deems unenforceable, to make it
enforceable.
15.GOVERNING LAW
The law of the State of Nevada shall govern the interpretation and
application of all of the provisions of this Agreement.
16.SUCCESSORS AND ASSIGNS
It is expressly understood that this Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation or organization with which or into which the
Company may be merged or acquired by or which may succeed to its assets or
business, provided, however, that the obligations of the Executive are personal
and shall not be assigned by him.
17.INDEMNITY
General. Company shall, to the fullest extent authorized by the Delaware
General Company Law, as amended, indemnify and hold harmless Executive in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative against expenses, liabilities and
losses (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by Executive in
connection therewith.
Expenses. This right to indemnification includes the right to be paid by
Company the expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
Nevada law requires, an advancement of expenses incurred by Executive shall be
made only upon delivery to Executive of an undertaking, by or on behalf of
Executive, to repay all amounts so advanced if it is ultimately determined by
final judicial decision from which there is no further right to appeal that
Executive is not entitled to be indemnified for such expenses. The rights to
indemnification and to the advancement of expenses shall be contract rights and
such rights shall continue as to Executive after his termination of employment
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators.
Claims for Indemnification or Expenses. If a claim under either A or B above
is not paid in full by Company within sixty (60) days after Company receives a
written claim, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, Executive may at any time
thereafter bring suit against Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, Executive shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the Executive to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by Company to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that Executive is not entitled to be indemnified, or to such
advancement of expenses, shall be on Company.
18.DISPUTE RESOLUTION
A. Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement (excepting the confidentiality and non-disclosure
provisions of Section 11 hereof, and the Covenant-Not-To-Compete provisions of
Section 12 hereof), or the statutory rights or obligations of either party
hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section below writing and served upon the other. Any demand for mediation
shall be made in writing party to the dispute, by certified mail, return
receipt requested, at the business address of or at the last known residence
address of Executive respectively. The demand shall set forth with reasonable
specificity the basis of the dispute and the relief sought. The mediation
learning will occur at a time and place convenient to the parties in Las Vegas,
Nevada, Arizona, within thirty (30) days of the date of selection or
appointment of the mediator and shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA").
B. Arbitration. In the event that the dispute is not settled through
mediation, the parties shall then proceed to binding arbitration before a
single independent arbitrator selected pursuant to Section 18(A). The mediator
shall not serve as arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL
EMPLOYMENT DISCRIMINATION TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY,
OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY
INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient to the parties in Las Vegas, Nevada,
within thirty (30) days of selection or appointment of the arbitrator. If
Company has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy
to the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. ** 1-16. If no such policy has been adopted, the
arbitration shall be governed by the National Rules for the Resolution of
Employment Disputes of the AAA. The arbitrator shall issue written findings of
fact and conclusions of law, and an award, within fifteen (15) days of the date
of the hearing unless the parties otherwise agree.
C. Damages. In cases of breach of contract or policy, damages shall be
limited to contract damages. In cases of intentional discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with 42
U.S.C. * 1981(a) and the Civil Rights Act of 1991. In cases of employment
tort, the arbitrator may award punitive damages if proved by clear and
convincing evidence. Any award of punitive damages shall not exceed two times
any compensatory award and in any event, shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000). The arbitrator may award fees to the prevailing
party and assess costs of the arbitration to the non-prevailing party. Issues
of procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. ** 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of
a trial judge sitting without a jury.
D. Selection of Mediators or Arbitrators. The parties shall select the
mediator or arbitrator form a panel list made available by the AAA. If the
parties are unable to agree to a mediator or arbitrator within ten (10) days of
receipt of a demand for mediation or arbitration, the mediator or arbitrator
will be chosen by alternatively striking from a list of five (5) mediators or
arbitrators obtained by Company from AAA. Executive shall have the first
strike.
19.NOTICES
Notices. Any notice delivered under this Agreement shall be deemed duly
delivered four (4) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (1) business day after
it is sent for next-business day delivery via a reputable international
overnight courier service, in each case to the address of the recipient set
forth in the introductory paragraph hereto. Either party may change the address
to which notices are to be delivered by giving notice of such change to the
other party.
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
effective on the date set forth above.
Innovative Energy Solutions, Inc. "Executive"
By: ________________________ _______________________
Ronald C. Foster Terry Dingwall
Chairman of the Board of Directors
#
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 18th day
of June 2004, by and between Stephen P. Monaco ("Executive"), who resides at
13205 Cedar Street, Leawood, KS 66209, United States, and Innovative Energy
Solutions, Inc. ("iESi", or "Company."), 41 North Mojave Road, Las Vegas,
Nevada 89101, United States, effective July 1, 2004 ("Effective Date").
R E C I T A L S
Company wishes to retain the services of Executive pursuant to this
Employment Agreement, the terms and provisions of which are set forth below.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. POSITION AND DUTIES.
During the Term (as defined in Section 5) Executive will continue
to be employed by Company as its Vice President and Chief Marketing Officer,
and shall perform those duties as described in Job Description, (attached as
Exhibit A), and as determined from time to time determined by the Board of
Directors of Company ("Board") in accordance with the policies, practices and
bylaws of Company. During the Term, the Board may, in its sole discretion,
appoint Executive as a member of the Board.
Executive shall serve Company faithfully, loyally, honestly, and
to the best of Executive's ability. Executive will devote Executive's best
efforts and substantially all of the Executive's business time to the
performance of Executive's duties for, and in the business and affairs of,
Company.
Subject to Section 7, the Board reserves the right, in its sole
discretion, to change or modify Executive's position, title, and duties during
the Term of this Agreement.
2. BASE SALARY.
Commencing on the Effective Date and during the remaining Term of
this Agreement, Executive's annual base salary will be One Hundred Fifty
Thousand U.S. Dollars ($150,000), payable in accordance with Company's
customary payroll practice. Executive's base salary will be reviewed annually
by the Board in accordance with Company's compensation review policies and
practices, all as determined by Company in its discretion.
However, Executive agrees that Company shall have no obligation to
pay any salary to Executive until such time as the Company has received
unrestricted equity investments from persons other than the Company's
incorporators of $1,500,000 (One Million Five Hundred Thousand U.S. Dollars) or
more and those funds are on hand and available in the Company's bank account
for payment at the direction of the Board (the "Outside Funds"). Within ten
(10) business days after the Outside Funds are on hand as aforesaid, Company
shall pay to Executive all earned but unpaid salary attributable to Executive's
employment with Company from the Effective Date until the date of payment, and
shall thereafter pay, so long as this Agreement continues, payable in
accordance with Company's customary payroll practice.
3. INCENTIVE COMPENSATION.
Company has or will develop a performance-based compensation
program for members of its senior executive management team that is
discretionary in nature and based on among other things the financial
performance of Company and the Executive's value in achieving this performance.
Executive shall be eligible to participate in any and all performance-based
incentive compensation program that the Board has established or may in the
future establish for Executive, as well as any performance-based incentive
compensation program established from time to time for other members of
Company's senior management.
4. OTHER AGREEMENTS.
Other Agreements. Company and Executive may, from time to time, enter into one
or more agreements relating to specific benefit and/or compensation programs
including without limitation, a change of control agreement, stock option
agreements, stock purchase agreements, and stock grant agreements. Nothing in
this Agreement is intended to alter or modify any of such agreements, which are
now referred to as "Ancillary Agreements."
5. TERM AND TERMINATION.
This Agreement will continue in full force and effect until
terminated by the parties. This Agreement may be terminated in any of the
following ways: (a) it may be negotiated and replaced by a written agreement
signed by both parties; (b) Company may elect to terminate this Agreement, with
or without "Cause," as defined below; (c) Executive may elect to terminate this
Agreement with or without "Good Reason," as defined below; or (d) either party
may serve notice on the other of its or his desire to terminate this Agreement
at the end of the Term.
The "Term" of this Agreement shall begin on the Effective Date and
shall expire by its terms in sixty (60) months, on June 30, 2009, unless sooner
terminated in accordance with the provisions of this Agreement. Thereafter,
the "Term" of this Agreement shall renew automatically for additional twelve
(12) month periods unless terminated accordance with the provisions of this
Agreement.
6. TERMINATION BY COMPANY.
A. Termination for Cause. Company may terminate this Agreement and
Executive's employment for Cause at any time upon written notice. For purposes
of this Agreement, "Cause" shall be limited to discharge resulting from a
determination by Company that within the period of time contemplated by this
agreement the Executive has: (i) been convicted of a felony involving
dishonesty, fraud, theft or embezzlement; (ii) failed or refused, in a material
respect, to follow reasonable policies or directives established by Company and
after written notice thereof from Company, and a reasonable opportunity by
Executive to cure such failures or refusals after having been given reasonable
written notice of such failures or refusals; (iii) willfully and persistently
failed to attend to the material duties or obligations imposed upon Executive
under this Agreement after reasonable written notice from Company and a
reasonable opportunity by Executive to cure such failure; (iv) performed an act
or failed to act, which, if Executive were prosecuted and convicted, would
constitute a felony involving $1,000 or more of money or property of Company,
or (v) committed other acts constituting intentional misconduct or dishonesty
that in the reasonable discretion of the Board are likely to have a material
adverse effect on the Company.
If this Agreement and Executive's employment are terminated by
Company for Cause, Executive shall receive no Severance Benefits.
B. Termination Without Cause. Company also may terminate this
Agreement and Executive's employment at any time or elect to not renew this
Agreement at the end of any Term without Cause by giving at least 60 days prior
written notice to Executive. In the event (i) this Agreement and Executive's
employment are terminated by Company, or (ii) Company elects not to renew this
Agreement at the end of any Term, without Cause, Executive shall be entitled to
receive Severance Benefits pursuant to Section 9.
7. TERMINATION BY EXECUTIVE.
Executive may terminate this Agreement and his employment with or
without "Good Reason" in accordance with the provisions of this Section 7.
A. Termination For Good Reason. Executive may terminate this Agreement
and Executive's employment for "Good Reason" by giving written notice to
Company within 60 days (or such longer period as may be agreed to in writing by
Company) of Executive's reason(s) for believing that "Good Reason" for his
termination of employment exists.
Executive shall have "Good Reason" to terminate his Agreement and
Executive's employment upon the occurrence of any of the following events: (i)
the assignment to Executive of any duties that are inconsistent with, or the
reduction of powers or functions associated with, Executive's position, duties,
or responsibilities with Company, or an adverse change in Executive's titles,
authority, or reporting responsibilities, or in conditions of Executive's
employment, (ii) the Executive's base salary is reduced or the potential
incentive compensation (or bonus) to which Executive may become entitled to at
any level of performance by the Executive or Company is reduced, (iii) the
failure of Company to cause any successor to expressly assume and agree to be
bound by the terms of this Agreement, (iv) any purported termination by Company
of Executive's employment for grounds other than for "Cause," (v) Company
relieving the Executive of Executive's duties other than for "Cause," or (vi)
Executive is required to relocate.
If Executive terminates this Agreement and his employment for Good
Reason, Executive shall be entitled to receive Severance Benefits pursuant to
Section 9.
B. Termination Without Good Reason. Executive also may terminate this
Agreements and Executive's employment without Good Reason at any time by giving
60 days notice to Company. If Executive terminates this Agreement and
Executive's employment without Good Reason, Executive shall not be entitled to
receive Severance Benefits pursuant to Section 9.
8. DEATH OR DISABILITY
This Agreement will terminate automatically on Executive's death.
Any salary or other amounts due to Executive for services rendered prior to
Executive's death shall be paid to Executive's surviving spouse, or if
Executive does not leave a surviving spouse, to Executive's estate. No other
benefits shall be payable to Executive's estate or heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other
benefit plans maintained in whole or in part by Company for the benefit of
Executive, his estate or heirs.
In the Executive becomes "Disabled," Executive's employment
hereunder and Company's obligation to pay Executive's salary shall continue for
a period of eighteen (18) months from the date of such Disability, at which
time Executive's employment hereunder shall automatically cease and terminate.
Executive shall be considered "Disabled" or to be suffering from a "Disability"
for purposes of this Section 8 if, in the reasonable, good faith judgment of a
licensed physician selected by the Board, Executive is unable for a period of
ninety (90) consecutive business days to perform the essential functions of
Executive position required under this Agreement, with or without reasonable
accommodations, because of a physical or mental impairment. Any dispute
relating to the existence of a Disability shall be resolved by the opinion of
the licensed physician selected by the Board, provided, however, that if
Executive does not accept the opinion of the licensed physician selected by
Company, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by Executive; provided further, however, that if Company
does not accept the opinion of the licensed physician selected by Executive,
the dispute shall be finally resolved by the opinion of a licensed physician
selected by the licensed physicians selected by Company and Executive,
respectively.
9. SEVERANCE BENEFITS
If this Agreement and Executive's employment are terminated
without Cause pursuant to Section 6(B) hereof or if Executive elects to
terminate this Agreement for Good Reason pursuant to Section 7(A) hereof,
Executive shall receive the "Severance Benefits" as provided by this Section.
The Severance Benefits shall be payable in a single lump sum within ten (10)
days following termination of employment and shall equal the greater of (i) sum
of (a) the Executive's base salary for the unexpired Term, and (b) the average
of incentive compensation paid to the Executive for the two (2) years prior to
the date of termination multiplied by a fraction, the numerator of which is the
number of months remaining from the date of termination to the end of the Term
and the denominator of which is twelve (12), and (ii) the sum of (x)
Executive's base salary for a twenty-four (24) month period as in effect on the
date of termination and (y) the average on an annual basis of incentive
compensation paid to the Executive for the two years prior to the date of
termination. In addition, the Executive shall continue to receive life,
disability, accident and group health insurance benefits substantially similar
to those which he was receiving immediately prior to his termination of
employment until the earlier of the end of the period of eighteen (18) months
following his termination of employment or the day on which he becomes eligible
to receive any substantially similar continuing health care benefits under any
Plan or program of any other employer. If a particular insurance benefit may
not be continued for any reason, Company shall pay Executive the amount
necessary to permit Executive to purchase the same insurance benefits as were
provided by Company, such payment to be made to Executive in a single lump sum.
The benefits provided pursuant to this Section shall be provided on
substantially the same terms and conditions as they were provided prior to the
ermination of employment, except that the full cost of such benefits shall be
paid by the Company. The Executive's right to receive continued coverage under
the Company's group health plans pursuant to Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as it may be amended or
replaced from time to time, shall commence following the expiration of his
right to receive continued benefits under this Agreement.
Executive shall have no duty to mitigate damages in order to
receive the benefits provided by this Section.
