UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HYDRO ENVIRONMENTAL RESOURCES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
HYDRO ENVIRONMENTAL RESOURCES, INC.
June 18, 2001
To Our Shareholders:
We would like to thank you for supporting our company
throughout the growing and developing stages. After many months
of changing conditions, we are pleased to announce that the
Company is on a very positive track and settled in our new
corporate offices in Las Vegas, Nevada, where we feel the time
for better days has come.
After several press releases, we have had a flood of
inquiries about the technology and its potential markets.
Excitement is rising as well, because a new vista for potential
end user unfolds. The Company was advised by the Nevada Energy
Commission that they could see a market for 300,000 units coupled
to a 300-watt fuel cell in the State of Nevada alone.
Negotiations are continuing with several groups in various niche
markets, which should, if successfully concluded, be greatly
profitable for the Company.
HERI is expecting to move at a more rapid pace. We have had
many inquiries involving not only power plants, but various
residential and industrial companies, as well as a major
automotive company showing interest in our revolutionary and
unique technology. We have had numerous inquiries from several
shareholders in regards to their investment. While we cannot
advise you in this regard, we do want to stress the importance of
allowing the Company to grow and ask that you to have faith and
allow your investment to grow along with HERI. We would also
like to request that you consider all the potential of the
product, have confidence in our dedicated team, and stay true to
the initial belief in the Company.
After many years of growing pains (Research and
Development), the company is looking forward to finally
generating revenues.
You are cordially invited to attend the Annual Meeting of
Shareholders to be held on June 29, 2001, at 10:00 a.m. PDT, at
5725 South Valley View Blvd, Suite 3, Las Vegas, Nevada 89118.
Enclosed with this letter is a Notice of Annual Meeting together
with a Proxy Statement which contains information with respect to
the proposals to be voted. We believe that the proposals
discussed in the Proxy Statement are very important to the
company and its shareholders. It is very important that your
shares be voted, and we hope that you will be able to attend the
Annual Meeting. In either case, we urge you to execute and
return the enclosed form of proxy as soon as possible, whether or
not you expect to attend the Annual Meeting in person.
Sincerely,
/s/ Jack H. Wynn
Jack H. Wynn
President
5725 S. VALLEY VIEW BLVD., STE. 3 ? LAS VEGAS, NV ? 89118
PHONE: 702-597-9070 ? FAX: 702-597-0947
HYDRO ENVIRONMENTAL RESOURCES, INC.
5725 S. Valley View Blvd., Suite 3
Las Vegas, Nevada 89118
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 2001
TO THE STOCKHOLDERS OF HYDRO ENVIRONMENTAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Hydro Environmental Resources, Inc., an Oklahoma
corporation (the "Company"), will be held at 10:00 a.m. PDT, on Friday,
June 29, 2001, at 5725 S. Valley View Blvd., Suite 3, Las Vegas, Nevada
89118, for the following purposes:
1. To elect the directors of the Company to serve for a one year
term;
2. To approve the reincorporation of Hydro Environmental Resources,
Inc. in the State of Nevada;
3. To ratify the selection of Cordovano and Harvey, P.C., as
independent public accountants of the Company for the 2001 fiscal
year; and
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on June 7, 2001
as the record date for the determination of stockholders entitled to
notice and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors,
/s/ Jack H. Wynn
Jack Wynn, President
Las Vegas, Nevada
June 18, 2001
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN
PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT ATTENDANCE
AT THE MEETING WILL NOT BY ITSELF REVOKE A PROXY. FURTHERMORE, IF YOUR
SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU
WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A
PROXY ISSUED IN YOUR NAME.
HYDRO ENVIRONMENTAL RESOURCES, INC.
5725 S. Valley View Blvd., Suite 3
Las Vegas, Nevada 89118
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 29, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
General
- -------
The enclosed proxy is solicited on behalf of the Board of Directors of
Hydro Environmental Resources, Inc., an Oklahoma corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on
June 29, 2001, at 10:00 a.m. PDT (the "Annual Meeting"), or at any
adjournment or postponement thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting
will be held at 5725 S. Valley View Blvd., Suite 3, Las Vegas, Nevada
89118 in Las Vegas, Nevada. The Company intends to mail this proxy
statement and accompanying proxy card on or about June 18, 2001 to
all stockholders entitled to vote at the Annual Meeting.
Voting Rights and Outstanding Shares
- ------------------------------------
Only holders of record of shares of the Company's Common Stock at the
close of business on June 7, 2001 will be entitled to notice of and to
vote at the Annual Meeting. At the close of business on June 7, 2001,
the Company had outstanding and entitled to vote 34,055,078 shares of
Common Stock. Each holder of record of the Company's Common Stock on
such date will be entitled to one vote for each share held on all
matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Abstentions will be counted
towards the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker
non-votes are counted towards establishment of the required quorum, but
are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
- -----------------------
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by
filing with the Secretary of the Company at the Company's principal
executive office at 5725 S. Valley View Blvd., Suite 3, Las Vegas,
Nevada 89118, Attention: Secretary, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by
attending the meeting and voting in person. Please note, however, that
attendance at the meeting will not by itself revoke a proxy.
Furthermore, if the shares are held of record by a broker, bank or
other nominee and the stockholder wishes to vote at the meeting, the
stockholder must obtain from the record holder a proxy issued in the
stockholder's name.
1
Solicitation
- ------------
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy
statement, the proxy and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding in their
names shares of Common Stock beneficially owned by others to forward to
such beneficial owners. The Company may reimburse persons representing
beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation
of proxies by mail may be supplemented by telephone, facsimile,
telegram or personal solicitation by directors, officers or other
regular employees of the Company. No additional compensation will be
paid to directors, officers or other regular employees for such
services.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of its common stock as of June
5, 2001, by (i) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, (ii) each
director of the Company, (iii) each named executive officer, and (iv)
all directors and officers as a group. Except as otherwise indicated,
the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable.
Name and Address of Amount of Percent of
Beneficial Owner (1) Ownership (2) Class (3)
-------------------- ------------- ----------
Jack H. Wynn 7,600,000 22.3%
Julio P. Focaracci (4) 213,200 *
John L. Wheeler 0 -
Lane Austin 217,000 *
Drew Sakson 300,000 *
Officers and directors as
a Group (5 persons) 8,330,200 24.5%
* constitutes less than one 1 percent (1%) of all issued and
outstanding shares of Common Stock.
- ------------------
(1) Unless otherwise indicated, the address of each beneficial
owner is that of the Company.
(2) Beneficial ownership is determined in accordance with the rules of
the SEC, based on factors including voting and investment power
with respect to shares. Common stock subject to options currently
exercisable, or exercisable within 60 days after June 7, 2001, are
deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for
computing the percentage ownership for any other person.
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(3) Based on an aggregate of 34,055,078 shares of Company's Common
Stock issued and outstanding as of June 7, 2001.
(4) Mr. Focaracci directly owns 100,000 shares and owns as joint
tenant with his wife 8,200 shares. His wife owns 105,000 shares,
therefore, Mr. Focaracci is deemed to be the beneficial owner of
these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires that the Company's officers and
directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, file reports of
ownership and changes of ownership with the SEC. Officers, directors
and greater than ten percent (10%) shareholders are required by SEC
regulation to furnish the Company with copies of all such reports they
file.
Based solely on its review of the copies of such reports received by
the Company, and on written representations by the Company's officers
and directors regarding their compliance with the applicable reporting
requirements under Section 16(a) of the Exchange Act, the Company
believes that, with respect to its fiscal year ended December 31, 2000,
all of the Company's directors and officers and all of the persons
known to the Company to own more than ten percent (10%) of the
Company's Common Stock, either failed to file, on a timely basis, or
have yet to file the required beneficial ownership reports with the
SEC.
Compensation of Directors and Executive Officers
- ------------------------------------------------
None of the Company's officers and/or directors receive any
compensation for their respective services rendered to the Company, nor
have they received such compensation in the past. They have agreed to
act without compensation until authorized by the Board of Directors,
which is not expected to occur until the Company has generated revenues
from operations. As of the date of this proxy statement, the Company
has no funds available to pay directors. Further, none of the directors
are accruing any compensation pursuant to any agreement with the
Company.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the Company for
the benefit of its employees.
PROPOSAL 1
ELECTION OF DIRECTORS
As provided in the By-Laws of the Company, the Board of Directors has
nominated a slate of candidates for election to the Board of Directors
for a term of one year and until his successor has been elected and
qualified. The By-Laws also provide that the Board of Directors shall
have the right at any time during the ensuing year to increase the
number of directors and to elect such directors by a majority vote. The
Board has no standing committees of any kind.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares
represented by executed proxies will be voted, if authority to do so is
not withheld, for the election of the two nominees named below. In the
event that any nominee should be unavailable for election as a result
of an unexpected occurrence, such shares will be voted for the election
of such substitute nominee as the Board of Directors may propose. The
persons nominated for election have agreed to serve if elected, and the
Board of Directors has no reason to believe that these nominees will be
unable to serve.
3
Nominees Standing for Election
------------------------------
The following nominees are standing for election to serve as members of
the Board of Directors to serve until the next annual meeting of
shareholders or until their successors are duly elected and qualified.
