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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of The Securities Exchange Act of 1934
INTEGRAL TECHNOLOGIES, INC.
(Name of Small Business Issuer in its charter)
NEVADA 98-0163519
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
#3 - 1070 West Pender St.
Vancouver, British Columbia, Canada V6E 2N7
(Address, including postal code, of principal
executive offices)
(604) 685-9933
(Issuer's telephone number)
Copy to:
Futro & Trauernicht LLC
Attorneys and Counselors at Law
1401 17th Street, Suite 1150
Denver, Colorado 80202
Securities to be registered under Section 12(b) of the Exchange Act: NONE
Securities to be registered under Section 12(g) of the Exchange Act:
COMMON STOCK
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INTEGRAL TECHNOLOGIES, INC.
FORM 10-SB
TABLE OF CONTENTS
<TABLE>
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Page
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PART I
Cautionary Statement Concerning Forward Looking Statements.....................................................1
Item 1. Description of Business.............................................................................1
Item 2. Plan of Operation...................................................................................9
Item 3. Description of Property.............................................................................9
Item 4. Security Ownership of Certain Beneficial Owners and Management.....................................10
Item 5. Directors and Executive Officers, Promoters and Control Persons....................................12
Item 6. Executive Compensation.............................................................................16
Item 7. Certain Relationships and Related Transactions.....................................................20
Item 8. Description of Securities..........................................................................21
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters....................................................................23
Item 2. Legal Proceedings..................................................................................23
Item 3. Changes in and Disagreements with Accountants......................................................24
Item 4. Recent Sales of Unregistered Securities............................................................24
Item 5. Indemnification of Directors and Officers..........................................................25
PART F/S
Financial Statements.........................................................................................F-1
PART III
Item 1. Index to Exhibits and Description..................................................................26
SIGNATURES....................................................................................................27
</TABLE>
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PART I
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO
DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this document and any document
incorporated by reference herein, are advised that this document and documents
incorporated by reference into this document contain both statements of
historical facts and forward looking statements. Forward looking statements are
subject to certain risks and uncertainties, which could cause actual results to
differ materially for those indicated by the forward looking statements.
Examples of forward looking statements include, but are not limited to: (i)
projections of revenues, income or loss, earning or loss per share, capital
expenditures, dividends, capital structure and other financial items, (ii)
statements of the plans and objectives of the Company or its management of Board
of Directors, including the introduction of new products, or estimates or
predictions of actions by customers, suppliers, competitors or regulatory
authorities, (iii) statements of future economic performance, and (iv)
statements of assumptions underlying other statements and statements about the
Company or its business.
This document and any documents incorporated by reference herein also identify
important factors which could cause actual results to differ materially from
those indicated by forward looking statements. These risks and uncertainties
include price competition, the decisions of customers, the actions of
competitors, the effects of government regulation, possible delays in the
introduction of new products, customer acceptance of products and services, and
other factors which are described herein and/or in documents incorporated by
reference herein.
The cautionary statements made pursuant to the Private Litigation Securities
Reform Act of 1995 above and elsewhere by the Company should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made by the
Company prior to the effective date of such Act. Forward looking statements are
beyond the ability of the Company to control and in many cases the Company
cannot predict what factors would cause results to differ materially from those
indicated by the forward looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
Integral Technologies, Inc. (the "Company", "Integral" or the "Registrant") is a
development stage company, incorporated under the laws of the State of Nevada on
February 12, 1996. The Registrant is in the business of developing and/or
acquiring emerging technologies, funding research and development and
commercializing those technologies, primarily through licensing agreements,
generating revenues for the Company in the form of royalties and/or licensing
fees.
The Registrant is not in the manufacturing business. Instead, the Registrant's
approach is to work with Original Equipment Manufacturers ("OEM") to develop
customer-specific applications of the core technologies. It is assumed that the
customer-specific applications will be developed in conjunction with key
customers who will bear some or all of the expense. To date the Registrant's
operating subsidiaries have generated nominal revenues.
Through two of its subsidiaries, NextAntennas.Com, Inc. ("NEXT") and Emergent
Technologies Corp. ("Emergent"), the Registrant has developed and acquired six
new antenna technologies which the Registrant is now attempting to bring to
market.
The Registrant has acquired the rights to develop and license four new
technologies created at the Center for Industrial Research Applications (CIRA),
a unique research center within West Virginia
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University ("WVU"). Each technology the Registrant seeks out and subsequently
funds has a vast commercial market potential. Once funding is completed by the
Registrant, WVU, acting as the licensor, transfers technologies/products
transferring the rights to the West Virginia University Research Corporation
("WVURC"). From there, the rights are transferred to a private entity called
Integral Concepts Inc., a private company wholly owned by Dr. James Smith who is
a Director of CIRA at West Virginia University and an affiliate of the
Registrant. In return for its initial investment in the research and development
of a technology, WVU receives a royalty based on revenues generated by the
licensing of the specific technology. Pursuant to the license agreement, a
modest annual minimum royalty payment is due.
SUBSIDIARIES
NEXTANTENNAS.COM, INC.
Company Background
NextAntennas.Com, Inc. ("NEXT"), a wholly-owned subsidiary of the Registrant,
was incorporated in the State of Delaware on November 2, 1999, for the purpose
of developing and commercializing new antenna technologies. The focus of NEXT
will be to continue to develop and commercialize new antenna technologies which
will meet the needs of the wireless industry consumer. It is the intent of the
Registrant to protect the intellectual and proprietary rights of the
technologies which it develops through patent applications.
The Antenna Industry
As wireless technologies revolutionize the telecommunications industry over the
next five years, through such upcoming technologies like Iridium, Teledisic, the
Intelligent Highway System, Wireless LAN systems such as Bluetooth and of
course, the expanding wireless telephony systems, millions of new radio devices
will be produced each year, all of which require an antenna.
Company Products
The Registrant's subsidiary, NEXT, has developed six new antennae designs that
are very low cost, physically small and very competitive in performance:
o the "GPS" antenna is used in radio receivers on the ground to receive 1.5
GHz signals from global positioning satellites orbiting the earth at an
altitude of approximately 23,000 miles;
o the "LEO" antenna is used for the VHF function in radio
transmitters/receivers on the ground, to transmit/receive signals in the 145
MHz frequency range to Low Earth Orbit satellites, orbiting the earth at an
approximate altitude of 450 miles;
o the "GPS/LEO" antenna, as the name indicates is a dual purpose antenna;
o the "CDPD" antenna is used in transmission/reception of signals in the
824-894MHz/1.5MHz range. The Cellular Digital Packet Data network is
currently one technology on the market today which facilitates wireless
internet access.
o the "GPS/CDPD" antenna, as the name indicates is a dual purpose antenna;
o the "portable phone" antenna is used in cellular and cordless phones,
transmitting and receiving signals in the 820 MHz to 960 MHz range as well
as the 1.5 GHz frequency range.
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The research and development costs associated with the development of these new
"antenna solutions" has been funded by the Registrant. All of these new antennas
present a radical new form factor, as compared to the more costly and obtrusive
antenna technologies available today.
The market need for GPS technologies continues to escalate as companies continue
to demand "tracking and/or location identification technologies. The FCC has
mandated that by 2002, US wireless carriers provide their subscribers with the
technology that will enable the carrier to identify the subscriber's location in
the event of an emergency such as a vehicle crash in which the occupant is
injured and possibly rendered unconscious.
The LEO antenna is for use with asset tracking systems which handles short
bursts of data from such assets as shipping containers, tractor trailers and
electricity meters. As opposed to the GPS technology which identifies location
the LEO technology allows for the transmission of data. Such data would indicate
such things as to whether a tractor trailer is full, the doors are open, or even
that a refrigeration unit on a trailer is malfunctioning.
The CDPD antenna is for use in wireless internet access technologies.
The "portable phone" antenna is for use in digital cordless phones and cellular
phones operating in the 920MHz and 820-890MHz frequency ranges respectively.
Testing has indicated that the NEXT antennas are equal to or better than
existing antenna technologies in performance. In addition, the NEXT antenna is
less expensive than other antennas, and, due to its form factor, better able to
marry with the housing of the phones, potentially reducing manufacturing costs.
The next generation of digital cordless phones will operate in the 2.4MHz
frequency range. Also operating in the 2.4 MHz range will be Wireless Lan
Products (WLANS).
The Registrant has completed a patent review of each of these technologies and
has commenced preparation of patent applications. However, its efforts are
focussed primarily on commercializing such technologies. No assurances can be
given that the Registrant will be granted any patents on its technologies.
Product Manufacturing and Distribution
NEXT will not be in the manufacturing business. NEXT will form strategic
alliances with manufacturing companies. It is intended that alliance
manufacturing companies will be able to manufacture NEXT'S antenna products on a
timely basis, while protecting the intellectual properties of NEXT'S products
and providing the customer with a high quality product.
Additional revenue will be derived from licensing fees and royalties.
Barriers to Entry into Market Segment
Management's philosophy is that while the NEXT's antenna products are patent
pending, there is no long term protection in the world today for any product or
technology. Therefore, the key to capturing and maintaining market share will be
to provide the telecommunications industry with a new antenna, at a cost
comparable to existing antennae technologies.
Management believes that other antenna technologies available in the marketplace
today, are typically more costly and exhibiting a more obtrusive form factor.
EMERGENT TECHNOLOGIES CORP.
Company Background
Emergent Technologies Corp. ("Emergent") was incorporated in the State of West
Virginia on September 29, 1995 for the purpose of developing the Contrawound
Toroidal Helical Antenna ("CTHA") for commercialization to government and/or
military applications worldwide.
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Originally licensed to Integral Concepts, Inc., from WVU, all worldwide rights
to develop, manufacture and market for the government and military applications
of the CTHA, were sub-licensed to Emergent on January 2, 1996. The Registrant
subsequently acquired an 80% equity interest in Emergent.
Product Development and Proprietary Rights
The patented CTHA technology was initially developed and patented at WVU in
1994. The first antennae were made by hand from wood, plastic, rope, wires, and
duct tape. Over time, the antenna took on different shapes and sizes and many
different materials were used. Emergent acquired the exclusive worldwide license
to exploit the CTHA technology to the military and government markets.
The CTHA technology has received patent protection, with WVU as assignee, under
US Patent numbers 5,654,723 dated August 5, 1997 and 5,442,369 dated August 15,
1995.
Concurrent with the physical development, the research team at Emergent created
a computer model to simulate and predict the behavior of the CTHA. This model is
important because it offers a numerical benchmark against which observations can
be weighed. It also provides antenna designers a preview of expected
performance. This computer model offers a high level of confidence.
In 1997, researchers at Emergent developed a circuit-board-based CTHA. This
advancement overcame the problems of how to mass-produce these antennae. It is
now possible to produce thousands or millions of identical copies of the antenna
quickly on a very cost-effective basis. It is also possible for OEM customers to
(under license), print the antenna directly onto their radio printed circuit
boards.
Research over the past three years has continued both within WVU and at the
Emergent labs. Since the inception of Emergent in September of 1995, almost $2
million has been spent on CTHA research and development.
Product Description
The CTHA technology is a new antenna technology suitable for most mobile
communications, including military and selected other government-specific
applications as well as cellular/PCS telephony, paging, GPS, SMR, marine and
aircraft communications. It provides significantly enhanced performance in
mobile radios and offers manufacturers a number of new design possibilities. In
all aspects of current testing, the CTHA has outperformed traditional antennas,
yet it remains compatible with the infrastructure used in modern communication
systems.
The CTHA is a low profile, fully resonant antenna structure, which has a
toroidal (donut-shaped) surface and a cross-polarized field pattern. The radical
change in design for this antenna allows the unit to emit and receive a signal
that is omni-directional, allowing it to operate with equal efficiency
regardless of position or orientation. During a recent field test, where all
external parameters were equal, the CTHA outperformed dipole antennas by over
300% in distances achieved. In addition, it is well suited for portable low
frequency military applications since it can be easily carried and stored.
Product Capabilities
The CTHA is able to send and receive signals to and from any direction while
being only minimally affected by obstacles such as buildings and trees. The
potential for the CTHA is very large when one considers the number of
applications for which traditional antennas are used in today's world, and
particularly when one visualizes the future, as wireless technologies
revolutionize telecommunications worldwide.
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Testing
The CTHA has received independent validation from such organizations as the US
Department of Defense, Northrop Grumman, and the Office of National Drug Control
Policy. The CTHA has been successfully tested on certified antenna ranges and in
land and sea tests under a wide spectrum of environmental conditions. These
tests were performed with independent observers from both the military and
numerous end users, integrators, and manufacturers. The overwhelming success of
these tests has resulted in the requisition of prototypes by some of the largest
antenna users in the world.
Competitive Comparison
The CTHA will be competing with monopole and dipole antennae. Monopoles and
dipoles are the long pieces of wire with which we are all familiar. The length
of the wire depends on the frequency being used and the sensitivity required.
Using conventional technology, cellular telephone antennae are about six inches
long, AM/FM antennae are about two feet long, while HF (high frequency) antennae
are up to 100 feet long.
The monopole and dipole antenna business is very competitive, but it is also a
very fast-growing market and most major manufacturers are profitable. Antenna
prices vary widely depending on the application and packaging requirements.
The CTHA will be a formidable competitor for the mobile communications market
(cellular, paging, GPS) utilized by the government/military and civilian
markets, because of its unique performance and physical characteristics.
Since the CTHA is an omni-directional radiator, it will not be competing for the
fixed-system point-to-point market dominated by highly-directional antennae.
INTEGRAL VISION SYSTEMS INC.
Company Background
Integral Vision Systems Inc. ("Integral Vision") was incorporated in the State
of West Virginia on January 20, 1994. The Registrant acquired a 100% equity
interest in Integral Vision in March 1997, from three shareholders of Integral
Vision, in exchange for 100,000 shares of restricted stock of the Registrant.
A. 3D Machine Vision Colorimetry Ensures Color Quality Control in a
Manufacturing Environment.
Originally licensed to Integral Concepts from WVU on January 19, 1993, all
worldwide (excluding Canada) commercialization rights were sub-licensed to
Integral Vision on February 15, 1994. Integral Vision is the operating entity
through which the 2D and 3D machine vision colorimetry technologies will be
developed and commercialized.
Development and Proprietary Rights
The 3D Machine Vision Colorimetry technology is protected by US patent number
5,485,429 issued on February 27,1996.
Product Description
The 3D Color Machine Vision is a system whereby computers can be given
"eyesight" to look for specific physical events or characteristics. For
instance, the system can be programmed to detect color inconsistencies, or to
detect optical inconsistencies in glass and plastic manufacturing processes. In
addition, the system uses extremely sophisticated pattern detection and
analysis, which can be used to find camouflaged shapes and patterns. The unit is
a combination of generic hardware (mini-lasers and computer processors) and
proprietary software. The scanning and analysis process is patented.
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The Market
Until the development of the 3D technology, there was no known process or device
for the color measurement of three-dimensional objects. Now, using this
technology, it is possible for manufacturers to ensure the color consistency of
any product that comes off a production line. When operating in real time with
feed-back, feed-forward control, this technology eliminates other time-consuming
and expensive quality control measures, such as human inspection. This
technology can ensure color consistency at all stages of production, which is a
great advantage since components are often brought together from different parts
of the world for assembly.
Commercialization Objective
Currently, Integral Vision is exploring licensing partners for the purpose of
commercializing the technologies. The Registrant's approach is to develop
OEM-customer-specific applications of the technology, then license the
application to the customer on a per-unit of production or sales or sales
royalty basis.
Competitive Comparison
Most machine vision products in the market are simplistic devices which detect
the presence or absence of something, or measure an object, but which offer no
real-time analysis of the object itself. Examples include photoelectric
counters, laser measurement systems, and product speed calibration systems. None
of these systems have the ability to perform qualitative analysis on the objects
in real time.
The color machine vision market is segmented along two lines:
o Spectrophotometers devices which measure the ratio of reflected light to
incident light for one or many wavelengths in the visible spectrum; have
had limited success because they work only on flat surfaces.
o Human observers - about 5% of humans have the visual acuity to perform
close color matching; still the preferred method despite obvious
shortcomings.
B. RF Plasma Ignition System (New Spark Plug)
Development and Proprietary Rights
Originally licensed to Integral Concepts from WVU on April 12, 1994, all
worldwide commercialization rights were acquired by Integral Vision through a
sub-license agreement with Integral Concepts dated February 15, 1996. The
Registrant has entered into a contract with WVU for the development of this
technology. RF Plasma Generation technology is protected by US patent number
5,361,737 issued on November 8, 1994.
Product Description
Using a patented process, microwave radio frequency emissions create a plasma at
the end of the emitter. A plasma is a small cloud of ions. It appears to the eye
as an electrical flame. The size of the plasma is in relation to the power
applied and the size of the emitter. The plasma can be created instantaneously,
or held for a sustained period and can be produced in mid-air, in a combustion
cylinder, a smokestack, etc.
When implemented in a small form factor, the technology offers a replacement to
conventional sparkplugs. The emitter would be manufactured to resemble the form
factor of a conventional spark plug. The conventional electronic ignition system
would be modified to activate the RF-generation system, which would then send
energy to the emitters.
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The technology can be used to produce and sustain a large plasma area. Such
large plasmas can be used for electronics cleaning, smokestack scrubbing
operations, and other industrial applications.