If Company terminates the Agreement and Executive's employment for
Cause, or if Executive voluntarily terminates this Agreement and Executive's
employment without Good Reason prior to the end of the Term, no Severance
Benefits shall be paid to Executive. No Severance Benefits are payable in the
event of Executive's death or disability while in the active employ of Company.
10.BENEFITS
Executive will be entitled to participate in all employee benefit
plans, including, but not limited to, retirement plans, stock option plans,
life insurance plans, and health and dental plans available to other Company
employees, subject to restrictions (including waiting periods) specified in the
applicable Plan. Executive is entitled to six (6) weeks of paid vacation per
calendar year, with such vacation to be scheduled and taken in accordance with
Company's standard vacation policies. In addition to the compensation and
benefits provided above, the Company shall, upon receipt of appropriate
documentation, reimburse Executive for his reasonable travel, lodging,
entertainment, promotion, and other ordinary and necessary business expenses
consistent with Company policies.
11.CONFIDENTIALITY AND NON-DISCLOSURE
During the course of Executive's employment, Executive has and
will become exposed to a substantial amount of confidential and proprietary
information, including, but not limited to trade secrets, intellectual
property, patent applications, copyright applications, technical drawings,
financial information, annual report, audited and unaudited financial reports,
strategic plans, business plans, marketing strategies, new business strategies,
personnel and compensation information, and other such reports, documents or
information. In the event Executive's employment is terminated by either party
for any, reason, Executive will return to Company and Executive will not take,
any copies of such documents, computer print-outs, computer tapes, floppy
disks, CD ROMs, DVDs, etc., in any form, format or manner whatsoever, nor will
Executive disclose the same in whole or in part to any person or entity, in any
manner either directly or indirectly. Excluded from this Agreement is
information that is already disclosed to third parties and is in the public
domain or that Company consents to be disclosed, with such consent to be in
writing. The provisions of this Section 11 shall survive the termination of
this Agreement.
12.COVENANT-NOT-TO-COMPETE
A. Interests to be Protected. The parties acknowledge that during the
Term, Executive will perform essential for Company, its employees and
shareholders, and for customers of Company. Therefore, Executive will be given
an opportunity to meet, work with and develop close working relationships with
Company's clients on a first-hand basis and will gain valuable insight as to
the clients' operations, personnel and need for services. In addition,
Executive will be to, have access to, and be required to work with, a
considerable amount of Company's confidential and proprietary information,
including but not limited to information concerning Company's methods of
operation, financial information, strategic planning, operational budgets and
strategies, payroll data, management systems programs, computer systems,
marketing plans and strategies, merger and acquisition strategies and customer
lists.
The parties also expressly recognize and acknowledge that the
personnel of Company have been trained by, and are valuable to Company, and
that if Company must hire new personnel or retrain existing personnel to fill
vacancies Company will incur substantial expense in recruiting and training
such personnel. The parties expressly recognize that should Executive compete
with Company in any manner whatsoever, it would seriously impair the goodwill
and diminish the value of Company's business.
The parties acknowledge that this covenant has an extended
duration; however, they agree that this covenant is reasonable and that it is
necessary for the protection of Company, its shareholders and employees.
For these and other reasons, and the fact that there are many
other employment opportunities available to Executive if Executive should
terminate, the parties are in full and complete agreement that the following
restrictive covenants (which together are referred to as the
"Covenant-Not-To-Compete") are fair and reasonable and are freely, voluntarily
and knowingly entered into. Further, each party has been given the opportunity
to consult with independent legal counsel before entering into this Agreement.
B. Devotion to Employment. Executive shall devote substantially all of
Executive's business time and best efforts to the performance of Executive's
duties on behalf of Company. During the term of employment, Executive shall
not at any time or place or to any extent whatsoever, either directly or
indirectly, engage in any activity competitive with or adverse to Company's
business, practice or affairs, whether alone or as partner, officer, director,
employee, shareholder of any corporation or as a trustee, fiduciary, consultant
or other representative. This is not intended to prohibit Executive from
engaging in nonprofessional activities such as personal investments or
conducting private business affairs which may include other boards of
directors' activity, as long as they do not conflict with Company.
Participation to a reasonable extent in civic, social or community activities
is encouraged.
C. Non-Solicitation of Customer or Suppliers. During the term of
Executive's employment with Company and for a period of twelve (12) months
after the expiration or termination of employment with Company for Cause or
without Good Reason (if initiated by Executive), Executive shall not, directly
or indirectly, for Executive, or on behalf of, or in conjunction with, any
other person(s), company, partnership, corporation, or governmental entity, in
any manner whatsoever, call upon, contact encourage, handle or solicit, or
cause others to solicit, any person or other entity that is, or was within the
twelve (12) month period immediately prior to the date of Executive's
termination, a customer or supplier of Company or any of its subsidiaries or
affiliates, for the purpose of soliciting, selling or purchasing from such
customer or supplier the same, similar, or related services or products that
are provided by, or purchased by, Company or any of its subsidiaries or
affiliates. Notwithstanding the foregoing, the obligations of Executive under
this Section 12(C), shall terminate only if the employment of Executive is
terminated by Company without Cause or if Executive terminates his employment
for Good Reason. If Executive violates Executive's obligations under this
Section 12(C), then the time periods hereunder shall be extended by the period
of time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
D. Non-Solicitation of Employees. During the term of Executive's
employment with Company and for a period of twelve (12) months after the
termination of employment with Company, regardless of who initiates the
termination, Executive shall not, directly or indirectly, for Executive, or on
behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, in any manner whatsoever, seek to hire,
and/or hire any person who, on the date hereof, or on the date of Executive's
termination, is an employee of Company or any of its subsidiaries or
affiliates, and that receives annual compensation in excess of $25,000, for
employment or as an independent contractor with any person or entity (other
than Company or any of its subsidiaries or affiliates), unless first authorized
in writing by Company, which authorization may be withheld in the sole and
absolute discretion of Company. If Executive violates Executive's obligations
wider this Section 12(D), then the time periods hereunder shall be extended by
the period of time equal to that period beginning when the activities
constituting such violation commenced and ending when the activities
constituting such violation terminated.
E. Competing Business. During the term of Executive's employment and
for a period of twelve (12) months after the termination of employment with
Company for Cause or without Good Reason (if initiated by Executive), Executive
shall not, directly or indirectly, (including, without limitation, as a
partner, director, officer or employee of, or lender or consultant to, any
other personal entity, or shareholder (other than as the holder of less than
five percent of the stock of a corporation the securities of which are traded
on a national securities exchange or in the over-the-counter market), for
Executive, or on behalf of, or in conjunction with, any other person(s),
company, partnership, corporation, or governmental entity, in any manner
whatsoever, or in any other capacity, within, into or from the Restricted
Territory (as defined below) engage or cause others to engage in the same or
similar business as Company and its subsidiaries (i.e., Motorsports internet-
related business), or any aspect thereof, unless first authorized in writing by
Company, which authorization may be withheld in the sole and absolute
discretion of Company. For purposes of this Section 12(E), the term
"Restricted Territory" shall mean any geographical service area where Company
or any of its subsidiaries and affiliates is engaged in business, sells
products or performs services or was considering engaging in business at any
time, prior to the termination or at the time of termination. Notwithstanding
the foregoing, the obligations of Executive under this Section 12(E), shall
terminate only if Executive is terminated by Company without Cause or if
Executive terminates his employment for Good Reason. If Executive violates
Executive's obligations under this Section 12(E), then the time periods
hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminated.
F. Judicial Amendment. If the scope of any provision of this Section
12 is found by a court of competent jurisdiction to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the
maximum extent permitted by law. The parties agree that the scope of any
provision of this Agreement may be modified by a judge in any proceeding to
enforce this Agreement, so that such provision can be enforced to the maximum
extent permitted by law. If any provision of this Agreement is found to be
invalid or unenforceable for any reason, it shall not affect the validity of
the remaining provisions of this Agreement.
G. Injunctive Relief Damages and Forfeiture. Due to the nature of
Executive's position with Company, and with full realization that a violation
of this Agreement will cause immediate and irreparable injury and damage, which
is not readily measurable, and to protect Company's interests, Executive
understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Company may seek to
enforce this Agreement with an action for injunctive relief to cease or prevent
any actual or threatened violation of this Agreement on the part of Executive.
H. Survival. The provisions of this Section 12, shall survive the
termination of this Agreement.
13.AMENDMENTS
This Agreement constitutes the entire agreement between the
parties as to the subject matter hereof. Accordingly, there are no side
agreements or verbal agreements other than those that are stated in this
agreement. Any amendment, modification or change in said Agreements must be
done so in writing and signed by both parties.
14.SEVERABILITY
In the event a court or arbitrator declares that any provision of
this Agreement is invalid or unenforceable, it shall not affect or invalidate
any of the remaining provisions. Further, the court shall have the authority
to re-write that portion of the Agreement it deems unenforceable, to make it
enforceable.
15.GOVERNING LAW
The law of the State of Nevada shall govern the interpretation and
application of all of the provisions of this Agreement.
16.SUCCESSORS AND ASSIGNS
It is expressly understood that this Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation or organization with which or into which the
Company may be merged or acquired by or which may succeed to its assets or
business, provided, however, that the obligations of the Executive are personal
and shall not be assigned by him.
17.INDEMNITY
General. Company shall, to the fullest extent authorized by the Delaware
General Company Law, as amended, indemnify and hold harmless Executive in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative against expenses, liabilities and
losses (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by Executive in
connection therewith.
Expenses. This right to indemnification includes the right to be paid by
Company the expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
Nevada law requires, an advancement of expenses incurred by Executive shall be
made only upon delivery to Executive of an undertaking, by or on behalf of
Executive, to repay all amounts so advanced if it is ultimately determined by
final judicial decision from which there is no further right to appeal that
Executive is not entitled to be indemnified for such expenses. The rights to
indemnification and to the advancement of expenses shall be contract rights and
such rights shall continue as to Executive after his termination of employment
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators.
Claims for Indemnification or Expenses. If a claim under either A or B above
is not paid in full by Company within sixty (60) days after Company receives a
written claim, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, Executive may at any time
thereafter bring suit against Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, Executive shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the Executive to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by Company to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that Executive is not entitled to be indemnified, or to such
advancement of expenses, shall be on Company.
18.DISPUTE RESOLUTION
A. Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement (excepting the confidentiality and non-disclosure
provisions of Section 11 hereof, and the Covenant-Not-To-Compete provisions of
Section 12 hereof), or the statutory rights or obligations of either party
hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section below writing and served upon the other. Any demand for mediation
shall be made in writing party to the dispute, by certified mail, return
receipt requested, at the business address of or at the last known residence
address of Executive respectively. The demand shall set forth with reasonable
specificity the basis of the dispute and the relief sought. The mediation
learning will occur at a time and place convenient to the parties in Las Vegas,
Nevada, Arizona, within thirty (30) days of the date of selection or
appointment of the mediator and shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA").
B. Arbitration. In the event that the dispute is not settled through
mediation, the parties shall then proceed to binding arbitration before a
single independent arbitrator selected pursuant to Section 18(A). The mediator
shall not serve as arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL
EMPLOYMENT DISCRIMINATION TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY,
OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY
INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient to the parties in Las Vegas, Nevada,
within thirty (30) days of selection or appointment of the arbitrator. If
Company has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy
to the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. ** 1-16. If no such policy has been adopted, the
arbitration shall be governed by the National Rules for the Resolution of
Employment Disputes of the AAA. The arbitrator shall issue written findings of
fact and conclusions of law, and an award, within fifteen (15) days of the date
of the hearing unless the parties otherwise agree.
C. Damages. In cases of breach of contract or policy, damages shall be
limited to contract damages. In cases of intentional discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with 42
U.S.C. * 1981(a) and the Civil Rights Act of 1991. In cases of employment
tort, the arbitrator may award punitive damages if proved by clear and
convincing evidence. Any award of punitive damages shall not exceed two times
any compensatory award and in any event, shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000). The arbitrator may award fees to the prevailing
party and assess costs of the arbitration to the non-prevailing party. Issues
of procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. ** 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of
a trial judge sitting without a jury.
D. Selection of Mediators or Arbitrators. The parties shall select the
mediator or arbitrator form a panel list made available by the AAA. If the
parties are unable to agree to a mediator or arbitrator within ten (10) days of
receipt of a demand for mediation or arbitration, the mediator or arbitrator
will be chosen by alternatively striking from a list of five (5) mediators or
arbitrators obtained by Company from AAA. Executive shall have the first
strike.
19.NOTICES
Notices. Any notice delivered under this Agreement shall be deemed duly
delivered four (4) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (1) business day after
it is sent for next-business day delivery via a reputable international
overnight courier service, in each case to the address of the recipient set
forth in the introductory paragraph hereto. Either party may change the address
to which notices are to be delivered by giving notice of such change to the
other party.
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
effective on the date set forth above.
Innovative Energy Solutions, Inc. "Executive"
By: ________________________ _______________________
Ronald C. Foster Stephen P. Monaco
Chairman of the Board of Directors
#
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 21st day
of June 2004, by and between Patrick J. Cochrane ("Executive"), who resides at
36 Fountain Creek Drive, Sherwood Park, Alberta, T8B 1C9, Canada, and
Innovative Energy Solutions, Inc. ("iESi", or "Company."), 41 North Mojave
Road, Las Vegas, Nevada 89101, United States, effective July 1, 2004
("Effective Date").
R E C I T A L S
Company wishes to retain the services of Executive pursuant to this
Employment Agreement, the terms and provisions of which are set forth below.
NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. POSITION AND DUTIES.
During the Term (as defined in Section 5) Executive will continue
to be employed by Company as its Chief Executive Officer and shall perform
those duties as described in Job Description, (attached as Exhibit A), and as
determined from time to time determined by the Board of Directors of Company
("Board") in accordance with the policies, practices and bylaws of Company.
During the Term, the Board may, in its sole discretion, appoint Executive as a
member of the Board.
Executive shall serve Company faithfully, loyally, honestly, and
to the best of Executive's ability. Executive will devote Executive's best
efforts and substantially all of the Executive's business time to the
performance of Executive's duties for, and in the business and affairs of,
Company.
Subject to Section 7, the Board reserves the right, in its sole
discretion, to change or modify Executive's position, title, and duties during
the Term of this Agreement.
2. BASE SALARY.
Commencing on the Effective Date and during the remaining Term of
this Agreement, Executive's annual base salary will be One Hundred Eighty
Thousand U.S. Dollars ($180,000), payable in accordance with Company's
customary payroll practice. Executive's base salary will be reviewed annually
by the Board in accordance with Company's compensation review policies and
practices, all as determined by Company in its discretion.