Name Age Position Director Since
- ---- --- -------- --------------
Jack H. Wynn 71 President and Director November 1998
Julio P. Focaracci 47 Secretary, Treasurer December 15, 2000
and Director
John L. Wheeler 59 Director December 15, 2000
Drew Sakson 42 Director December 15, 2000
Lane J. Austin 53 Director April 2001
Set forth below is biographical information for each person nominated
to serve in office for a one-year term expiring at the 2002 Annual
Meeting.
Jack H. Wynn
- ------------
Mr. Wynn was the sole officer and a director of the Company from
its inception in November 1998 until December 2000. Mr. Wynn helped
the Company raise funds for research and development as well as
developing a present marketing plan and was instrumental in taking the
Company public. He also is currently the owner of North Bay Corporate
Services Firm in Hayward, California which he founded in 1998. Prior
to founding Hydro Environmental Resources, Inc., from 1980 to 1983, Mr.
Wynn was Chairman of the Board of Scanner Energy, an Oklahoma leasing
and oil production corporation with leases in numerous states. From
1984 to 1989, Mr. Wynn formed and operated the Oklahoma Transfer and
Registrar Corporation, which was later transferred to San Francisco,
California as Securities Transfer Pacifica Corporation. During his
years as owner and manager, the company contracted and transferred
shares for over 60 public corporations. While at the company, Mr. Wynn
developed a state of the art computer system used by many transfer
agents today. During this time, he was also instrumental in the
development and growth of Power Train corporation, a company which
successfully developed the hydraulic power system used in heavy
industry today. From 1972 to 1980, Mr. Wynn was a partner with Scholen,
Wynn & Associates, a securities and insurance brokerage firm. Mr. Wynn
has over twenty years experience in the life insurance industry,
including ten years with Occidental Life Insurance.
Julio P. Focaracci
- ------------------
Mr. Focaracci was appointed as the Company's Secretary and Treasurer on
April 7, 2001. Mr. Focaracci brings to the Company over 20 years
experience in engineering, manufacturing, project management, quality
and package development. From 1998 to present, Mr. Focaracci has been
the Senior Manufacturing Engineer for Applied Biosystems in Foster
City, California. From 1996 to 1998, Mr. Focaracci was the Quality and
Process Manager for Xerox Corporation, Digital Desktop Division in Palo
Alto, California. He provided team facilitation for new products and
provided project management training. Mr. Focaracci has a Masters of
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Business and Administration from St. Mary's Collage in Moraga,
California, and a Bachelor of Science degree in Engr. Tech/Mechanical
Engr. From Cal Poly State University in San Luis Obispo, California.
John L. Wheeler
- ---------------
Mr. Wheeler has been qualified as an attorney at law in Australia since
1965. He started private practice in 1970. Since forming his own
practice, he has been involved in many notable cases, which have been
groundbreaking legal precedents throughout the years. He has on
numerous occasions been asked to advise the government or opposition on
proposed legislation. He has practiced in commercial law and has
advised on public company acquisitions and mergers domestically and
internationally. Currently he is involved in assisting in the
development of public corporations specializing in new technology.
Mr. Wheeler was the foundation president of the Big Brother Big Sister
movement in Australia and held that position for 10 years. He has been
a member of other charities, including Boys Town Queensland, Pregnancy
Help and Centrecare.
Drew Sakson
- -----------
Since 1987, Mr. Sakson has owned and operated Drew Sakson Management,
the largest retail sub-prime mortgage lender in western Colorado. The
company closes in excess of 15 million dollars of loans annually and
has recently expended its sales into conventional and non-conventional
borrowers. They also owned and operate several million dollars worth
of real estate, including a hotel in Rifle and a condominium in Aspen,
Colorado. From October 1987 to September 1993, Mr. Sakson owned and
operated several hotels on the South Miami Beach, Florida. He sold his
interest in the South Beach real estate in August 1993. In Miami he
was instrumental in the development of Viatical settlement financing
and served on the Board of Directors of American Life Resources, the
company that created the concept of purchasing life insurance policies
from the terminally ill. From 1993 to 1995 he served on the board of
directors of CAPX, a publicly traded corporation, which later became
known as Autolend, the third largest financing company for cars at
auctions to dealers in the United States.
Lane J. Austin
- --------------
From October 1997 to present, Mr. Austin has been self-employed as a
consultant providing corporate manufacturing, quality and operations
consulting services to technology companies. He reports to executive
management defining, developing, documenting and implementing complete
corporate business strategies from order receipt to delivery of
products to customers. From January 1994 to October 1997, Mr. Austin
was the Senior Corporate Quality Manager for Quicklogic. He developed,
implemented and directed all corporate quality activities for Field
Progammable Gate Array (FPGA) products and PCB programmer assemblies.
He was responsible for staffing, managing and budgeting Quality
activities. Additional responsibilities included extensive customer
presentations, and resolution of customer quality issues. Mr. Austin
has a Bachelor of Arts degree in Experimental Psychology from
California State University at Hayward and has his ISO9000 Lead
Assessor Certification.
The five candidates receiving the highest number of affirmative votes
cast at the meeting will be elected directors of the Company.
Abstentions and broker non-votes will have the same effect as a vote
against this Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THE NAMED NOMINEES
5
PROPOSAL 2
THE REDOMICILE OF THE COMPANY'S PLACE OF INCORPORATION
FROM OKLAHOMA TO NEVADA
INTRODUCTION
For the reasons set forth below, the Board believes that the best
interests of the Company and its shareholders will be served by
changing the Company's state of incorporation from Oklahoma to Nevada
(the "Reincorporation"). The Board has approved the Reincorporation,
which will be effected pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") described below. Under the Merger Agreement,
the Company will be merged with and into its newly formed Nevada
subsidiary, Hydro Environmental Resources, Inc., ("Hydro Nevada").
Hydro Nevada is a wholly-owned subsidiary of the Company recently
incorporated in Nevada solely for the purpose of effecting the
Reincorporation. Hydro Nevada currently has no material assets and no
business operations. Upon the effectiveness of the Reincorporation, the
Company will cease to exist and Hydro Nevada will continue to operate
the Company's business under the name "Hydro Environmental Resources,
Inc."
At the Annual Meeting, the shareholders of the Company (the
"Shareholders") will be asked to consider and vote upon the
Reincorporation as outlined in the Merger Agreement by and between
Hydro Nevada and Hydro Oklahoma, attached as Exhibit A. For the reasons
set forth below, the Board believes that approval of the
Reincorporation is in the best interests of the Company and its
shareholders. Shareholder approval of the Reincorporation will
constitute approval of the Merger Agreement and all related
transactions, which will effect the change in the legal domicile of the
company.
REASONS FOR THE REINCORPORATION
The Board believes that the Reincorporation will provide flexibility
for both the management and business of the Company. For many years,
Nevada has followed a policy of encouraging incorporation in that state
and has been a leader in adopting, construing and implementing
comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Such an
environment will enhance the Company's operations and its ability to
obtain equity financing and to effect acquisitions and other
transactions. Consequently, many corporations originally domiciled
elsewhere have subsequently changed corporate domicile to Nevada in a
manner similar to that proposed by the Company.
THE MERGER
After the Reincorporation is effected by the Merger Agreement, Hydro
Nevada will emerge as the surviving corporation. The terms and
conditions of the Merger are set forth in the Merger Agreement attached
as an exhibit to this Proxy Statement, and the summary of the terms and
conditions of the Merger set forth below is qualified by reference to
the full text of the Merger Agreement. Upon consummation of the Merger,
Hydro Nevada will continue to exist in its present form under the name
"Hydro Environmental Resources, Inc.", and the Company will cease to
exist. The Reincorporation will change the legal domicile of the
Company, but will not result in a change in the principal offices,
business, management, assets or liabilities of the Company. By
operation of law, Hydro Nevada will succeed to all of the assets and
assume all of the liabilities of the Company.
The Board of Directors of Hydro Nevada will be comprised of the persons
elected to the Company's Board of Directors at the Annual Meeting. The
Hydro Nevada Board of Directors will be of one class, and shall serve
for a term of one year commencing upon election subsequent to the
Reincorporation. It is anticipated that the
6
directors of Hydro Nevada will elect as officers of Hydro Nevada the
same persons who are elected as officers of the Company following the
Annual Meeting.
After the Merger, the rights of shareholders and the Company's
corporate affairs will be governed by the Nevada Revised Statutes (the
"NRS") and by the Articles of Incorporation and bylaws of Hydro Nevada,
instead of the Oklahoma General Corporation Act (the "OGCA") and the
articles of incorporation and bylaws of the Company. Certain material
differences are discussed below under "Comparison of Shareholders
Rights under Nevada and Oklahoma Corporate Law and Charter Documents."
A copy of the Articles of Incorporation of Hydro Nevada (the "Nevada
Articles") are included as Exhibit C to this Proxy Statement. The
articles of incorporation and bylaws of the Company and the bylaws of
Hydro Nevada (the "Nevada Bylaws") are available for inspection by
shareholders of the Company at the principal offices of the Company
located at 5725 S. Valley View Blvd., Suite 3, Las Vegas, Nevada 89118.
Telephone (702) 597-9070.
Upon the effectiveness of the Merger, each share of common stock of the
Company issued and outstanding immediately prior thereto shall be
converted into shares of fully paid and nonassessable shares of Hydro
Nevada. Shareholders will receive one share of common stock and one
share of Series A Preferred Stock of Hydro Nevada for every five (5)
shares of Hydro Oklahoma. There are no shares of common stock or
Series A Preferred Stock of Hydro Nevada issued and outstanding.
