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Exhibit 6.3
Founders Agreement
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FOUNDERS AGREEMENT
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Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx, and Xxxxxx Xxxxx
(individually referred to by name or as a "Shareholder," and collectively
referred to as "Shareholders") and Hydro-Air Technologies, Inc., a New Mexico
corporation (Corporation") agree:
. Recital: The Shareholders have incorporated the Corporation to operate a
business which will develop an invention which will produce electrical energy
from chemical processes ("HARPS Technology"). The Corporation has signed an
agreement with First Capital Invest Corp. ("First Capital") by which First
Capital may invest in the Corporation to exploit the HARPS Technology ("Offer To
Purchase"). The Offer To Purchase also provides for possible acquisition of the
Shareholder's interest in the Corporation by a separate company the
("Acquisition Company") in exchange for shares of the Acquisition Company. The
Shareholders have agreed to a plan of organization, management and funding for
the Corporation and for ownership of their interest in the Corporation or in the
Acquisition Company which they hereby reduce to writing.
. Definitions: The following words have the following meanings when used in this
Agreement:
. Company: "Company" means either (i) Corporation or (ii) the Acquisition
Company or any other successor entity to the extent it represents the
financial interest originally derived from the HARPS Technology.
. Company Shares: "Company Shares" means the units of ownership of the
Company.
. Founder: "Founder" means individually and "Founders" means collectively
Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx and
any other person designated as a Founder by the unanimous consent of the
then Founders. The Founders are all Shareholders.
. Founder Shares: "Founder Shares" means Company Shares issued or awarded
to Founders as Founder Shares.
. Discretionary Shares: "Discretionary Shares" means Company Shares issued
or awarded as Discretionary Shares to non-Founders by the Founders.
. Investor: "Investor" means anyone (including a Founder) who makes a
monetary investment in the Corporation.
. Investor Shares: "Investor Shares" means Company Shares issued to
Investors as Investor Shares.
. W: "W" means the fraction of full-time work. W is calculated by taking
the total number of authorized hours, as determined by the Board, that are
worked for the Company during the year and dividing by 2,000 (40 hours per
week times 50 weeks, allowing 2 weeks for vacation). The W calculation is
based on the number of authorized hours worked whether or not a salary was
paid for the time worked. W can not exceed 1.0, even if the individual
works more than 2,000 hours in a given year. The year, for the purpose of
calculating hours worked begins July 8, 1997, since that is the date
notification was given of the first financial investment.
. Phase 1: "Phase 1." means the engineering research and development that
determines the feasibility and practicality of producing HARPS power
plants. This is expected to include the design and fabrication of a
prototype HARPS unit and testing it.
. Phase 2: "Phase 2" means the design and fabrication of commercially
viable HARPS units. Commercially viable will be determined by the sale and
support of HARPS units.
. Proportionately Shared: "Proportionately Shared" means the sharing of
awarded Founders Shares among the Founders proportional to the Founder's
individual contribution to a milestone as determined by the Founders. For
the purpose of the division of an award, each Founder will rank the
contribution of each of the other Founders. Subsequent to this ranking,
all rankings will be linearly combined to determine the portion awarded to
each Founder.
III. Stock Issuance: It is intended that 100,000 Company Shares be distributed
in a manner that will reward individuals that achieve defined objectives that
are beneficial to the Corporation. The following delineates the method by which
Company Shares have or will be issued:
A. The Corporation has initially issued and delivered 2,500 Founder Shares
to each Founder.
B. Dana and Xxxxx Xxxxxx will jointly be issued 2,500 Discretionary
Shares, as compensation for exerting considerable effort over an extended
period of time in an attempt to provide investors for the Corporation.
C. Founders who actively and whole-heartedly (as determined by the
Founders) working for the success of the Company for the first four years:
3,000 Founder Shares per year multiplied by W.