However, Executive agrees that Company shall have no obligation to
pay any salary to Executive until such time as the Company has received
unrestricted equity investments from persons other than the Company's
incorporators of $1,500,000 (One Million Five Hundred Thousand U.S. Dollars) or
more and those funds are on hand and available in the Company's bank account
for payment at the direction of the Board (the "Outside Funds"). Within ten
(10) business days after the Outside Funds are on hand as aforesaid, Company
shall pay to Executive all earned but unpaid salary attributable to Executive's
employment with Company from the Effective Date until the date of payment, and
shall thereafter pay, so long as this Agreement continues, payable in
accordance with Company's customary payroll practice.
3. INCENTIVE COMPENSATION.
Company has or will develop a performance-based compensation
program for members of its senior executive management team that is
discretionary in nature and based on among other things the financial
performance of Company and the Executive's value in achieving this performance.
Executive shall be eligible to participate in any and all performance-based
incentive compensation program that the Board has established or may in the
future establish for Executive, as well as any performance-based incentive
compensation program established from time to time for other members of
Company's senior management.
4. OTHER AGREEMENTS.
Other Agreements. Company and Executive may, from time to time, enter into one
or more agreements relating to specific benefit and/or compensation programs
including without limitation, a change of control agreement, stock option
agreements, stock purchase agreements, and stock grant agreements. Nothing in
this Agreement is intended to alter or modify any of such agreements, which are
now referred to as "Ancillary Agreements."
5. TERM AND TERMINATION.
This Agreement will continue in full force and effect until
terminated by the parties. This Agreement may be terminated in any of the
following ways: (a) it may be negotiated and replaced by a written agreement
signed by both parties; (b) Company may elect to terminate this Agreement, with
or without "Cause," as defined below; (c) Executive may elect to terminate this
Agreement with or without "Good Reason," as defined below; or (d) either party
may serve notice on the other of its or his desire to terminate this Agreement
at the end of the Term.
The "Term" of this Agreement shall begin on the Effective Date and
shall expire by its terms in sixty (60) months, on June 30, 2009, unless sooner
terminated in accordance with the provisions of this Agreement. Thereafter,
the "Term" of this Agreement shall renew automatically for additional twelve
(12) month periods unless terminated accordance with the provisions of this
Agreement.
6. TERMINATION BY COMPANY.
A. Termination for Cause. Company may terminate this Agreement and
Executive's employment for Cause at any time upon written notice. For purposes
of this Agreement, "Cause" shall be limited to discharge resulting from a
determination by Company that within the period of time contemplated by this
agreement the Executive has: (i) been convicted of a felony involving
dishonesty, fraud, theft or embezzlement; (ii) failed or refused, in a material
respect, to follow reasonable policies or directives established by Company and
after written notice thereof from Company, and a reasonable opportunity by
Executive to cure such failures or refusals after having been given reasonable
written notice of such failures or refusals; (iii) willfully and persistently
failed to attend to the material duties or obligations imposed upon Executive
under this Agreement after reasonable written notice from Company and a
reasonable opportunity by Executive to cure such failure; (iv) performed an act
or failed to act, which, if Executive were prosecuted and convicted, would
constitute a felony involving $1,000 or more of money or property of Company,
or (v) committed other acts constituting intentional misconduct or dishonesty
that in the reasonable discretion of the Board are likely to have a material
adverse effect on the Company.
If this Agreement and Executive's employment are terminated by
Company for Cause, Executive shall receive no Severance Benefits.
B. Termination Without Cause. Company also may terminate this
Agreement and Executive's employment at any time or elect to not renew this
Agreement at the end of any Term without Cause by giving at least 60 days prior
written notice to Executive. In the event (i) this Agreement and Executive's
employment are terminated by Company, or (ii) Company elects not to renew this
Agreement at the end of any Term, without Cause, Executive shall be entitled to
receive Severance Benefits pursuant to Section 9.
7. TERMINATION BY EXECUTIVE.
Executive may terminate this Agreement and his employment with or
without "Good Reason" in accordance with the provisions of this Section 7.
A. Termination For Good Reason. Executive may terminate this Agreement
and Executive's employment for "Good Reason" by giving written notice to
Company within 60 days (or such longer period as may be agreed to in writing by
Company) of Executive's reason(s) for believing that "Good Reason" for his
termination of employment exists.
Executive shall have "Good Reason" to terminate his Agreement and
Executive's employment upon the occurrence of any of the following events: (i)
the assignment to Executive of any duties that are inconsistent with, or the
reduction of powers or functions associated with, Executive's position, duties,
or responsibilities with Company, or an adverse change in Executive's titles,
authority, or reporting responsibilities, or in conditions of Executive's
employment, (ii) the Executive's base salary is reduced or the potential
incentive compensation (or bonus) to which Executive may become entitled to at
any level of performance by the Executive or Company is reduced, (iii) the
failure of Company to cause any successor to expressly assume and agree to be
bound by the terms of this Agreement, (iv) any purported termination by Company
of Executive's employment for grounds other than for "Cause," or (v) Company
relieving the Executive of Executive's duties other than for "Cause."
If Executive terminates this Agreement and his employment for Good
Reason, Executive shall be entitled to receive Severance Benefits pursuant to
Section 9.
B. Termination Without Good Reason. Executive also may terminate this
Agreements and Executive's employment without Good Reason at any time by giving
60 days notice to Company. If Executive terminates this Agreement and
Executive's employment without Good Reason, Executive shall not be entitled to
receive Severance Benefits pursuant to Section 9.
8. DEATH OR DISABILITY
This Agreement will terminate automatically on Executive's death.
Any salary or other amounts due to Executive for services rendered prior to
Executive's death shall be paid to Executive's surviving spouse, or if
Executive does not leave a surviving spouse, to Executive's estate. No other
benefits shall be payable to Executive's estate or heirs pursuant to this
Agreement, but amounts may be payable pursuant to any life insurance or other
benefit plans maintained in whole or in part by Company for the benefit of
Executive, his estate or heirs.
In the Executive becomes "Disabled," Executive's employment
hereunder and Company's obligation to pay Executive's salary shall continue for
a period of eighteen (18) months from the date of such Disability, at which
time Executive's employment hereunder shall automatically cease and terminate.
Executive shall be considered "Disabled" or to be suffering from a "Disability"
for purposes of this Section 8 if, in the reasonable, good faith judgment of a
licensed physician selected by the Board, Executive is unable for a period of
ninety (90) consecutive business days to perform the essential functions of
Executive position required under this Agreement, with or without reasonable
accommodations, because of a physical or mental impairment. Any dispute
relating to the existence of a Disability shall be resolved by the opinion of
the licensed physician selected by the Board, provided, however, that if
Executive does not accept the opinion of the licensed physician selected by
Company, the dispute shall be resolved by the opinion of a licensed physician
who shall be selected by Executive; provided further, however, that if Company
does not accept the opinion of the licensed physician selected by Executive,
the dispute shall be finally resolved by the opinion of a licensed physician
selected by the licensed physicians selected by Company and Executive,
respectively.
9. SEVERANCE BENEFITS
If this Agreement and Executive's employment are terminated
without Cause pursuant to Section 6(B) hereof or if Executive elects to
terminate this Agreement for Good Reason pursuant to Section 7(A) hereof,
Executive shall receive the "Severance Benefits" as provided by this Section.
The Severance Benefits shall be payable in a single lump sum within ten (10)
days following termination of employment and shall equal the greater of (i) sum
of (a) the Executive's base salary for the unexpired Term, and (b) the average
of incentive compensation paid to the Executive for the two (2) years prior to
the date of termination multiplied by a fraction, the numerator of which is the
number of months remaining from the date of termination to the end of the Term
and the denominator of which is twelve (12), and (ii) the sum of (x)
Executive's base salary for a twenty-four (24) month period as in effect on the
date of termination and (y) the average on an annual basis of incentive
compensation paid to the Executive for the two years prior to the date of
termination. In addition, the Executive shall continue to receive life,
disability, accident and group health insurance benefits substantially similar
to those which he was receiving immediately prior to his termination of
employment until the earlier of the end of the period of eighteen (18) months
following his termination of employment or the day on which he becomes eligible
to receive any substantially similar continuing health care benefits under any
Plan or program of any other employer. If a particular insurance benefit may
not be continued for any reason, Company shall pay Executive the amount
necessary to permit Executive to purchase the same insurance benefits as were
provided by Company, such payment to be made to Executive in a single lump sum.
The benefits provided pursuant to this Section shall be provided on
substantially the same terms and conditions as they were provided prior to the
termination of employment, except that the full cost of such benefits shall be
paid by the Company. The Executive's right to receive continued coverage under
the Company's group health plans pursuant to Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as it may be amended or
replaced from time to time, shall commence following the expiration of his
right to receive continued benefits under this Agreement.
Executive shall have no duty to mitigate damages in order to
receive the benefits provided by this Section.
If Company terminates the Agreement and Executive's employment for
Cause, or if Executive voluntarily terminates this Agreement and Executive's
employment without Good Reason prior to the end of the Term, no Severance
Benefits shall be paid to Executive. No Severance Benefits are payable in the
event of Executive's death or disability while in the active employ of Company.
10.BENEFITS
Executive will be entitled to participate in all employee benefit
plans, including, but not limited to, retirement plans, stock option plans,
life insurance plans, and health and dental plans available to other Company
employees, subject to restrictions (including waiting periods) specified in the
applicable Plan. Executive is entitled to six (6) weeks of paid vacation per
calendar year, with such vacation to be scheduled and taken in accordance with
Company's standard vacation policies. In addition to the compensation and
benefits provided above, the Company shall, upon receipt of appropriate
documentation, reimburse Executive for his reasonable travel, lodging,
entertainment, promotion, and other ordinary and necessary business expenses
consistent with Company policies.
11.CONFIDENTIALITY AND NON-DISCLOSURE
During the course of Executive's employment, Executive has and
will become exposed to a substantial amount of confidential and proprietary
information, including, but not limited to trade secrets, intellectual
property, patent applications, copyright applications, technical drawings,
financial information, annual report, audited and unaudited financial reports,
strategic plans, business plans, marketing strategies, new business strategies,
personnel and compensation information, and other such reports, documents or
information. In the event Executive's employment is terminated by either party
for any, reason, Executive will return to Company and Executive will not take,
any copies of such documents, computer print-outs, computer tapes, floppy
disks, CD ROMs, DVDs, etc., in any form, format or manner whatsoever, nor will
Executive disclose the same in whole or in part to any person or entity, in any
manner either directly or indirectly. Excluded from this Agreement is
information that is already disclosed to third parties and is in the public
domain or that Company consents to be disclosed, with such consent to be in
writing. The provisions of this Section 11 shall survive the termination of
this Agreement.
(a) No Use of Name. I shall not at any time use the Company's name or any
of the Company trademark(s) or trade name(s) in any advertising or publicity
without the prior written consent of the Company.
12.COVENANT-NOT-TO-COMPETE
A. Interests to be Protected. The parties acknowledge that during the
Term, Executive will perform essential for Company, its employees and
shareholders, and for customers of Company. Therefore, Executive will be given
an opportunity to meet, work with and develop close working relationships with
Company's clients on a first-hand basis and will gain valuable insight as to
the clients' operations, personnel and need for services. In addition,
Executive will be to, have access to, and be required to work with, a
considerable amount of Company's confidential and proprietary information,
including but not limited to information concerning Company's methods of
operation, financial information, strategic planning, operational budgets and
strategies, payroll data, management systems programs, computer systems,
marketing plans and strategies, merger and acquisition strategies and customer
lists.
The parties also expressly recognize and acknowledge that the
personnel of Company have been trained by, and are valuable to Company, and
that if Company must hire new personnel or retrain existing personnel to fill
vacancies Company will incur substantial expense in recruiting and training
such personnel. The parties expressly recognize that should Executive compete
with Company in any manner whatsoever, it would seriously impair the goodwill
and diminish the value of Company's business.
The parties acknowledge that this covenant has an extended
duration; however, they agree that this covenant is reasonable and that it is
necessary for the protection of Company, its shareholders and employees.
For these and other reasons, and the fact that there are many
other employment opportunities available to Executive if Executive should
terminate, the parties are in full and complete agreement that the following
restrictive covenants (which together are referred to as the
"Covenant-Not-To-Compete") are fair and reasonable and are freely, voluntarily
and knowingly entered into. Further, each party has been given the opportunity
to consult with independent legal counsel before entering into this Agreement.
B. Devotion to Employment. Executive shall devote substantially all of
Executive's business time and best efforts to the performance of Executive's
duties on behalf of Company. During the term of employment, Executive shall
not at any time or place or to any extent whatsoever, either directly or
indirectly, without the express written consent of Company, engage in any
outside employment, or in any activity competitive with or adverse to Company's
business, practice or affairs, whether alone or as partner, officer, director,
employee, shareholder of any corporation or as a trustee, fiduciary, consultant
or other representative. This is not intended to prohibit Executive from
engaging in nonprofessional activities such as personal investments or
conducting to a reasonable extent private business affairs which may include
other boards of directors' activity, as long as they do not conflict with
Company. Participation to a reasonable extent in civic, social or community
activities is encouraged.
C. Non-Solicitation of Customer or Suppliers. During the term of
Executive's employment with Company and for a period of twelve (12) months
after the expiration or termination of employment with Company for Cause or
without Good Reason (if initiated by Executive), Executive shall not, directly
or indirectly, for Executive, or on behalf of, or in conjunction with, any
other person(s), company, partnership, corporation, or governmental entity, in
any manner whatsoever, call upon, contact encourage, handle or solicit, or
cause others to solicit, any person or other entity that is, or was within the
twelve (12) month period immediately prior to the date of Executive's
termination, a customer or supplier of Company or any of its subsidiaries or
affiliates, for the purpose of soliciting, selling or purchasing from such
customer or supplier the same, similar, or related services or products that
are provided by, or purchased by, Company or any of its subsidiaries or
affiliates. Notwithstanding the foregoing, the obligations of Executive under
this Section 12(C), shall terminate only if the employment of Executive is
terminated by Company without Cause or if Executive terminates his employment
for Good Reason. If Executive violates Executive's obligations under this
Section 12(C), then the time periods hereunder shall be extended by the period
of time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
D. Non-Solicitation of Employees. During the term of Executive's
employment with Company and for a period of twelve (12) months after the
termination of employment with Company, regardless of who initiates the
termination, Executive shall not, directly or indirectly, for Executive, or on
behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, in any manner whatsoever, seek to hire,
and/or hire any person who, on the date hereof, or on the date of Executive's
termination, is an employee of Company or any of its subsidiaries or
affiliates, and that receives annual compensation in excess of $25,000, for
employment or as an independent contractor with any person or entity (other
than Company or any of its subsidiaries or affiliates), unless first authorized
in writing by Company, which authorization may be withheld in the sole and
absolute discretion of Company. If Executive violates Executive's obligations
wider this Section 12(D), then the time periods hereunder shall be extended by
the period of time equal to that period beginning when the activities
constituting such violation commenced and ending when the activities
constituting such violation terminated.