The Market
The patented ignition system for internal combustion engines is adaptable to
virtually any existing internal combustion engine. It produces a larger "spark"
area than conventional spark plugs, so it burns fuel more efficiently and is
more effective at igniting lean-burn mixtures. It therefore reduces pollution
and improves fuel-efficiency. This system is ideal for use in automobiles or any
another device, which requires an ignition source.
The market for this product is expanding greatly because the US government has
statutorily mandated improved automobile gasoline efficiency to reduce
combustion engine emissions. Because spark plugs ignite only a localized region
of the combustion chamber, igniting a very lean air-to-fuel mixture is almost
impossible without the use of additional spark plugs or expensive fuel injection
equipment and/or techniques. The Plasma Ignition System solves this problem in a
cost effective, efficiency equipment manner.
Commercialization Objective
The Registrant's approach is to develop OEM-customer-specific applications of
the technology, then license the application to the customer on a per-unit of
production or sales royalty basis.
Competitive Comparison
Compared to conventional spark plugs, the RF Plasma generators are superior. The
system uses less energy than a conventional spark plug and gives superior
combustion because a large plasma "flame" is created in the cylinder, rather
than a small spark. Overall, engine efficiency could increase by up to 40%.
C. 2D Color Machine Vision (Counterfeit Currency/Document Detection)
Development and Proprietary Rights
Originally licensed to Integral Concepts from WVU, on January 19, 1993, all
worldwide (excluding Canada) commercialization rights were sub-licensed to
Integral Vision on February 15, 1994.
Product Description
The 2D Color Machine Vision system is a small, laser-based computerized device
which can be programmed to scan and validate printed documents, including
currencies, passports, tickets, and other secure or valuable documents. The
unique algorithms employed by the system make it possible to even allow for wear
and tear and fading. The entire device can be produced in a package roughly the
size of a credit card swipe unit. Scan rates of up to 1 per second have been
achieved in early prototypes; speeds of 10 per second are thought possible
within a year. The unit is a combination of generic hardware (mini-lasers and
computer processors) and proprietary software.
The Market
The counterfeit detection market is growing. Scanners, color laser printers, and
bleaching techniques make counterfeiting easier than ever. Although
counterfeiters are targeting more than just currency, internationally, the
emphasis is still on detecting counterfeit US dollars, which is the dominant
international currency.
This device will create a new category of counterfeit detection by employing
spectral analysis of the bill and sophisticated numerical algorithms. As a
digital device - unlike all predecessors - the Registrant's
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counterfeit detector can be programmed and reprogrammed to change its processes.
As the Registrant advances the technology (the software), as new currencies are
released, and as the device is programmed to handle multiple currencies, those
changes can probably be achieved with only a new software load to this device.
Commercialization Objective
The Registrant's approach is to develop OEM-customer-specific applications of
the technology, then license the application to the customer on a per-unit of
production or sales royalty basis.
Competitive Comparison
Currently available counterfeit detection instruments fall into these broad
categories:
o Chemical agents which react with the paper
o Devices which identify specific ink taggants (additives), usually
metallic
o Devices which identify magnetic elements in the printed document
The Registrant's device relies on patented sophisticated spectral analysis
processes. The unit can be programmed to analyze any printed document. Testing
has produced extremely high accuracy rates. A multi-function system is planned
which would allow a single scanner to be used for multiple currency and
documents.
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ITEM 2. PLAN OF OPERATION
Since incorporation in February of 1996, the Registrant has expended
approximately $3.0 million on general and administrative costs, and research and
development costs on technologies in which it has an interest.
The objective of the Registrant at this time is to focus all of its resources on
the successful and timely commercialization of its antenna technologies. In
order to achieve this goal, the Registrant will incur monthly operating costs of
approximately $100,000. The Registrant is not in the manufacturing business. The
Registrant, through its subsidiaries, is in the business of research and
development of new antenna technologies. Manufacturing of product will be
achieved through sub-contractors.
The Registrant must obtain additional funding in the amount of approximately
$1.2 million to fund operations of the Registrant over the next twelve months,
assuming that there may be no cash flow generated from the sale of products.
The Registrant has been negotiating with several potential customers for the
sale of its antenna products, through purchase orders and/or licensing
agreements. Although there can be no assurances, management anticipates that
sales revenue will be generated in the first quarter of calendar year 2000.
At this time, the Registrant will focus only minimal efforts on the
commercialization of the other technologies in which it has an interest.
Various factors affecting the Registrant and its subsidiaries raise doubt as to
their ability to continue as a going concern. There can be no assurance that the
Company will be able to continue as a going concern, or achieve material
revenues and profitable operations. The Registrant requires additional
financing. No assurances can be given that financing will be available to the
Registrant in the amounts required, or that, if available, the financing will be
available on terms satisfactory to the Registrant.
ITEM 3. DESCRIPTION OF PROPERTY
Neither the Registrant nor its subsidiaries own any real property. The
Registrant and its subsidiaries lease office space in Vancouver, B.C., Canada,
Bellingham, Washington, and Mt. Clare, West Virginia, respectively.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. Common Stock
The following table sets forth, as of November 10, 1999, the stock ownership of
each person known by the Registrant to be the beneficial owner of five percent
or more of the Registrant's common stock, each Officer and Director individually
and all Directors and Officers of the Registrant as a group. Each person is
believed to have sole voting and investment power over the shares except as
noted.
<TABLE>
<CAPTION>
======================================================================================
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Ownership(1)(2) Percent of Class (3)
- -------------------------- -------------------------- --------------------
<S> <C> <C>
William S. Robinson (4)
#3 - 1070 West Pender St.
Vancouver, B.C. V6E 2N7 1,958,533 8.5%
- -------------------------- -------------------------- --------------------
William A. Ince (5)
#3 - 1070 West Pender St.
Vancouver, B.C. V6E 2N7 1,863,333 8.1%
- -------------------------- -------------------------- --------------------
James Smith
Route 4, Box E36
Bruceton Mills, WV 26330 1,857,140 8.2%
- -------------------------- -------------------------- --------------------
Denzel Jack Parsons
209 Joy Lane
Bridgeport, WV 26330 1,250,000 5.5%
========================== ========================== ====================
All officers and directors
of the Registrant as a group
(3 persons) 5,071,866 21.6%
======================================================================================
</TABLE>
(1) Unless otherwise indicated, all shares are directly beneficially owned and
investing power is held by the persons named.
(2) Includes vested options beneficially owned but not yet exercised and
outstanding. Although Mr. Robinson and Mr. Ince own shares of Series A
Convertible Preferred Stock, which are convertible into common stock, the
conversion rate cannot be determined at this time and are therefore not
included.
(3) Based upon 22,542,062 shares issued and outstanding, plus the amount of
shares each person or group has the right to acquire within 60 days
pursuant to options, warrants, conversion privileges or other rights.
(4) Mr. Robinson is an officer and director of the Registrant and each of its
subsidiaries. Beneficial ownership figure includes 450,000 shares
underlying options granted but not yet exercised.
(5) Mr. Ince is an officer and director of the Registrant and each of its
subsidiaries. Beneficial ownership figure includes 450,000 shares
underlying options granted but not yet exercised.
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B. Series A Convertible Preferred Stock
The following table sets forth, as of November 10, 1999, the stock ownership of
each person known by the Registrant to be the beneficial owner of five percent
or more of the Registrant's Series A Convertible Preferred Stock, each Officer
and Director individually and all Directors and Officers of the Registrant as a
group. Each person is believed to have sole voting and investment power over the
shares except as noted.
<TABLE>
<CAPTION>
======================================================================================
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Ownership(1) Percent of Class (2)
- -------------------------- -------------------------- --------------------
<S> <C> <C>
William S. Robinson (3)
#3 - 1070 West Pender St.
Vancouver, B.C. V6E 2N7 442,197 67.6%
- -------------------------- -------------------------- --------------------
William A. Ince (4)
#3 - 1070 West Pender St.
Vancouver, B.C. V6E 2N7 212,213 32.4%
========================== ========================== ====================
All officers and directors
of the Registrant as a group
(2 persons) 654,410 100%
======================================================================================
</TABLE>
(1) Unless otherwise indicated, all shares are directly beneficially owned and
investing power is held by the persons named.
(2) Based upon 654,410 Series A Convertible Preferred shares issued and
outstanding.
(3) Mr. Robinson is an officer and director of the Registrant and each of its
subsidiaries.
(4) Mr. Ince is an officer and director of the Registrant and each of its
subsidiaries.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and Executive Officers of Registrant. The Registrant has a
Board of Directors which is currently comprised of three members. Each
director holds office until the next annual meeting of shareholders or
until a successor is elected or appointed. The members of the Board and
the executive officers of the Registrant and their respective age and
position are as follows:
<TABLE>
<CAPTION>
Director of
Name Age Position with Registrant Registrant Since
- ------------------------------- ---------------- -------------------------------------------------- --------------------
<S> <C> <C> <C>
William S. Robinson 43 Chairman, CEO and Treasurer February 1996
William A. Ince 49 Director, President, Secretary and Chief February 1996
Financial Officer
Denzel Jack Parsons 53 Director October 4, 1999
</TABLE>
(b) Directors and Executive Officers of NEXT. The Registrant's subsidiary,
NEXT, has a Board of Directors which is comprised of two members who
hold office until the next annual meeting of shareholders or until a
successor is elected or appointed. The members of the Board and the
executive officers of NEXT and their respective age and position are as
follows:
<TABLE>
<CAPTION>
Director of
Name Age Position with NEXT NEXT Since
- ------------------------------- ---------------- ------------------------------------------------ --------------------
<S> <C> <C> <C>
William S. Robinson 43 Chairman, CEO and Treasurer November 1999
William A. Ince 49 Director, President, Secretary and Chief November 1999
Financial Officer
</TABLE>
(c) Directors and Executive Officers of Emergent. The Registrant's
subsidiary, Emergent, has a Board of Directors which is comprised of
three members. Each director holds office until the next annual meeting
of shareholders or until a successor is elected or appointed. The
members of the Board and the executive officers of Emergent and their
respective age and position are as follows:
<TABLE>
<CAPTION>
Director of
Name Age Position with Emergent Emergent Since
- ------------------------------- ---------------- ------------------------------------------------ --------------------
<S> <C> <C> <C>
Denzel Jack Parsons 52 Director and President October 1995
William S. Robinson 43 Director and Treasurer December 1997
William A. Ince 49 Director and Secretary December 1997
</TABLE>
12
<PAGE> 15
(d) Directors and Executive Officers of Integral Vision. The Registrant's
subsidiary, Integral Vision, has a Board of Directors which is
comprised of two members. Each director holds office until the next
annual meeting of shareholders or until a successor is elected or
appointed. The members of the Board and the executive officers of
Integral Vision and their respective age and position are as follows:
<TABLE>
<CAPTION>
Director of
Integral Vision
Name Age Position with Integral Vision Since
- ------------------------------- ---------------- ------------------------------------------------ --------------------
<S> <C> <C> <C>
William S. Robinson 43 Chairman, CEO and Treasurer March 11, 1997
William A. Ince 49 Director, President, Secretary and Chief March 11, 1997
Financial Officer
</TABLE>
(b) Family Relationships. None.
(c) Involvement in Certain Legal Proceedings. None.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
WILLIAM ROBINSON: (CHAIRMAN AND CEO): As a co-founder, and significant
shareholder of the Registrant, Mr. Robinson has been responsible since the
inception of the Registrant of securing funding, including the commitment of
personal funds, in order to ensure the ongoing operations of the Registrant and
its subsidiaries. Together with Mr. Ince, he has been responsible for the
development and implementation of corporate strategies.
During the period 1988 to 1996, Mr. Robinson was President of Achieva
Development Corporation. Achieva is a mining company with properties located in
various counties throughout the world.
Mr. Robinson brings many years of management experience in finance, banking and
corporate development. Previously, he acted as a director of a number of private
and public companies involved in natural resources, sales and marketing, and
computer technologies.
WILLIAM A. INCE: (DIRECTOR, PRESIDENT, SECRETARY AND CHIEF FINANCIAL OFFICER):
Mr. Ince, a co-founder and significant shareholder of the Registrant, is
responsible, along with Mr. Robinson for the development and implementation of
corporate strategies. He is responsible for cash management of the Registrant
and its subsidiaries.
Prior to his engagement with the Registrant, Mr. Ince was a self-employed
management consultant for a period of five years.
Mr. Ince brings with him a background as a professional accountant and
experience from management positions in finance and operations in several
private companies. He has held significant equity positions in companies in
various industries. He has consulted to both private and public companies in the
areas of marketing and finance, as well as turn-around situations. Mr. Ince has
been responsible for "team building" efforts to ensure that each project is
brought to fruition on a timely basis.
JACK PARSONS (DIRECTOR): Mr. Parsons' career began as a member of the US Army
Special Forces from 1967-1981, serving in multiple countries, including Vietnam.
From 1981 to 1987, Mr. Parsons served in numerous leadership roles with the
Joint Communications Unit, including Requirements Manager for the Communications
Enhancement Program for Joint Special Operations Forces. Following military
retirement, as a program manager for Tracor Inc., Mr. Parsons established and
managed the Field Technical Unit for the direct support to US Joint Special
Operations Forces. In his role with Tracor, Mr. Parsons was responsible for the
development and fielding of Light Weight Deployable Communications
13
<PAGE> 16
and Table Top Base Station for Special Forces' use. Mr. Parsons led the
deployment of these systems in support of Operation Desert Storm.
In 1991, Mr. Parsons established Wintec, Inc. to provide engineering development
services to the government base, relying on his knowledge of government contract
and procurement procedures. Wintec has secured, and continues to secure,
multi-million dollar, multi-year contracts with the Department of Defense. In
1995, Mr. Parsons left Wintec and has since served as President of the
Registrant's subsidiary, Emergent.
SIGNIFICANT EMPLOYEES, CONSULTANTS AND ADVISORS
ROBERT M. CALIS (GENERAL MANAGER; INTEGRAL, VICE PRESIDENT, SALES AND MARKETING
NEXT): The Company has retained Mr. Calis as General Manager to Integral and as
Vice President, Sales and Marketing of Integral's subsidiary, NEXT. Mr. Calis
will assist Mr. Robinson and Mr. Ince in their efforts to move the Company
forward through the commercialization of the technologies in which it has an
interest.
Mr. Calis' background includes over 12 years of successful experience in the
telecommunications industry in the areas of invisioneering, business
development, marketing, operations, product management, sales and financial
management. Most recently, Mr. Calis was President and CEO of Inevitable
Technologies Inc., a leading supplier and developer of colloborative
VideoConferencing Systems.
In his role of General Manager and Managing Director, Mr. Calis will initially
develop and assist in the execution of a cohesive marketing effort for the
commercialization of NEXT's antenna products and technologies. Mr. Calis will
also assist the Company in the identification of potential strategic partners
and licensees for its other technologies.
DANIEL HARRELL (VICE PRESIDENT PRODUCT DEVELOPMENT AND OPERATIONS, NEXT): Mr.
Harrell is responsible for directing the daily activities of the development
team, in its research and development activities, in order to meet the market
needs. In addition, he is responsible for identification of new products, and
subsequently moving them from the conceptual to production stage.
Mr. Harrell enjoyed a 17 year career with the US Army. In his 8 year engagement
with HQ US Southcom, he was stationed in Panama. During his engagement as Site
Commander, Project Officer and Intelligence Collector, he received the Joint
Merious Service medal for outstanding performance during "Operation Just Cause"
in Panama.
During his last 4 years in the military, Mr. Harrell was Director of
Operations/Program Manager at HQ USA INSCOM, Ft. Belvoir, Virginia. In his
capacity, he planned, executed and managed a $4 million annual budget to include
a $1 million operational budget. He significantly improved resource utilization
during a period of fiscal reduction and reduced manpower.
THOR LARSEN: (VICE PRESIDENT INTELLECTUAL PROPERTY INTEGRAL AND NEXT): Mr.
Larsen brings to Integral and specifically, its new antenna technologies,
valuable insight into the potential role of these antennas in the
telecommunications industry and the possibilities for its technological marriage
with other evolving wireless technologies. Another role for Mr. Larsen will be
to protect the proprietary nature of the new antenna technologies developed by
Integral and its subsidiaries. He will assist the Registrant in drafting
documents for patent applications.
Mr. Larsen's career with IBM began in 1962 after his graduation from Columbia
University with a Masters of Science in Electrical Engineering. During his
career with IBM, he has been involved in a variety of projects with the focus
being on developing and implementing leading edge technologies which provide for
advancements in the data communication industry. He has been granted eleven US
patents. Since 1986, Mr. Larsen held the position of Senior Technical Staff
Member at IBM. From 1995 until his
14
<PAGE> 17
retirement from IBM on February 28, 1999, he has been responsible for developing
new application for IBM's silicon germanium technology in wireless and wired
communications.
IBM describes Silicon Germanium as "targeting microwave-frequency radio and
mixed-signal applications, including the "explosively growing wireless
communications market."
ABRAHAM WEI: Mr. Wei serves as an advisor to the Registrant on a variety of
issues relating to market opportunities, product manufacturing and ongoing
corporate development of the company.
As the CEO and founder of V-Packet.Com, Inc., Mr. Wei brings 15 years of diverse
business experience in engineering, manufacturing and sales in the networking
industry. Mr. Wei has held various positions with increasing scope and
responsibility over the past 7 years at Ascend Communications, Inc. most
recently as Vice President, Worldwide Sales Operations. Prior to this, Mr. Wei
held the position of Vice President of Manufacturing Operations for Ascend in
which he managed Ascend's manufacturing operations throughout the Company's
astronomical growth from $40.0 million in sales in 1994 to $1.2 billion in sales
in 1997. As a former Director of Ascend Communications, Mr. Wei maintains a
personal and professional relationship with the executive management of Ascend.