The change in domicile by corporate merger will not materially affect
the proportionate equity interest in the Company of any shareholder or
the relative rights, preferences, privileges or priorities of any such
stockholder. Upon completion of the merger, each five (5) shares of
Hydro Oklahoma common stock will be exchanged for one share of the new
Nevada corporation's common stock and one share of its Series A
Preferred Stock. The stock issued in the change of domicile merger
transaction will be fully paid and non-assessable. All shares will
have the same par value of $0.001 per share. The common shares will
have voting rights and other rights as presently possessed by our
shareholders. The preferred stock will carry no voting rights, will
have a liquidation premium of $1.00 per share, and will not pay
dividends at this time.
Consummation of the Merger is subject to the approval of the Company's
shareholders. The affirmative vote, a majority of all votes entitled to
be cast, whether or not present at the Annual Meeting, who are entitled
to vote at the Annual Meeting is required for the approval and adoption
of the Merger. The Merger is expected to become effective as soon as
practicable after shareholder approval is obtained and all other
conditions to the Merger have been satisfied, including the receipt of
all consents, orders and approvals necessary for consummation of the
Merger. Prior to its effectiveness, however, the Merger may be
abandoned by the Board if, for any reason, the Board determines that
consummation of the Merger is no longer advisable.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation of the Company pursuant to the Merger Agreement
will be a tax free reorganization under the Internal Revenue Code of
1986, as amended. Accordingly, a holder of the Common Stock (a
"Holder") will not recognize gain or loss in respect of Holder's Common
Stock as a result of the Reincorporation. The Holder's basis in a share
of Hydro Nevada will be the same as Holder's basis in five (5) of the
corresponding shares of the Company held immediately prior to the
Reincorporation. The Holder's holding period in a share of Hydro Nevada
will include the period during which Holder held the corresponding five
(5) shares of the Company, provided Holder held the corresponding five
(5) shares as a capital asset at the time of the Reincorporation.
In addition, neither the Company nor Hydro Nevada will recognize gain
or loss as a result of the Reincorporation, and Hydro Nevada will
generally succeed, without adjustment, to the tax attributes of the
Company. Nevada has no corporate income tax, no taxes on corporate
shares, no franchise tax, no personal income tax, no I.R.S. information
sharing agreement, nominal annual fees, minimal reporting and
disclosure requirements, and shareholders are not public record.
7
The foregoing summary of federal income tax consequences is included
for general information only and does not address all income tax
consequences to all of the Company's shareholders. The Company's
shareholders are urged to consult their own tax advisors as to the
specific tax consequences of the Reincorporation with respect to the
application and effect of state, local and foreign income and other tax
laws.
SECURITIES ACT CONSEQUENCES
Pursuant to Rule 145(a)(2) under the Securities Act of 1933, as amended
(the "Securities Act"), a merger which has the sole purpose of changing
an issuer's domicile within the United States does not involve a sale
of securities for the purposes of the Securities Act. Accordingly,
separate registration of shares of common stock of Hydro Nevada will
not be required.
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS
The Company's authorized capital in Oklahoma consists of 50,000,000
shares of Common Stock, $0.001 par value and 5,000,000 shares of
Preferred Stock, $0.001 par value. As of June 7, 2001 there were
34,055,078 shares of Common Stock outstanding and no shares of
Preferred Stock outstanding. The holders of Common Stock are entitled
to vote on all matters to come before a vote of the shareholders of the
Company.
COMPARISON OF SHAREHOLDER RIGHTS UNDER NEVADA AND OKLAHOMA
CORPORATE LAW AND CHARTER DOCUMENTS
GENERAL. Subject to shareholder approval prior to the effective time
(the "Effective Time") of the Reincorporation, the Company will change
its domicile to Nevada and shall thereafter be governed by the Nevada
Revised Statues ("NRS") and by the Nevada Articles and the Nevada
Bylaws (together, the "Nevada Charter Documents"). Upon the filing with
and acceptance by the Secretary of State of Nevada of Articles of
Merger in Nevada, the Company will become Hydro Environmental
Resources, Inc., a Nevada Corporation, ("Hydro Nevada") and each five
(5) outstanding shares of Company Common Stock will be deemed for all
purposes to evidence ownership of, and to represent, one (1) share of
Hydro Nevada Common Stock.
The Nevada Charter Documents effectively replace the Company's current
Articles of Incorporation, as amended ("Oklahoma Articles") and the
Oklahoma Bylaws (together, the "Oklahoma Charter Documents") including
providing officers, directors and agents of Hydro Nevada with certain
indemnification rights in addition to those currently provided for the
Company.
If the Reincorporation is consummated, holders of Common Stock will
become holders of Nevada Common Stock, which will result in their
rights as shareholders being governed by the laws of the State of
Nevada. In addition, their rights as shareholders will be governed by
the Nevada Charter Documents. It is not practical to describe all of
the differences between the Nevada Articles and the Oklahoma Articles
and the Nevada Bylaws and the Oklahoma Bylaws or all of the differences
between the laws of the States of Nevada and Oklahoma. The following is
a summary of some of the significant rights of the shareholders under
Oklahoma and Nevada law and under the Oklahoma and Nevada Charter
Documents. This summary is qualified in its entirety by reference to
the full text of such documents and laws.
8
AUTHORIZED CAPITAL STOCK
The following discussion is qualified in its entirety by reference to
the Nevada Charter Documents. The authorized capital stock of Hydro
Nevada, upon effectuation of the transaction set forth in the Merger
Agreement is 60,000,000 shares as hereinafter set forth. The
description of the classes of shares and a statement of the number of
shares in each class and the relative rights, voting power,
restrictions and preferences granted to and imposed upon the shares of
each class are discussed below.
COMMON STOCK. The total number of shares of Common Stock this
Corporation shall have the authority to issue is 50,000,000. The
Common Stock shall have a stated par value of $0.001 per share. Each
share of Common Stock shall have, for all purposes one (1) vote per
share. The holders of Common Stock issued and outstanding have and
possess the right to receive notice of shareholders' meetings
and to vote upon the election of directors or upon any other matter as
to which approval of the outstanding shares of Common Stock or approval
of the common shareholders is required or requested.
PREFERRED STOCK. The total number of shares of Preferred Stock this
Corporation is authorized to issue is 10,000,000 shares with a stated
par value of $0.001 per share. The Board of Directors is hereby
authorized from time to time, without shareholder action, to provide
for the issuance of Preferred Stock in one or more series not exceeding
in the aggregate the number of Preferred Stock authorized by these
Articles of Incorporation, as amended from time to time. The Board of
Directors of the Corporation is vested with authority to determine and
state the designations and the preferences, limitations, relative rights,
and voting rights, if any of each such series by the adoption and filing
in accordance with the Nevada Revised States, before the issuance of any
shares of such series, of an amendment or amendments to these Articles
of Incorporation determining the terms of such series, which amendment
need not be approved by the shareholder or the holders of any class or
series of shares except as provided by law. All shares of Preferred Stock
of the same series shall be identical with each other in all respects.
SERIES A PREFERRED STOCK. A total of 7,000,000 shares of preferred
stock shall be designated as Series A Preferred Stock. Holders of
Series A Preferred Stock have no voting rights, no rights to convert to
common stock, and are entitled to a liquidation preference of $1.00 per
share. Holders may receive dividends at any time, by board resolution,
and must receive dividends of at least $0.10 per share prior to common
shareholders receiving any dividends. Except as noted in the Articles of
Incorporation, holders are not entitled to receive dividends. The
Series A Preferred Stock may be called by the Company, by action of the
board of directors, at any time after two years from the date of issue.
A holder whose shares are called shall be entitled to receive $0.01 for
each share called.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY
CORPORATE TRANSACTIONS
NEVADA. Approval of consolidations and sales, leases or exchanges of
all or substantially all of the property or assets of a corporation,
requires the affirmative vote or consent of the holders of a majority
of the outstanding shares entitled to vote thereon.
OKLAHOMA. Because the Oklahoma Charter Documents are silent on the
matter of the vote of shareholders required to approve a plan of merger
or a plan of share exchange, or to approve a transaction involving a
sale, lease, exchange, or other disposition of all, or substantially
all, of its property, with or without its good will, otherwise than in
the usual and regular course of business, such plan requires the
approval of a majority of all the votes entitled to be cast thereon.
If the Reincorporation is consummated there will be no change in the
shareholder vote needed to pass such transactions which will remain a
majority of all of the votes entitled to be cast on the transaction by
each voting group entitled to vote thereon.
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SHAREHOLDERS CONSENT WITHOUT A MEETING
NEVADA. Any action required or permitted to be taken at a meeting of
the shareholders may be taken without a meeting if, before or after the
action, a written consent thereto is signed by shareholders holding at
least a majority of the voting power, except that if a different
proportion of voting power is required for such an action at a meeting,
then that proportion of written consents is required. In no instance
where action is authorized by written consent need a meeting of share-
holders be called or notice given.
OKLAHOMA. Any action required or permitted by the Oklahoma General
Corporation Act (OGCA) to be taken at a shareholders' meeting may be
taken without a meeting if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of the
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered
office in Oklahoma, its principal place of business, or an officer or
agent of the corporation having custody of the book in which
proceedings of meetings of shareholders are recorded. Every written
consent shall bear the date of signature of each shareholder who signs
the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation, written
consents signed by a sufficient number of holders are delivered to the
corporation in the manner set forth above.