D. The Founder who provides the initial contact(s) that lead to Phase 1
Investment of up to $500,000: 600 Founder Shares per each $100,000 of
investment. (The Founder who provides the initial contact, may share this
award with other Founders or individuals who aid in the procurement of the
investment, in any way he sees fit.) This investment is a singular
opportunity and is closed after the above stated amount of money is
received by the Company from a Board approved investor, unless
specifically opened again by the Board. Investments may be received in
stages if all is not needed at once, as determined by the Board. If a
Founder receives an investment sales commission from the investor, he
shall not receive an award of Founder Shares for bringing in the
investment. If the Founder wishes to invest in the Corporation, he
receives both the Founder Shares and the Investor Shares.
E. The Founder who provides the initial contact(s) that lead to Phase 2
Investments of up to $5,000,000: 600 Founder Shares per each $1,000,000 of
investment. (The Founder who provides the initial contact, may share this
award with other Founders or individuals who helped, in any way he sees
fit.) This investment is a singular opportunity and is closed after the
above stated amount of money is received by the Company from a Board
approved investor, unless specifically opened again by the Board.
Investments may be received in stages if all is not needed at once, as
determined by the Board. The amount of shares awarded to the Founder(s)
will be based on the amount of money actually invested, not the amount
committed by the investor. If a Founder receives an investment sales
commission from the investor, he shall not receive an award of Founder
Shares for bringing in the investment. If the Founder wishes to invest in
the Corporation, he receives both the Founder Shares and the Investor
Shares.
F. Founders who write proposals that result in government grants that are
subsequently awarded and accepted by the Board: 1,000 Founder Shares per
each $100,000. If more than one Founder participates in the submittal of
the successful proposal(s), the Founder Shares awarded will be
Proportionately Shared. This item also applies to procuring grants from
companies or other organizations. Total awards for all grants is limited
to 5,000 Founder Shares unless specifically extended by the Board. The
Board will examine all grants carefully before acceptance to assure that
no serious restrictions or other negative impacts on the Company are
involved in the grant.
G. For Xxxxxx X. Xxxxxxx exclusively licensing the HARPS invention to the
Corporation: 8,000 Founder Shares; 2,000 upon signing a license agreement
and 2,000 at the end of each of the following three (3) years from the
date of initial signing.
H. For Founders contribution to the design and construction of the first
successful brine concentrator (prototype): 3,500 Founder Shares. This
award is intended to be Proportionately Shared among the Founders.
I. For Founders contribution to the design and fabrication of the first
successful power unit (heater, boiler, turbine, and condenser)
(prototype): 3,500 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
J. For Founders contribution to the design and fabrication of the first
commercial HARPS unit: 4,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
K. For Founders contribution to activities in support of the Phase 1
(prototype HARPS production) design and fabrication effort including
company management, project management, procurement,
bookkeeping/accounting, legal, and human resources activities: 2,000
Founder Shares. This award is intended to be Proportionately Shared among
the Founders.
L. For Founders contribution to activities in support of the Phase 2
(commercial HARPS production) design and fabrication effort including
company management, project management, procurement,
bookkeeping/accounting, legal, and human resources activities: 2,000
Founder Shares. This award is intended to be Proportionately Shared among
the Founders.
M. For Founders contribution to marketing the first commercial HARPS unit
in the United States: 3,000 Founder Shares. This award is intended to be
Proportionately Shared among the Founders.
N. For Founders contribution to marketing the first commercial HARPS unit
in a country other than the United States: 2,000 Founder Shares. This
award is intended to be Proportionately Shared among the Founders.
O. For introduction, by a Founder, of a new product that is accepted by
the Board and is subsequently manufactured and marketed by the Company:
3,000 Founder Shares. This award may, at the discretion of the Founders,
be Proportionately Shared among the Founders.
P. For introduction, by a Founder, of a patentable invention that
contributes to the success of the HARPS technology and that is accepted by
the Board. (This award may be applicable even if the Board chooses not to
apply for a patent for the invention, at the discretion of the Founders.):
Up to 2,000 Founder Shares. This award may, at the discretion of the
Founders, be Proportionately Shared among the Founders. For the purpose of
determining the number of shares to be awarded, each Founder will rank the
number of shares appropriate for the value of the invention to the
Company. Subsequent to this ranking, all rankings will be linearly
combined to determine the number of shares awarded.