Mr. Wei holds an MBA from Pepperdine University and Bachelor of Science degree
in Computer Science University of California, Berkley. Mr. Wei participated in
Ascend's successful initial public offering in 1994.
RICHARD SLEZAK: Mr. Slezak continues to advise the Registrant on a variety of
issues relating to market opportunities and ongoing corporate development of the
Company.
Mr. Slezak manages the Enterprise Networking Unit product portfolio including
routers, ATM, VPN and Enterprise Network Switch products worldwide for Lucent
Technologies, Inc.
Prior to his engagement at Lucent, Mr. Slezak spent over twenty years at AT&T.
In his last position there he had managed the Advanced Intelligent Networks
business with annual revenues of over $600 million.
Mr. Slezak holds an MBA in International Business from the University of
Pittsburgh and is an Advisory Board Member of Telecommunications Magazine.
15
<PAGE> 18
ITEM 6. EXECUTIVE COMPENSATION
(a) General
The following information discloses all plan and non-plan compensation awarded
to, earned by, or paid to the executive officers of the Registrant for all
services rendered in all capacities to the Registrant and its subsidiaries. No
executive officer of the Registrant or its subsidiaries received a total annual
salary and bonus exceeding $100,000 for the fiscal year ended June 30, 1999, or
otherwise meets the reporting requirements of Item 402 of Regulation S-B.
(b) Summary Compensation Table
The following table sets forth all compensation, including bonuses, stock option
awards and other payments, paid or accrued by the Registrant and/or its
subsidiaries, during the fiscal years ended June 30, 1999, 1998 and 1997 to or
for the Registrant's Chief Executive Officer and each of the other executive
officers of the Registrant.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------
(a) (b) (c) (d) (e)
Name Other
And Year Annual
Principal Ended Salary Bonus Compensation
Position June 30 ($) ($) ($)
- -------------------------------- ------------ ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
William S. Robinson, 1999 $105,000 -0- -0-
Director, Chairman, 1998 $ 90,000 -0- -0-
CEO, Treasurer (n1) 1997 -0- -0- -0-
William A. Ince, 1999 $105,000 -0- -0-
Director, President, 1998 $ 90,000 -0- -0-
Secretary, (n2) 1997 $ 32,476 -0- -0-
</TABLE>
(n1) Pursuant to an employment agreement entered into between the
Registrant and William Robinson, accrued salary for the fiscal
year end June 30, 1999 was $105,000, of which no payments were
made; and accrued salary for the fiscal year end June 30, 1998
was $90,000, of which no payments were made. Portions of Mr.
Robinson's accrued salary were converted into shares common
stock of the Registrant. In April 1999, Mr. Robinson received
333,333 shares of common stock in lieu of $50,000 salaries
accrued in fiscal year ending June 30, 1998. Subsequent to
fiscal year end, the balance of Mr. Robinson's accrued salary
was converted into shares of Series A Convertible Preferred
Stock. In September 1999, Mr. Robinson received 175,000 shares
of Series A in lieu of $175,000 in accrued salaries. See, Item
4, Sales of Unregistered Securities, subparagraph (m).
(n2) Pursuant to an employment agreement entered into between the
Registrant and William Ince, accrued salary for the fiscal
year end June 30, 1999 was $105,000, of which no payments were
made; and accrued salary for the fiscal year end June 30, 1998
was $90,000, of which payments of $9,100 were made and $89,900
was accrued. Portions of Mr. Ince's accrued salary were
converted into shares common stock of the Registrant. In April
1999, Mr. Ince received 333,333 shares of common stock in lieu
of $50,000 salaries accrued in fiscal year ending June 30,
1998. Subsequent to fiscal year end, the balance of Mr. Ince's
accrued salary was converted into shares of Series A
Convertible Preferred Stock. In September 1999, Mr. Ince
received 175,000 shares of Series A in lieu of $175,000 in
accrued salaries. See, Item 4, Sales of Unregistered
Securities, subparagraph (n).
16
<PAGE> 19
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------
Awards Payouts
------------------------------------ ----------------
(a) (b) (f) (g) (h) (i)
Name Restricted
And Year Stock Shares LTIP All Other
Principal Ended Award(s) Underlying Payouts Compensation
Position June 30 ($) Options ($) ($)
- ------------------------------- ----------------- ------------------ ----------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
William S. Robinson, 1999 -0- 230,000(n1) -0- -0-
Chairman, CEO, 1998 -0- -0- -0- -0-
Treasurer 1997 -0- 230,000 -0- -0-
William A. Ince, 1999 -0- 230,000(n1) -0- -0-
Director, President, 1998 -0- -0- -0- -0-
Secretary, 1997 -0- 230,000 -0- -0-
</TABLE>
(n1) 1999 option figures include repriced options previously
granted in 1997 and not yet exercised. See details in notes to
the following table for Option/SAR Grants In Last Fiscal Year.
(c) Option/SAR Grants in Last Fiscal Year
The information provided in the table below provides information with respect to
individual grants of stock options for the year ended June 30, 1999 to each of
the executive officers named in the Summary Compensation Table above. The
Registrant did not grant any stock appreciation rights for the year ended June
30, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
(a) (b) (c) (d) (e)
% of Total
Number of Options/SARS
Securities Granted to
Underlying Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year (n1) ($/Sh) Date
- ---------------------------------- ------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
William S. Robinson, 230,000(n2) 10.1% $.15 01/30/01
Chairman, CEO, Treasurer
William A. Ince, Director, 230,000(n3) 10.1% $.15 01/30/01
President, Secretary
</TABLE>
(n1) The percentage of total options granted (1,635,000) and
repriced (630,000) in the fiscal year is based upon all
options granted to eligible participants, which includes
officers, directors, employees, consultants and advisors,
under the Registrant's employee stock option plan in fiscal
1999.
(n2) William S. Robinson: Reflects repricing of 230,000 options
granted on January 31, 1997, with an original exercise price
of $.50 per share, repriced to $.15 per share on January 13,
1999. The options are fully vested. Subsequent to fiscal year
end, on August 10, 1999,
17
<PAGE> 20
Mr. Robinson was granted 120,000 options under Registrant's
employee stock option plan at an exercise price of $.23,
expiring on January 30, 2001, which options are not reflected
in the above chart.
(n3) William A. Ince: Reflects repricing of 230,000 options granted
on January 31, 1997, with an original exercise price of $.50
per share, repriced to $.15 per share on January 13, 1999. The
options are fully vested. Subsequent to fiscal year end, on
August 10, 1999, Mr. Ince was granted 120,000 options under
Registrant's employee stock option plan at an exercise price
of $.23, expiring on January 30, 2001, which options are not
reflected in the above chart.
(d) Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The information provided in the table below provides information with respect to
each exercise of stock options during most recent fiscal year by the executive
officers named in the Summary Compensation Table and the fiscal year end value
of unexercised options.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Value FY-End (#) FY-End($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)(n1) Unexercisable Unexercisable(n1)
- -------------------------- --------------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
William S. Robinson -0- -0- 230,000/-0- $25,300/-0-
Director, Chairman,
CEO, Treasurer
William A. Ince -0- -0- 230,000/-0- $25,300/-0-
Director, President,
Secretary,
</TABLE>
(n1) The aggregate dollar values in columns (c) and (e) are
calculated by determining the difference between the fair
market value of the common stock underlying the options and
the exercise price of the options at exercise or fiscal year
end, respectively. In calculating the dollar value realized
upon exercise, the value of any payment of the exercise price
is not included.
(e) Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year
This table has been omitted, as no executive officers named in the Summary
Compensation Table above received any awards pursuant to any LTIP during fiscal
1999.
(f) Compensation of Directors
No compensation was paid by the Registrant to its Directors for any service
provided as a Director during the fiscal year ended June 30, 1999. There are no
other formal or informal understandings or arrangements relating to
compensation; however, Directors may be reimbursed for all reasonable expenses
incurred by them in conducting the Registrant's business. These expenses would
include out-of-pocket expenses for such items as travel, telephone, and postage.
18
<PAGE> 21
(g) Employment Contracts and Termination of Employment and
Change-in-Control Arrangements
The Registrant has entered into employment agreements with William S. Robinson
and William A. Ince. The term of both employment contracts is for five years
beginning July 1, 1997 and ending June 30, 2002. Pursuant to each agreement,
annual salary to each of William Robinson and William Ince is as follows:
<TABLE>
<S> <C>
July 1, 1997 to June 30, 1998 $ 90,000
July 1, 1998 to June 30, 1999 $105,000
July 1, 1999 to June 30, 2000 $120,000
July 1, 2000 to June 30, 2001 $120,000
July 1, 2001 to June 30, 2002 $120,000
</TABLE>
Pursuant to the employment agreements, in the event the Registrant terminates
the employment of the executive without cause, then the executive shall be
entitled to severance pay equal to twelve month's base salary based on the base
salary then in effect at the termination. In addition, the employment agreements
provide that in the event the Registrant is indebted to the executive for a
minimum of three months salary, the executive shall have the option to convert
such unpaid salary into shares of common stock of the Registrant at market price
(average daily closing over the previous month).
The Registrant's Board of Directors has complete discretion as to the
appropriateness of (a) key-man life insurance, (b) obtaining officer and
director liability insurance, (c) employment contracts with and compensation of
executive officers and directors, (d) indemnification contracts, and (e)
incentive plan to award executive officers and key employees.
The Registrant's Board of Directors is responsible for reviewing and determining
the annual salary and other compensation of the executive officers and key
employees of the Registrant. The goals of the Registrant are to align
compensation with business objectives and performance and to enable the
Registrant to attract, retain and reward executive officers and other key
employees who contribute to the long-term success of the Registrant. The
Registrant intends to provide base salaries to its executive officers and key
employees sufficient to provide motivation to achieve certain operating goals.
Although salaries are not specifically tied into performance, incentive bonuses
may be available to certain executive officers and key employees. In the future,
executive compensation may include without limitation cash bonuses, stock option
grants and stock reward grants.
(h) Employee Benefit and Consulting Services Compensation Plan
On February 20, 1997, the Registrant adopted an employee benefit and consulting
services compensation plan (the "Plan"), which, as amended, covers up to 15% of
the shares of the Registrant's outstanding common stock on any given date. Under
the Plan, the Registrant may issue common stock and/or options to purchase
common stock to certain officers, directors and employees and consultants of the
Registrant and its subsidiaries. The purpose of the Plan is to promote the best
interests of the Registrant and its shareholders by providing a means of
non-cash remuneration to eligible participants who contribute to operating
progress and earning power of the Registrant. The Plan is administered by the
Registrant's Board of Directors or a committee thereof which has the discretion
to determine from time to time the eligible participants to receive an award;
the number of shares of stock issuable directly or to be granted pursuant to
option; the price at which the option may be exercised or the price per share in
cash or cancellation of fees or other payment which the Registrant or its
subsidiaries is liable if a direct issue of stock and all other terms on which
each option shall be granted. As of the fiscal year ended June 30, 1999, options
to acquire 3,300,000 shares covered by the Plan were outstanding, all at
exercise prices ranging from $.15 to $2.00 per share, and are fully vested,
including grants to the following Officers and Directors of the Registrant to
acquire the number of shares indicated: William S. Robinson, 230,000 options at
$0.15 per share; and William A. Ince, 230,000 options at $0.15 per share.
Shares of common stock issued pursuant to the Plan are deemed to be issued
pursuant to Rule 701 of the Securities Act of 1933 and are restricted securities
as defined in Rule 144(a)(3) of the Securities Act of
19
<PAGE> 22
1933. Ninety days after the effective date of this registration statement,
participants in the Plan, including affiliates, may sell their shares in
accordance with the exemption provided by Rule 701 without being bound by the
one year holding period under Rule 144(d).
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) On February 16, 1996, in connection with the formation of the Registrant,
the following affiliates were issued shares of common stock.
<TABLE>
<CAPTION>
Name Shares Consideration Received
---- ------ ----------------------
<S> <C> <C>
William A. Ince 1,500,000 services valued at $15,000
William S. Robinson 1,500,000 cash of $10,000 and services valued at $5,000
Dr. James E. Smith 1,500,000 services valued at $15,000
</TABLE>
(b) Between July 1996 and October 1996, the Registrant issued 175,000 shares to
each of Dr. James Smith and Denzel Jack Parsons, each being affiliates of the
Registrant. These shares were issued for cash at a price of approximately $.11
per share. These transactions were exempt from Registration under Section 504 of
Regulation D of the Securities Act of 1933, as amended.
(c) Pursuant to an agreement and plan of reorganization between the Registrant
and Integral Vision, pursuant to which Integral Vision became a wholly-owned
subsidiary of the Registrant, Dr. Jim Smith was issued 57,140 shares of common
stock of the Registrant in exchange for his 57.14% interest in Integral Vision.
(d) In February 1997, in anticipation of the Registrant acquiring a controlling
interest in Emergent, the Registrant issued 1,800,000 shares of Common Stock,
all of which were held in escrow. Prior to closing, the Registrant agreed to
release to Denzel Jack Parsons 300,000 shares. Upon closing of the acquisition
in April 1999, 300,000 shares were delivered to Dr. James E. Smith, and
1,200,000 shares were delivered to Denzel Jack Parsons.
(e) Dr. James E. Smith is a significant shareholder of the Registrant. He is a
professor of West Virginia University ("WVU"). Dr. Smith is also the sole
shareholder of Integral Concepts. The Registrant is a party to various
agreements with Integral Concepts, WVU and the West Virginia University Research
Corporation ("WVURC").
On April 12, 1994, WVURC granted an exclusive license to Integral Concepts: (1)
to manufacture CTHAs and to license others to do so; and (2) to sublicense
others to manufacture, market, sell copies of, license and distribute CTHAs. The
consideration for the license was: (1) $1.00 and (2) a royalty of $3,000 per
year or 10% of the net revenues received by Integral Concepts whichever is
greater.
On January 2, 1996, Integral Concepts entered into a sublicense with
Registrant's subsidiary, Emergent, wherein Integral Concepts granted to Emergent
the exclusive worldwide right to manufacture, sell copies of, sublicense to and
distribute the process and equipment related to the design, construction and
operation of the CTHA and to further sublicense to others the rights to
manufacture, sell copies of, license and distribute the same, to military and
government applications worldwide. The term of the license agreement granted by
Integral Concepts is perpetual and requires the payment of a minimum annual
royalty of $3,000. Further, Emergent will pay a minimum annual royalty of 10% of
the net royalties derived from sales, licenses or sublicenses of the CTHA
technology with a credit for the minimum royalty.
20
<PAGE> 23
ITEM 8. DESCRIPTION OF SECURITIES
(a) Capital Stock
The Registrant is presently authorized to issue 50,000,000 shares of its common
stock, with a par value of $0.001 per share, and 20,000,000 shares of Preferred
Stock, $.001 par value, of which 1,000,000 have been designated as Series A
Convertible Preferred. At November 10, 1999, 22,542,062 shares of common stock
are issued and outstanding, and 654,410 Series A Convertible Preferred shares
are issued and outstanding.
(b) Common Stock
The holders of the common stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. Shares of common
stock do not carry cumulative voting rights and, therefore, a majority of the
outstanding shares of common stock will be able to elect the entire Board of
Directors and, if they do so, minority shareholders would not be able to elect
any members to the Board of Directors.
Shareholders of the Registrant have no preemptive rights to acquire additional
shares of common stock or other securities. The common stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Registrant, the shares of common stock are entitled to share
equally in corporate assets after satisfaction of all liabilities.
The outstanding shares of common stock are fully paid and non-assessable. There
are no outstanding options, warrants or rights to purchase shares of the
Registrant's common stock, other than disclosed in this Registration Statement.
(c) Preferred Stock
The Registrant's Articles of Incorporation authorize the Registrant to issue
20,000,000 shares of preferred stock, $.001 par value. The preferred stock may
be divided into and issued in one or more series as may be determined by
resolution of the board of directors. The board of directors is authorized,
without any further action by the shareholders, to determine dividend rates,
liquidation preferences, redemption provisions, sinking fund provisions,
conversion rights, voting rights, and other rights, preferences, privileges and
restrictions of any wholly unissued series of preferred stock and the number of
shares constituting any such series. In addition, such preferred stock could
have other rights, including voting and economic rights senior to the common
stock so that the issuance of such preferred stock could adversely affect the
market value of the common stock. The creation of one or more series of
preferred stock also may have the effect of delaying, deferring or preventing a
change in control of the Registrant without any action by shareholders.
The Registrant has designated 1,000,000 of the shares of preferred stock as
Series A Convertible Preferred Stock, of which 654,410 shares have been issued.
Each share of Series A:
o has a stated value and liquidation preference of $1.00;
o has a 5% annual dividend, payable in cash or shares of common stock;
o may be converted into shares of common stock based on the current
market price of the common stock;
o may be redeemed by the Registrant within one year after issue at
$1.50, after one year but less than two years at $2.00, after two
years but less than three years at $2.50, after three years but less
than four years at $3.00, and after four years but less than five
years at $3.50;
o may be voted on all matters on an as-converted basis; and
21
<PAGE> 24
o may be voted as a class on any merger, share exchange,
recapitalization, dissolution, liquidation or change in control of
the Registrant.
The details of the dividend rates, liquidation preferences, redemption
provisions, conversion rights, voting rights, and other rights, preferences,
privileges and restrictions are set forth in the "Designation of Rights and
Preferences of Series A Convertible Preferred Stock," that was filed as an
amendment to the Registrant's Articles of Incorporation on November 8, 1999.