If the Reincorporation is consummated, the number of shareholders
required to consent to an action without a shareholders meeting will
remain the same which requires a majority of the voting power
shareholders consenting to the action in writing. However, such action
may be taken without a meeting before or after a majority of the voting
shareholders have consented to such action in writing.
ANTI-TAKEOVER STATUTES
NEVADA. Except under certain circumstances Nevada law prohibits a
"business combination" between the corporation and an "interested
shareholder", however the Nevada Articles expressly elect not to be
governed by these provisions as contained in NRS 78.411 to 78.444
inclusive. To the extent permissible under the applicable law of any
jurisdiction to which the corporation may become subject by reason of
the conduct of business, the ownership of assets, the residence of
shareholders, the location of offices or facilities, or any other item,
the Company has elected not to be governed by the provisions of any
statute that (i) limits, restricts, modified, suspends, terminates, or
otherwise affects the rights of any shareholder to cast one vote for
each share of common stock registered in the name of such shareholder
on the books of the corporation, without regard to whether such shares
were acquired directly from the Company or from any other person and
without regard to whether such shareholder has the power to exercise or
direct the exercise of voting power over any specific fraction of the
shares of common stock of the Company issued and outstanding or (ii)
grants to any shareholder the right to have his or her stock redeemed
or purchased by the corporation or any other shareholder on the
acquisition by any person or group of persons of shares of the Company.
In particular, to the extent permitted under the laws of the state of
Nevada, the Company elects not to be governed by any such provision of
the Nevada Revised Statutes.
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OKLAHOMA. Although O.S. 18-1090.3.B.1. allows for corporations to elect
not to be governed by Oklahoma law prohibiting "business combinations"
between the corporation and "interested shareholders" the Corporation
did not make such election in its Articles of Incorporation, therefore
the Corporation is prohibited from such business combinations with
interested shareholders.
If the Reincorporation is consummated, the Board of Directors will not
be prohibited from entering into business combinations, such as mergers
and/or acquisitions, with interested shareholders of the Corporation if
the Board of Directors deems it beneficial to the Corporation's
business and its shareholders. The Board of Directors has a fiduciary
duty to its shareholders to ensure any such business combination would
be fair and not result in any unwanted takeover of corporate control.
QUORUM OF DIRECTORS
NEVADA. A majority of the Board of Directors in office shall constitute
a quorum for the transaction of business, but if at any meeting of the
Board there be less than a quorum present, a majority of those present
may adjourn from time to time, until a quorum shall be present, and no
notice of such adjournment shall be required. The Board of Directors
may prescribe rules not in conflict with these Bylaws for the conduct
of its business; provided, however, that in the fixing of salaries of
the officers of the corporation, the unanimous action of all the
directors shall be required.
OKLAHOMA. A quorum at all meetings of the Board of Directors consists
of a majority of the number of directors then holding office. The act
of a majority of the Directors present at a meeting which a quorum is
present shall be the act of the Board of Directors.
SPECIAL MEETINGS OF SHAREHOLDERS
NEVADA. Special meetings of the shareholders may be held at the office
of the corporation in the State of Nevada, or elsewhere, whenever
called by the President, or by the Board of Directors, or by vote of,
or by an instrument in writing signed by the holders of a majority of
the issued and outstanding capital stock. Not less than ten (10) nor
more than sixty (60) days written notice of such meeting, specifying
the day, hour and place, when and where such meeting shall be convened,
and the objects for calling the same, shall be mailed in the United
States Post Office, or via express or overnight mail, addressed to each
of the shareholders of record at the time of issuing the notice, and at
his, her, or its address last known, as the same appears on the books
of the corporation.
The written certificate of the officer or officers calling any special
meeting setting forth the substance of the notice, and the time and
place of the mailing of the same to the several shareholders, and the
respective addresses to which the same were mailed, shall be prima
facie evidence of the manner and fact of the calling and giving such
notice.
OKLAHOMA. A corporation shall hold a special meeting of shareholders:
(a) On call of its board of directors or the person or persons
authorized by the bylaws or resolution of the board of directors to
call such a meeting. The bylaws provide that a meeting may be called by
the Chief Executive Officer of the corporation or by a majority of the
Board of Directors, and shall be called after the corporation's receipt
of the request in writing from shareholders owning of record one-fourth
of the amount of each class or series of the stock of the corporation
issued and outstanding and entitled to vote. Special shareholders'
meetings may be held in or out of this state at the place stated in or
fixed in accordance with the bylaws at a place stated in or fixed by
the Chief Executive Officer. Only business within the purpose or
purposes described in the notice of the meeting may be conducted at a
special shareholders' meeting.
11
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS.
The Oklahoma Law and the Nevada Law both provide that, unless the
articles of incorporation provide otherwise, any action required or
permitted to be taken at a meeting of the shareholders may be taken
without a meeting if the holders of outstanding stock, having at least
the minimum number of votes that would be necessary to authorize or
take such action at a meeting, consent to the action in writing. In
addition, the Oklahoma law requires the corporation to give prompt
notice of the taking of corporate action without a meeting by less than
unanimous written consent to those shareholders who did not consent in
writing. Therefore, there will not be any significant difference in
shareholder rights with respect to actions by written consent.
AMENDMENTS TO CHARTER
NEVADA. The articles of incorporation may be amended in any of the
following respects by a vote of a majority of the shareholders entitled
to vote on an amendment: (a) by addition to its corporate powers and
purposes, or diminution thereof, or both. (b) by substitution of other
powers and purposes, in whole or in part, for those prescribed by its
articles of incorporation, (c) by increasing, decreasing or
reclassifying its authorized stock, by changing the number, par value,
preferences, or relative, participating, optional or other rights, or
the qualifications, limitations or restrictions of such rights, of its
shares, or of any class or series of any class thereof whether or not
the shares are outstanding at the time of the amendment, or by changing
shares with par value, whether or not the shares are outstanding at the
time of the amendment, into shares without par value or by changing
shares without par value, whether or not the shares are outstanding at
the time of the amendment, into shares with par value, either with or
without increasing or decreasing the number of shares, and upon such
basis as may be set forth in the certificate of amendment, (d) by
changing the name of the corporation, (e) by making any other change or
alteration in its articles of incorporation that may be desired. If any
proposed amendment would alter or change any preference or any relative
or other right given to any class or series of outstanding shares, then
the amendment must be approved by the vote, in addition to the
affirmative vote otherwise required, of the holders of shares
representing a majority of the voting power of each class or series
affected by the amendment regardless of limitations or restrictions on
the voting power thereof.
OKLAHOMA. The articles of incorporation may be amended at any time, or
from time to time, by the affirmative vote of two-thirds of the members
present at any annual meeting of the stockholders, if notice of the
proposed amendment shall have been given in the call for such meeting.
Such amendments shall be put into effect by the directors, who shall
sign and acknowledge and file new or revised articles containing such
amendments and superseding the original articles.
NOTICE, ADJOURNMENT AND PLACE OF
SHAREHOLDERS' MEETINGS
NEVADA. The Board of Directors may designate any place, either within
or without the state of incorporation, as the place of meeting for any
annual or special meeting. A waiver of notice, signed by all
shareholders entitled to vote at a meeting, may designate any place,
either within or without the state of incorporation, as the place for
the holding of such meeting. If no designation is made, the place of
meeting shall be the registered office of the corporation in the state
of incorporation. Nevada Bylaws provide that the notification of the
annual meeting shall state the purpose or purposes for which the
meeting is called and the date, time, and the place, which may be
12
within or without this state, where it is to be held. A copy of such
notice shall be either delivered personally to, or shall be mailed with
postage prepaid, to each shareholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before
such meeting.
OKLAHOMA. Written notice stating the place, day, and hour of the
meeting, and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10)
days nor more than sixty (60) days before the date of the meeting to
each shareholder entitled to vote at such meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid,
directed to the shareholder at this address as it appears on the
records of the corporation. An affidavit of the secretary or an
assistant secretary or of the transfer agent of the corporation that
the notice has been given, in the absence of fraud, shall be prima
facie evidence of the facts stated therein. When a meeting is
adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote
at the meeting.
DIRECTORS
NEVADA. The Nevada Certificate provides that the initial number of
members of the Nevada board shall be five (5), and thereafter shall not
be less than one (1) nor more than seven (7), and may, at any time or
times, be increased or decreased by a duly adopted amendment to the
Articles of Incorporation, or in such manner as shall be provided in
the Bylaws of the corporation or by an amendment to the Bylaws of the
corporation duly adopted by either the Board of Directors or the
Shareholders.
OKLAHOMA. The Oklahoma Bylaws provide that the Board of Directors shall
consist of such number of directors as may be determined from time to
time by resolution of the Board of Directors. No director need be an
officer or shareholder of the Corporation, but each director shall be a
natural person 21 years of age or older.
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ELECTION AND REMOVAL OF DIRECTORS
NEVADA. The Nevada Bylaws provide each director shall hold office until
the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified. At a meeting expressly called
for the removal of one or more directors, such directors may be removed
by a vote of a majority of the shares of outstanding stock of the
corporation entitled to vote at an election of directors. Vacancies on
the board may be filled by the remaining directors.