E. Competing Business. During the term of Executive's employment and
for a period of twelve (12) months after the termination of employment with
Company for Cause or without Good Reason (if initiated by Executive), Executive
shall not, directly or indirectly, (including, without limitation, as a
partner, director, officer or employee of, or lender or consultant to, any
other personal entity, or shareholder (other than as the holder of less than
five percent of the stock of a corporation the securities of which are traded
on a national securities exchange or in the over-the-counter market), for
Executive, or on behalf of, or in conjunction with, any other person(s),
company, partnership, corporation, or governmental entity, in any manner
whatsoever, or in any other capacity, within, into or from the Restricted
Territory (as defined below) engage or cause others to engage in the same or
similar business as Company and its subsidiaries (i.e., Motorsports internet-
related business), or any aspect thereof, unless first authorized in writing by
Company, which authorization may be withheld in the sole and absolute
discretion of Company. For purposes of this Section 12(E), the term
"Restricted Territory" shall mean any geographical service area where Company
or any of its subsidiaries and affiliates is engaged in business, sells
products or performs services or was considering engaging in business at any
time, prior to the termination or at the time of termination. Notwithstanding
the foregoing, the obligations of Executive under this Section 12(E), shall
terminate only if Executive is terminated by Company without Cause or if
Executive terminates his employment for Good Reason. If Executive violates
Executive's obligations under this Section 12(E), then the time periods
hereunder shall be extended by the period of time equal to that period
beginning when the activities constituting such violation commenced and ending
when the activities constituting such violation terminated.
F. Judicial Amendment. If the scope of any provision of this Section
12 is found by a court of competent jurisdiction to be too broad to permit
enforcement to its full extent, then such provision shall be enforced to the
maximum extent permitted by law. The parties agree that the scope of any
provision of this Agreement may be modified by a judge in any proceeding to
enforce this Agreement, so that such provision can be enforced to the maximum
extent permitted by law. If any provision of this Agreement is found to be
invalid or unenforceable for any reason, it shall not affect the validity of
the remaining provisions of this Agreement.
G. Injunctive Relief Damages and Forfeiture. Due to the nature of
Executive's position with Company, and with full realization that a violation
of this Agreement will cause immediate and irreparable injury and damage, which
is not readily measurable, and to protect Company's interests, Executive
understands and agrees that in addition to instituting legal proceedings to
recover damages resulting from a breach of this Agreement, Company may seek to
enforce this Agreement with an action for injunctive relief to cease or prevent
any actual or threatened violation of this Agreement on the part of Executive.
H. Survival. The provisions of this Section 12, shall survive the
termination of this Agreement.
13.AMENDMENTS
This Agreement constitutes the entire agreement between the
parties as to the subject matter hereof. Accordingly, there are no side
agreements or verbal agreements other than those that are stated in this
agreement. Any amendment, modification or change in said Agreements must be
done so in writing and signed by both parties.
14.SEVERABILITY
In the event a court or arbitrator declares that any provision of
this Agreement is invalid or unenforceable, it shall not affect or invalidate
any of the remaining provisions. Further, the court shall have the authority
to re-write that portion of the Agreement it deems unenforceable, to make it
enforceable.
15.GOVERNING LAW
The law of the State of Nevada shall govern the interpretation and
application of all of the provisions of this Agreement.
16.SUCCESSORS AND ASSIGNS
It is expressly understood that this Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation or organization with which or into which the
Company may be merged or acquired by or which may succeed to its assets or
business, provided, however, that the obligations of the Executive are personal
and shall not be assigned by him.
17.INDEMNITY
General. Company shall, to the fullest extent authorized by the Delaware
General Company Law, as amended, indemnify and hold harmless Executive in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative against expenses, liabilities and
losses (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by Executive in
connection therewith.
Expenses. This right to indemnification includes the right to be paid by
Company the expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
Nevada law requires, an advancement of expenses incurred by Executive shall be
made only upon delivery to Executive of an undertaking, by or on behalf of
Executive, to repay all amounts so advanced if it is ultimately determined by
final judicial decision from which there is no further right to appeal that
Executive is not entitled to be indemnified for such expenses. The rights to
indemnification and to the advancement of expenses shall be contract rights and
such rights shall continue as to Executive after his termination of employment
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators.
Claims for Indemnification or Expenses. If a claim under either A or B above
is not paid in full by Company within sixty (60) days after Company receives a
written claim, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, Executive may at any time
thereafter bring suit against Company to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, Executive shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the Executive to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by Company to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that Executive is not entitled to be indemnified, or to such
advancement of expenses, shall be on Company.
18.DISPUTE RESOLUTION
A. Mediation. Any and all disputes arising under, pertaining to or
touching upon this Agreement (excepting the confidentiality and non-disclosure
provisions of Section 11 hereof, and the Covenant-Not-To-Compete provisions of
Section 12 hereof), or the statutory rights or obligations of either party
hereto, shall, if not settled by negotiation, be subject to non-binding
mediation before an independent mediator selected by the parties pursuant to
Section below writing and served upon the other. Any demand for mediation
shall be made in writing party to the dispute, by certified mail, return
receipt requested, at the business address of or at the last known residence
address of Executive respectively. The demand shall set forth with reasonable
specificity the basis of the dispute and the relief sought. The mediation
learning will occur at a time and place convenient to the parties in Las Vegas,
Nevada, Arizona, within thirty (30) days of the date of selection or
appointment of the mediator and shall be governed by the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA").
B. Arbitration. In the event that the dispute is not settled through
mediation, the parties shall then proceed to binding arbitration before a
single independent arbitrator selected pursuant to Section 18(A). The mediator
shall not serve as arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL
EMPLOYMENT DISCRIMINATION TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY,
OR ALLEGED EMPLOYMENT TORT COMMITTED BY COMPANY OR A REPRESENTATIVE OF COMPANY
INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR
PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient to the parties in Las Vegas, Nevada,
within thirty (30) days of selection or appointment of the arbitrator. If
Company has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy
to the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. ** 1-16. If no such policy has been adopted, the
arbitration shall be governed by the National Rules for the Resolution of
Employment Disputes of the AAA. The arbitrator shall issue written findings of
fact and conclusions of law, and an award, within fifteen (15) days of the date
of the hearing unless the parties otherwise agree.
C. Damages. In cases of breach of contract or policy, damages shall be
limited to contract damages. In cases of intentional discrimination claims
prohibited by statute, the arbitrator may direct payment consistent with 42
U.S.C. * 1981(a) and the Civil Rights Act of 1991. In cases of employment
tort, the arbitrator may award punitive damages if proved by clear and
convincing evidence. Any award of punitive damages shall not exceed two times
any compensatory award and in any event, shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000). The arbitrator may award fees to the prevailing
party and assess costs of the arbitration to the non-prevailing party. Issues
of procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. ** 1-16, except that court review of the
arbitrator's award shall be that of an appellate court reviewing a decision of
a trial judge sitting without a jury.
D. Selection of Mediators or Arbitrators. The parties shall select the
mediator or arbitrator form a panel list made available by the AAA. If the
parties are unable to agree to a mediator or arbitrator within ten (10) days of
receipt of a demand for mediation or arbitration, the mediator or arbitrator
will be chosen by alternatively striking from a list of five (5) mediators or
arbitrators obtained by Company from AAA. Executive shall have the first
strike.
19.NOTICES
Notices. Any notice delivered under this Agreement shall be deemed duly
delivered four (4) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (1) business day after
it is sent for next-business day delivery via a reputable international
overnight courier service, in each case to the address of the recipient set
forth in the introductory paragraph hereto. Either party may change the address
to which notices are to be delivered by giving notice of such change to the
other party.
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
effective on the date set forth above.
Innovative Energy Solutions, Inc. "Executive"
By: ________________________ _______________________
Ronald C. Foster Patrick J. Cochrane
Chairman of the Board of Directors
#
Employment Agreement
This Employment Agreement (the "Agreement") is made effective as of the
1st day of July 2004, by and between Innovative Energy Solutions, Inc., a
Nevada corporation (the "Corporation") and Trevor Park,
___________________________________________ SS # ____________ ("Employee").
WHEREAS, in conjunction with the effectuation of its future plans, the
Corporation desires to assure itself of the continuing services of Employee
during the term hereof, and
WHEREAS, employee is agreeable to such arrangement on the terms and
conditions hereinafter set forth and Employee desires to insure his continued
employment by the Corporation.
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. Employment. The Corporation hereby employs Employee and Employee
hereby accepts such employment by the Corporation upon the terms and conditions
hereinafter set forth, all other agreements, arrangements and undertakings
between the Corporation and Employee with respect to employment being
superseded hereby for all purposes.
2. Term. The term of said employment shall be for one (3) year,
beginning on July 1, 2004 and, subject to Paragraph 8, terminating on July 1,
2007, unless extended pursuant to Paragraph 9.
3. Compensation. As compensation for all services he may render to the
Corporation, the Corporation shall pay to Employee:
3.1. Employee shall be paid an annual salary of $60,000. USD and
bonus to be determined based on performance. A ninety (90)
evaluation period is part of this agreement.
3.2 Such bonus that may, but need not be, be declared and paid
from time to time in the sole and absolute discretion of the
Board of Directors of the Corporation or duly - authorized
Compensation Committee thereof, after taking into consideration
the performance of the Corporation, profitability, working capital
requirements and such other factors as shall be determined by
the Board of Directors of the Corporation or the duly-authorized
Compensation Committee thereof.
a. Employee shall receive stock options for service render at
the end of each employed year.
b. Employee shall be reimbursed for approved expenses
c. Vacation awarded as per the employee manual
d. Health insurance as provided in the employee manual.
4. Duties. For the entire term of this Employment Agreement, Employee
shall be employed in the capacity of Vice President of finance of new business
overseeing and management of all daily activities of funding the Company's
project and facility. Other duties as instructed by management of the
Corporation. Employee shall do and perform all services or acts necessary or
advisable, subject to the policies set by management of the Corporation.
Employee shall have such powers and authorities as shall be conferred by
management of the Corporation.
5. Extent of Services.
5.1. For the full terms of this Employment Agreement, Employee
shall devote substantially all of this attention, abilities and
energies to the business of the Corporation during regular
business hours.
5.2. Employee shall not, without the prior written consent of the
Corporation or unless otherwise permitted pursuant to this
Paragraph 5, directly or indirectly, during the term of this
Employment Agreement, engage in any activity competitive with
or adverse to the Corporations business or welfare, whether alone,
as a partner, or as an officer, director, employee or shareholder
of any other business entity, except that the ownership of not
more than five percent (5%) of the equity securities of any
publicly traded corporation shall not be deemed a violation
of this paragraph 5.2.
6. Benefits.
6.1. Employee shall receive medical and disability insurance and
other fringe benefits on a basis not less favorable as the same
are extended to other key employees of the Corporation.
6.2. Employee shall be entitled in each year of the term of this
Employment Agreement to such vacation and sick leave as shall be
determined by the Board of Directors, during which time his
compensation pursuant to Paragraph 3 hereof, shall be paid in full.
7. Expenses. Subject to written policies, which may be established from
time to time by the Board of Directors of the Corporation, Employee is
authorized to incur reasonable expenses in performing his obligations
hereunder, including expenses for entertainment, travel and similar items. The
Corporation agrees to reimburse Employee for all such expenses upon
presentation from time to time of itemized accounts of such expenditures.
8. Termination.
8.1. The employment of Employee hereunder may be terminated at
any time by action of the Corporation's Board of Directors for
any of the following:
8.1.1. Upon thirty (30) days prior written notice in the
event f illness or permanent disability of Employee resulting in a failure to
discharge ubstantially his duties under this Employment Agreement for a period
of six (6) consecutive months r a total of two hundred ten (210) days during
any calendar year, and upon such termination, Employee shall e entitled to
receive and shall be paid all compensation ursuant to Paragraph 3 hereof
through and including the date of termination; or
8.1.2. At any time pon the occurrence of any one or more
of the following events:
8.1.2.1. Employee's repeated intentional ailure or
refusal o perform such duties consistent with her capacity as sales assistance
of the Corporation;
8.1.2.2. Employee's raud, dishonesty or other willful
misconduct in the performance of services on behalf of the Corporation; or
8.1.2.3. A material breach of any provision of his
Employment Agreement that has not been corrected by Employee within hirty (30)
days after receipt by him of written notice of such breach, in which case the
Corporation shall not be required to pay any further compensation o Employee.
Termination of Employee's employment under this Paragraph 8 shall not be in
limitation of any other right or remedy that the Corporation may have under
this Employment Agreement or otherwise.
8.1.2.4 Employee failure or unable to fulfill the
responsibilities of the position in which she was employed.
8.2 Employee may terminate this Employment Agreement upon a
material breach of any provision of this Employment Agreement
by the Corporation that has not been corrected by the Corporation
within thirty (30) days after receipt by it of written notice of
such breach.
8.3 This Employment Agreement shall not be terminated by any of
the following:
8.3.1 Merger or consolidation where the Corporation is not
the resulting or surviving corporation or entity; or
8.3.2 Transfer of substantially all of the assets of the
Corporation. In the event of any such merger, consolidation or transfer of
assets, the surviving or resulting corporation or entity or the transferee of
the Corporation's assets shall remain bound by and shall continue to obtain the
benefits of the provisions of this Agreement.
9. Renewal. This Employment Agreement shall be automatically renewed
for successive one (1) year periods, unless written notice of termination is
given by one party to the other party not less than three (1) months prior to
the end of the term hereof or any renewal hereof. For any renewal period, the
compensation to be paid by the Corporation to Employee shall be as mutually
determined by the Corporation and Employee but is to be not less than the
amount paid pursuant to Paragraph 3.1.
10. Nondisclosure Covenant. During the term of employment, Employee will
have access to and acquire various confidential knowledge, including without
limitation compilations of information, which are owned by the Corporation and
which are regularly used by the Corporation in the operation of its business.