22
<PAGE> 25
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is a limited public market for the common stock of the Registrant which
currently trades on the NASD OTC Bulletin Board under the symbol "ITKG" where it
has been traded since February 27, 1997.
The following table sets forth the range of high and low bid quotations for the
Company's Common Stock on the OTC Bulletin Board for each quarter of 1998 and
1999.
<TABLE>
<CAPTION>
Low Bid High Bid
------- --------
<S> <C> <C>
1st Qtr. 1998 $ 0.422 $1.422
2nd Qtr. 1998 $ 0.625 $1.313
3rd Qtr. 1998 $ 0.25 $0.906
4th Qtr. 1998 $ 0.125 $0.688
1st Qtr. 1999 $ 0.141 $0.438
2nd Qtr. 1999 $ 0.25 $0.484
3rd Qtr. 1999 $ 0.234 $0.438
</TABLE>
The source of this information is America Online quotation services and
broker-dealers making a market in the Company's Common Stock. These prices
reflect inter-dealer prices, without retail markup, markdown or commission and
may not represent actual transactions.
As of November 10, 1999, there were approximately 98 holders of record of the
Company's Common Stock (this number does not include beneficial owners who hold
shares at broker/dealers in "street-name").
To date, the Registrant has not paid any dividends on its common stock and does
not expect to declare or pay any dividends on such common stock in the
foreseeable future. Payment of any dividends will be dependent upon future
earnings, if any, the financial condition of the Registrant, and other factors
as deemed relevant by the Registrant's Board of Directors.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending material legal proceeding.
Although no litigation is pending, a dispute exists between WVU and the
Registrant with respect to the development work performed by WVU on the Plasma
Ignition System and Counterfeit Detection Technology. The dispute relates to the
following:
o amounts billed by WVU to the Registrant for development work
contracted for by the Registrant,
o the value of such development work performed by WVU,
o the ensuing delivery or non-delivery of prototypes to the Registrant
by WVU, and
o the ownership rights to equipment which was purchased pursuant to the
development of the aforementioned technologies under the prototype
development agreements.
Included in current liabilities is the amount of $397,296 owing to WVU for the
development of the Plasma Ignition System and the Counterfeit Detection
Technology. It is the opinion of management of the
23
<PAGE> 26
Registrant that the balance owing to West Virginia University as reflected in
these financial statements of $397,296 should be reduced to $43,052.
The effect of this write down of the amount owing to WVU on the Balance Sheet of
the Company as at June 30, 1999, would be to reduce current liabilities from
$1,009,020 to $654,776, thereby decreasing Stockholders' Deficit from $(547,492)
to $(193,248).
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of securities of
the Registrant without registration since formation of the Registrant.
(a) On February 16, 1996 the Registrant issued a total of 6,000,000 shares of
Common Stock to four persons who were founders of the Registrant. Issuance of
the shares of Common Stock was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.
(b) Between July 1996 and October 1996, the Registrant made a private placement
of 5,650,000 shares of Common Stock at prices ranging from $.11 to $1.13 per
share. Of the 5,650,000 shares issued, 559,000 shares were issued in
consideration of services value at $61,605 ($.11 per share). No commissions were
paid. This transaction was exempt from registration under Section 504 of
Regulation D of the Securities Act of 1933, as amended.
(c) Pursuant to an agreement and plan of reorganization between the Registrant
and Integral Vision dated March 11, 1997, pursuant to which Integral Vision
became a wholly-owned subsidiary of the Registrant, three persons owning 100% of
Integral Vision were issued a total of 100,000 shares of Common Stock of the
Registrant in exchange for their interest in Integral Vision. The Registrant
believes that the transaction was consummated in reliance on Section 4(2) and/or
Regulation D of the Securities Act of 1933.
(d) In October 1997, the Registrant issued a total of 825,396 shares of its
common stock at $0.7875 per share. Commissions of 12% of the gross proceeds were
paid to a placement agent. This transaction was exempt from registration under
Section 504 of Regulation D of the Securities Act of 1933, as amended.
(e) Pursuant to an agreement and plan of reorganization between the Registrant
and Emergent dated December 10, 1997, pursuant to which Emergent became a
controlled subsidiary of the Registrant, two persons owning 100% of Emergent
were issued a total of 1,800,000 shares of Common Stock of the Registrant in
exchange for their interest in Emergent. The Registrant believes that the
transaction was consummated in reliance on Section 4(2) and/or Regulation D of
the Securities Act of 1933.
(f) In August 1998, the Registrant issued 50,000 shares of its common stock, at
a deemed price of $.20 per share, for consulting services rendered to the
Registrant. The Registrant believes this transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act.
(g) In November and December 1998, the Registrant issued 200,000 shares to two
persons as compensation for services rendered, valued at $39,000. This
transaction was exempt from registration under Section 504 of Regulation D of
the Securities Act of 1933, as amended.
24
<PAGE> 27
(h) Between January 1999 and March 1999, the Registrant issued and sold shares
of common stock and Debentures which were subsequently converted into shares of
common stock for aggregate proceeds of $852,568. A management fee of 6% was paid
in connection with the sale of the Debentures. An aggregate of 6,000,000 shares
of common stock were issued. These transactions were exempt from registration
under Section 504 of Regulation D of the Securities Act of 1933, as amended.
(i) In April 1999, the Registrant issued a total of 666,666 shares of its common
stock, 333,333 to each of William S. Robinson and William A. Ince in
consideration of management fees owing in the amount of $50,000 to each of
William S. Robinson and William A. Ince. These shares were issued at a deemed
price of $.15 per share. The Registrant believes this transaction was exempt
from registration pursuant to Section 4(2) of the Securities Act.
(j) In April 1999, the Registrant issued a total of 150,000 shares of its common
stock in settlement of a litigation matter. The Registrant believes this
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act.
(k) In May 1999, the Registrant issued a total of 645,000 shares of its common
stock to members of the Registrant's employee benefit and consulting services
plan who exercised their options granted under the plan. The exercise price of
the shares issued was between $.15 and $.25 per share. These shares were issued
pursuant to Rule 701 of the Securities Act.
(l) In July 1999, the Registrant issued 50,000 shares of its common stock, at a
deemed price of $.25 per share, for consulting services rendered to the
Registrant. The Registrant believes this transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act.
(m) In September 1999, the Registrant issued an aggregate 654,401 shares of its
Series A Convertible Preferred Stock to officers and directors of the
Registrant. William S. Robinson received 175,000 shares of Series A in lieu of
accrued salaries through September 30, 1999 and 267,197 shares of Series A in
repayment of loans made to the Registrant. William A. Ince received 175,000
shares of Series A in lieu of accrued salaries through September 30, 1999 and
47,213 shares of Series A in repayment of loans made to the Registrant. The
Registrant believes this transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act.
(n) In November 1999, the Registrant issued a total of 405,000 shares of its
common stock to members of the Registrant's employee benefit and consulting
services plan who exercised their options granted under the plan. The exercise
price of the shares issued ranged between $.15 and $.20 per share. These shares
were issued pursuant to Rule 701 of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Incorporation and Bylaws provided the Registrant
may indemnify a controlling person, office or director from liability for acting
in such capacities, to the full extent permitted by the law of the State of
Nevada. The Articles of Incorporation further provide that, to the full extent
permitted by the Nevada Corporation Code, as the same exists or may hereafter be
amended, a director or officer of the Registrant shall not be liable to the
Registrant or its shareholders for monetary damages for breach of fiduciary duty
as a director or officer.
25
<PAGE> 28
PART F/S
<TABLE>
<CAPTION>
Index Page
- ----- ----
<S> <C> <C>
1. Audited Consolidated Financial Statements
June 30, 1999 and 1998 F-2
2. Unaudited Consolidated Financial Statements
September 30, 1999 and 1998 F-18
</TABLE>
F-1
<PAGE> 29
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(U.S. DOLLARS)
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS F-3
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity (Deficiency) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 - F-17
</TABLE>
F-2
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND SHAREHOLDERS OF
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
We have audited the accompanying consolidated balance sheets of Integral
Technologies, Inc. (A Development Stage Company) as of June 30, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for each of the years ended June 30, 1999, 1998 and
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as at June
30, 1999 and 1998 and the consolidated results of their operations and cash
flows for each of the years ended June 30, 1999, 1998 and 1997 in conformity
with generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
consolidated financial statements, the Company has minimal capital resources
available and has incurred substantial losses to June 30, 1999. The Company must
obtain additional financing to meet its cash flow requirements. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. These financial statements do not include any adjustments that may
result from the outcome of these uncertainties.
The financial statements of the Company for the period from February 12, 1996
(inception) through June 30, 1996 were audited by other auditors. We have
compiled the cumulative amounts for the period from February 12, 1996
(inception) to June 30, 1999 from audited financial statements for the period
from February 12, 1996 (inception) to June 30, 1996 and the audited consolidated
financial statements for the years ended June 30, 1999, 1998 and 1997.
"Pannell Kerr Forster"
Chartered Accountants
Vancouver, Canada
November 4, 1999
F-3
<PAGE> 31
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
(U.S. DOLLARS)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 647 $ 480
Due from affiliated company 0 116,000
----------- -----------
TOTAL CURRENT ASSETS 647 116,480
PROPERTY AND EQUIPMENT (note 6) 42,238 21,796
INVESTMENT IN AND ADVANCES TO AFFILIATED COMPANY 0 750,000
LICENSE AGREEMENTS AND INTANGIBLES (notes 5 and 7) 1,622,928 8,254
----------- -----------
TOTAL ASSETS $ 1,665,813 $ 896,530
=========== ===========
LIABILITIES
CURRENT
Accounts payable and accruals (note 10) $ 544,511 $ 326,544
Due to West Virginia University Research Corporation (note 14) 397,296 397,296
Due to officers and directors 0 33,229
Due to minority interest (note 5) 79,412 0
Liability to stockholder 0 25,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,021,219 782,069
LONG-TERM DEBT (note 8) 376,170 396,029
----------- -----------
TOTAL LIABILITIES 1,397,389 1,178,098
----------- -----------
CONTINGENCY (note 14)
STOCKHOLDERS' EQUITY (DEFICIENCY) (note 9)
PREFERRED STOCK, $0.001 Par Value, 20,000,000 shares authorized, no
shares issued and outstanding
COMMON STOCK AND PAID IN CAPITAL IN EXCESS OF $0.001 PAR VALUE
50,000,000 Shares authorized
22,087,062 (1998 - 14,375,396) issued and outstanding 4,016,267 1,786,630
PROMISSORY NOTES RECEIVABLE (note 9) (284,068) 0
OTHER COMPREHENSIVE INCOME 44,679 36,235
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (3,508,454) (2,104,433)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 268,424 (281,568)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 1,665,813 $ 896,530
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 32
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12,
1996
YEAR ENDED YEAR ENDED YEAR ENDED (INCEPTION)
JUNE 30, JUNE 30, JUNE 30, THROUGH
1999 1998 1997 JUNE 30, 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
EXPENSES
Interest on beneficial
conversion feature (note 12) $ 566,456 0 $ 0 $ 566,456
Consulting 214,068 233,317 97,434 612,995
Salaries 280,600 233,759 0 514,359
Legal and accounting 106,051 79,091 59,391 247,901
Research and development 64,521 258,384 356,118 908,114
Bank charges and interest, net 55,760 41,385 39,726 136,343
Travel and entertainment 34,085 93,043 118,372 267,390
Telephone 26,341 42,319 35,269 103,929
General and administrative 20,656 54,284 51,505 141,337
Rent 18,905 26,095 17,631 69,354
Advertising 7,615 39,885 36,631 84,131
Write-down of license and
operating assets (note 5(a)) 0 424,654 0 424,654
Depreciation and amortization 8,963 14,000 10,140 34,334
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (1,404,021) (1,540,216) (822,217) (4,111,297)
EXTRAORDINARY ITEM
Cancellation of debt (note 8) 0 602,843 0 602,843
------------ ------------ ------------ ------------
NET LOSS FOR PERIOD $ (1,404,021) $ (937,373) $ (822,217) $ (3,508,454)
============ ============ ============ ============
LOSS PER COMMON SHARES
BEFORE EXTRAORDINARY ITEM $ (0.08) $ (0.12) $ (0.09)
EXTRAORDINARY ITEM PER COMMON
SHARE 0.00 0.05 0.0
------------ ------------ ------------ ------------
NET LOSS PER COMMON SHARE $ (0.08) $ (0.07) $ (0.09)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 17,285,785 12,343,346 8,894,110
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 33
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1996
(U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12,
1996
YEAR ENDED YEAR ENDED YEAR ENDED (INCEPTION)
JUNE 30, JUNE 30, JUNE 30, THROUGH
1999 1998 1997 JUNE 30, 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
SHARES OF COMMON STOCK ISSUED
Balance, beginning of year 12,575,396 11,750,000 6,000,000 0
Issued for
Cash 200,000 825,396 5,086,000 1,000,000
Exercise of stock options 445,000 0 0 0
Promissory note 1,683,789 0 0 0
Settlement of lawsuit 150,000 0 0 0
Property and equipment (to officers
and directors) 0 0 0 1,500,000
Services (provided by officers and
directors) 666,666 0 0 2,000,000
Services 250,000 0 564,000 1,500,000
Conversion of convertible debenture 3,869,120 0 0 0
Acquisition of subsidiary 1,800,000 0 100,000 0
Held in escrow 447,091 0 0 0
------------ ------------ ------------ ------------
Balance, end of year 22,087,062 12,575,396 11,750,000 6,000,000
============ ============ ============ ============
COMMON STOCK AND PAID-IN CAPITAL IN EXCESS OF PAR
Balance, beginning of year $ 1,786,630 $ 1,214,630 $ 60,000 $ 0
Issued for
Cash 50,000 650,000 865,514 10,000
Exercise of stock options 80,500 0 0 0
Promissory notes receivable 252,568 0 0 0
Settlement of lawsuit 15,000 0 0 0
Property and equipment (to officers
and directors 0 0 0 15,000
Services (provided by officers and
directors) 100,000 0 0 20,000
Share issue costs (100,500) (78,000) (48,920) 0
Services 50,000 0 63,036 15,000
Conversion of convertible debenture 525,813 0 0 0
Acquisition of subsidiary 619,200 0 275,000 0
Stock option compensation benefit 70,600 0 0 0
Interest on beneficial conversion 566,456 0 0 0
------------ ------------ ------------ ------------
Balance, end of year $ 4,016,267 $ 1,786,630 $ 1,214,630 $ 60,000
============ ============ ============ ============
PROMISSORY NOTES RECEIVABLE
Balance, beginning of year $ 0 $ 0 $ 0 $ 0
Issued during year (284,068) 0 0 0
------------ ------------ ------------ ------------
Balance, end of year $ (284,068) $ 0 $ 0 $ 0
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 36,235 $ 11,375 $ (1,226) $ 0
Foreign currency translation adjustment 8,444 24,860 12,601 (1,226)
------------ ------------ ------------ ------------
Balance, end of year $ 44,679 $ 36,235 $ 11,375 $ (1,226)
============ ============ ============ ============
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE
Balance, beginning of year $ (2,104,433) $ (1,167,060) $ (344,843) $ 0
Net loss for year (1,404,021) (937,373) (822,217) (3,508,454)
------------ ------------ ------------ ------------
Balance, end of year $ (3,508,454) $ (2,104,433) $ (1,167,060) $ (3,508,454)
============ ============ ============ ============
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) $ 268,424 $ (281,568) $ 58,945 $ (3,449,680)
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 34
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12,
1996
YEAR ENDED YEAR ENDED YEAR ENDED (INCEPTION)
JUNE 30, JUNE 30, JUNE 30, THROUGH
1999 1998 1997 JUNE 30, 1999
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,404,021) $ (937,373) $ (822,217) $(3,508,454)
Adjustments to reconcile net loss to
net cash used in operating activities
Extraordinary item 0 (602,843) 0 (602,843)
Consulting services and financing fees 150,000 0 63,036 248,036
Depreciation and amortization 13,466 14,000 10,140 38,837
Stock option compensation benefit 70,600 0 0 70,600
Interest on beneficial conversion 566,456 0 0 566,456
Settlement of lawsuit 15,000 0 0 15,000
Write-down of license and operating assets 0 424,654 0 424,654
Changes in non-cash working capital
Due from affiliated company 0 (112,922) (3,078) (116,000)
Promissory notes receivable (284,068) 0 0 (284,068)
Other 0 757 (1,173) (2,612)
Accounts payable and accruals 217,967 208,737 110,919 544,511
Due to West Virginia University
Research Corporation 0 157,384 22,821 397,296
Due to affiliated companies 0 (50,000) 41,749 3
Due to officers and directors (33,229) 23,229 7,186 0
----------- ----------- ----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (687,829) (874,377) (570,617) (2,208,584)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of property, equipment and
intangibles assets (33,908) 0 (56,568) (111,539)
Assets acquired and liabilities assumed
on purchase of subsidiary (129,474) 0 0 (129,474)
Investment in and advances to affiliated
companies 0 0 (660,000) (750,000)
License agreements 0 0 (116,581) (124,835)
----------- ----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (163,382) 0 (833,149) (1,115,848)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Advances from stockholders 79,412 240,705 758,167 1,078,284
Repayments to stockholders (94,046) 0 0 (94,046)
Liability to issue common stock (25,000) 25,000 (249,429) 0
Proceeds from issuance of common stock 383,068 650,000 865,514 1,923,582
Proceeds from convertible debentures 600,000 0 0 600,000
Share issue costs (100,500) (78,000) 0 (227,420)
----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 842,934 837,705 1,374,252 3,280,400
----------- ----------- ----------- -----------
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH 8,444 24,860 12,601 44,679
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH 167 (11,812) (16,913) 647
CASH, BEGINNING OF PERIOD 480 12,292 29,205 0
----------- ----------- ----------- -----------
CASH, END OF PERIOD $ 647 $ 480 $ 12,292 $ 647
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Issue of common stock
For property and equipment $ 0 $ 0 $ 0 $ 15,000
For services (provided by officers and directors) 100,000 0 0 120,000
For settlement of lawsuit 15,000 0 0 15,000
For services 50,000 0 63,036 148,036
For acquisition of subsidiary 619,200 0 275,000 894,200
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid 0 41,385 39,726 81,111
Income tax paid 0 0 0 0
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 35
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
1. INCORPORATION AND NATURE OF OPERATIONS
The Company was incorporated under the laws of the State of Nevada on
February 12, 1996. The Company is in the development stage as more
fully defined in Statement No. 7 of the Financial Accounting Standards
Board. Planned principal operations of the Company have not yet
commenced.