OKLAHOMA. The Oklahoma Bylaws provide each director shall serve until
the next annual meeting of the shareholders or until the director's
successor shall have been duly elected and qualified, except in the
event of the director's death, resignation or removal. Any director may
be removed, with or without cause, at any meeting of shareholders by
the affirmative vote of a majority in number of shares of the
shareholders present in person or by proxy at such meeting and entitled
to vote for the election of such director; provided notice of the
intention to act upon such matter shall have been given in the notice
calling such meeting. Vacancies on the board may be filled by the
remaining directors.
INSPECTION OF BOOKS AND RECORDS
NEVADA. Pursuant to the Bylaws of Hydro Nevada, the Board of Directors
shall have power to close the share books of the corporation for a
period of not to exceed sixty (60) days preceding the date of any
meeting of shareholders, or the date for payment of any dividend, or
the date for the allotment of rights, or capital shares shall go into
effect, or a date in connection with obtaining the consent of
shareholders for any purpose. In lieu of closing the share transfer
books as aforesaid, the Board of Directors may fix in advance a date,
not exceeding sixty (60) days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion
or exchange of capital shares shall go into effect, or a date in
connection with obtaining any such consent, as a record date for the
determination of the shareholders entitled to a notice of, and to vote
at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent.
OKLAHOMA. Pursuant to the Oklahoma Bylaws, the Secretary shall make
available at the executive office of the corporation, at least ten days
before such meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address
and the number of shares held by each. Such record shall be produced
and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder for any purpose germane to the
meeting during the whole time of the meeting for the purposes thereof.
Oklahoma law provides that any shareholder, in person or by attorney or
other agent, upon written demand under oath stating the purpose thereof,
shall have the right during the usual hours for business to inspect for
any proper purpose the corporation's stock ledger, a list of its
shareholders, and its other books and records, and to make copies or
extracts therefrom.
14
LIMITATION ON LIABILITY OF DIRECTORS;
INDEMNIFICATION OF OFFICERS AND DIRECTORS
NEVADA. Pursuant to the Nevada Charter Documents, the corporation shall
have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with any such action,
suit or proceeding, if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action
or proceeding, he or she had reasonable cause to believe that his or
her conduct was unlawful.
Hydro Nevada Bylaws specifically provide that the corporation shall
have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with
the defense or settlement of such action or suit, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter
as to which such a person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine on application that, despite
the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for
such expenses as the court deems proper.
OKLAHOMA. The Oklahoma Bylaws provide that to the full extent not
prohibited by the law as in effect from time to time, the corporation
shall indemnify any person (and the heirs, executors and
representatives of such person) who is or was a director, officer,
employee or agent of the corporation, or who, at the request of the
corporation, is or was a director, officer, employee, agent, partner,
or trustee, as the case may be, of any other corporation, partnership,
proprietorship, trust, association or other entity in which the
corporation owns an interest, against any and all liabilities and
reasonable expenses incurred by such person in connection with or
resulting from any claim, action, suit or proceeding, whether brought
by or in the right of the corporation or otherwise and whether civil,
criminal, administrative or investigative in nature, and in connection
with an
15
appeal relating thereto, in which such person is a party or is
threatened to be made a party by reason of serving or having served in
any such capacity.
DISSENTERS' RIGHTS AS A RESULT OF THE REINCORPORATION MERGER
Shareholders have dissenters' rights in Oklahoma as a result of the
proposed Reincorporation. Shareholders who oppose the Reincorporation
will have the right to receive payment for the value of their shares
pursuant to Section 1091 of Title 18 of the Oklahoma Statutes("O.S.").
A copy of Section 1091 is attached hereto as Exhibit D to this Proxy
Statement. The material requirements for a shareholder to properly
exercise his or her rights are summarized below. However, these
provisions are very technical in nature, and the following summary is
qualified in its entirety by the actual statutory provisions that
should be carefully reviewed by any shareholder wishing to assert such
rights.
Under the Oklahoma Law, such dissenters' rights will be available only
to those shareholders of the Company who (i) object to the proposed
Reincorporation in writing prior to or at the Annual Meeting before the
vote on the matter is taken (a negative vote will not itself constitute
such a written objection); and (ii) do not vote any of their shares in
favor of the proposed Reincorporation at the Annual Meeting.
Within ten days after the effective date of the Reincorporation, Hydro
Nevada will send to each shareholder who has satisfied both of the
foregoing conditions a written notice in which Hydro Nevada will notify
such shareholders of their right to demand payment for their shares and
will supply a form for dissenting shareholders to demand payment.
Shareholders will have 30 days to make their payment demands or lose
such rights. If required in the notice sent by Hydro Nevada, each
dissenting shareholder must also certify whether or not he or she
acquired beneficial ownership of such shares before or after the date
of the first announcement to the news media of the proposed
transaction.
Upon receipt of each demand for payment, Hydro Nevada will pay each
dissenting shareholder the amount that Hydro Nevada estimates to be the
fair value of such shareholder's shares, plus interest from the date of
the completion of the Reincorporation to the date of payment. With
respect to any dissenting shareholder who does not certify that he or
she acquired beneficial ownership of the shares prior to the first
public announcement of the transaction, Hydro Nevada may, instead of
making payment, offer such payment if the dissenter agrees to accept it
in full satisfaction of his or her demand. "Fair value" with respect to
a dissenter's shares, means the value of the shares immediately before
the effectuation of the Reincorporation, excluding any appreciation or
depreciation in anticipation of such events. Any dissenter who does not
wish to accept the payment or offer made by Hydro Nevada must notify
Hydro Nevada in writing of his or her own estimate of the fair value of
the shares within 30 days after the date Hydro Nevada makes or offers
payment. If the dissenting shareholder and Hydro Nevada are unable to
agree on the fair value of the shares, then Hydro Nevada will commence
a proceeding with the Oklahoma courts within 60 days after receiving
the dissenter's notice of his or her own estimate of fair value. If
Hydro Nevada does not commence such a proceeding within the 60-day
period, it must pay each dissenter whose demand remains unresolved the
amount demanded by such dissenter. If a proceeding is commenced, the
court will determine the fair value of the shares and may appoint one
or more appraisers to help determine such value.
All dissenting shareholders must be a party to the proceeding, and all
such shareholders will be entitled to judgment against Hydro Nevada for
the amount of the fair value of their shares, to be paid on surrender
of the certificates representing such shares. The judgment will include
an allowance for interest (at a rate determined by the court) to the
date of payment. The costs of the court proceeding, including the fees
and expenses of any appraisers, will be assessed against Hydro Nevada
unless the court finds that the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment at a higher
amount than that offered by Hydro Nevada.
16
Both Hydro Nevada and the dissenters must bear their own respective
legal fees and expenses, unless the court requires one party to pay
such legal fees and expenses because of the conduct of such party. The
loss or forfeiture of appraisal rights simply means the loss of the
right to receive a cash payment from Hydro Nevada in exchange for
shares. In such event the shareholder would still hold the appropriate
number of shares of Hydro Nevada.
VOTE REQUIRED
Under Oklahoma law, the affirmative vote of a majority of all the votes
entitled to be cast is needed to approve the proposed Reincorporation.
As a result, abstentions and broker non-votes will have the same effect
as negative votes. Although the Board has recommended that the
foregoing proposal be adopted, shareholders should be aware that the
continuing Directors may have a personal interest in the
Reincorporation because it broadens the scope of indemnification
available to Directors. The broader scope of indemnification available
under Nevada law could result in increased costs and expenses to the
Company to the potential indirect detriment of the shareholders.
AMENDMENT TO THE MERGER AGREEMENT; TERMINATION
The Merger Agreement may be terminated and the Reincorporation
abandoned, notwithstanding shareholder approval, by the Board of
Directors of the Company at any time before consummation of the
Reincorporation if (i) shareholders holding more than five percent (5%)
of the issued and outstanding shares of the Company's Common Stock
dissent and seek appraisal rights; or (ii) the Board of Directors of
the Company determines that in its judgment the Reincorporation does
not appear to be in the best interests of the Company or its
shareholders. In the event the Merger Agreement is terminated or the
shareholders fail to approve the Reincorporation, the Company would
remain as an Oklahoma corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS FOR THE REASONS STATED ABOVE,
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE TRANSACTIONS
CONTEM- PLATED BY THE PROPOSED REINCORPORATION MERGER ARE DESIRABLE AND
IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Cordovano and Harvey, P.C. as the
Company's independent public accountants for the fiscal year ending
December 31, 2001. Cordovano and Harvey, P.C. has audited the Company's
financial statements since fiscal 2000. A representative of Cordovano
and Harvey, P.C. is expected to be present at the Annual Meeting, will
have an opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.
Shareholder ratification of the selection of Cordovano and Harvey, P.C.
as the Company's independent public accountants is not required by the
Company's By-Laws or other applicable legal requirement. However, the
Board is submitting the selection of Cordovano and Harvey, P.C. to the
shareholders for ratification as a matter of good corporate practice.
If the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board at its discretion may direct the
17
appointment of a different independent accounting firm at any time
during the year if it determines that such a change would be in the
best interests of the Company and its shareholders.
The affirmative vote of the holders of a majority of the shares
represented and entitled to vote at the meeting will be required to
ratify the selection of Cordovano and Harvey, P.C. as the Company's
independent public accountants for the fiscal year ending December 31,
2001. Abstentions will be counted toward the tabulation of votes cast
on proposals presented to the shareholders and will have the same
effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this
matter has been approved.
Audit Fees
- ----------
During the fiscal year ended December 31, 2000, the aggregate fees
billed by Cordovano and Harvey, P.C. for the audit of the Company's
financial statements for such fiscal year and for the reviews of the
Company's interim financial statements were $3,912.50.
