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Update Page 1 of 2 <br /> • Hall, Heidi <br /> From: Ed Palmer[ceo@solarattic.com] <br /> Sent: Wednesday, April 03, 2002 12:40 PM <br /> To: Heidi Hall <br /> Subject: Update <br /> Dear Heidi, <br /> I have attached a copy of the term sheet SolarAttic just received. It is in <br /> rough form [first draft] from SBS Capital and there are some obvious issues <br /> that still have to be worked through before it is acceptable to SolarAttic. The <br /> timing of funding is set for August. Possibly as early as July. I believe <br /> SolarAttic will work out these term sheet issues with SBS Capital and connect <br /> with funding at that time. <br /> In the interim, I have been unable to obtain any bridge financing that would <br /> help us deal with the cash we owe the city. Having already cut all staff and <br /> focused on admin issues and funding, I will attempt to gain enough new sales <br /> to cash flow some minimal mfr operations. <br /> Sales are coming in. I.E. -- I have sold $16,300 worth of PCS1 pool heaters <br /> • over the last 10 days. However, we do not have inventory and will struggle <br /> to get these units produced because of poor cash flow. We cannot access <br /> any cash from these sales until we find a way of coping with the inventory <br /> and build issues. If we get another $10-15k in sales, I believe I can get our <br /> bank to help. In the interim, we could use the City's assistance to help us <br /> bridge this time gap we are facing. <br /> I believe it would be in the City's interest to help us a little further. The <br /> upside potential is much greater than any downside for the city. I.E. We are <br /> already set up in the small incubator space and offer the city another <br /> example of energy technologies being developed. No one seems to be <br /> beating on the door to get into the incubator at this time. And, SolarAttic has <br /> basically a small office operation in play which could be shut down IF <br /> NEEDED. <br /> Therefore, I offer the following solution to keep us "Alive" through August. <br /> In exchange for past due rent and rent through August 31, 2002, SolarAttic <br /> will provide the City with 20,000 shares of common stock and an option to <br /> purchase 20,000 additional shares of stock for five years at 50 cents per <br /> share. This matches current small investments and the valuation of SBS <br /> Capital on the business and provides $10,000 worth of SolarAttic stock to the <br /> • City at this time. <br /> This would not provide the City with cash; but, it would help keep us 'Alive' <br /> 4/3/02 <br />