The Company intends to capitalize on new, patented or patent pending
technologies or advancements in technologies. Pursuant to an agreement
dated November 8, 1995 between three individuals, including two
officers and directors of the Company, and Integral Concepts Inc.
("ICI"), a company 100% controlled by a significant shareholder of the
Company and an employee of West Virginia University Research
Corporation ("WVURC"), the Company has been assigned the rights of the
three individuals which include the first right of refusal to acquire
the marketing and manufacturing rights to all technologies assigned to
ICI by WVURC. ICI obtains the manufacturing and marketing rights to all
technologies developed by WVURC pursuant to an exclusive agreement,
however, West Virginia University retains all proprietary rights to the
technologies.
To June 30, 1999, the Company has acquired or is in the process of
acquiring certain rights to further develop, manufacture and market
worldwide four new technologies originally assigned to ICI:
a) Contrawound Toroidal Helical Antenna - government and military
applications (note 7(a))
b) Plasma Ignition System (note 7(b))
c) 2D Machine Vision Colorimetry (note 7(c))
d) 3D Machine Vision Colorimetry (note 7(d))
The Company's head office is located in Vancouver, Canada. However, all
further development of the above technologies is being done either
directly by the Company or WVURC at West Virginia University.
2. GOING CONCERN
These financial statements have been prepared by management in
accordance with generally accepted accounting principles on a going
concern basis. This presumes funds will be available to finance
on-going development, operations and capital expenditures and the
realization of assets and the payment of liabilities in the normal
course of operations for the foreseeable future.
The Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by similar
companies and has an accumulated deficit during the development stage
of $3,508,454; (1998 - $2,104,433). These factors raise substantial
doubt about the Company's ability to continue as a going concern and is
dependent on its ability to obtain and maintain an appropriate level of
financing on a timely basis and to achieve sufficient cash flows to
cover obligations and expenses (note 12). The outcome of these matters
cannot be predicted. These financial statements do not give effect to
any adjustments to the amounts and classification of assets and
liabilities which might be necessary should the Company be unable to
continue its operations as a going concern.
F-8
<PAGE> 36
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
These financial statements include the accounts of Integral
Technologies, Inc. (a development stage company), its
wholly-owned subsidiary, Integral Vision Systems, Inc.
("IVSI") (a development stage company) and in 1999, its 80%
owned subsidiary Emergent Technology Corporation ("ETC") (a
development stage company). All intercompany balances and
transactions have been eliminated.
(b) Depreciation and amortization
Depreciation and amortization are provided using the
straight-line method based on the following estimated useful
lives:
Machinery, furniture and equipment - 5 Years
Computer hardware and software - 5 Years
Leasehold improvements - 3 Years
The Company reviews long-term assets to determine if the
carrying amount is recoverable based on the estimate of future
cash flow expected to result from the use of the asset and its
eventual disposition. If in this determination there is an
apparent shortfall, the loss will be recognized as a current
charge to operations.
(c) Loss per share
Loss per share computations are based on the weighted average
number of common shares outstanding during the period. Common
share equivalents consisting of stock options are not
considered in the computation because their effect would be
anti-dilutive.
(d) Shares issued in exchange for services
The valuation of the common shares issued in exchange for
services is valued at an estimated fair market value as
determined by officers and directors of the Company based upon
other sales and issuances of the Company's common shares
within the same general time period.
(e) Foreign currency translation
Amounts recorded in foreign currency are translated into
United States dollars as follows:
(i) Monetary assets and liabilities are translated at the
rate of exchange in effect at the balance sheet date;
and,
(ii) Revenues and expenses, at the average rate of
exchange for the year.
Gains and losses arising from this translation of foreign
currency are excluded from net loss for the period and
accumulated as a separate component of shareholder's equity
(deficiency).
F-9
<PAGE> 37
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) License agreements and intangibles
The Company is in the development stage with respect to the
technologies acquired pursuant to the license agreements. At
such time as commercial production commences, those costs will
be charged to operations on a unit-of-production method based
on estimated future sales. When there is little prospect of
further development of the technology by the Company, the
costs of that license agreement will be charged to operations.
(g) Research and development
Research and development expenditures are charged to
operations as incurred.
(h) Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates and would impact future results of operations
and cash flows.
(i) Financial instruments
The Company's financial instruments include cash, amounts due
from/to affiliated company, note receivable, investment in and
advances to affiliated company, accounts payable and accruals,
due to West Virginia University Research Corporation,
long-term debt and minority interest. Unless otherwise noted,
in the opinion of management, the carrying value of these
financial instruments approximates their fair market values
and the Company is not exposed to significant credit, interest
or currency risk.
(j) Income taxes
The Company uses the asset and liability approach in its
method of accounting for income taxes which requires the
recognition of deferred tax liabilities and assets for
expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and
liabilities. A valuation allowance against deferred tax assets
is recorded if, based upon weighted available evidence, it is
more likely than not that some or all of the deferred tax
assets will not be realized.
(k) Stock based compensation
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans.
Compensation expense is recorded when options are granted to
management at discounts to market.
(l) Interest on beneficial conversion
The beneficial conversion features relating to the 2%
convertible debenture (note 8) and promissory note are
accounted for as interest. This policy conforms to the
accounting for these transactions announced by the SEC staff
in March, 1997.
F-10
<PAGE> 38
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
4. COMPARATIVE FIGURES
Certain of the comparative figures were reclassified to conform with
the current year's presentation.
5. ACQUISITIONS
(a) By agreement dated March 11, 1997 (the effective date of
acquisition), the Company acquired a 100% interest in Integral
Vision Systems, Inc. ("IVSI") (a development stage company)
for 100,000 common shares of the Company at a deemed value of
$2.75 per share (equal to one-half the closing market trading
price of the Company's shares on the NASD market on March 11,
1997). The shares were issued pursuant to an exemption from
registration under the Securities Act of 1933 and are
"restricted securities" as that term is defined in Rule 144.
The Company advanced $158,000 to IVSI prior to the acquisition
date. The acquisition has been accounted for by the purchase
method.
The cost of the acquisition has been allocated in these
financial statements as follows:
<TABLE>
<S> <C>
Purchase price - 100,000 common shares $275,000
Funds advanced to IVSI prior to acquisition 158,000
--------
433,000
Fair market value of net assets acquired 41,419
--------
Purchase price discrepancy allocated to
license agreement (note 7(d)) $391,581
========
</TABLE>
IVSI's net loss from operations for the year ended June 30,
1998 amounted to $83,853 (1997 loss of $137,601) and these
operating results are included in the consolidated statement
of operations.
The operations of IVSI have ceased while management seeks a
new technology partner. Accordingly, the Company's investment
in the license agreement of $391,581 has been written off and
the net operating assets of IVSI amounting to $33,073 have
been written off.
(b) In September 1996, the Company entered into a letter agreement
to acquire a 10% interest in ETC (a development stage company)
from two related parties of the Company for consideration of
$100,000 (as at June 30, 1998 this investment was accounted
for at cost). The Company had an option to acquire the
remaining 90% interest in ETC by issuing 1,800,000 common
shares of the Company and by funding ETC's research and
development of the Contrawound Toroidal Helical Antenna for
government and military applications (note 1) to a minimum of
$1,200,000 (of which the Company advanced a total of
$650,000). The Company issued 1,800,000 shares which at the
1998 year-end were held by ETC's attorney in escrow subject to
the closing of the final agreement (which was closed March 11,
1999). The shares were released from escrow and are recorded
in these financial statements at $0.344 per share, the closing
market trading price of the Company's shares on the NASD
market on March 11, 1999. The 1,800,000 shares and the
$650,000 advanced entitles the Company to a further 70%
interest in ETC.
During the year, a third party investor contributed $470,588
in cash for a 20% interest in ETC. The same investor
contributed a further $79,412 which they intend to convert
into shares of ETC. This will dilute the Company's ownership
interest in ETC to 76.625%.
F-11
<PAGE> 39
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
5. ACQUISITIONS (Continued)
The cost of the acquisition has been allocated in these financial
statements as follows:
<TABLE>
<S> <C>
Purchase price (1,800,000 shares) $ 619,200
10% investment acquired in prior year 100,000
-----------
719,200
Net assets (liabilities) acquired (895,474)
-----------
Purchase price discrepancy allocated to
license agreement (note 7(a)) $ 1,614,674
===========
</TABLE>
6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
ACCUMULATED
AMORTIZATION
AND
COST DEPRECIATION NET NET
------- ------------ ------- -------
<S> <C> <C> <C> <C>
Machinery, furniture and equipment $56,583 $22,634 $33,949 $11,263
Computer hardware and software 20,825 12,536 8,289 9,311
Leasehold improvements 3,667 3,667 0 1,222
------- ------- ------- -------
$81,075 $38,837 $42,238 $21,796
======= ======= ======= =======
</TABLE>
7. LICENSE AGREEMENTS
(a) Toriodal Helical Antenna
ETC was formed to develop, commercialize, market and
manufacture certain proprietary Toroidal Helical Antenna
Technology ("the Technology") (note 1). The Company obtained
an exclusive sub-license to the technology from Integral
Concepts, Inc. ("ICI"), a company 100% controlled by a former
shareholder of ETC, a significant shareholder of the Company,
and an employee of WVURC of its right, title and interest in
and to all worldwide government and military applications and
resulting procurement interests in the Technology. ICI
obtained the license to the Technology from WVURC. WVURC has
the proprietary interest in and holds the patents to the
technology.
All development of the Technology is being done by the Company
or WVURC at West Virginia University.
Pursuant to an agreement dated January 2, 1996 with ICI, ETC
acquired the right to manufacture and market the Toriodal
Helical Antenna Technology. The Company is obligated to pay a
$3,000 minimum annual royalty to WVURC to maintain the license
in good standing. In addition, a further 10% royalty of any
net revenues is payable to WVURC on behalf of ICI, such
royalties to be reduced by the $3,000 minimum annual royalty
payment. To date there have been no net revenues.
F-12
<PAGE> 40
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
7. LICENSE AGREEMENTS (Continued)
The license is automatically renewed for one year periods each
December 31 as long as the required minimum royalty payments
described above are paid to WVURC on behalf of ICI.
Either party may terminate this agreement upon 90 days written
notice. The Company is responsible for the reimbursement of
project development costs incurred by WVURC.
(b) Plasma Ignition System
Pursuant to an agreement dated February 15, 1996 with ICI, the
Company acquired the rights to manufacture and market the
Plasma Ignition System (note 1), an ignition system for
internal combustion engines, for a license fee of $8,251. The
Company is obligated to pay a $3,000 minimum annual royalty to
WVURC on behalf of ICI to maintain the license in good
standing. In addition, a further 10% royalty of any net
revenues is payable to WVURC on behalf of ICI and a 1% royalty
of any gross revenues is payable to ICI. Such royalties are to
be reduced by the $3,000 minimum annual royalty. To date there
have been no net revenues.
The license is automatically renewed for one-year periods each
December 31 as long as the required minimum royalty payments
described above are paid to WVURC on behalf of ICI.
Pursuant to an agreement dated February 9, 1996 with WVURC,
the Company is responsible for the reimbursement of project
development costs which are incurred by WVURC. To June 30,
1999, $445,570 of project development costs has been paid or
is payable to WVURC (note 14). Either party may terminate this
agreement upon 90 days written notice.
(c) 2D Machine Vision Colorimetry
Pursuant to an agreement dated February 9, 1996 with ICI, the
Company acquired the right to manufacture and market the 2D
Machine Vision Colorimetry (note 1), a counterfeit currency
determination software. The Company is obligated to pay a
$3,000 minimum annual royalty to WVURC to maintain the license
in good standing. In addition, a further 10% royalty of any
net revenues is payable to WVURC on behalf of ICI, such
royalties to be reduced by the $3,000 minimum annual royalty
payment. To date there have been no net revenues
The license is automatically renewed for one year periods each
December 31 as long as the required minimum royalty payments
described above are paid to WVURC on behalf of ICI.
Pursuant to an agreement dated February 9, 1996 with WVURC,
the Company is responsible for the reimbursement of project
development costs incurred by WVURC. To June 30, 1999,
$350,151 of project development costs has been paid or is
payable to WVURC (note 14). Either party may terminate this
agreement upon 90 days written notice.
F-13
<PAGE> 41
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
7. LICENSE AGREEMENTS (Continued)
(d) 3D Machine Vision Colorimetry
The Company's subsidiary, IVSI, acquired the right to
manufacture and market the 3D Machine Vision Colorimetry (note
1), a color quality control software. IVSI is obligated to pay
a $3,000 minimum annual royalty to WVURC to maintain the
license in good standing. In addition, a further 10% royalty
of any net revenues is payable to WVURC on behalf of ICI, such
royalties to be reduced by the $3,000 minimum annual royalty
payment. To date there have been no net revenues
The license is automatically renewed for one year periods each
December 31 as long as the required minimum royalty payments
described above are paid to WVURC on behalf of ICI. Either
party may terminate this agreement upon 90 days written
notice.
On June 10, 1995, IVSI entered into an "Exclusive Limited
Sublicense Agreement" with REGI U.S., INC. ("REGI"), whereby
REGI obtained an exclusive sublicense to market and distribute
the 3D Machine Vision Colorimetry in Canada. The sublicense
requires REGI to pay to IVSI 2% of the "Net Revenues" (as
defined in the sublicense) that REGI derives from the
technology. Minimum royalty payments are as follows:
<TABLE>
<S> <C>
1997 $3,000
1998 4,500
1999 6,000
Every year thereafter 6,000
</TABLE>
REGI shall have the option to renew the sublicense for
successive one year periods so long as REGI is not in default
of the terms of the sublicense and the Company's license is
renewed by its licensor.
As described in note 5(a), IVSI has ceased operations while it
seeks a new technology partner.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
2% convertible debenture, due January 2004 convertible at the holder's option
into common stock of the Company $ 75,000 $ 0
10% Loan repayable on demand with one year's notice to two officers and
directors of the Company 301,170 396,029
-------- --------
$376,170 $396,029
======== ========
</TABLE>
During the year ended June 30, 1999, the Company issued $600,000, 2%
convertible debentures. Of this amount $525,000 was converted to
3,869,120 common shares (note 13(a)(ii)).
During the year ended June 30, 1998, all rights, title and interest in
a revolving line of credit, due to an officer and director of the
Company was conveyed to the Company for $1 and the loan was cancelled.
The line of credit balance of $563,843 and accrued interest of $39,000
is recorded as an extraordinary item in the consolidated statement of
operations for the year ended June 30, 1998.
F-14
<PAGE> 42
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
9. STOCKHOLDERS' EQUITY (DEFICIENCY)
(a) Authorized preferred shares
The preferred shares may be issued in one or more series. The
distinguishing features of each series including preference,
rights and restrictions are to be determined by the Company's
Board of Directors upon the establishment of each such series
(note 13).
(b) Stock options
Pursuant to the Company's 1996 Incentive Compensation Plan as
subsequently amended in 1997, the Company may issue stock
options and stock bonuses for shares in the capital stock of
the Company to provide incentives to officers, directors, key
employees and other persons who contribute to the success of
the Company. The exercise price of the Incentive Options
(employees of the Company or its subsidiaries) is no less than
the fair market value of the stock at the date of the grant
and for non-employees the exercise price is no less than 80%
of the fair value (defined as the most recent closing sale
price reported by NASDAQ) on the date of the grant.
The following table summarizes the Company's stock option
activity for the years ended June 30, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
NUMBER PRICE EXERCISE
OF SHARES PER SHARE PRICE
----------- ---------------- --------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1996 $0 $ 0 $ 0.00
Granted during year ended
June 30, 1997 1,990,000 $ 0.15 - $ 0.25 $ 0.24
----------- ---------------- ------
BALANCE JUNE 30, 1998 AND 1997 1,990,000 $ 0.15 to $ 2.00 $ 0.24
Granted during year ended
June 30, 1999 1,635,000 $ 0.15 to $ 0.25 $ 0.17
Cancelled (1,260,000) $ 0.15 $ 0.15
Exercised (445,000) $ 0.15 to $ 0.25 $ 0.20
----------- ---------------- ------
BALANCE JUNE 30, 1999 1,920,000 $ 0.15 to $ 2.00 $ 0.26
=========== ================ ======
</TABLE>
The exercise price per share at June 30, 1998 and 1997 were
$0.50 to $2.00. During the year ended June 30, 1999, 1,260,000
of the 1,990,000 stock options were cancelled, and 630,000
stock options were repriced to $0.15 to $0.25.