Q. Before any investments or grants are received, Founders may pay for
Board approved business and research expenses (but not salaries or patent
application costs for the first U.S. patent on HARPS technology) on a
voluntary basis. Expenses which are incurred before any investments are
received by the Corporation, such as incorporation expenses, legal fees,
the purchase of equipment, rental of space, and other operating expenses
shall be shared by the Founders on a voluntary basis. Each Founder shall
be awarded 1 Founder Share for each $5 of money supplied for Board
approved expenses. A Founder may supply more than his share of expenses
only if other Founders do not supply their share, and then only in equal
shares with the remaining Founders. These expenses may be reimbursed to
the Founders after investments or grants have been received, if the
Founder so wishes, but the corresponding Founder Shares must be
relinquished to the Company. (Some grants to not allow reimbursement of
previous expenses.)
R. At the end of four years, if there are any remaining undistributed
Founder Shares or Discretionary Shares, they shall be distributed among
the Founders in amounts proportional to the number of Shares that each
Founder possesses at that time, and/or, at the discretion of the Founders,
to other deserving individuals. If the Corporation is purchased by another
company, the remaining shares may be divided at that time, at the
discretion of the Founders. S. Phase 1 investments of $500,000 shall
entitle the investors to 20% of the Corporation. (100% of the Founder
Shares and Discretionary Shares will total 80% of the Corporation.) If the
Corporation is not purchased by The Acquisition Company prior to Phase 2,
investments of $5,000,000 shall entitle the investors to an additional 20%
of the Corporation. (100% of the Founder Shares and Discretionary Shares
will total 60% of the Corporation.) Smaller investments would entitle the
investors to a proportionately smaller fraction of the Corporation.
IV. Record of Services Provided: Each Founder is expected to keep a daily log of
hours spent on the project. The log shall include a note on the type of activity
and the results obtained. A copy of the log shall be sent to the Corporation
monthly, unless specific exemption is issued by the Board. It is expected that
only authorized hours that produce results beneficial to the Corporation will be
reported for this purpose. If the Board comes to the conclusion that a
particular Founder's efforts are not producing sufficiently beneficial results
for the Corporation, the Board may ask the individual to curtail that activity.
The Founder may continue with the activity unless the Board determines that it
negatively effects the Corporation in any way including, but not limited to,
utilization of resources or impairment of other authorized activities. No shares
will be awarded for such unauthorized activities.
V. Compensation: Compensation for hours worked by Founders will be as follows:
A. Before any investments are received by the Corporation, the Founders
shall work without any hourly compensation.
B. After some or all of the Phase 1 investment has been made, the Founders
shall work at $35 per hour. If funding is not sufficient, the Board shall
determine what work is most important to be accomplished and halt payment
for all other activities. Founders may bring to the attention of the Board
tasks that should be considered as necessary for Corporation operation and
success.
C. After the acquisition of sufficient funding through investments,
grants, or sales, salaries may be raised at the discretion of the Board,
which shall determine salaries based on the perceived value of the
individuals to the Company.
D. Xxxxxx Xxxxxxx will receive a 1% royalty on gross sales of HARPS power
plants and 0.5% on electric power sold from Company owned power plants.
VI. Management: At all times the Shareholders will vote their Company Shares so
that, unless there is unanimous agreement of the Shareholders to the contrary:
A. The Articles of Incorporation and Bylaws of the Corporation will not be
amended.
B. No Company Shares will be issued by the Corporation except as provided
in this Agreement.
C. Each Founder may designate one person as a Director and these Directors
will be elected for a period of four years or as long as he remains an
active employee of the Company, which ever time period is shorter. The
Corporation will take the action agreed upon by the majority of the
Directors. Each Director will have an equal vote on any Board action.
Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx, and Xxxxxx Xxxxx are
the initial designated Directors of the Corporation and have been so
elected.