Financial Information Systems Design and Implementation Fees
- ------------------------------------------------------------
During the fiscal year ended December 31, 2000, the Company was
not billed by Cordovano and Harvey, P.C. for any fees relating to
information technology consulting fees.
All Other Fees
- --------------
During the fiscal year ended December 31, 2000, there were no fees
billed by Cordovano and Harvey, P.C. for professional services other
than audit fees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
THE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
STOCKHOLDER PROPOSALS
The next annual meeting of the Company is scheduled for May 15, 2002.
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2002
Annual Meeting of stockholders pursuant to Rule 14a-8 of the Securities
and Exchange Commission is December 15, 2001. If the date of the annual
meeting is advanced by more than 30 calendar days or delayed by more
than 90 calendar days from the above meeting date, the Company shall,
in a timely manner, inform all shareholders of the changed meeting date
and of the date by which such proposals must be received.
OTHER MATTERS
The Board of Directors knows of no other business to come before the
meeting. If, however, other matters properly come before the meeting,
it is the intention of the persons named in the enclosed proxy to vote
the shares represented thereby in accordance with their best judgment.
18
ANNUAL REPORT
Included with this proxy statement is a copy of the Company's annual
report for the year ended December 31, 2000. This annual report is
taken from the Company's Form 10-KSB, filed with the United States
Securities and Exchange Commission on April 17, 2001, with certain
exhibits excluded. The entire filings, with all exhibits attached, are
available online at the SEC's website, www.sec.gov, or at FreeEdgar,
www.FreeEdgar.com. (Note that some of those exhibits are not attached
to the Form 10-KSB but are included in other Forms filed with the SEC;
those Forms are referenced from the Form 10-KSB, and are also available
online at the addresses mentioned above.) The exhibits listed in the
table below are not included with this proxy statement. Any shareholder
who wishes to receive a copy of any of these exhibits may view them
online at the addresses mentioned above, or may receive a copy from the
Company by written request sent to the Company at the address shown on
the cover page of this proxy statement, together with a check in the
amount of $20 for each exhibit requested, which covers the cost of
copying, handling, and mailing the exhibits. CERTAIN OTHER INFORMATION
IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST. PLEASE CONTACT HYDRO
ENVIRONMENTAL RESOURCES, INC., TELEPHONE (702) 597-9070, IF YOU WOULD
LIKE TO REQUEST A COPY OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED MARCH 31, 2001, OR ADDITIONAL REPORTS.
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 2.1 to the Registration Statement on Form 10-SB
filed with the Commission on March 22, 2000).
3.2 By-laws (incorporated by reference to Exhibit 2.2 to
the Registration Statement on Form 10-SB filed with the
Commission on March 22, 2000).
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 3.1 to the Registration Statement
on Form 10-SB filed with the Commission on March 22,
2000).
10.1 Assignment of Patent and Intellectual Property Rights
related to the ElectroChem Hydrogen Fuel Reactor
(incorporated by reference to Exhibit 6.1 the
Registration Statement on Form 10-SB filed with the
Commission on March 22, 2000).
10.2 Agreement between the Company and Orini Lumber
Processors Limited of Orini Rd Orini New Zealand dated
February 2001 (incorporated by reference to Exhibit
10.2 to the Company's Annual Statement on Form 10-KSB
for the year ended December 31, 2000, filed with the
Commission on April 17, 2001).
BY ORDER OF THE BOARD OF DIRECTORS
By: /s/ Jack H. Wynn
Jack H. Wynn, President
19
APPENDIX A
FORM OF PLAN OF MERGER
This Plan of Merger was authorized by the Board of Directors of
Hydro Environmental Resources, Inc., an Oklahoma Corporation, at
a special meeting held at ______ p.m. on ___________, 2001, and
by the Board of Directors of Hydro Environmental Resources, Inc.,
a Nevada Corporation at a special meeting held at _______ p.m. on
the same day. The Plan of Merger is adopted in order to re-
domicile the Company from Oklahoma to Nevada.
1. The constituent entities are:
a) Hydro Environmental Resources, Inc., a Oklahoma corporation,
("Hydro-OK") with business address of 5725 S. Valley View Blvd.,
Suite 3, Las Vegas, NV 89118. This shall be the merging company
of the merger; and
b) Hydro Environmental Resources, Inc., a Nevada corporation,
("Hydro-NV") with business address of 5725 S. Valley View Blvd.,
Suite 3, Las Vegas, NV 89118. This shall be the surviving company
of the merger.
2. There are a total of 34,055,078 shares of common stock
outstanding in Hydro-OK, each of which is entitled to one vote.
There are no shares of preferred stock outstanding in Hydro-OK.
No common stock or preferred stock of Hydro-NV has been issued.
3. There is a total of 50,000,000 shares of Hydro-OK common
stock authorized, $0.001 par value per share and 5,000,000 shares
of preferred stock authorized, $0.001 par value per share.
Immediately prior to the merger, there shall be a total of
50,000,000 shares of Hydro-NV common stock authorized, $0.001
par value per share and 10,000,000 shares of preferred stock
authorized, $0.001 par value per share, 7,000,000 of which shall
be designated as Series A Preferred Stock.
4. Upon completion of the merger, each five (5) shares of Hydro-
OK common stock will be exchanged for one share of Hydro-NV
common stock and one share of Hydro-NV Series A Preferred Stock.
There will, upon completion of the merger, be 6,811,016 shares of
Hydro-NV voting common stock outstanding, each with the same rights
and privileges as the shares of Hydro-OK had prior to the merger,
and 6,811,016 shares of Hydro-Nevada Preferred Stock. Holders of
preferred stock are entitled to a liquidation preference of $1.00,
have no voting rights, and will have a dividend preference above
that of common stock, and will not be entitled to accumulate divi-
dends in arrears or to participate in dividends with common share-
holders.
5. Upon completion of the merger, Hydro-OK shall promptly pay
to dissenting Hydro-OK shareholders, if any, the amounts to which
they are entitled under provisions of Oklahoma Business
Corporation Law, and will make an irrevocable appointment of the
Oklahoma Secretary of State as Hydro-NV's agent for acceptance of
service in the State of Oklahoma.
6. After the completion of the merger, the corporate existence
of Hydro-OK shall cease.
7. Upon approval of the merger by the shareholders of Hydro-OK,
the Articles of Merger shall be prepared and filed in the
appropriate offices in Oklahoma and Nevada.
8. This Plan of Merger may be executed in two or more
counterparts, and by fax. Each counterpart shall be deemed an
original, and all counterparts collectively shall constitute one
and the same document.
A-1
9. This Plan of Merger shall be governed by and construed in
accordance with the laws of the State of Nevada, regardless of
the laws that would otherwise govern under the Nevada conflicts
of law statutes.
10. This Plan of Merger constitutes the entire agreement between
the parties.
This Plan of Merger is approved and adopted by the Boards of
Directors of the two companies, as testified by the signatures of
the directors below.
Hydro Environmental Resources, Hydro Environmental Resources,
Inc. - Oklahoma Inc. - Nevada
By____________________________ By______________________________
Jack Wynn, Director Jack Wynn, Director
By____________________________ By______________________________
Julio P. Focaracci, Director Julio P. Focaracci, Director
By____________________________ By______________________________
John L. Wheeler, Director John L. Wheeler, Director
By____________________________ By______________________________
Lane J. Austin, Director Lane J. Austin, Director
By____________________________ By______________________________
Drew Sakson, Director Drew Sakson, Director
A-2
APPENDIX B
FORM OF ARTICLES OF MERGER OF
HYDRO ENVIRONMENTAL RESOURCES, INC. (OKLAHOMA)
AND
HYDRO ENVIRONMENTAL RESOURCES, INC. (NEVADA)
We, Jack H. Wynn and Julio P. Focaracci, President and Secretary,
respectively, of Hydro Environmental Resources, Inc. (Oklahoma)
and Hydro Environmental Resources, Inc. (Nevada), hereby certify:
1. A Plan of Merger was adopted by the Boards of Directors of
both of the constituent corporations in meetings held on
______________, 2001. A copy of this executed Plan of Merger, is
on file at the firm's resident office in Nevada.
2. The constituent entities are Hydro Environmental Resources,
Inc. (Oklahoma), an Oklahoma Corporation and Hydro Environmental
Resources, Inc. (Nevada), a Nevada Corporation. Hydro
Environmental Resources, Inc. (Nevada) shall be the surviving
company, with Hydro Environmental Resources, Inc. (Oklahoma)
being the acquired company.
3. Each five (5) shares of Hydro Environmental Resources, Inc.
(Oklahoma) common stock will be exchanged for one share of
common stock and one share of Series A Preferred Stock of
Hydro Environmental Resources, Inc. (Nevada). There will,
upon completion of the merger, be 6,811,016 shares of Hydro
Environmental Resources, Inc. (Nevada) voting common stock
outstanding and 6,811,016 shares of Hydro Environmental
Resources, Inc. (Nevada) Series A Preferred Stock out-
standing.
4. Prior to the merger, no shares of common stock of Hydro
Environmental Resources, Inc. (Nevada) had been issued.
5. The Plan of Merger was submitted to the shareholders of
Hydro Environmental Resources, Inc. (Oklahoma) by its Board of
Directors. There were a total of ________ shares of common stock
eligible to be voted, all of which were present when the vote was
taken. The Plan of Merger was approved by ____% of the vote of
the shareholders on _____________, 2001.