These changes have been retroactively adjusted above.
Subsequent to June 30, 1999, 87,500 and 665,000 additional
share options were issued under the plan for exercise prices
of $0.40 and $0.23 respectively.
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plan, and
accordingly, compensation expense of $70,600 was recognized as
salaries expense during the year ended June 30, 1999.
F-15
<PAGE> 43
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
9. STOCKHOLDERS' EQUITY (DEFICIENCY) (Continued)
(c) Included in promissory notes receivable are:
(i) $31,500 on exercise of 210,000 stock options, interest at
10% per annum, due November 1, 1999; and,
(ii) $252,568 for issue of 1,683,789 common shares, interest at 6%
per annum, due January 17, 2001.
10. RELATED PARTY TRANSACTIONS
(a) The Company's acquisition of IVSI and ETC as described in
notes 5(a) and 5(b) respectively were acquired from two
significant shareholders of the Company.
(b) Accounts payable at June 30, 1999 includes $383,500 (1998 -
$220,000) due to two directors and officers of the Company.
(c) Long-term debt includes $301,170 (1998 - $396,029) due to
officers and two directors of the Company.
(d) The Company accrued salaries and interest payable of $263,500
(1998 - $220,000; 1997 - $Nil) due to two directors and
officers of the Company. Of the 1999 amount, $100,000 was
settled by issue of 666,666 common shares.
(e) The Company paid $23,670 (1998 - $9,100; 1997 - $23,707) to
two officers and directors for consulting fees.
(f) The Company advanced $6,000 (1998 - $6,000, 1997 - $3,000) to
ICI for royalties and was charged $Nil (1998 - $257,384; 1997
- $313,026) by WVURC for reimbursement of research and
development expenditures.
11. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss
carry forward, has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred assets. At June
30, 1999 the Company has available a net operating loss carry forward
of approximately $2,448,000 which it may use to offset future federal
taxable income. The net operating loss carry forward if not utilized,
will begin to expire in 2011.
12. INTEREST ON BENEFICIAL CONVERSION
The difference between the market value of the Company's shares on the
date of conversion and the conversion rate pursuant to $525,000 of the
convertible debenture issued during the year was $398,077.
The difference between the market value of the Company's shares and the
issue price of 1,683,789 common shares for a promissory note in the
amount of $252,568 was $168,379. These amounts have been recorded as
interest expense in the statement of operations.
F-16
<PAGE> 44
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997 AND PERIOD FROM FEBRUARY 12, 1996
(INCEPTION) THROUGH JUNE 30, 1999
(U.S. DOLLARS)
13. SUBSEQUENT EVENTS
(a) Share issuances subsequent to June 30, 1999 were as follows:
(i) 405,000 shares on exercise of stock options for a
total value of $87,500.
(ii) 447,091 shares released from escrow on conversion of
convertible debenture of $75,000 (note 8).
(iii) 50,000 shares in lieu of services at an ascribed
value of $13,000.
(b) Subsequent to June 30, 1999, the Company designated 1,000,000
of its authorized 20,000,000 preferred shares as Series A
Convertible Preferred Stock with a par value of $0.001 each.
Cumulative dividends are accrued at the rate of 5% annually,
payable at the option of the Company. The shares may be
converted to restricted common shares at the average trading
price ten days prior to conversion, and entitled to votes
equal to the number of common shares into which each series of
preferred stock may be converted. Each Series A Convertible
Preferred Stock may be redeemed by the Company for $1.50 each
within one year after the date of issue, or $2.00, $2.50,
$3.00 and $3.50 in each of the subsequent four years after
date of issue.
The Company intends to settle $383,229 included in accounts
payable and $281,182 included in long-term debt, both amounts
due to two officers and directors of the Company, by issue of
$664,411 Series A Convertible Preferred Stock subsequent to
June 30, 1999.
14. CONTINGENCY
A dispute exists between WVURC and the Company with respect to the
development work performed by WVURC on the Plasma Ignition System and
the Counterfeit Detection Technology. The Company has included in its
accounts the amount owing to WVURC of $397,296, however, it is the
opinion of management that this amount should be reduced to $43,052.
Management intends to defend this position. As the actual outcome
cannot be determined at this time, any adjustments required will be
recorded by the Company when settlement occurs.
15. COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12,
1996
(INCEPTION)
YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1999
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
Net loss $(1,404,021) $(937,373) $(822,217) $(3,508,454)
Other
comprehensive
income 8,444 24,860 12,601 44,679
----------- --------- --------- -----------
Comprehensive
loss $(1,395,577) $(912,513) $(809,616) $(3,463,775)
=========== ========= ========= ===========
</TABLE>
F-17
<PAGE> 45
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(U.S. DOLLARS)
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-19
Consolidated Statements of Loss F-20
Consolidated Statements of Cash Flow Position F-21
Consolidated Statements of Changes in Stockholders' Equity F-22
Notes to Consolidated Financial Statements F-23 - F-31
</TABLE>
F-18
<PAGE> 46
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
AS AT AS AT
SEPT 30/99 SEPT 30/98
----------- -----------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 3,334 $ (450)
Advances to Emergent Technologies Corp. 0 113,000
----------- -----------
TOTAL CURRENT ASSETS 3,334 112,550
----------- -----------
FIXED
Fixed assets, cost 81,073 39,392
Less: accumulated depreciation (38,835) (19,596)
----------- -----------
TOTAL FIXED ASSETS 42,238 19,796
----------- -----------
OTHER
Investment in and advances to Emergent Technologies Corp. 750,000
License agreement 1,622,929 399,832
Intangibles (net) 1 1
----------- -----------
TOTAL OTHER ASSETS 1,622,930 1,149,833
----------- -----------
TOTAL ASSETS 1,668,502 1,282,179
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Accounts payable 304,527 514,180
Due to West Virginia University 397,296 397,296
Due to minority interest 79,412 0
----------- -----------
TOTAL CURRENT LIABILITIES 781,235 911,466
----------- -----------
LONG TERM
Liability to Issue Common Stock 60,000 0
Loans Payable 0 351,579
----------- -----------
TOTAL LONG TERM LIABILITIES 60,000 351,579
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
PREFERRED SHARES AND PAID IN CAPITAL
IN EXCESS OF $0.001 PAR VALUE
$0.001 par value; 20,000,000 shares authorized
664,410 (1998-none issued and outstanding) 664,410 0
COMMON SHARES AND PAID IN CAPITAL
IN EXCESS OF $0.001 PAR VALUE
50,000,000 shares authorized
22,137,062 (1998-12,576,000) issued and outstanding 4,147,698 2,428,374
PROMISSORY NOTES RECEIVABLE (284,068) 0
OTHER COMPREHENSIVE INCOME 44,679 42,540
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (3,745,452) (2,451,780)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 827,267 19,134
----------- -----------
TOTAL LIABILITIES & SHAREHOLDERS EQUITY (DEFICIENCY) 1,668,502 1,282,179
----------- -----------
</TABLE>
F-19
<PAGE> 47
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
CONSOLIDATED STATEMENTS OF LOSS
FOR THE QUARTER ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
QUARTER QUARTER INCEPTION TO
ENDED ENDED (FEBRUARY 16/96)
SEPT 30/99 SEPT 30/98 TO SEPTEMBER 30/99
----------- ----------- ------------------
<S> <C> <C> <C>
REVENUE $ 21,797 $ 21,797
----------- -----------
EXPENSES
Interest on beneficial
conversion feature 12,500 566,456
Write-down of license and
Operating assets 424,654
Research and development 908,113
Travel and entertainment 13,858 281,248
Consulting 50,700 9,550 663,695
Salaries and benefits 24,412 328,771
Management fees 60,000 52,500 270,000
Legal and accounting 7,000 247,901
Bank charges and interest, net 84,150 215 220,493
Advertising (385) 84,131
Telephone 3.062 8,016 106,991
General and administrative 13,528 3,983 154,866
Rent 9,085 1,707 78,439
Depreciation and
Amortization 2,000 34,334
----------- -----------
Total expenses 258,795 97,086 4,370,092
----------- ----------- -----------
Loss before
Extraordinary item 4,348,295
Extraordinary item
Cancellation of debt (602,843)
-----------
NET LOSS FOR THE PERIOD 236,998 97,086 3745,452
-----------
DEFICIT, BEG OF PERIOD 3,508,454 2,354,694
---------- -----------
DEFICIT END OF PERIOD 3,745,452 2,451,780
---------- -----------
NET LOSS
PER COMMON SHARE $ .01 $ .01
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 22,076,306 12,576,000
</TABLE>
F-20
<PAGE> 48
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
CONSOLIDATED STATEMENTS OF CASH FLOW POSITION
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
AS AT AS AT
SEPT 30/99 SEPT 30/98
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(236,998) $ (90,781)
Item not involving cash
Depreciation and amortization 0 2,000
--------- ---------
(236,998) (88,781)
--------- ---------
CHANGES IN NON-CASH WORKING CAPITAL
Accounts payable (239,982) 57,088
Advances to Emergent Technologies Corp. 3,000
Short term loans 31,100 27,763
Loans payable (376,170) 0
--------- ---------
(616,152) 87,851
--------- ---------
(853,150) (930)
--------- ---------
FINANCING ACTIVITIES
Liability to issue common shares 60,000 0
Issuance of common shares 131,428 0
Issuance of preference shares 664,410 0
--------- ---------
855,841 0
--------- ---------
INCREASE (DECREASE) IN CASH 2,691 (930)
CASH, BEGINNING OF PERIOD 643 480
--------- ---------
CASH, END OF PERIOD 3,334 (450)
--------- ---------
</TABLE>
F-21
<PAGE> 49
INTEGRAL TECHNOLOGIES, INC.
\ (A DEVELOPMENT STAGE CO.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Other Total
----------------------- Promissory Comprehensive Acc. Stockholders
Shares Amount Note Income Deficit Equity'
---------- ---------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
BEGINNING 22,087,062 4,016,267 (284,068) 44,679 (3,508,454) 268,424
COMMON
SHARES ISSUES
For cash 50,000 12,500 0 0 0 12,500
Conversion
Of debenture 0 118,931 0 0 0 118,931
Net loss
for the period 0 0 0 0 (236,998) (236,998)
---------- ---------- ---------- ---------- ---------- ----------
Balance, end
of period 22,137,062 4,147,698 (284,068) 44,679 (3,745,452) 162,857
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
F-22
<PAGE> 50
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
1. INCORPORATION AND NATURE OF OPERATIONS
The Company was incorporated under the laws of the State of Nevada on February
12, 1996. The Company is in the development stage as more fully defined in
Statement No. 7 of the Financial Accounting Standards Board. Planned principal
operations of the Company have not yet commenced.
The Company intends to capitalize on new, patented technologies or advancements
in technologies. Pursuant to an agreement dated November 8, 1995 between three
individuals, including officers and directors of the Company, and Integral
Concepts Inc. ("ICI"), a company 100% controlled by a significant shareholder of
the Company and an employee of West Virginia University Research Corporation
("WVRUC"), the Company has been assigned the rights of the three individuals
which include the first right of refusal to acquire the marketing and
manufacturing rights to all technologies assigned to ICI by WVRUC pursuant to an
exclusive agreement, however, West Virginia University retains all proprietary
rights to the technologies.
To September 30, 1999, the Company has acquired or is in the process of
acquiring certain rights to further develop, manufacture and market worldwide
four new technologies originally assigned to ICI.
a) Contrawound Toroidal Helical Antenna-government and military
applications (note 7(a)
b) Plasma Ignition System (note 7 (b))
c) 2D Machine Vision Colorimetry (note (c))
d) 3D Machine Vision Colorimetry (note 7(d))
The Company's head office is located in Vancouver, Canada. However, all further
development of the above technologies is being done either directly by the
Company or WVRUC at West Virginia University.
2. GOING CONCERN
These financial statements have been prepared by management in accordance with
generally accepted accounting principles on a going concern basis. This presumes
funds will be available to finance on-going development, operations and capital
expenditures and the realization of assets and the payment of liabilities in the
normal course of operations for the foreseeable future.
The Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by similar companies
and has an accumulated deficit of $3,745,452; (1998-$2,451,780). These factors
raise substantial doubt about the Company's ability to continue as a going
concern and is dependent on its ability to obtain and maintain an appropriate
level of financing on a timely basis, and to achieve sufficient cash flows to
cover obligations and expenses. The outcome of these matters cannot be
predicted. These financial statements do not give effect to any adjustments to
the amounts and classification of assets and liabilities which might be
necessary should the Company be unable to continue its operations as a going
concern.
F-23
<PAGE> 51
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
These financial statements include the accounts of Integral Technologies, Inc.
(a development stage company), its wholly-owned subsidiary, Integral Vision
Systems, Inc ("IVSI") ( a development stage company) and its 80% owned
subsidiary Emergent Technologies Corp. ("ETC") (a development stage company).
All inter-company balances and transactions have been eliminated.
(b) Depreciation and amortization
Depreciation and amortization are provided using the straight-line method based
on the following estimated useful lives:
Machinery, furniture and equipment -5years
Computer hardware and software -5years
Leasehold improvements -3years
The Company reviews long-term assets to determine if the carrying amount is
recoverable based on the estimate of future cash flow expected to result form
the use of the asset and its eventual disposition. If in this determination
there is an apparent shortfall, the loss will be recognized as a current charge
to operations.
(c) Loss per share
Loss per share computations are based on the weighted average number of common
shares outstanding during the period. Common share equivalents consisting of
stock options are not considered in the computation because their effect would
be anti-dilutive.
(d) Shares issued in exchange for services
The valuation of the common shares issued in exchange for services is valued at
an estimated fair market value as determined by the officers and directors of
the Company based upon other sales and issuances of the Company's common shares
within the same general time period.
(e) Foreign currency translation
Amounts recorded in foreign currency are translated into United States dollars
as follows:
(i) Monetary assets and liabilities are translated at the rate of exchange
in effect at the balance sheet date; and,
(ii) Revenues and expenses, at the average rate of exchange for the year.
Gains and losses arising from this translation of foreign currency are excluded
from the net loss for the period and accumulated as a separate component of
shareholders' equity (deficiency).
F-24
<PAGE> 52
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(f) License agreements and intangibles
The Company is in the development stage with respect to the technologies
acquired pursuant to the license agreements. At such time as commercial
production commences, these costs will be charged to operations on a
unit-of-production method based on estimated future sales. When there is little
prospect of further development of the technology by the Company, the costs of
that license agreement will be charged to operations.
(g) Research and development
Research and development expenditures are charged to operations as incurred.
(h) Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates and would impact future results of
operations and cash flows.
(i) Financial instruments
The Company's financial instruments include cash, investment in and advances to
affiliated company, accounts payable and accruals, due to West Virginia
University Research Corporation, long term debt and minority interest. Unless
otherwise noted, in the opinion of management, the carrying value of these
financial instruments approximates their fair market values and the Company is
not exposed to significant credit, interest or currency risk.
(j) Income taxes
The Company uses asset and liability approach in its method of accounting for
income taxes which requires the recognition of deferred tax liabilities and
assets for expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets is recorded if, based upon weighted
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
(k) Stock based compensation
The Company applies APB Opinion No. 25 and related interpretation in accounting
for its stock option plans. Compensation expense is recorded when options are
granted to management at discounts to market.
(l) Interest on Beneficial Conversion
The beneficial conversion features relating to the 2% convertible debenture and
promissory notes are accounted for as interest. This policy conforms to the
accounting for these transactions announced by the SEC staff in March 1997.
F-25
<PAGE> 53
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
4. COMPARATIVE FIGURES
Certain of comparative figures were reclassified to conform with the current
year's presentation.
5. ACQUISITIONS
(a) By agreement dated March 11, 1997 (the effective date of acquisition), the
Company acquired a 100% interest in Integral Visions Systems, Inc. ("IVSI" (a
development stage company) for 100,000 common shares of the Company at a deemed
value of $2.75 per share (equal to one-half) the closing market trading price of
the Company's shares on the NASD market on March 11, 1997). The shares were
issued pursuant to an exemption from registration under the Securities Act of
1933 and are "restricted securities" as that term is defined in Rule 144. The
Company advanced $158,000 to IVSI prior to the acquisition date. The acquisition
has been accounted for by the purchase method.
The cost of the acquisition has been allocated in these financial statements as
follows:
<TABLE>
<S> <C>
Purchase price-100,000 common shares $275,000
Funds advanced to IVSI prior to acquisition 158,000
--------
433,000
Fair market value 41,419
--------
Purchase price discrepancy allocated to license agreement
(note 7(d)) $391,581
--------
</TABLE>
IVSI's net loss from operations for the year ended June 30, 1998 amounted to
$83,853 (1997 loss of $137,601) and these operating results are included in the
consolidated statements of operations.
The operations of IVSI have ceased while management seeks a new technology
partner. Accordingly the Company's investment in the license agreement of
$391,581 has been written down to a nominal amount of $1 and the net operating
assets of IVSI amounting to $33,073 have been written off.