D. The Shareholders have caused the Directors to elect, consistent with
their obligations under law, the following persons to the following
Corporation offices, so long as these persons are ready, willing and able
to serve in the designated positions:
Name Office
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Xxxxxx X. Xxxxxxx President and Chairman of the Board
Xxxxx X. Xxxxx Vice President of Operations
Xxxxxxx Xxxxxxx Vice President of Business and Marketing
Xxxxxx Xxxxx Vice President of Engineering
E. The books of the Corporation will be maintained in accordance with the
method required for federal income tax return reporting applied on a basis
consistent with prior periods and will be subjected to audit at
Corporation's expense upon demand by any Shareholder. Each Shareholder
will have access at any reasonable time to Corporation's books and
records.
F. The employment agreements between the Corporation and each of the
Founders will not be changed without unanimous approval by the Board.
G. If the Directors are deadlocked and cannot reach a decision, Xxxxxx X.
Xxxxxxx will nominate and the Shareholders will elect another Director to
break the deadlock.
H. The Corporation will not, except in the ordinary course of business,
(i) borrow money, (ii) transfer all or substantially all of its assets, or
(iii) loan money or assets.
VII. Restrictions: The Corporation and Shareholders will execute a Stock
Restriction Agreement in the form attached as Exhibit 1. The restrictions
imposed by this Stock Restriction Agreement are those of the Corporation as well
as those of the Shareholders. All certificates representing Company Shares will
be marked "Voting, transfer and encumbrance of the securities represented by
this certificate are restricted by the terms of agreements on file at the
Corporation office."
VIII. Voting Trust: The Shareholders and Xxxxxx X. Xxxxxxx,
as Voting Trustee will execute a Voting Trust Agreement in the form agreed to by
them creating a Voting Trust ("Voting Trust"). Corporation will issue and
deposit in the Voting Trust the shares not previously issued which are to be
awarded as Founders Shares or Discretionary Shares. The Voting Trustee will hold
the shares deposited in the Voting Trust ("Voting Trust Shares") and issue such
shares as Founder Shares or Discretionary Shares, and if The Acquisition Company
is to acquire the shares of the Corporation, exchange Corporation shares for The
Acquisition Company shares and hold the Acquisition Company Shares for issuance
as Founder Shares or Discretionary Shares.
IX. Acquisition: If the Corporation is acquired by The Acquisition Company or
any other entity, the non-cash consideration paid for the acquisition of other
than Investor Shares will be allocated among the holders of Founder Shares,
Discretionary Shares, and Voting Trust Shares in proportion to their then
holdings of Founder Shares, Discretionary Shares, and Voting Trust Shares. The
Voting Trust Shares will be issued in accordance with the provisions of the
Voting Trust herein. The cash consideration paid for the acquisition will be
allocated among the owners of the Founders Shares in proportion to their
ownership of Founders Shares.
X. Documentation: This is a binding document setting out the parties intent. The
contribution of capital, issuance or award of Company Shares and other actions
may have occurred before all document giving effect to this Agreement have been
signed. The parties will use their best efforts in good faith to agree on the
matters dealt with herein where future determination is required and will sign
any document and take any action required to accomplish this intent.
XI. Binding Effect: Every person or entity who is the record, legal or
beneficial owner of Company Shares, whether by issue or transfer, including
without limitation the spouse, heirs, surviving joint tenants, executors,
administrators, trustee, personal representatives, transferees, donees,
nominees, grantees, successors, and assigns will be bound by and entitled to the
benefits of the terms of this Agreement. This agreement is specifically
enforceable, constitutes the entire agreement of the parties with respect to its
subject matter, is governed by and construed in accordance with the laws of New
Mexico and may be modified only in writing by the unanimous agreement of all
parties hereto. A Shareholder will have sole authority to vote, manage, control,
dispose of or encumber any Company Shares owned by the Shareholder and any
spouse of the Shareholder.
DATED: __________, 1997.
SHAREHOLDERS:
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XXXXX X. XXXXX
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XXXXXX X. XXXXXXX
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XXXXXXX XXXXXXX
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XXXXXX XXXXX
CORPORATION: HYDRO-AIR TECHNOLOGIES, INC.,
a New Mexico corporation
By____________________________
Xxxxxx X. Xxxxxxx,
President