6. Hydro Environmental Resources, Inc. (Nevada), the acquiring
company, shall be the surviving entity.
7. No amendment to the Articles of Incorporation of Hydro
Environmental Resources, Inc. are required as a result of this
merger.
B-1
For Hydro Environmental Resources, Inc. (Nevada)
- ----------------------- -----------------------------
Jack H. Wynn, President Julio P. Focaracci, Secretary
State of Nevada )
) ss.
County of Clark )
On , 2001, personally appeared before me, a Notary public,
Jack H. Wynn and Julio P. Focaracci, who acknowledged that they are
the President and Secretary, respectively, of Hydro Environmental
Resources, Inc., a Nevada corporation, and that they executed the
above instrument in those capacities.
A Notary Public in and for said County and State.
For Hydro Environmental Resources, Inc. (Oklahoma)
- ----------------------- -----------------------------
Jack H. Wynn, President Julio P. Focaracci, Secretary
State of Nevada )
) ss.
County of Clark )
On , 2001, personally appeared before me, a Notary public,
Jack H. Wynn and Julio P. Focaracci, who acknowledged that they are
the President and Secretary, respectively, of Hydro Environmental
Resources, Inc., an Oklahoma corporation, and that they executed the
above instrument in those capacities.
A Notary Public in and for said County and State.
B-2
APPENDIX C
FORM OF CHARTER OF NEVADA SUBSIDIARY
Articles of Incorporation
of
Hydro Environmental Resources, Inc.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, for the purpose of association to
establish a corporation for the transaction of business and the
promotion and conduct of the objects and purposes hereinafter
stated, under the provisions of and subject to the requirements
of the laws of the State of Nevada, do make, record and file
these Articles of Incorporation in writing.
AND WE DO HEREBY CERTIFY:
ARTICLE ONE: The name of this Corporation is:
Hydro Environmental Resources, Inc.
Article Two: The principal office in the State of Nevada is to
be located at:
5725 S. Valley View Blvd., Suite 3
Las Vegas, NV 89118
The Resident agent for this Corporation shall be:
Chapman & Flanagan, Ltd.,
777 N. Rainbow Blvd., Suite 390
Las Vegas, NV 89107
This Corporation may also maintain an office or offices at
such other places within or outside the State of Nevada, as it
may from time to time determine. Corporate business of every
kind and nature may be conducted, and meetings of directors
and stockholders held outside the State of Nevada, the same as
in the State of Nevada.
C-1
Article Three: This Corporation may engage in any lawful
activity.
Article Four: This Corporation is authorized to issue two
classes of capital stock, referred to as Common Stock and
Preferred Stock, each with par value of $0.001 per share. This
Corporation shall be authorized to issue a maximum of 50,000,000
(fifty million) shares of Common Stock, and a maximum of
10,000,000 (ten million) shares of Preferred Stock.
Each share of Common Stock Such stock may be issued by this
Corporation from time to time by the Board of Directors
thereof. The shares of stock shall be designated "Common
Stock" and the holders thereof shall be entitled to one (1)
vote for each share held by them.
A total of 7,000,000 shares of preferred stock shall be desig-
nated as Series A Preferred Stock. Holders of Series A Preferred
Stock have no voting rights, no rights to convert to common stock,
and are entitled to a liquidation preference of $1.00 per share.
Holders may receive dividends at any time, by board resolution,
and must receive dividends of at least $0.10 per share prior to
common shareholders receiving any dividends. Except as noted
herein, holders are not entitled to receive dividends. The
Series A Preferred Stock may be called by the Company, by action
of the board of directors, at any time after two years from the
date of issue. A holder whose shares are called shall be entitled
to receive $0.01 for each share called.
The Board of Directors is hereby authorized to provide for the
issuance of the remaining Preferred Stock in one or more series,
and may determine and state the designations, preferences,
limitations, terms, and rights associated with each series of
Preferred Stock, without additional shareholder approval.
Article Five: No Director or Officer of this Corporation shall
be liable to this Corporation or its stockholders for any breach
of fiduciary duty as Officer or Director of this Corporation.
This provision shall not affect liability for acts or omissions
which involve intentional misconduct, fraud, a knowing violation
or law, or the payment of dividends in violation of NRS 78.300.
All expenses incurred by Officers or Directors in defending a
civil or criminal action, suit, or proceeding, must be paid by
this Corporation as they are incurred in advance of a final
disposition of the action, suit or proceeding, upon receipt of
an undertaking by or on behalf of a Director or Officer to
repay the amount if it is ultimately determined by a court of
competent jurisdiction, that he or she did not act in good
faith, and in the manner he or she reasonably believed to be
or not opposed to the best interests of this Corporation.
C-2
The members of the governing Board shall be styled Directors,
and the number of Directors shall not be less than one (1)
pursuant to the terms of NRS 78.115. The names and addresses
of the first Board of Directors, which shall consist of five
(5) members are:
Jack H. Wynn 5725 S. Valley View Blvd., Suite 3,
Las Vegas, NV 89118
Julio P. Focaracci 5725 S. Valley View Blvd., Suite 3
Las Vegas, NV 89118
John L. Wheeler 5725 S. Valley View Blvd., Suite 3
Las Vegas, NV 89118
Drew Sakson 5725 S. Valley View Blvd., Suite 3
Las Vegas, NV 89118
Lane J. Austin 5725 S. Valley View Blvd., Suite 3
Las Vegas, NV 89118
The number of Directors of this Corporation may from time to
time be increased or decreased as set forth hereinabove by an
amendment to the By-Laws in that regard, and without the
necessity of amending these Articles of Incorporation.
The name and address of the incorporator is:
Daniel G. Chapman 777 N. Rainbow Blvd., Suite 390
Las Vegas, NV 89107
Article Six: The capital stock of this Corporation, after the
amount of the subscription price has been paid in cash or in
kind, shall be and remain non-assessable and shall not be subject
to assessment to pay debts of this Corporation.
C-3
Article Seven: This Corporation shall have perpetual
existence.
Article Eight: No holder of any shares of this Corporation
shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of this Corporation of any class now
or hereafter authorized, or any securities exchangeable for or
convertible into such shares, or warrants or other instruments
evidencing rights or options to subscribe for, purchase or
otherwise acquire such shares.
Article Nine: This Corporation shall not be governed by the
provisions of NRS 78.411 to 78.444, inclusive.
Executed this ______ day of ____________, 2001.
-------------------------------
Daniel G. Chapman, Incorporator
C-4
CERTIFICATE OF ACCEPTANCE OF
APPOINTMENT AS RESIDENT AGENT
In the matter of Hydro Environmental Resources, Inc., I
hereby certify that on the ____ day of ____________, 2001, I
accepted the appointment as Resident Agent of the above-entitled
corporation in accordance with NRS 78.090.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day
of ____________, 2001.
-----------------------------------
Chapman & Flanagan, Ltd.
by Daniel G. Chapman, its Secretary
C-5
APPENDIX D
APPRAISAL RIGHTS
Oklahoma Revised Statutes
18-1091.
A. Any shareholder of a corporation of this state who holds
shares of stock on the date of the making of a demand pursuant to
the provisions of subsection D of this section with respect to
the shares, who continuously holds the shares through the
effective date of the merger or consolidation, who has otherwise
complied with the provisions of subsection D of this section and
who has neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to the provisions of
Section 1073 of this title shall be entitled to an appraisal by
the district court of the fair value of the shares of stock under
the circumstances described in subsections B and C of this
section. As used in this section, the word "shareholder" means a
holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a
nonstock corporation; and "depository receipt" means an
instrument issued by a depository representing an interest in one
or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository. The
provisions of this subsection shall be effective only with
respect to mergers or consolidations consummated pursuant to an
agreement of merger or consolidation entered into after November
1, 1988.
B.1. Except as otherwise provided for in this subsection,
appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or
consolidation, or of the acquired corporation in a share
acquisition, to be effected pursuant to the provisions of Section
1081, other than a merger effected pursuant to subsection G of
Section 1081, and Sections 1082, 1086, 1087, 1090.1 or 1090.2 of
this title.
2. a. No appraisal rights under this section shall be
available for the shares of any class or series of stock which
stock, or depository receipts in respect thereof, at the record
date fixed to determine the shareholders entitled to receive
notice of and to vote at the meeting of shareholders to act upon
the agreement of merger or consolidation, were either:
(1) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.;
or
(2) held of record by more than two thousand holders.
No appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the shareholders of the
surviving corporation as provided in subsection G of Section 1081
of this title.
b. In addition, no appraisal rights shall be available for any
shares of stock, or depository receipts in respect thereof, of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the shareholders of the
surviving corporation as provided for in subsection F of Section
1081 of this title.
D-1
3. Notwithstanding the provisions of paragraph 2 of this
subsection, appraisal rights provided for in this section shall
be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
the provisions of Sections 1081, 1082, 1086, 1087, 1090.1 or
1090.2 of this title to accept for the stock anything except:
a. shares of stock of the corporation surviving or resulting
from the merger or consolidation or depository receipts thereof,
or
b. shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation
will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than two thousand
holders, or
c. cash in lieu of fractional shares or fractional depository
receipts described in subparagraphs a and b of this paragraph, or
d. any combination of the shares of stock, depository receipts,
and cash in lieu of the fractional shares or depository receipts
described in subparagraphs a, b, and c of this paragraph.