(b) In September 1996, the Company entered into a letter agreement to acquire a
10% interest in ETC (a development stage company) from two related parties of
the Company for consideration of $100,000. The Company had an option to acquire
the remaining 90% interest in ETC by issuing 1,800,000 common shares of the
Company and by funding ETC's research and development of the Contrawound
Toroidal Helical Antenna for government and military applications (note 1) to a
minimum of $1,200,000. The Company issued 1,800,000 shares which at the 1998
year-end were held by ETC's attorney in escrow subject to the closing of the
final agreement (which was closed on March 11, 1999). These shares were released
from escrow and are recorded in these financial statements at $.34 per share,
the closing market trading price of the Company's shares in the NASD market on
March 11, 1999. The 1,800,000 shares and the $650,000 advanced entitles the
Company to a further 70% interest in ETC.
F-26
<PAGE> 54
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
During the year ended June 30, 1998, a third party investor contributed $470,588
for a 20% interest in ETC. The same investor contributed a further $79,412 which
they intend to convert into shares in ETC. This will dilute ITI's ownership
interest to 76.625%.
The cost of the acquisition has been allocated in these financial statements as
follows:
<TABLE>
<S> <C>
Purchase price (1,800,000 shares ) $ 619,200
10% investment acquired in prior year 100,000
----------
719,200
Net assets acquired 895,474
----------
Purchase price discrepancy allocated to license agreement
(note 7(a)) $1,614,674
----------
</TABLE>
6. FIXED ASSETS
<TABLE>
<CAPTION>
1999 1998
--------- ----
ACCUMULATED
AMORTIZATION
AND
COST DEPRECIATION NET NET
------ ------------ ------ ------
<S> <C> <C> <C> <C>
Machinery, furniture and equipment 56,583 22,634 33,949 9,263
Computer hardware and software 20,825 12,536 8,289 9,311
Leasehold improvements 3,667 3,667 0 1,222
------ ------ ------ ------
81,075 38,837 42,238 19,796
------ ------ ------ ------
</TABLE>
7. LICENSE AGREEMENTS
(a) Toroidal Helical Antenna
ETC was formed to develop, commercialize, market and manufacture certain
proprietary Toroidal Helical Antenna Technology ("the Technology") (note 1). The
Company obtained an exclusive sub-license to the technology from Integral
Concepts, Inc. ("ICI"), a company 100% controlled by a shareholder of ETC, a
significant shareholder of the Company, and an employee of West Virginia
Research Corporation ("WVRUC") of its right title and interest in and to all
worldwide government and military applications and resulting procurement
interests in the Technology. ICI obtained the license to the Technology from
WVRUC. WVRUC has the proprietary interest in and holds the patents to the
technology.
All development of the Technology is being done by the Company or WVRUC at West
Virginia University.
Pursuant to an agreement dated January 2, 1996 with ICI, the Company acquired
the right to manufacture and market the Toroidal Helical Antenna Technology. The
Company is obligated to pay a $3,000 minimum annual royalty to WVRUC to maintain
the license in good standing. In addition a further 10% royalty of any net
revenues is payable to WVRUC on behalf of ICI, such royalties to be reduced by
the $3,000 minimum annual royalty payment. To date there have been no net
revenues.
F-27
<PAGE> 55
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
The license is automatically renewed for one year periods each December 31 as
long as the required minimum royalty payments described above are paid to WVRUC
on behalf of ICI.
Either party may terminate this agreement upon 90 days written notice. The
Company is responsible for the reimbursement of project costs incurred by WVRUC.
(b) Plasma Ignition System
Pursuant to an agreement dated February 15, 1996 with ICI, the Company acquired
the rights to manufacture and market the Plasma Ignition System (note 1), an
ignition system for internal combustion engines, for a license fee of $8,251.
The Company is obligated to pay a $3,000 minimum annual royalty to WVRUC on
behalf of ICI to maintain the license in good standing. In addition, a further
10% royalty of any net revenues is payable to WVRUC on behalf of ICI and a 1%
royalty of any gross revenues is payable to ICI. Such royalties are to be
reduced by the $3,000 minimum annual royalty. To date there have been no net
revenues.
The license is automatically renewed for one year periods each December 31 as
long as the required minimum royalty payments described above are paid to WVRUC
on behalf of ICI
Pursuant to an agreement dated February 9, 1996 with WVRUC, the Company is
responsible for reimbursement of project development costs incurred by WVRUC. To
June 30, 1998, $445,570 of project development costs has been paid or is payable
to WVRUC (note 13). Either party may terminate this agreement upon 90 days
written notice.
(c) 2D Machine Vision Colorimetry
Pursuant to an agreement dated February 9, 1996 with ICI, the Company acquired
the right to manufacture and market the 2D Machine Vision Colorimetry (note 1),
a counterfeit currency determination software. The Company is obligated to pay a
$3,000 minimum annual royalty to WVRUC to maintain the license in good standing.
In addition, a further 10% royalty of any net revenues is payable to WVRUC on
behalf of ICI, such royalties to be reduced by the $3,000 minimum annual royalty
payment. To date there have been no net revenues.
The license is automatically renewed for one year periods each December 31 as
long as the required minimum royalty payments described above are paid to WVRUC
on behalf of ICI.
Pursuant to an agreement dated February 9, 1996 with WVRUC, the Company is
responsible for reimbursement of project development costs incurred by WVRUC. To
June 30, 1999, $350,151 of project development costs has been paid or is payable
to WVRUC (note 13). Either party may terminate this agreement upon 90 days
written notice.
(d) 3D Machine Vision Colorimetry
The Company's subsidiary, IVSI acquired the right to manufacture and market the
3D Machine Vision Colorimetry (note 1), a color quality control software. IVSI
is obligated to pay a $3,000 minimum annual royalty to WVRUC to maintain the
license in good standing. In addition, a further 10% royalty of any net reveues
is payable to WVRUC on behalf of ICI, such royalties to be reduced by the $3,000
minimum annual royalty payment. To date there have been no net revenues.
F-28
<PAGE> 56
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
The license is automatically renewed for one year periods each December 31 as
long as the required minimum royalty payments described above are paid to WVRUC
on behalf of ICI. Either party may terminate this agreement upon 90 days written
notice.
On June 10, 1995 IVSI entered into an "Exclusive Limited Sublicense Agreement"
with REGI U.S., Inc. ("REGI") whereby REGI obtained an exclusive sublicense to
market and distribute the 3D Machine Vision Colorimetry in Canada. The
sublicense requires REGI to pay to IVSI 2% of the "Net Revenues" (as defined in
the sublicense) that REGI derives from the technology. Minimum royalty payments
are as follows:
<TABLE>
<S> <C>
1997 $3,000
1998 4,500
1999 6,000
Every year thereafter 6,000
</TABLE>
REGI shall have the option to renew the sublicense for successive one year
periods so long as REGI is not in default of the terms of the sublicense and the
Company's license is renewed by its licensor.
As described in note 5(a), IVSI has ceased operations while it seeks a new
technology partner.
8. LONG TERM DEBT
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
10% Loan repayable on demand with one year's notice
to two officers and directors of the Company 0 351,579
-- -------
</TABLE>
During the year ended June 30,1998, all rights, title and interest in a
revolving line of credit, due to an officer and director of the Company was
conveyed to the Company for $1 and the loan was cancelled. The line of credit
balance of $563,843 and accrued interest of $39,000 is recorded as an
extraordinary item in the consolidated statement of operations for the year
ended June 30, 1998.
9. STOCKHOLDERS' EQUITY
(a) Authorized preferred shares
The preferred shares may be issued in one or more series. The distinguishing
features of each series including preference, rights and restrictions are to be
determined by the Company's Board of Directors upon establishment of each such
series .
(b) Stock options
Pursuant to the Company's 1996 Incentive Compensation Plan as subsequently
amended in 1997, the Company may issue stock options and stock bonuses for
shares in the capital stock of the Company to provide incentives to officers,
directors, key employees and other such persons
F-29
<PAGE> 57
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
who contribute to the success of the Company. The exercise price of the
Incentive Options (employees of the Company or its subsidiaries) is no less than
the fair market value of the stock at the date of the grant and for
non-employees the exercise price is no less than 80% of the fair value (defined
as the most recent closing sale price reported by NASDAQ on the date of the
grant).
The following table summarizes the Company's stock activity for the years ended
June 30, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
NUMBER PRICE EXERCISE
OF SHARES PER SHARE PRICE
---------- -------------- --------
<S> <C> <C> <C>
Balance June 30, 1998 and 1997 1,990,000 $0.15 to $2.00 $0.24
Granted during the year 1,635,000 $0.15 to $.25 $0.17
Cancelled (1,260,000) $.15 $.15
Exercised (445,000) $0.15 to $0.25 $0.25
---------- -------------- -----
Balance June 30, 1999 1,920,000 $0.15 to $2.00 $0.25
---------- -------------- -----
</TABLE>
The exercise price per share at June 30, 1998 and 1997 was $0.50 to $2.00.
During the year ended June 30, 1999, 1,260,000 of the 1,990,000 stock options
were cancelled and 630,000 stock options were re-priced to $0.15 to $0.25. These
changes have been retroactively adjusted above.
During the quarter-ended September 30,1999, 87,500 and 665,000 additional share
options were issued under the plan for an exercise prices of $0.40 and $.23
respectively.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock option plan and accordingly, compensation expense of $70,600 was
recognized as salaries expense during the year ended June 30, 1999.
(c) Included in promissory notes receivable are:
(i) $31,500 on exercise of 210,000 stock options, interest of
10% per annuam, due November 1, 1999; and
(ii) $252,568 for issue of 1,683,789 common shares, interest
at 6% per annum, due January 17, 2001.
10. INCOME TAXES
A deferred tax assessment stemming from the Company's net loss carry forward,
has been reduced by a valuation account to zero due to uncertainties regarding
the utilization of deferred assets. At June 30, 1999 the Company has available a
net operating loss carry forward of approximately $2,448,000 which it may use to
offset federal taxable income. The net operating loss carry forward if not
utilized, will begin to expire in 2011.
F-30
<PAGE> 58
INTEGRAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE CO.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
(UNAUDITED)
11. INTEREST ON BENEFICIAL CONVERSION
The differences between the market value of the Company's shares on the date of
conversion and the conversion rate pursuant to $525,000 of the convertible
debenture issued during the year ended June 30, 1999 was $398,077.
The difference between the market value of the Company's shares and the issue
price of 1,683,789 common shares for a promissory note in the amount of $252,568
was $168,379. These amounts have been recorded as interest expenses in the
statement of operations.
12. CONTINGENCY
A dispute exists between WVRUC and the Company with respect to the development
work performed by WVURC on the Plasma Ignition System and the Counterfeit
Detection Technology. The Company has included in its accounts the amount owing
to WVU of $397,296, however, it is the opinion of management that this amount
should be reduced to $43,052, Management intends to defend this position. As the
actual outcome cannot be determined at this time, any adjustments required will
be recorded by the Company when settlement occurs.
F-31
<PAGE> 59
PART III
ITEM 1. INDEX TO AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between the Registrant and
Integral Vision Systems, Inc. dated March 11, 1997. (Filed
herewith.)
2.2 Agreement and Plan of Reorganization between the Registrant and
Emergent Technologies Corporation dated December 10, 1997. (Filed
herewith.)
3.1 Articles of Incorporation, as amended and currently in effect.
(Filed herewith.)
3.2 Bylaws, as amended and restated on December 31, 1997. (Filed
herewith.)
10.1 Sublicense Agreement between the Registrant's subsidiary, Integral
Concepts, Inc., and Emergent Technologies Corporation dated January
2, 1996, relating to the Toroidal Helical Antenna. (Filed herewith.)
10.2 Agreement between the Registrant and West Virginia University
Research Corporation on Behalf of West Virginia University dated
February 9, 1996, relating to RF Quarter-Wave Coaxial Cavity
Resonator. (Filed herewith.)
10.3 Agreement between the Registrant and West Virginia University
Research Corporation on Behalf of West Virginia University dated
February 9, 1996, relating to Counterfeit Currency Determination
Prototype. (Filed herewith.)
10.4 Sublicense Agreement between Integral Concepts, Inc. and the
Registrant dated February 15th, 1996, relating to the design,
construction and operation of a Plasma Ignition System. (Filed
herewith.)
10.5 Employment Agreement between the Registrant and William S. Robinson
dated October 1, 1997 and Addendum dated March 15, 1999. (Filed
herewith.)
10.6 Employment Agreement between the Registrant and William A. Ince
dated October 1, 1997 and Addendum dated March 15, 1999. (Filed
herewith.)
10.7 Employee Benefit and Consulting Services Compensation Plan, as
restated January 10, 1999. (Filed herewith.)
21.1 List of Subsidiaries. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
</TABLE>
26
<PAGE> 60
SIGNATURES
Pursuant to the requirements Section 12 of the Securities Exchange Act of 1934,
the Registrant has duly caused this report or amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
----------------------------------------------------------
William S. Robinson, Chairman, Chief Executive
Officer, Treasurer and Director
By: /s/ William A. Ince
----------------------------------------------------------
William A. Ince, President, Secretary,
Chief Financial Officer and Director
By: /s/ Denzel Jack Parsons
----------------------------------------------------------
Denzel Jack Parsons, Director
Dated: December 2, 1999
27
<PAGE> 61
EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between the Registrant and
Integral Vision Systems, Inc. dated March 11, 1997. (Filed
herewith.)
2.2 Agreement and Plan of Reorganization between the Registrant and
Emergent Technologies Corporation dated December 10, 1997. (Filed
herewith.)
3.1 Articles of Incorporation, as amended and currently in effect.
(Filed herewith.)
3.2 Bylaws, as amended and restated on December 31, 1997. (Filed
herewith.)
10.1 Sublicense Agreement between the Registrant's subsidiary, Integral
Concepts, Inc., and Emergent Technologies Corporation dated January
2, 1996, relating to the Toroidal Helical Antenna. (Filed herewith.)
10.2 Agreement between the Registrant and West Virginia University
Research Corporation on Behalf of West Virginia University dated
February 9, 1996, relating to RF Quarter-Wave Coaxial Cavity
Resonator. (Filed herewith.)
10.3 Agreement between the Registrant and West Virginia University
Research Corporation on Behalf of West Virginia University dated
February 9, 1996, relating to Counterfeit Currency Determination
Prototype. (Filed herewith.)
10.4 Sublicense Agreement between Integral Concepts, Inc. and the
Registrant dated February 15th, 1996, relating to the design,
construction and operation of a Plasma Ignition System. (Filed
herewith.)
10.5 Employment Agreement between the Registrant and William S. Robinson
dated October 1, 1997 and Addendum dated March 15, 1999. (Filed
herewith.)
10.6 Employment Agreement between the Registrant and William A. Ince
dated October 1, 1997 and Addendum dated March 15, 1999. (Filed
herewith.)
10.7 Employee Benefit and Consulting Services Compensation Plan, as
restated January 10, 1999. (Filed herewith.)
21.1 List of Subsidiaries. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
INTEGRAL TECHNOLOGIES, INC.
Acquisition of
INTEGRAL VISION SYSTEMS, INC.
<PAGE> 2
TABLE OF CONTENTS
RECITALS
AGREEMENT
<TABLE>
<S> <C>
1. Plan of Reorganization
1.1 Liabilities
1.2 Acquisition
1.3 Exchange of Shares
1.4 Reorganization
1.5 Taxes
2. Closing
2.1 Delivery of Shares
2.2 Place and Time
2.3 Closing Requirements
3. Acquiror's Right to Unwind
4. Representations of Stockholders and Acquiree
4.1 Organization
4.2 Authority
4.3 Capitalization
4.4 Stockholders
4.5 Subsidiaries
4.6 Due Diligence
4.7 Approvals and Consent
4.8 Financial Statements
4.9 Undisclosed Liabilities
4.10 Assets
4.11 Environmental Matters
4.12 Insurance
4.13 Bank Accounts
4.14 Employees
4.15 Employment/Consulting Contracts
4.16 Litigation
4.17 Applicable Laws
4.18 Taxes
4.19 Breach of Contracts
4.20 Acquiree Disclosure
4.21 Stockholder Disclosure
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
5. Representations of Acquiror
5.1 Organization
5.2 Capitalization
5.3 Authority
5.4 Approvals and Consent
5.5 Litigation
5.6 Breach of Contracts
5.7 Acquiror Disclosure
6. Conduct of Acquiree's Business Pending Closing
6.1 Dividends and Distributions
6.2 Preservation of Organization
7. Indemnification
8. Joint Covenants of Acquiror and Acquiree
9. Restrictions on Transfer of Shares
10. Confidentiality
11. Advances
12. Nature and Survival of Representations
13. Conditions Precedent to the Obligations of Acquiree and Stockholders
13.1 Representations and Warranties True at Closing
13.2 Resolutions by Directors of Acquiror
13.3 No Litigation
13.4 Delivery of ITI Shares
13.5 Compliance
14. Conditions Precedent to the Obligations of Acquiror
14.1 Representations and Warranties True at Closing
14.2 Resolutions by Directors of Acquiree
14.3 No Litigation
14.4 Cancellation of Debt
14.5 Financial Conditions
14.6 Delivery of IVSI Shares
14.7 Delivery of Records
14.8 Compliance
</TABLE>
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<TABLE>
<S> <C>
15. Termination
15.1 Termination by Acquiror
15.2 Termination by Acquiree and Stockholders
15.3 Procedure Upon Termination
16. Miscellaneous
16.1 Undertakings and Further Assurances
16.2 Waiver
16.3 Notices
16.4 Headings
16.5 Governing Law
16.6 Binding Effect
16.7 Entire Agreement
16.8 Time
16.9 Expenses
16.10 Default Costs
16.11 Severability
16.12 Counterparts and Facsimile Signatures
</TABLE>
SIGNATURE PAGE
EXHIBITS
1.1 Schedule of Outstanding Debts Held By Stockholders of Acquiree
1.3 Schedule of Share Allocation
3 Summary of Technology Licenses Held By Acquiree
4.4 List of Acquiree Stockholders
4.7 Schedule of Approvals and Consents--Acquiree and Stockholders
4.8 Audited Financial Statements of Acquiree
4.9 Schedule of Liabilities of Acquiree
4.10 Schedule of Assets (and Encumbrances) of Acquiree
4.12 Insurance Policies
4.13 Schedule of Bank Accounts
4.16 Schedule of Litigation Matters
4.19 Breach of Contracts--Acquiree
5.2a Shareholders List of Acquiror
5.2b Employee Benefit and Consulting Services Compensation Plan of
Acquiror
5.4 Schedule of Approvals and Consents--Acquiror
5.6 Breach of Contracts--Acquiror
14.6 Form of Subscription Agreement--Stockholders
iv
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is
entered into as of the 11th day of March, 1997, by and between INTEGRAL
TECHNOLOGIES, INC., a Nevada corporation ("Acquiror"); INTEGRAL VISION SYSTEMS,
INC., a West Virginia corporation ("Acquiree"); and the undersigned
stockholders of Acquiree ("Stockholders"):
RECITALS
WHEREAS, Stockholders own 100% of the issued and outstanding common
stock of Acquiree; and
WHEREAS, Acquiror desires to acquire 100% of the issued and
outstanding common stock of Acquiree, and Stockholders desire to exchange 100%
of their shares of common stock in Acquiree for shares of common stock of
Acquiror; and
WHEREAS, a letter agreement dated November 8, 1995 (the "Letter"), was
executed by and between certain individual founders of Acquiror and Integral
Concepts, Inc., which Letter, inter alia, made initial provisions for the
consummation of this transaction, and is superseded by this Agreement to the
extent of any conflict between this Agreement and the Letter; and
WHEREAS, Acquiror has advanced ninety thousand dollars ($90,000.00) to
Acquiree, pursuant to the terms of the Letter;
NOW, THEREFORE, for and in consideration of the mutual covenants and
representations and warranties of each other contained herein and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Acquiror, Acquiree and Stockholders agree as follows:
1. Plan of Reorganization. The Plan of Reorganization is as follows:
1.1 Liabilities. At Closing (as hereinafter defined), Stockholders shall cancel
any and all outstanding debts (including promissory notes, accounts payable and
other obligations) of Acquiree held by Stockholders (collectively, the "Debt
Holders"), with all such outstanding debts held by Debt Holders, if any, more
fully described in Exhibit 1.1 hereto.