During the term of employment and for two (2) years after termination of
employment, Employee agrees to safeguard and, except for the benefit of the
Company, not to disclose, directly or indirectly, to anyone outside the Company
any proprietary or confidential information acquired while working for the
Company. Such information includes, without limitation, business plans,
customer lists, operating procedures, trade secrets, design formulas, know-how
and processes, computer programs and inventions, discoveries, and improvements
of any kind. All files, records, documents and other items relating to the
business of the Corporation, whether prepared by Employee or otherwise coming
into his possession, shall remain the exclusive property of the Corporation.
11. Sever-able Provisions. The provisions of this Employment Agreement
are sever-able, and if any one or more provisions are determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions shall
nevertheless be binding and enforceable.
12. Waiver. Either party's failure to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violation thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted to both parties hereunder are
cumulative and waiver of any single remedy shall not constitute a waiver of
either party's right to assert all other legal remedies available to him or it
under the circumstances.
13. Merger Clause. This Employment Agreement supersedes all prior
agreements and understandings between the parties and may not be modified,
waived or terminated orally. No attempted modification, waiver or termination
shall be valid unless in writing and signed by the party against whom the same
is sought to be enforced.
14. Governing Law. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
15. Attorney's Fees. In any action brought to enforce any provision of
this Agreement, the losing party shall pay the prevailing party's reasonable
attorney's fees and costs.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement effective as of the date and year first set forth above.
Employee Innovative Energy Solutions, Inc.
____________________________ By: _______________________
Trevor Park Patrick Cochrane, It's CEO
Employment Agreement
This Employment Agreement (the "Agreement") is made effective as of the
1st day of July 2004, by and between Innovative Energy Solutions, Inc., a
Nevada corporation (the "Corporation") and Alain Liberty, 36 Fountain Creek
Drive, Sherwood Park, Alberta, Canada SS # 270-166-614 ("Employee").
WHEREAS, in conjunction with the effectuation of its future plans, the
Corporation desires to assure itself of the continuing services of Employee
during the term hereof, and
WHEREAS, employee is agreeable to such arrangement on the terms and
conditions hereinafter set forth and Employee desires to insure his continued
employment by the Corporation.
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. Employment. The Corporation hereby employs Employee and Employee
hereby accepts such employment by the Corporation upon the terms and conditions
hereinafter set forth, all other agreements, arrangements and undertakings
between the Corporation and Employee with respect to employment being
superseded hereby for all purposes.
2. Term. The term of said employment shall be for three (3) year,
beginning on July 1, 2004 and, subject to Paragraph 8, terminating on July 1,
2007, unless extended pursuant to Paragraph 9.
3. Compensation. As compensation for all services he may render to the
Corporation, the Corporation shall pay to Employee:
3.1. Employee shall be paid an annual salary of $60,000 and bonus
to be determined based on performance. A ninety (90) evaluation
period is part of this agreement. Also, $25,000. in common stock to
be issued at the end of each term.
3.2 Such bonus that may, but need not be, be declared an d paid
from time to time in the sole and absolute discretion of the
Board of Directors of the Corporation or duly - authorized
Compensation Committee thereof, after taking into consideration
the performance of the Corporation, profitability, working capital
requirements and such other factors as shall be determined by
the Board of Directors of the Corporation or the duly-authorized
Compensation Committee thereof.
a. Employee shall receive stock options for service render at
the end of each employed year.
b. Employee shall be reimbursed for approved expenses
c. Vacation awarded as per the employee manual
d. Health insurance as provided in the employee manual.
4. Duties. For the entire term of this Employment Agreement, Employee
shall be employed in the capacity of Project Manager overseeing and management
of all daily activities at the Company's facility. Other duties as instructed
by management of the Corporation. Employee shall do and perform all services
or acts necessary or advisable, subject to the policies set by management of
the Corporation. Employee shall have such powers and authorities as shall be
conferred by management of the Corporation.
5. Extent of Services.
5.1. For the full terms of this Employment Agreement, Employee
shall devote substantially all of this attention, abilities and
energies to the business of the Corporation during regular business
hours.
5.2. Employee shall not, without the prior written consent of the
Corporation or unless otherwise permitted pursuant to this
Paragraph 5, directly or indirectly, during the term of this
Employment A greement, engage inany activity competitive with or
adverse to the Corporation's business orwelfare, whether alone,
as a partner, or as an officer, director, employee or shareholder
of any other business entity, except that the ownership of not more
than five percent (5%) of the equity securities of any publicly
traded corporation shall not be deemed a violation of this
paragraph 5.2.
6. Benefits.
6.1. Employee shall receive medical and disability insurance and
other fringe benefits on a basis not less favorable as the same are
extended to other key employees of the Corporation.
6.2. Employee shall be entitled in each year of the term of this
Employment Agreement to such vacation and sick leave as shall be
determined by the Board of Directors, during which time his
compensation pursuant to Paragraph 3 hereof, shall be paid in full.
7. Expenses. Subject to written policies, which may be established from
time to time by the Board of Directors of the Corporation, Employee is
authorized to incur reasonable expenses in performing his obligations
hereunder, including expenses for entertainment, travel and similar items. The
Corporation agrees to reimburse Employee for all such expenses upon
presentation from time to time of itemized accounts of such expenditures.
8. Termination.
8.1. The employment of Employee hereunder may be terminated at
any time by action of the Corporation's Board of Directors for
any of the following:
8.1.1. Upon thirty (30) days prior written notice in the
event f illness or permanent disability of Employee resulting in a failure to
discharge ubstantially his duties under this Employment Agreement for a period
of six (6) consecutive months r a total of two hundred ten (210) days during
any calendar year, and upon such termination, Employee shall e entitled to
receive and shall be paid all compensation ursuant to Paragraph 3 hereof
through and including the date of termination; or
8.1.2. At any time pon the occurrence of any one or more
of the following events:
8.1.2.1. Employee's repeated intentional ailure or
refusal o perform such duties consistent with her capacity as sales assistance
of the Corporation;
8.1.2.2. Employee's raud, dishonesty or other willful
misconduct in the performance of services on behalf of the Corporation; or
8.1.2.3. A material breach of any provision of his
Employment Agreement that has not been corrected by Employee within hirty (30)
days after receipt by him of written notice of such breach, in which case the
Corporation shall not be required to pay any further compensation o Employee.
Termination of Employee's employment under this Paragraph 8 shall not be in
limitation of any other right or remedy that the Corporation may have under
this Employment Agreement or otherwise.
8.1.2.4 Employee failure or unable to fulfill the
responsibilities of the position in which she was employed.
8.2 Employee may terminate this Employment Agreement upon a
material breach of any provision of this Employment Agreement
by the Corporation that has not been corrected by the Corporation
within thirty (30) days after receipt by it of written notice of
such breach.
8.3 This Employment Agreement shall not be terminated by any of
the following:
8.3.1 Merger or consolidation where the Corporation is not
the resulting or surviving corporation or entity; or
8.3.2 Transfer of substantially all of the assets of the
Corporation. In the event of any such merger, consolidation or transfer of
assets, the surviving or resulting corporation or entity or the transferee of
the Corporation's assets shall remain bound by and shall continue to obtain the
benefits of the provisions of this Agreement.
9. Renewal. This Employment Agreement shall be automatically renewed
for successive one (1) year periods, unless written notice of termination is
given by one party to the other party not less than three (1) months prior to
the end of the term hereof or any renewal hereof. For any renewal period, the
compensation to be paid by the Corporation to Employee shall be as mutually
determined by the Corporation and Employee but is to be not less than the
amount paid pursuant to Paragraph 3.1.
10. Nondisclosure Covenant. During the term of employment, Employee will
have access to and acquire various confidential knowledge, including without
limitation compilations of information, which are owned by the Corporation and
which are regularly used by the Corporation in the operation of its business.
During the term of employment and for two (2) years after termination of
employment, Employee agrees to safeguard and, except for the benefit of the
Company, not to disclose, directly or indirectly, to anyone outside the Company
any proprietary or confidential information acquired while working for the
Company. Such information includes, without limitation, business plans,
customer lists, operating procedures, trade secrets, design formulas, know-how
and processes, computer programs and inventions, discoveries, and improvements
of any kind. All files, records, documents and other items relating to the
business of the Corporation, whether prepared by Employee or otherwise coming
into his possession, shall remain the exclusive property of the Corporation.
11. Sever-able Provisions. The provisions of this Employment Agreement
are sever-able, and if any one or more provisions are determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions shall
nevertheless be binding and enforceable.
12. Waiver. Either party's failure to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violation thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted to both parties hereunder are
cumulative and waiver of any single remedy shall not constitute a waiver of
either party's right to assert all other legal remedies available to him or it
under the circumstances.
13. Merger Clause. This Employment Agreement supersedes all prior
agreements and understandings between the parties and may not be modified,
waived or terminated orally. No attempted modification, waiver or termination
shall be valid unless in writing and signed by the party against whom the same
is sought to be enforced.
14. Governing Law. This Employment Agreement shall be governed by and
construed in accordance with the laws of the State of California.
15. Attorney's Fees. In any action brought to enforce any provision of
this Agreement, the losing party shall pay the prevailing party's reasonable
attorney's fees and costs.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement effective as of the date and year first set forth above.
Employee Innovative Energy Solutions, Inc.
____________________________ By: _______________________
Alain Liberty Patrick Cochrane, It's CEO
INNOVATIVE ENERGY SOLUTIONS, INC.
2004 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
1. Purpose of the Plan.
This 2004 Stock Option Plan (the "Plan") is intended to attract and retain the
best available personnel for positions with Innovative Energy Solutions, Inc.
or any of its subsidiary corporations (collectively, the "Company"), and to
provide additional incentive to such employees and others to exert their
maximum efforts toward the success of the Company. The above aims will be
effectuated through the granting of certain stock options. Under the Plan,
options may be granted which are intended to qualify as "Incentive Stock
Options" under Section 422 of the Internal Revenue Code of 1986 (the "Code"),
or"Nonstatutory stock options".
2. Definitions.
As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company, or
if a Committee is appointed, "Board shall" refer to the Committee if the
context so requires.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Innovative Energy Solutions, Inc., a
Nevada corporation.
(e) "Committee" shall mean the Committee appointed by the Board
of Directors in accordance with paragraph (a) of Section 3(b) of the
Plan, if one is appointed, or the Board if no committee is appointed.
(f) "Consultant" shall mean any person who is engaged by the
Company or any Subsidiary to render consulting services and is
compensated for such consulting services.
(g) "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of
sick leave, military leave, or any other leave of absence approved by the
Board; provided that such leave is for a period of not more than 90 days
or reemployment upon the expiration of such leave is guaranteed by
contract or statute.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company.
(i) "Incentive Stock Option" or "ISO" shall mean an Option which
is intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and which shall be clearly identified as such in
the written Stock Option Agreement provided by the Company to each
Optionee granted an Incentive Stock Option under the Plan.
(j) "Non-Employee Director" shall mean a director who:
(i) Is not currently an officer (as defined in Section
16a-1 of the Securities Exchange Act of 1934, as amended) of the
Company or a Parent or Subsidiary of the Company, or otherwise
currently employed by the Company or a Parent or Subsidiary of the
Company;
(ii) Does not receive compensation, either directly or
indirectly, from the Company or a Parent or Subsidiary of the
Company, for services rendered as a Consultant or in any capacity
other than as a director, except for an amount that does not exceed
the dollar amount for which disclosure would be required pursuant
to Item 404(a) of Regulation S-K adopted by the United States
Securities and Exchange Commission; and
(iii) Does not possess an interest in any other transaction
for which disclosure would be required pursuant to Item 404(a) of
Regulation S-K adopted by the United States Securities and Exchange
Commission.
(k) "Nonstatutory Stock Option" or "Non-ISO" shall mean an
Option granted under this Plan which does not qualify as an Incentive
Stock Option and which shall be clearly identified as such in the written
Stock Option Agreement provided by the Company to each Optionee granted a
Nonstatutory Stock Option under this Plan. To the extent that the
aggregate fair market value of Optioned Stock to which Incentive Stock
Options granted under Options to an Employee are exercisable for the
first time during any calendar year (under the Plan and all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such Options shall
be treated as Nonstatutory Stock Options under the Plan. The aggregate
fair market value of the Optioned Stock shall be determined as of the
date of grant of each Option and the determination of which Incentive
Stock Options shall be treated as qualified incentive stock options under
Section 422 of the Code and which Incentive Stock Options exercisable for
the first time in a particular year in excess of the $100,000 limitation
shall be treated as Nonstatutory Stock Options shall be determined based
on the order in which such Options were granted in accordance with
Section 422(d) of the Code.
(l) "Option" shall mean an Incentive Stock Option, a
Nonstatutory Stock Option or both as identified in a written Stock Option
Agreement representing such stock option granted pursuant to the Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(n) "Optionee" shall mean an Employee or other person who is
granted an Option.
(o) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 2004 Incentive and Nonstatutory
Stock Option Plan.
(q) "Share" shall mean a share of the Common Stock of the
Company, as adjusted in accordance with Section 9 of the Plan.
(r) "Stock Option Agreement" shall mean the agreement to be
entered into between the Company and each Optionee which shall set forth
the terms and conditions of each Option granted to each Optionee,
including the number of Shares underlying such Option and the exercise
price of each Option granted to such Optionee under such agreement.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Administration of the Plan
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors"), as the Board of Directors may be composed from time
to time, except as provided in subparagraph (b) of this Paragraph 2. The
determinations of the Board of Directors under the Plan, including without
limitation as to the matters referred to in this Paragraph 2, shall be
conclusive. Any determination by a majority of the members of the Board of
Directors at any meeting, or by written consent in lieu of a meeting, shall be
deemed to have been made by the whole Board of Directors. Within the limits of
the express provisions of the Plan, the Board of Directors shall have the
authority, in its discretion, to take the following actions under the Plan:
(i) to determine the individuals to whom, and the time or times at
which, ISOs to purchase the Company's shares of Common Stock, par value $.001
per share ("Common Shares"), shall be granted, and the number of Common Shares
to be subject to each ISO,
(ii) to determine the individuals to whom, and the time or times at
which, Non-ISOs to purchase the Common Shares, shall be granted, and the number
of Common Shares to be subject to each Non-ISO,
(iii) to determine the terms and provisions of the respective stock
option agreements granting ISOs and Non-ISOs (which need not be identical),
(iv) to interpret the Plan,
(v) to prescribe, amend and rescind rules and regulations relating to
the Plan, and
(vi) to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan. In making such
determinations, the Board of Directors may take into account the nature of the
services rendered by such individuals, their present and potential
contributions to the Company's success and such other factors as the Board of
Directors, in its discretion, shall deem relevant. An individual to whom an
option has been granted under the Plan is referred to herein as an "Optionee."