4. In the event all of the stock of a subsidiary Oklahoma
corporation party to a merger effected pursuant to the provisions
of Section 1083 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Oklahoma
corporation.
C. Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections D and E of this section, shall apply as
nearly as is practicable.
D. Appraisal rights shall be perfected as follows:
1. If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of shareholders, the corporation, not less
than twenty (20) days prior to the meeting, shall notify each of
its shareholders entitled to appraisal rights that appraisal
rights are available for any or all of the shares of the
constituent corporations, and shall include in the notice a copy
of this section. Each shareholder electing to demand the
appraisal of the shares of the shareholder shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of the shares of
the shareholder. The demand will be sufficient if it reasonably
informs the corporation of the identity of the shareholder and
that the shareholder intends thereby to demand the appraisal of
the shares of the shareholder. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A
shareholder electing to take such action must do so by a separate
written demand as herein provided. Within five (5) days after the
effective date of the merger or consolidation, the surviving or
resulting corporation shall notify
D-2
each shareholder of each constituent corporation who has complied
with the provisions of this subsection and has not voted in favor
of or consented to the merger or consolidation as of the date
that the merger or consolidation has become effective; or
2. If the merger or consolidation is approved pursuant to the
provisions of Section 1073 or 1083 of this title, each
constituent corporation, either before the effective date of the
merger or consolidation or within five (5) days thereafter, shall
notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal
rights are available for any or all of the shares of the class or
series of stock of the constituent corporation, and shall include
in such notice a copy of this section; provided, if the notice is
given on or after the effective date of the merger or
consolidation, the notice shall be given by the surviving or
resulting corporation to all the holders of any class or series
of stock of a constituent corporation that are entitled to
appraisal rights. The notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify
the shareholders of the effective date of the merger or
consolidation. Any shareholder entitled to appraisal rights may,
within twenty (20) days after the date of mailing of the notice,
demand in writing from the surviving or resulting corporation the
appraisal of the holder's shares. The demand will be sufficient
if it reasonably informs the corporation of the identity of the
shareholder and that the shareholder intends to demand the
appraisal of the the holder's shares. If the notice does not
notify shareholders of the effective date of the merger or
consolidation either:
a. each constituent corporation shall send a second notice
before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
the constituent corporation that are entitled to appraisal rights
of the effective date of the merger or consolidation, or
b. the surviving or resulting corporation shall send a second
notice to all holders on or within five (5) days after the
effective date of the merger or consolidation; provided, however,
that if the second notice is sent more than twenty (20) days
following the mailing of the first notice, the second notice need
only be sent to each shareholder who is entitled to appraisal
rights and who has demanded appraisal of the holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation
that is required to give either notice that the notice has been
given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein. For purposes of determining the
shareholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not
more than five (5) days prior to the date the notice is given;
provided, if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be the
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
E. Within one hundred twenty (120) days after the effective
date of the merger or consolidation, the surviving or resulting
corporation or any shareholder who has complied with the
provisions of subsections A and D of this section and who is
otherwise entitled to appraisal rights, may file a petition in
district court demanding a determination of the value of the
stock of all such shareholders; provided, however, at any time
within sixty (60) days after the effective date of the merger or
consolidation, any shareholder shall have the right to withdraw
the demand of the shareholder for appraisal and to accept the
terms offered upon the merger or consolidation. Within one
hundred twenty (120) days after the effective date of the merger
or consolidation, any shareholder who has complied with the
requirements of subsections A and D of this section, upon written
request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted
in favor of the merger or
D-3
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of the
shares. The written statement shall be mailed to the shareholder
within five (5) days after the shareholder's written request for
a statement is received by the surviving or resulting corporation
or within five (5) days after expiration of the period for
delivery of demands for appraisal pursuant to the provisions of
subsection D of this section, whichever is later.
F. Upon the filing of any such petition by a shareholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which, within twenty (20) days after
service, shall file, in the office of the court clerk of the
district court in which the petition was filed, a duly verified
list containing the names and addresses of all shareholders who
have demanded payment for their shares and with whom agreements
regarding the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition
shall be accompanied by such duly verified list. The court clerk,
if so ordered by the court, shall give notice of the time and
place fixed for the hearing on the petition by registered or
certified mail to the surviving or resulting corporation and to
the shareholders shown on the list at the addresses therein
stated. Notice shall also be given by one or more publications at
least one (1) week before the day of the hearing, in a newspaper
of general circulation published in the City of Oklahoma City,
Oklahoma, or other publication as the court deems advisable. The
forms of the notices by mail and by publication shall be approved
by the court, and the costs thereof shall be borne by the
surviving or resulting corporation.
G. At the hearing on the petition, the court shall determine
the shareholders who have complied with the provisions of this
section and who have become entitled to appraisal rights. The
court may require the shareholders who have demanded an appraisal
of their shares and who hold stock represented by certificates to
submit their certificates of stock to the court clerk for
notation thereon of the pendency of the appraisal proceedings;
and if any shareholder fails to comply with this direction, the
court may dismiss the proceedings as to that shareholder.
H. After determining the shareholders entitled to an appraisal,
the court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment
or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining the fair value,
the court shall take into account all relevant factors. In
determining the fair rate of interest, the court may consider all
relevant factors, including the rate of interest which the
surviving or resulting corporation would have to pay to borrow
money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any shareholder
entitled to participate in the appraisal proceeding, the court
may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to
the final determination of the shareholder entitled to an
appraisal. Any shareholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to the
provisions of subsection F of this section and who has submitted
the certificates of stock of the shareholder to the court clerk,
if required, may participate fully in all proceedings until it is
finally determined that the shareholder is not entitled to
appraisal rights pursuant to the provisions of this section.
I. The court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the shareholders entitled thereto.
Interest may be simple or compound, as the court may direct.
Payment shall be made to each shareholder, in the case of holders
of uncertificated stock immediately, and in the case of holders
of shares represented by certificates upon the surrender to the
corporation of the certificates representing the stock. The
court's
D-4
decree may be enforced as other decrees in the district court may
be enforced, whether the surviving or resulting corporation be a
corporation of this state or of any other state.
J. The costs of the proceeding may be determined by the court
and taxed upon the parties as the court deems equitable in the
circumstances. Upon application of a shareholder, the court may
order all or a portion of the expenses incurred by any
shareholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all of the shares entitled to an appraisal.
K. From and after the effective date of the merger or
consolidation, no shareholder who has demanded appraisal rights
as provided for in subsection D of this section shall be entitled
to vote the stock for any purpose or to receive payment of
dividends or other distributions on the stock, except dividends
or other distributions payable to shareholders of record at a
date which is prior to the effective date of the merger or
consolidation; provided, however, that if no petition for an
appraisal shall be filed within the time provided for in
subsection E of this section, or if the shareholder shall deliver
to the surviving or resulting corporation a written withdrawal of
the shareholder's demand for an appraisal and an acceptance of
the merger or consolidation, either within sixty (60) days after
the effective date of the merger or consolidation as provided for
in subsection E of this section or thereafter with the written
approval of the corporation, then the right of the shareholder to
an appraisal shall cease; provided further, no appraisal
proceeding in the district court shall be dismissed as to any
shareholder without the approval of the court, and approval may
be conditioned upon terms as the court deems just.
L. The shares of the surviving or resulting corporation into
which the shares of any objecting shareholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-5
PROXY CARD FOR HYDRO ENVIRONMENTAL RESOURCES, INC. (the "Corporation")
This proxy is solicited on behalf of the Board of Directors of the
Corporation for the Annual Meeting of Shareholders to be held on June 29,
2001. The Board of Directors recommends a vote "FOR" the following:
Withhold authority to vote
for any individual nominee
FOR election of WITHHOLD vote (write number(s) of
all nominees from all nominees nominee(s) below):
1. Election of Directors:
Nominees: [ ] [ ] _________
01 - Jack H. Wynn
02 - Julio P. Focaracci _________
03 - John L. Wheeler
04 - Drew Sakson _________
05 - Lane J. Austin
2. Approval of the Reincorporation in Nevada.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the selection of Cordovano and Harvey, P.C. as independent
accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Votes MUST be indicated using black or blue ink. The undersigned hereby
appoints Jack H. Wynn, proxy, with full power of substitution, to vote all
shares of Common Stock of the undersigned in the Corporation at the Annual
Meeting of Shareholders to be held on June 29, 2001, and at any adjournment
thereof, upon all subjects that may properly come before the meeting. IF
SPECIFIC DIRECTIONS ARE NOT GIVEN WITH RESPECT TO ANY MATTERS TO BE ACTED
UPON AT THE ANNUAL MEETING AND THIS PROXY CARD IS SIGNED AND RETURNED, THE
PROXY WILL VOTE IN ACCORDANCE WITH THE ABOVE RECOMMENDATION AND MAY
EXERCISE DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
Please date and sign exactly as your name or names appear on this proxy
card. If the shares are held jointly, each shareholder should sign. If
signing as an executor, trustee, administrator, custodian, guardian,
corporate officer, or pursuant to a power of attorney, please so indicate
below.
Dated:____________ By:_____________________________________
Print Name:_____________________________
Check this box if you have either a change of address or comments, and
please note the same on this proxy card.
Mail this Proxy Card to: Hydro Environmental Resources, Inc.
Proxy Committee
Nevada Agency & Trust
50 W. Liberty, Suite 880
Reno, NV 89501