(b) Notwithstanding anything to the contrary contained herein, the Board of
Directors may at any time, or from time to time, appoint a committee (the
"Committee") of at least two members of the Board of Directors, and delegate to
the Committee the authority of the Board of Directors to administer the Plan.
Upon such appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board of Directors, and shall be substituted for
the Board of Directors, in the administration of the Plan, except that the
power to appoint members of the Committee and to terminate, modify or amend the
Plan shall be retained by the Board of Directors. In the event that any member
of the Board of Directors is at any time not a "disinterested person," as
defined in Rule 16b-3(c)(3)(i) promulgated pursuant to the Securities Exchange
Act of 1934, the Plan shall not be administered by the Board of Directors, and
may only by administered by a Committee, all the members of which are
disinterested persons, as so defined. The Board of Directors may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed, may fill vacancies in the Committee and may
discharge the Committee. A majority of the Committee shall constitute a quorum
and all determinations shall be made by a majority of its members. Any
determination reduced to writing and signed by a majority of the members shall
be fully as effective as if it had been made by a majority vote at a meeting
duly called and held. Members of the Committee shall not be eligible to
participate in this Plan.
4. Shares Subject to the Plan
The total number of Common Shares which may be optioned and sold under the
Plan shall be 2,500,000 in the aggregate, subject to adjustment as provided in
Paragraph 9. The Company shall at all times while the Plan is in force reserve
such number of Common Shares as will be sufficient to satisfy the requirements
of outstanding Options. The Common Shares to be issued upon exercise of
Options shall in whole or in part be authorized and un-issued or reacquired
Common Shares. The unexercised portion of any expired, terminated or canceled
Option shall again be available for the grant of Options under the Plan.
5. Eligibility
(a) Subject to subparagraphs (b) and (c) of this Paragraph 5, Options may be
granted to key employees, officers, directors or consultants of the Company, as
determined by the Board of Directors.
(b) An ISO may be granted, consistent with the other terms of the Plan, to
an individual who owns (within the meaning of Sections 422(b)(6) and 424(d) of
the Code), more that ten (10%) percent of the total combined voting power or
value of all classes of stock of the Company or a subsidiary corporation (any
such person, a "Principal Stockholder") only if, at the time such ISO is
granted, the purchase price of the Common Shares subject to the ISO is an
amount which equals or exceeds one hundred ten percent (110%) of the fair
market value of such Common Shares, and such ISO by its terms is not
exercisable more than two and one-half (2 1/2) years after it is granted.
(c) A director or an officer of the Company who is not also an employee of
the Company and consultants to the Company shall be eligible to receive Non-
ISOs but shall not be eligible to receive ISOs.
(d) Nothing contained in the Plan shall be construed to limit the right to
the Board of Directors to grant an ISO and Non-ISO concurrently under a single
stock option agreement so long as each Option is clearly identified as to its
status. Furthermore, if an Option has been granted under the Plan, additional
Options may be granted from time to time to the Optionee holding such Options,
and Options may be granted from time to time to one or more employees, officers
or directors who have not previously been granted Options.
(e) The Plan Plan shall not confer upon any Optionee any right with respect
to continuation of employment or other relationship with the Company nor shall
it interfere in any way with his right or the Company's right to terminate his
employment or other relationship at any time.
6. Terms of Options
The term of each Option granted under the Plan shall be contained in a stock
option agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the
Plan, including the following:
(a) The purchase price of the Common Shares subject to each ISO shall not be
less than the fair market value (or in the case of the grant of an ISO to a
Principal Stockholder, not less that 110% of fair market value) of such Common
Shares at the time such Option is granted. Such fair market value shall be
determined by the Board of Directors and, if the Common Shares are listed on a
national securities exchange or traded on the over-the-counter market, the fair
market value shall be the mean of the highest and lowest trading prices or of
the high bid and low asked prices of the Common Shares on such exchange, or on
the over-the-counter market as reported by the NASDAQ system or the National
Quotation Bureau, Inc., as the case may be, on the day on which the ISO is
granted or, if there is no trading or bid or asked price on that day, the mean
of the highest and lowest trading or high bid and low asked prices on the most
recent day preceding the day on which the ISO is granted for which such prices
are available.
(b) The purchase price of the Common Shares subject to each Non-ISO shall
not be less than 85% of the fair market value of such Common Shares at the time
such Option is granted. Such fair market value shall be determined by the
Board of Directors in accordance with subparagraph (a) of this Paragraph 5.
The purchase price of the Common Shares subject to each Non-ISO shall be
determined at the time such Option is granted.
(c) The dates on which each Option (or portion thereof) shall be exercisable
and the conditions precedent to such exercise, if any, shall be fixed by the
Board of Directors, in its discretion, at the time such Option is granted.
(d) The expiration of each Option shall be fixed by the Board of Directors,
in its discretion, at the time such Option is granted; however, unless
otherwise determined by the Board of Directors at the time such Option is
granted, an Option shall be exercisable for five (5) years after the date on
which it was granted (the "Grant Date"). Each Option shall be subject to
earlier termination as expressly provided in Paragraph 7 hereof or as
determined by the Board of Directors, in its discretion, at the time such
Option is granted.
(e) Options shall be exercised by the delivery by the Optionee thereof to
the Company at its principal office, or at such other address as may be
established by the Board of Directors, of written notice of the number of
Common Shares with respect to which the Option is being exercised accompanied
by payment in full of the purchase price of such Common Shares. Payment for
such Common Shares may be made (as determined by the Board of Directors) (i) in
cash, (ii) by certified check or bank cashier's check payable to the order of
the Company in the amount of such purchase price, (iii) by a promissory note
issued by the Optionee in favor of the Company in the amount equal to such
purchase price and payable on terms prescribed by the Board of Directors, which
provides for the payment of interest at a fair market rate, as determined by
the Board of Directors, (iv) by delivery of capital stock to the Company having
a fair market value (determined on the date of exercise in accordance with the
provisions of subparagraph (a) of this Paragraph 5) equal to said purchase
price, or (v) by any combination of the methods of payment described in clauses
(i) through (iv) above.
(f) An Optionee shall not have any of the rights of a stockholder with
respect to the Common Shares subject to his Option until such shares are issued
to him upon the exercise of his Option as provided herein.
(g) No Option shall be transferable, except by will or the laws of descent
and distribution, and any Option may be exercised during the lifetime of the
Optionee only by him. No Option granted under the Plan shall be subject to
execution, attachment or other process. In the case of a nonstatutory stock
option, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner during the period ending one year
from the date of grant and thereafter only (i) after written notice to the
Board and (ii) in a manner which is in compliance with all applicable
provisions of the Securities Act of 1933, as amended (?1933 Act?) and the 1934
Act to the reasonable satisfaction of the Company. Upon any permitted sale or
other transfer, the transferee shall remain subject to all terms and conditions
of the Plan and the Stock Option Agreement.
7. Death or Termination of Employment
(a) If employment or other relationship of an Optionee with the Company
shall be terminated voluntarily by the Optionee and without the consent of the
Company or for "Cause" (as hereinafter defined), and immediately after such
termination such Optionee shall not then be employed by the Company, any
Options granted to such Optionee to the extent not theretofore exercised shall
expire forthwith. For purposes of the Plan, "Cause" shall mean "Cause" as
defined in any employment agreement ("Employment Agreement") between Optionee
and the Company, and, in the absence of an Employment Agreement or in the
absence of a definition of "Cause" in such Employment Agreement, "Cause" shall
mean (i) any continued failure by the Optionee to obey the reasonable
instructions of the President or any member of the Board of Directors, (ii)
continued neglect by the Optionee of his duties and obligations as an employee
of the Company, or a failure to perform such duties and obligations to the
reasonable satisfaction of the President or the Board of Directors, (iii)
willful misconduct of the Optionee or other actions in bad faith by the
Optionee which are to the detriment of the Company, including without
limitation commission of a felony, embezzlement or misappropriation of funds or
commission of any act of fraud or (iv) a breach of any material provision of
any Employment Agreement not cured within 10 days after written notice thereof.
(b) If such employment or other relationship shall terminate other than (i)
by reason of death, (ii) voluntarily by the optionee and without the consent of
the Company, or (iii) for Cause, and immediately after such termination such
Optionee shall not then be employed by the Company, any Options granted to such
Optionee may be exercised at any time within three months after such
termination, subject to the provisions of subparagraph (d) of this Paragraph 6.
After such three-month period, the unexercised Options shall expire. For the
purposes of the Plan, the retirement of an Optionee either pursuant to a
pension or retirement plan adopted by the Company or on the normal retirement
date prescribed from time to time by the Company, and the termination of
employment as a result of a disability (as defined in Section 22(e) (3) of the
Code) shall be deemed to be a termination of such Optionee's employment or
other relationship other than voluntarily by the Optionee or for Cause.
(c) If an Optionee dies (i) while employed by, or engaged in such other
relationship with, the Company or (ii) within three months after the
termination of his employment or other relationship other than voluntarily by
the Optionee and without the consent of the Company or for Cause, any options
granted to such Optionee may be exercised at any time within twelve months
after such Optionee's death, subject to the provisions of subparagraph (d) of
this Paragraph 6. After the three month period, the unexercised Options shall
expire.
(d) An Option may not be exercised pursuant to this paragraph 7 except to
the extent that the Optionee was entitled to exercise the Option at the time of
termination of employment or Such other relationship, or death, and in any
event may not be exercised after the expiration of the earlier of (i) the term
of the option or (ii) five (5) years from the date the Option was granted, or
two and one-half (21/2) years from the date an ISO was granted if the optionee
was a Principal Stockholder at that date.
(e) The Nonstatutory Stock Options granted to, and held by, any person under
this Plan, may be deemed canceled and forfeited by the Board, if the Board, in
its sole discretion, determines that the conduct of the holder of such
nonstatutory Stock Option has been contrary to the best interests of the
Company and could reasonably be deemed by the Board to have a material adverse
effect on the Company or the business of the Company.
8. Leave of Absence.
For purposes of the Plan, an individual who is on military or sick leave or
other bona fide leave of absence (such temporary employment by the United
States or any state government) shall be considered as remaining in the employ
of the Company for 90 days or such longer period as shall be determined by the
Board of Directors.
9. Option Adjustments.
(a) The aggregate number and class of shares as to which Options may be
granted under the Plan, the number and class shares covered by each outstanding
Option and the exercise price per share thereof (but not the total price), and
all such Options, shall each be proportionately adjusted for any increase
decrease in the number of issued Common Shares resulting from split-up spin-off
or consolidation of shares or any like Capital adjustment or the payment of any
stock dividend.
(b) Except as provided in subparagraph (c) of this Paragraph 9, upon a
merger, consolidation, acquisition of property or stock, separation,
reorganization (other than a merger or reorganization of the Company in which
the holders of Common Shares immediately prior to the merger or reorganization
have the same proportionate ownership of Common Shares in the surviving
corporation immediately after the merger or reorganization) or liquidation of
the Company, as a result of which the stockholders of the Company receive cash,
stock or other property in exchange for their Common Shares, any Option granted
hereunder shall terminate, but, provided that the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise his Option in
whole or in part whether or not the vesting requirements set forth in the stock
option agreement have been satisfied.
(c) If the stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their Common Shares in any
transaction involving a merger, consolidation, acquisition of property or
stock, separation or reorganization (other than a merger or reorganization of
the Company in which the holders of Common Shares immediately prior to the
merger or reorganization have the same proportionate ownership of Common Shares
in the surviving corporation immediately after the merger or reorganization),
all options granted hereunder shall terminate in accordance with the provision
of subparagraph (b) of this Paragraph 8 unless the of Directors and the
corporation issuing the Exchange Stock in their sole and arbitrary discretion
and subject to any required action by the stockholders of the Company and such
corporation, agree that all such Options granted hereunder are converted into
options to purchase shares of Exchange Stock. The amount and price of such
options shall be determined by adjusting the amount and price of the Options
granted hereunder in the same proportion as used for determining the number of
shares of Exchange Stock the holders of the Common Shares receive in such
merger, consolidation, acquisition of property or stock, separation or
reorganization. The vesting schedule set forth in the stock option agreement
shall continue to apply to the options granted for the Exchange Stock.
(d) All adjustments pursuant to this Paragraph 9 shall be made by the Board
of Directors and its determination as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive.
10. Further Conditions of Exercise.
(a) Unless prior to the exercise of an Option the Common Shares issuable
upon such exercise are the subject of a registration statement filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and there is then in effect a prospectus filed
as part of such registration statement meeting the Requirements of Section
10(a)(3) of the Securities Act, the notice of exercise with respect to such
Option shall be accompanied by a representation or agreement of the individual
exercising the Option to the Company to the effect that such shares are being
acquired for investment only and not with a view to the resale or distribution
thereof, or such other, documentation as may be required by the Company,
unless, in the opinion of counsel to the Company, such representation,
agreement or documentation is not necessary to comply with the Securities Act.
(b) Anything in the Plan to the contrary notwithstanding, the Company shall
not be obligated to issue or sell any Common Shares until they have been listed
on each securities exchange on which the Common Shares may then be listed and
until and unless, in the opinion of counsel to the Company, the Company may
issue such shares pursuant to a qualification or an effective registration
statement, or an exemption from registration, under such state and federal
laws, rules or regulations as such counsel may deem applicable. The Company
shall use reasonable efforts to effect such listing, qualification and
registration, as the case may be.
11. Termination, Modification and Amendment
(a) The Plan (but not Options previously granted under the Plan) shall
terminate five (5) years from the earlier of the date of its adoption by the
Board of Directors or the date on which the Plan is approved by the affirmative
vote of the holders of a majority of the outstanding shares of capital stock of
the Company entitled to vote thereon, and no Option shall be granted after
termination of the Plan.
(b) The Plan may at any time be terminated and from time to time be modified
or amended by the affirmative vote of the holders of a majority of the
outstanding shares of the capital stock of the Company present, or represented,
and entitled to vote at a meeting duly held in accordance with the applicable
laws of the State of Delaware.
(c) The Board of Directors of the Company may at any time terminate the Plan
or from time to time make such modifications or amendments of the Plan as it
may deem advisable; provided, however, that the Board of Directors shall not
(i) modify or amend the Plan in any way that would disqualify any ISO issued
pursuant to the Plan as an Incentive Stock Option or (ii) without approval by
the affirmative vote of the holders of a majority of the outstanding shares of
the capital stock of the Company present, or represented, and entitled to vote
at a meeting duly held in accordance with the applicable laws of the State of
Delaware, increase (except as provided by Paragraph 8) the maximum number of
Common Shares as to which Options may be granted under the Plan or change the
class of persons eligible to Options under the Plan.
(d) No termination, modification or amendment of the Plan may adversely
affect the rights conferred by any Options the consent of the Optionee thereof.
12. Effectiveness of the Plan
The Plan shall become effective upon adoption by the Board of Directors. The
Plan shall be subject to approval by the affirmative vote of the holders of a
majority of the outstanding shares of the capital stock of the Company entitled
to vote thereon within one year following adoption of the Plan by the Board of
Directors, and all Options granted prior to such approval shall be subject
thereto. In the event such approval is withheld, the Plan and all Options,
which may have been granted there under, shall become null and void.
13. Not a Contract of Employment
Nothing contained in the Plan or in any stock option agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of, or in
another relationship with, the relationship with, the Company.
14. Miscellaneous
(a) If an Option has been granted under the Plan, additional Options may be
granted from time to time to the Optionee, and Options may be granted from time
to time to one or more individuals who have not previously been granted
options.
(b) Nothing contained in the Plan shall be construed to limit the right of
the Company to grant options otherwise than under the Plan in connection with
the acquisition of the business and assets of any corporation, firm, person or
association, including options granted to employees thereof who become
employees of the Company, nor shall the provisions of the Plan be to limit the
right of the Company to grant options Otherwise than under the Plan for other
proper corporate purposes.
(d)(c)The Company shall have the right to require the Optionee to pay the
Company the cash amount of any taxes the Company is required to withhold in
connection with the exercise of an Option.
(d) No award under this Plan shall be taken into account in determining an
Optionee's compensation for purposes of an employee benefit plan of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in its behalf by one of its officers and sealed by its corporate seal, as of
the date set forth below, and the Employee has hereunto set his hand on or as
of said date, which date is the date such option rights were approved for
grant, with Employee by his aid execution hereof hereby representing that the
residence indicated below his (or her) name is his (or her) bona fide residence
and domicile.
Adopted by Directors:December 22, 2003
Approved by Shareholders: December 22, 2003
Innovative Energy Solutions, Inc.
/s/ Ron Foster
_________________________
Ron Foster, Chairman
StockOptionPlan.doc
Ex 10.8
PURCHASE AGREEMENT
This purchase agreement ("Agreement") is made and entered into as of this 15th
day of May 2004, by and between Innovative Energy Solutions, Inc., a Alberta,
Canada Corporation, (hereinafter "IESIAC") whose address is Innovative Energy
Solutions, Inc.
1903-121 Avenue North East, Edmonton Alberta, Canada T6S 1B2, Telephone: (780)
475-0023 Fax: (780) 475-9921, E-mail: iESi@telus.net ("Company") and Innovative
Energy Solutions, Inc., (hereinafter "iESi") whose address is 41 North Mojave
Road, Las Vegas, Nevada 89101, with reference to the following facts:
RECITALS
WHEREAS, iESi desires to purchase 100% of the Patents, Licenses, Trademarks,
Assignments and all other intellectual properties, including the equipment and
goodwill ("Operations") of IESIAC of Alberta, Canada Corporation, 1903-121
Avenue North East, Edmonton Alberta, Canada T6S 1B2 ("Property").
NOW THEREFORE, in consideration of the mutual covenants and promises contained
herein, and for valuable consideration, the receipt and sufficiency of which
are hereby mutually acknowledged, the parties to this Agreement (collectively
"parties" and individually a "party") agree as follows:
AGREEMENT
1. iESi agrees to purchase all the assets and intellectual properties as
listed in Exhibit "A" of IESIAC for a total purchase price of
$15,800,000. This acquisition shall include all of the equipment of
IESIAC and iESi shall assume the liabilities of IESIAC as outlined on
Exhibit A. The following liabilities are specifically not assumed by
iESi:
a. All other liabilities owed by IESIAC, offices, operating expenses,
leases and other items pertaining to the operation of IESIAC.
2. Payment of the purchase price shall be as follows:
(a) Cash of $800,000. to assume License and/or Patents Liabilities.
(b) Common Stock $ 15,000,000. or 6,000,000 common shares at $2.50 per
share.
(c). To determine fair market value of the assets of IESIAC, an
Determination of Estimated Enterprise Value appraisal will be provided by
an independent professional appraisal company, the cost of which is to be
borne by iESi.
(d) Employment agreement to be issued to the following;
Patrick Cochrane Terry Dingwall
Alain Liberty Trevor Park
3. iESi agrees to issue 6,000,000 shares of common stock to IESIAC or its
shareholders upon iESi execution of the Agreement. IESIAC shall provide all
documents, patents, license agreements, licenses, plans, proposal and all
other items pertaining to the purchased properties.
4. Company represents and warrants that:
IESIAC is a corporation duly formed and validly existing in good standing
under the laws of the Alberta, Canada and has the full right, power, legal
capacity and authority to enter into and carry out the terms of this
Agreement.
(i) Company has good and marketable title to all of the assets and
properties now carried on its books, including those reflected in the most
recent balance sheet contained in the Company Financial Statements, free and
clear of all liens, claims, security interests or other encumbrances except
as those described in the Company Financial; Statements or arising thereafter
in the ordinary course of business (none of which will be material).
(ii) To the best of Company's knowledge there is no claim, proceeding,
litigation or investigation, whether civil or criminal in nature, pending or
threatened against IESIAC or its principals, in any court or by or before any
governmental body or agency, including without limitation any claim,
proceeding or litigation for the purpose of challenging, enjoining or
prevention the execution, delivery or consummation of this Agreement other
than disclosed in Exhibit A.
5. Company represents and warrants that:
(i) Company is a corporation duly formed and validly existing in good
standing under the laws of Alberta Canada and has the full right, power,
legal capacity and authority to enter into and carry out the terms of this
Agreement.
6. Each party ("Indemnifying Party") hereby indemnifies, defends and holds
harmless the other party and its successors, licensees, assigns, and
employees, officers, directors (collectively for the purposes of this
Paragraph "Indemnified Party") from and against any and all liability, loss,
damage, cost and expense, including, without limitation, reasonable
attorney's fees, arising out of any breach, or claim by a third party with
respect to any warranty, representation or agreement made by the Indemnifying
Party herein. The Indemnified Party shall promptly notify the Indemnifying
Party of any claim to which the foregoing indemnification applies and the
Indemnifying Party shall undertake, at its own cost and expense, engage its
own counsel. If the Indemnifying Party fails to promptly appoint competent
and experienced counsel, the Indemnified Party may engage its own counsel and
the reasonable charges in connection therewith shall promptly be paid by the
Indemnifying Party. If the Indemnified Party settles or compromises any such
suit, claim or proceeding, the amount thereof shall be charged to the
Indemnifying Party, provided that the Indemnifying Party's reasonable prior
approval has been secured.
7. The parties hereto agree to execute such further and other documents and to
enter into such further undertakings as may be reasonably necessary to carry
out the full force and intent of this Agreement.
8. The provisions of this Agreement shall enure to the benefit of and be
binding upon the legal representatives of the Company, Foster, Cochrane,
Dingwall and upon their respective heirs executors, administrators,
successors and permitted assigns.
9. Any notice required or permitted to be given hereunder may be delivered,
sent by registered mail, postage prepaid, or sent by facsimile, addressed to
the proposed recipient of the notice at the address set out on the first page
hereof or to such other address or addresses as the parties may indicate from
time to time by notice in writing to the others.
10. This Agreement shall in all respects be interpreted, enforced and governed
under the laws of the state of Nevada. The language and all parts of this
Agreement shall be in all cases construed as a whole according to its very
meaning and not strictly for or against any individual party.
11. This Agreement memorializes and constitutes the entire agreement and
understanding between the parties regarding the subject matter hereof, and
supersedes all prior negotiations, proposed agreements and agreements,
whether written or unwritten. The parties acknowledge that no other party,
nor any agent or attorney of any other party, has made any promises,
representations, or warranties whatsoever, expressly or impliedly, which are
not expressly contained in this Agreement, and the parties further
acknowledge that they have not executed this Agreement in reliance upon any
collateral promise, representation, warranty, or in reliance upon any belief
as to any fact or matter not expressly recited in this Agreement. Any
modification to this Agreement shall be made in writing.
12. Should any provision of this Agreement be declared or determined by any
court to be illegal or invalid, the validity of the remaining parts, terms or
provisions shall not be affected thereby and, in lieu of such illegal or
invalid provision, there shall be added a provision as similar in terms and
amount to such illegal or invalid provision as may be possible and, if such
illegal or invalid provision cannot be so modified, then it shall be deemed
not to be a part of this Agreement.
13. For the convenience of the parties, this Agreement may be executed by
facsimile signatures and in counterparts that shall together constitute the
agreement of the parties as one and the same instrument. It is the intent of
the parties that a copy of this Agreement signed by any party shall be fully
enforceable against that party.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
Innovative Energy Solutions, Inc. Innovative Energy Solutions, Inc.
A Canadian Corporation A Nevada Corporation
/s/ Fred Dornan /s/ Patrick Cochrane
Patrick Cochrane
President President & CEO
Date: May 15th, 2004__ Date: May 15th, 2004_
EXHIBIT "A"
Patents
All the listed patents have only been filed in Romania and have been assigned
to IESIAC in a Licensing Agreement from Transterm and Dimitru Fectu:
Patents Under Licensing Agreements to IESIAC from Hyunik Yang & HY-EN Research
1. Korean No. 10-2002-0026277 "Energy Generating Device"
2. Korean Patent No. 10-2002-006931 "Apparatus for Generating Hydrogen Gas"
PCT Patent No. KR2003/002395
Oil Remediation, Centrifuge and Boiler Equipment
See attached Equipment List Schedule "B"
Agreements
(a) A Licensing Agreement dated October 24, 2003 from Hyunik Yang and HY-EN
Research Ltd to IESI Canada. These Agreements conveyed the marketing rights to
the Hydrogen Technology.
(b) Memorandum of Understanding & Temporary Licensing Agreement dated May 13,
2004 from Delta-Enviro Tech, Inc. to IESI Canada. These Agreements gave an
exclusive marketing agreement to Delta-Enviro Tech, Inc. for the Mid-East
Arabaic world for both the Heat Pipe and Hydrogen Technology.
(c) Licensing Agreement with Intellectual Property Assignments dated September
8, 2003 from Transterm Corporation and Dumitru Fetcu to IESI Canada. These
Agreements conveyed ownership of eleven patents and all marketing rights to
the Heat Pipe Technology.
(d) A Memorandum of Understanding and Temporary Licensing Agreement dated May
9, 2004 with Omipex Group to retrofit the Steaua Romana Refinery in Romania
with the Heat Pipe Technology.
SCHEDULE "B"
Oil Reclamation Equipment List
As at May 07, 2004
1. One Only Super Sharples Centrifuge, Serial #P3400 $ 179,075.00
2. One Only Centrifuge Stand $ 5,557.50
3. One Only Westfalia OSA 35 Centrifuge Skid, Serial # 1648035 $ 203,775.00
4. Two Only Stainless Steel Heat Exchanges, @ $8,027.50 each $ 16,055.00
5. One Only Double Screen Pot $ 4,322.50
6. One Only Trash Pump $ 3,705.00
7. One Only Viking Feed Pump $ 4,569.50
8. One Only Viking Centrifugal Pump $ 2,470.00
9. One Only Wilden Diaphragm Pump $ 2,311.40
10. One Only Viking L120 Pump $ 2,311.92
11. One Only Stand Alone 200 Amp Main Control Centre $ 8,645.00
12. One Only Portable Lincoln Ranger Welder $ 4,875.00
13. One Only High Pressure Steam Plant, Serial # S-33384 $ 132,600.00
14. One Only Flat Deck Tamdem Trailer, Serial # 2AS9PF4828FB015323 $ 5,590.00
15. One Only Swaco High Speed ALS II Shale Shaker, Serial # 72376 $ 20,895.00
16. One Only Site Office & Parts Skid Trailer $ 22,750.00
17. Miscellaneous Parts and Spares $ 13,000.00
Total $ 632,477.82
PURCHASE AGREEMENT
AMENDMENT NUMBER ONE (1)
September 22, 2004
This purchase agreement ("Agreement") is made and entered into as of this 15th
day of May 2004, by and between Innovative Energy Solutions, Inc., a Alberta,
Canada Corporation, (hereinafter "IESIAC") whose address is Innovative Energy
Solutions, Inc.
1903-121 Avenue North East, Edmonton Alberta, Canada T6S 1B2 , Telephone: (780)
475-0023 Fax: (780) 475-9921, E-mail: iESi@telus.net ("Company") and Innovative
Energy Solutions, Inc., (hereinafter "iESi") whose address is 41 North Mojave
Road, Las Vegas, Nevada 89101, with reference to the following facts:
Agreement Section
Item #2 (a)
Is hereby amended as follows;
(a) Cash of $629,088.74 to assume License and/or Patents Liabilities
IN WITNES S WHEREOF the parties have executed this Agreement as of the date
first above written.
Innovative Energy Solutions, Inc. Innovative Energy Solutions, Inc.
A Canadian Corporation A Nevada Corporation
/s/ Fred Dornan /s/ Patrick Cochrane
Patrick Cochrane
President President & CEO
Date:__________ Date:____________
#
Exhibit 10.9
Employment Agreement
This Employment Agreement (the "Agreement") is made effective as of the
1st day of July 2004, by and between Innovative Energy Solutions, Inc., a
Nevada corporation (the "Corporation") and Norman L Arrison, 11412-102 Avenue,
Edmonton, Alberta, Canada T5K-
0P9 SS # 000-00-0000 ("Employee").
WHEREAS, in conjunction with the effectuation of its future plans, the
Corporation desires to assure itself of the continuing services of Employee
during the term hereof, and
WHEREAS, employee is agreeable to such arrangement on the terms and
conditions hereinafter set forth and Employee desires to insure his continued
employment by the Corporation.
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. Employment. The Corporation hereby employs Employee and Employee
hereby accepts such employment by the Corporation upon the terms and conditions
hereinafter set forth, all other agreements, arrangements and undertakings
between the Corporation and Employee with respect to employment being
superseded hereby for all purposes.
2. Term. The term of said employment shall be for one (3) year,
beginning on July 1, 2004 and, subject to Paragraph 8, terminating on July 1,
2007, unless extended pursuant to Paragraph 9.
3. Compensation. As compensation for all services he may render to the
Corporation, the Corporation shall pay to Employee:
3.1. Employee shall be paid an annual salary of $100,000. C.A.
and bonus to be determined based on performance. A ninety (90)
evaluation period is part of this agreement.
3.2 Such bonus that may, but need not be, be declared and paid
from time to time in the sole and absolute discretion of the Board
of Directors of the Corporation or duly-authorized Compensation
Committee thereof, after taking into consideration the performance
of the Corporation, profitability, working capital requirements and
such other factors as shall be determined by the Board of Directors
of the Corporation or the duly-authorized Compensation Committee
thereof.
a.Employee shall receive stock option for service render at
the end of each employed year.
b.Employee shall be reimbursed for approved expenses
c.Vacation awarded as per the employee manual
d.Health insurance as provided in the employee manual.
4. Duties. For the entire term of this Employment Agreement, Employee
shall be employed in the capacity of Project Manager overseeing and management
of all daily activities at the Company's facility. Other duties as instructed
by management of the Corporation. Employee shall do and perform all services
or acts necessary or advisable, subject to the policies set by management of
the Corporation. Employee shall have such powers and authorities as shall be
conferred by management of the Corporation.
5. Extent of Services.
5.1. For the full terms of this Employment Agreement, Employee
shall devote substantially all of this attention, abilities and
energies to the business of the Corporation during regular
business hours.
5.2. Employee shall not, without the prior written consent of the
Corporation or unless otherwise permitted pursuant to this
Paragraph 5, directly or indirectly, during the term of this
Employment Agreement, engage in any activity competitive with or
adverse to the Corporation's business or welfare, whether alone,
as a partner, or as an officer, director, employee or shareholder
of any other business entity, except that the ownership of not
more than five percent (5%) of the equity securities of any
publicly traded corporation shall not be deemed a violation of
this paragraph 5.2.
6. Benefits.
6.1. Employee shall receive medical and disability insurance and
other fringe benefits on a basis not less favorable as the same are
extended to other key employees of the Corporation.
6.2. Employee shall be entitled in each year of the term of this
Employment Agreement to such vacation and sick leave as shall be
determined by the Board of Directors, during which time his
compensation pursuant to Paragraph 3 hereof, shall be paid in full.
7. Expenses. Subject to written policies, which may be established from
time to time by the Board of Directors of the Corporation, Employee is
authorized to incur reasonable expenses in performing his obligations
hereunder, including expenses for entertainment, travel and similar items. The
Corporation agrees to reimburse Employee for all such expenses upon
presentation from time to time of itemized accounts of such expenditures.
8. Termination.
8.1. The employment of Employee hereunder may be terminated at any
time by action of the Corporation's Board of Directors for
any of the following:
8.1.1. Upon thirty (30) days prior written notice in the
event of illness or permanent disability of Employee resulting in a failure to
discharge substantially his duties under this Employment Agreement for a period
of six (6) consecutive months or a total of two hundred ten (210) days during
any calendar year, and upon such termination, Employee shall be entitled to
receive and shall be paid all compensation pursuant to Paragraph 3 hereof
through and including the date of termination; or
8.1.2. At any time upon the occurrence of any one or more of
the following events:
8.1.2.1. Employee's repeated intentional failure or refusal
to perform such duties consistent with her capacity as sales assistance of the
Corporation;
8.1.2.2. Employee's fraud, dishonesty or other willful
misconduct in the performance of services on behalf of the Corporation; or
8.1.2.3. A material breach of any provision of this
Employment Agreement that has not been corrected by Employee within thirty (30)
days after receipt by him of written notice of such breach, in which case the
Corporation shall not be required to pay any further compensation to Employee.
Termination of Employee's employment under this Paragraph 8 shall not be in
limitation of any other right or remedy that the Corporation may have under
this Employment Agreement or otherwise.
8.1.2.4 Employee failure or unable to fulfill the
responsibilities of the position in which she was employed.
8.2 Employee may terminate this Employment Agreement upon a
material breach of any provision of this Employment Agreement by the
Corporation that has not been corrected by the Corporation within thirty (30)
days after receipt by it of written notice of such breach.
8.3 This Employment Agreement shall not be terminated by any
of the following:
8.3.1 Merger or consolidation where the Corporation is not
the resulting or surviving corporation or entity; or
8.3.2 Transfer of substantially all of the assets of the
Corporation. In the event of any such merger, consolidation or transfer of
assets, the surviving or resulting corporation or entity or the transferee of
the Corporation's assets shall remain bound by and shall continue to obtain the
benefits of the provisions of this Agreement.
9. Renewal. This Employment Agreement shall be automatically renewed
for successive one (1) year periods, unless written notice of termination is
given by one party to the other party not less than three (1) months prior to
the end of the term hereof or any renewal hereof. For any renewal period, the
compensation to be paid by the Corporation to Employee shall be as mutually
determined by the Corporation and Employee but is to be not less than the
amount paid pursuant to Paragraph 3.1.
10. Nondisclosure Covenant. During the term of employment, Employee will
have access to and acquire various confidential knowledge, including without
limitation compilations of information, which are owned by the Corporation and
which are regularly used by the Corporation in the operation of its business.
During the term of employment and for two (2) years after termination of
employment, Employee agrees to safeguard and, except for the benefit of the
Company, not to disclose, directly or indirectly, to anyone outside the Company
any proprietary or confidential information acquired while working for the
Company. Such information includes, without limitation, business plans,
customer lists, operating procedures, trade secrets, design formulas, know-how
and processes, computer programs and inventions, discoveries, and improvements
of any kind. All files, records, documents and other items relating to the
business of the Corporation, whether prepared by Employee or otherwise coming
into his possession, shall remain the exclusive property of the Corporation.
11. Sever-able Provisions. The provisions of this Employment Agreement
are sever-able, and if any one or more provisions are determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions shall
nevertheless be binding and enforceable.
12. Waiver. Either party's failure to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violation thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted to both parties hereunder are
cumulative and waiver of any single remedy shall not constitute a waiver of
either party's right to assert all other legal remedies available to him or it
under the circumstances.
13. Merger Clause. This Employment Agreement supersedes all prior
agreements and understandings between the parties and may not be modified,
waived or terminated orally. No attempted modification, waiver or termination
shall be valid unless in writing and signed by the party against whom the same
is sought to be enforced.
14. Governing Law. This Employment Agreement hall be governed by and
construed in accordance with the laws of the State of California.
15. Attorney's Fees. In any action brought to enforce any provision of
this Agreement, the losing party shall pay the prevailing party's reasonable
attorney's fees and costs.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement effective as of the date and year first set forth above.
Employee Innovative Energy Solutions, Inc.
/s/ Norman L. Arrison /s/ Patrick Cochrane
By:___________________________ By: _______________________
Dr:Norman L Arrison Patrick Cochrane,It's
CEO
Ex 10.10
Research & Development
And Intellectual Property Assignment Agreement
This Research & Development and Intellectual Property Assignment Agreement
("Agreement") is made and entered into as of this 26th day of June 2004, by
and between Innovative Energy Solutions, Inc., a Nevada Corporation, organized
and existing under the laws of Nevada, having its principle office at 41 North
Mojave Road, Las Vegas, Nevada, USA 89101 (hereinafter "the COMPANY"), and Dr.
Hyunik YANG, an individual residing in the Republic of South Korea, whose
address for service is 1271 Sa 1 Dong, An San City, Kyungki Do, Republic of
South Korea, 425-791 (hereinafter "YANG") (the COMPANY and YANG are hereinafter
occasionally referred to as "Parties" in singular or plural usage, as indicated
by the context).
RECITALS
WHEREAS YANG has developed proprietary design, experimental
information, specialized Know-how, secret formulae, data and intellectual
property rights for the following technologies: "hydrogen generating device"
and "heat generating device" (collectively refer to "Technologies");
WHEREAS Yang had filed intellectual property rights for the
Technologies in Korea and filed PCT for hydrogen generating device (hydrogen
samples, devices, demonstrations and trade secrets relating the Technologies
within sixty (60) days upon signing of this Agreement.
Article 2. R&D AND NEW TECHNOLOGY
1. YANG agrees to use its best efforts and to devote such time as is
necessary to develop sustainable and continuous research to complement the
Technologies and to facilitate the development for the purpose of
commercialization of the Technologies.
2. YANG hereby agrees to extend this Agreement to include any and all
future additions, changes, improvements, substitutions and modifications to the
Technologies aforementioned ("New Technologies"). Such additions, changes,
improvements, substitutions and modifications to the Technologies
aforementioned shall be immediately disclosed to the COMPANY.
Article 3. THE OBLIGATION OF THE COMPANY
1. The COMPANY shall use its best efforts and to devote such time as is
necessary to commercialize, promote and fully exploit the Technologies in the
Territory.
2. The COMPANY shall use its best efforts and to devote such time as is
necessary to develop and provide sufficient funding for R&D.
Article 4. CONSIDERATION
The consideration for the assignment of intellectual property rights in
the Territory and R&D for the aforementioned Technologies under this Agreement
shall be FIFTEEN MILLION (15,000,000) USD.
Article 5.TERMS OF PAYMENT
1. Payment of the said consideration shall be SIX MILLION (6,000,000)
preferred shares with voting rights, at the value of USD $2.50 per share.
2. To determine fair market value of the Intellectual Property Rights for
the Technologies, a Determination of Estimated Enterprise Value appraisal will
be provided by an independent professional appraisal company, the cost of
which is to be borne by the COMPANY.
3. The COMPANY agrees to issue SIX MILLION (6,000,000) preferred shares to
YANG within SIXTY (60) business days of the Company's execution of this
Agreement. Said shares can be converted to common stock of the COMPANY for
trading purposes.
4. The COMPANY agrees to grant a position of director & officer of the
COMPANY to YANG.
Article 6.REPRESENTATIONS AND WARRANTIES
1. YANG represents and warrants that:
a. YANG has the full right, power, legal capacity and authority to
enter into and carry out the terms of this Agreement.
b. To the best of YANG's knowledge, there is no claim, proceeding,
litigation or investigation, whether civil or criminal in nature,
pending or threatened against the aforementioned Intellectual Property
Rights for the Technologies, in any court or by or before any
governmental body or agency, including without limitation any claim,
proceeding or litigation for the purpose of challenging, enjoining or
prevention the execution, delivery or consummation of this Agreement.
2. The COMPANY represents and warrants that:
The COMPANY is a corporation duly formed and validly existing in
good standing under the laws of Nevada, USA and has the full right, power,
legal capacity and authority to enter into and carry out the terms of this
Agreement.
Article 7. TERMINATION
1. The Company's Dissolution, Bankruptcy or Receivership shall be
considered circumstances for which YANG may terminate this Agreement.
2. In the event of termination of this Agreement under this Article, the
Intellectual Property Rights for the Technologies shall automatically return to
Yang, without the consent of the COMPANY.
Article 8. NOTICE
Any notice required or permitted to be given hereunder may be
delivered, sent by registered mail, postage prepaid, or sent by facsimile,
addressed to the proposed recipient of the notice at the address set out on
the first page hereof or to such other address(s) as the parties may indicate
by notice in writing to the other party.
Article 9. GOVERNING LAW
This Agreement shall in all respects be interpreted, enforced and
governed under the laws of the state of Nevada, USA. The language and all
parts of this Agreement shall be in all cases construed as a whole according
to its very meaning and not strictly for or against any individual party.
Article 10. ENTIRE AGREEMENT
This Agreement memorializes and constitutes the entire agreement and
understanding between the parties regarding the subject matter hereof, and
supersedes all prior negotiations, proposed agreements and agreements, whether
written or unwritten. The parties acknowledge that no other party, nor any
agent or attorney of any other party, has made any promises, representations,
or warranties whatsoever, expressly or impliedly, which are not expressly
contained in this Agreement, and the parties further acknowledge that they
have not executed this Agreement in reliance upon any collateral promise,
representation, warranty, or in reliance upon any belief as to any fact or
matter not expressly recited in this Agreement.
Article 11. AMENDMENT
Any modification or amendment to this Agreement shall be made in
writing.
Article 12. SEVERABILITY
Should any provision of this Agreement be declared or determined by
any court to be illegal or invalid, the validity of the remaining parts, terms
or provisions shall not be affected thereby and, in lieu of such illegal or
invalid provision, there shall be added a provision as similar in terms and
amount to such illegal or invalid provision as may be possible and, if such
illegal or invalid provision cannot be so modified, then it shall be deemed
not to be a part of this Agreement.
Article 13. COUNTERPARTS
For the convenience of the parties, this Agreement may be
executed by facsimile signatures and in counterparts that shall together
constitute the agreement of the parties as one and the same instrument. It is
the intent of the parties that a copy of this Agreement signed by any party
shall be fully enforceable against that party.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
Dr. Hyunik Yang Innovative Energy Solutions, Inc.
A Nevada Corporation
/s/ Hyunik Yang /s/ Patrick J. Cochrane
________________________ ________________________
Patrick J. Cochrane, CEO
#
Dated as of ____ May, 2004
Ex 10.11
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
SUNWOO ENERGY TECHNOLOGY INC.,
A body corporate incorporated pursuant to the laws of the
Republic of Korea
(hereinafter "SUNWOO")
OF THE FIRST PART
- And -
KOO HYO HWEA,
An individual whose address is
(hereinafter "KOO")
OF THE SECOND PART
- And -
INNOVATIVE ENERGY SOLUTIONS INC.,
A body corporate incorporated pursuant to the laws of the
State of Nevada, USA (hereinafter "IESI")
OF THE THIRD PART
WITNESSETH:
WHEREAS SUNWOO has developed the Product which is set forth in
article 1.1("Product");
AND WHEREAS the parties have agreed that IESI is to market and
distribute the Product pursuant to the terms and conditions of this Agreement
in the Territory which are set forth in article 2.1 ("Territory");
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions
(a) "Agreement" means this Exclusive Distributorship Agreement;
(b) "Product" means the Heat Pipe Heat Exchanger that SUNWOO has
developed and manufactures.
1.2 Index and Headings
The index and headings in this Agreement have been inserted for
reference and as a mater of convenience only and in no way define, limit or
enlarge the scope or meaning of this Agreement or any provisions hereof.
ARTICLE 2 - RELATIONSHIP OF THE PARTIES
2.1 Grant
SUNWOO agrees to grant Exclusive Distributorship Right for the Product to IESI
in the Territory of Canada, USA, Mexico. SUNWOO agrees to grant IESI a (ROFER)
right of first refusal for Europe.
2.2 Obligations of IESI
(a) On execution of the Agreement, IESI will issue KOO 1,000 (Five
Thousand) share options per year for the term of this Agreement of IESI
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