1.2 Acquisition. At the Closing, Acquiror shall acquire from Stockholders, and
Stockholders shall sell, transfer, assign and convey to Acquiror, 100% of all
the issued and outstanding shares of common stock of Acquiree, par value $1.00
per share, on the date thereof (the "IVSI Shares"), in exchange for 100,000
restricted shares of Acquiror's common stock, par value $.001 per share (the
"ITI Shares"). The ITI Shares issued shall have the rights, restrictions and
privileges set forth in Acquiror's Articles of Incorporation and in the stock
certificates therefor.
1.3 Exchange of Shares. To consummate the acquisition, ITI Shares shall be
delivered by the Acquiror to the respective Stockholders as set forth in
Exhibit 1.3 hereto for the number of shares indicated across from their
respective names, in exchange for 100% of the IVSI Shares owned by each
Stockholder, as indicated on the signature page hereto.
1.4 Reorganization. Upon the Closing, Acquiree shall become a wholly-owned
subsidiary of Acquiror. The officers and directors of Acquiree shall resign at
the Closing, and the officers and directors of Acquiree after the
reorganization shall be:
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<PAGE> 6
Name Position
---- --------
William S. Robinson President, Treasurer, Director
William A. Ince Secretary, Director
1.5 Taxes. It is the intention of the parties hereto that this transaction
qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal
Revenue Code of 1954, as amended, and related sections thereunder. In the event
that this transaction is determined not to qualify as a tax-free
reorganization, each party shall be responsible for and shall pay any and all
taxes charges or fees attributable to such party, including individual state
and federal income taxes, arising out of, or by reason of, the exchange of the
ITI Shares for the IVSI Shares, or otherwise in connection with the
transactions contemplated hereby.
2. Closing. At the Closing, Stockholders shall be deemed to have accepted
delivery of the certificates of the ITI Shares to be issued in their names, and
in connection therewith, shall make delivery of their IVSI Shares to Acquiror.
2.1 Delivery of Shares. On or before the Closing Date, Stockholders shall
deliver their respective certificates representing 100% of all the issued and
outstanding IVSI Shares duly endorsed in blank, free and clear of all claims
and encumbrances; and on the Closing Date, Acquiror shall deliver the ITI
Shares, which shall be appropriately restricted as to transfer, to
Stockholders. All stock certificates delivered by Stockholders under this
Agreement may be held in escrow by counsel to Acquiree until the Closing. The
ITI Shares shall be duly issued in the names designated by the Stockholders in
accordance with Subparagraph 1.3 above, and shall be duly recorded on the books
and records of Acquiror.
2.2 Place and Time. The closing of the reorganization and the transactions
contemplated in this Agreement (the "Closing") shall take place within fifteen
(15) days following the satisfaction (or waiver) of the conditions set forth in
Paragraphs 13 and 14 hereof at such place and on such date as mutually agreed
upon by the parties (the "Closing Date").
2.3 Closing Requirements. At the Closing, each of the parties shall execute and
deliver such instruments and documents and take such other actions as may, in
the reasonable opinion of counsel for each, be required to complete the
transactions under this Agreement. The following documents shall have been
delivered and the following activities shall be deemed to have taken place
contemporaneously at the Closing:
a) the securities to be delivered pursuant to Subparagraph 2.1 have
been delivered to the respective parties duly endorsed or issued as
the case may be, pursuant to Subparagraphs 1.3 and 2.1.
b) delivery of all corporate records of Acquiree, including without
limitation, corporate minute books (which shall contain copies of
the Articles of Incorporation and Bylaws, as amended to the
Closing), stock books, stock transfer books, corporate seals, and
such other corporate books and records as may be reasonably
requested for review by Acquiror;
c) delivery of the evidence of cancellation of debts and release of
liens by the Debt Holders satisfactory to Acquiror pursuant to
Subparagraph 1.1 hereof;
d) a certificate of the President and the Secretary of Acquiree to the
effect that all representations and warranties of Acquiree made
under this Agreement are reaffirmed on the Closing Date, the same
as though originally given to Acquiror on said date as set forth
herein;
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<PAGE> 7
e) the Subscription Agreements of the Stockholders;
f) a certificate from the West Virginia Secretary of State dated at or
about the date of the Closing to the effect that Acquiree is in
good standing under the laws of said State;
g) copies of resolutions by Acquiree's Board of Directors authorizing
this Agreement;
h) resignations of all of the members of the Board of Directors and
officers of Acquiree effective as of the Closing Date;
i) a certificate of the President and the Secretary of Acquiror to the
effect that all representations and warranties of Acquiror made
under this Agreement are reaffirmed on the Closing Date, the same
as though originally given to Acquiree and Stockholders on said
date;
j) copies of resolutions by Acquiror's Board of Directors authorizing
this Agreement;
k) a certificate from the Secretary of State of Nevada dated at or
about the date of Closing to the effect that Acquiror is in good
standing under the laws of said State; and
l) the parties hereto have signed and delivered such other instruments
and documents, if any, relating to and effecting the transactions
contemplated herein.
3. Technology Licenses Held By Acquiree. West Virginia University Research
Corporation ("WVURC") has licensed the rights to certain technologies to
Integral Concepts, Inc. ("ICI"), some of which have been further sub-licensed
to Acquiree. Copies of all such licenses from WVURC to ICI, sub-licenses from
ICI to Acquiree, and any further sub-licenses from Acquiree to any third-party
will be provided by Acquiree at Closing and identified on Exhibit 3. Acquiror
acknowledges the existence of the required royalty payments that exist under
the licenses and sub-licenses identified on Exhibit 3 and that the royalty
payments will continue to be required to be paid after the consummation of this
transaction."
4. Representations of Stockholders and Acquiree. Each of the Stockholders and
Acquiree hereby represents and warrants that effective this date and the
Closing Date, the representations and warranties listed below are true and
correct:
4.1 Organization. Acquiree is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of West Virginia with full
power and authority to own and use its properties and conduct its business as
presently conducted by it. Acquiree has furnished Acquiror or its counsel with
copies of the Articles of Incorporation and the Bylaws of Acquiree, including
all amendments thereto. Such copies are true, correct and complete and contain
all amendments through the date hereof, which, together with this Agreement,
are sufficient to effect the transactions hereunder and evidence the intent of
the parties hereto.
4.2 Authority. Acquiree has the requisite corporate authority to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement by Acquiree and the consummation of the transactions
contemplated hereby will not violate or conflict with any provisions of the
Articles of Incorporation, as amended, or Bylaws of Acquiree or contravene any
law, rule, regulation, court or administrative order binding on it, or result
in the breach of or constitute a default in the performance of any material
obligation, agreement, covenant or condition contained in any material
contract, lease, judgment, decree, order, award, note, loan or credit agreement
or any other material agreement or instrument to which Acquiree is a party or
by which it is bound, the default or breach of which would have
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<PAGE> 8
a material adverse effect on the property and assets of Acquiree, considered as
a whole. Acquiree has taken all requisite corporate action to authorize and
approve the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. Upon due execution and
delivery of this Agreement, this Agreement will constitute a valid, legal and
binding obligation of Acquiree and the respective Stockholders enforceable
against them in accordance with its terms.
4.3 Capitalization. The authorized stock of Acquiree consists of (a) one
hundred (100) shares of common stock, par value $1.00 per share, and (b) no
shares of preferred stock. Immediately prior to the Closing, there will be one
hundred (100) shares of IVSI common stock issued and outstanding and no shares
of IVSI preferred stock issued and outstanding. All such IVSI shares issued and
outstanding are duly and validly authorized and issued and are fully paid and
nonassessable. Acquiree does not have outstanding any security convertible
into, or any warrant, option or other right to subscribe for or acquire any
shares of stock of Acquiree.
4.4 Stockholders. The holders of the IVSI Shares shown on the stock books of
the Acquiree own 100% of the issued and outstanding IVSI Shares, free and clear
of any security interest, claim, lien or encumbrance; and there are no
outstanding rights, warrants or options to subscribe for or acquire or
instruments convertible into or exchangeable for, any shares of stock or other
equity interest in Acquiree. The Acquiree Stockholders listed on the attached
Exhibit 1.3 are the owners of 100% of the issued and outstanding IVSI Shares;
such IVSI Shares are free and clear from claims, liens, or other encumbrances;
and Stockholders have the unqualified right to transfer and dispose of their
respective IVSI Shares. Stockholders will deliver, upon reasonable demand of
Acquiror, any approvals, consents or other authorizations to Acquiror and said
approvals, consents and other authorizations will have been duly executed,
valid and binding.
4.5 Subsidiaries. Acquiree has no subsidiaries.
4.6 Due Diligence. In addition to the documents described in Subparagraph 4.1
hereof, Acquiree has furnished to Acquiror copies of all documents requested by
Acquiror. No "due diligence" investigations undertaken by Acquiror shall in any
event relieve Acquiree or the respective Stockholders of their responsibilities
for the accuracy and completeness of any representation or warranty of Acquiree
or of the respective Stockholders contained herein or the performance of any
covenant or agreement of Acquiree or of the respective Stockholders contained
herein.
4.7 Approvals and Consent. Except as set forth in Exhibit 4.7 hereto, no
approval, authorization or other action by, or filing with, any third-party,
including a governmental authority is required in connection with the
execution, delivery and performance by Acquiree and the respective Stockholders
of their obligations under this Agreement and their respective performance of
the transactions contemplated hereby.
4.8 Financial Statements. Acquiree has provided audited financial statements of
Acquiree prepared in accordance with the requirements of Regulation S-B of the
Securities Act of 1933, as amended (the "Act"), for the period of time since
commencing operations up to June 30, 1996, which are attached as Exhibit 4.8.
4.9 Undisclosed Liabilities. Acquiree has no material liabilities or
obligations whatsoever, either accrued, absolute, contingent or otherwise,
except: (i) as disclosed on the financial statements attached as Exhibit 4.8;
(ii) that do or may exceed $1,000 per liability/obligation as shown on Exhibit
4.9 hereto; or (iii) those incurred in or as a result of the ordinary course of
business of Acquiree and not exceeding $10,000 in the aggregate.
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<PAGE> 9
4.10 Assets. The assets of Acquiree as set forth in Exhibits 4.8 and/or 4.10
(including real, personal and intangible) have been acquired in bona fide
transactions, fully supported by appropriate instruments of assignment, sale,
or transfer, where appropriate, and are offset by no liabilities or
contingencies, contractual or otherwise, except as indicated in Exhibits 4.8
and/or 4.10.
4.11 Environmental Matters. The operations of Acquiree on the Closing Date will
be in substantial compliance with all applicable material federal, state or
local environmental statutes, rules and regulations; none of the operations of
Acquiree is subject to any pending judicial or administrative proceedings
alleging the violation of any federal, state or local environmental statute,
rule or regulation; and none of the real property owned or leased by Acquiree
is subject of a federal, state or local government investigation regarding or
in response to a release or threatened release of any hazardous substance into
the environment, which investigation or remedial action in response thereto
would materially adversely affect the operations or financial condition of the
Acquiree, considered as a whole.
4.12 Insurance. Acquiree's policies of insurance in force are listed on Exhibit
4.12 hereto. Such policies are in amounts and contain coverages sufficient to
satisfy all minimum requirements of law, are sufficient for the adequate
protection of the insurable interest of Acquiree and will be outstanding and in
force on the Closing Date hereunder.
4.13 Bank Accounts. Exhibit 4.13 hereto sets forth the name of each bank in
which Acquiree has an account or safe deposit box and the names of all persons
authorized thereon or to have access thereto. At the Closing hereunder, new
signature cards will be signed as directed by Acquiror.
4.14 Employees. No employee of Acquiree is represented by a union or a
collective bargaining agreement of any kind. Acquiree has complied in all
material respects with all applicable laws relating to the employment of labor
in connection with the operations of its business, including, without
limitation, those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity and the payment
and withholding of taxes, including income and social security taxes.
4.15 Employment/Consulting Contracts. Acquiree has no Employment/Consulting
Contracts or any contracts providing for bonus, profit sharing or pension
arrangements.
4.16 Litigation. Except as set forth in Exhibit 4.16 hereto, Acquiree is not
involved in any pending litigation or governmental investigation or proceeding
and, to the best knowledge of Acquiree and Stockholders, no litigation, claims,
assessments, or governmental investigation or proceeding is threatened against
Acquiree, its Stockholders or properties.
4.17 Applicable Laws. Acquiree has complied with all state, federal and local
laws in connection with its formation, issuance of securities, organization,
capitalization and operations, and no contingent liabilities have been
threatened or claims made, and no basis for the same exists with respect to
said operations, formation or capitalization, including claims for violation of
any state or federal securities laws.
4.18 Taxes. Acquiree has filed all governmental, tax or related returns and
reports due or required to be filed and has paid all taxes or assessments which
have become due as of the Closing Date, and Acquiree, to the best of its
knowledge, is not subject to a tax audit by any federal, state or local tax
authority and its properties are not subject to any tax liens. Acquiree will
cause to be filed or prepared, as applicable, by the Closing Date, all federal,
state, county and local income, excise, property and other tax returns, forms,
or reports, which are due or required to be filed by it prior to the Closing
Date.
4.19 Breach of Contracts. Except as disclosed on Exhibit 4.19, Acquiree has not
breached, nor is there any pending or threatened claims or any legal basis for
a claim that Acquiree has breached, any of
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<PAGE> 10
the terms or conditions of any agreements, contracts or commitments to which it
is a party or is bound and the execution and performance hereof will not
violate any provisions of applicable law of any agreement to which Acquiree is
subject.
4.20 Acquiree Disclosure. At the date of this Agreement, Acquiree has, and at
the Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of Acquiree. Acquiree has not
now and will not have, at the Closing Date, withheld disclosure of any such
events, conditions, and facts which it, through management, has knowledge of,
or has reasonable grounds to know, which may materially affect the business and
prospects of Acquiree.
4.21 Stockholder Disclosure. Each Stockholder hereby represents that the
materials prepared and delivered by Acquiror to Stockholders will have been
read and understood by such Stockholder, including Paragraph 9 hereof, that he
is familiar with the business of Acquiror, that he is acquiring the ITI Shares
under Section 4(2) of the Act, commonly known as the private offering
exemption, and that the shares are restricted and may not be resold, except in
reliance upon an exemption under the Act.
5. Representations of Acquiror. Acquiror hereby represents and warrants as
follows:
5.1 Organization. Acquiror is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada with full power and
authority to own and use its properties and conduct its business as presently
conducted by it. Acquiror is duly qualified and in good standing to do business
as a foreign corporation in any other jurisdiction where failure to so qualify
would have a material adverse effect on its business or assets. The Acquiror
has made available to Acquiree copies of the Articles of Incorporation and the
Bylaws of Acquiror, including all amendments thereto. Such copies are true,
correct and complete and contain all amendments through the date hereof,
together with this Agreement, which are sufficient to effect the transactions
hereunder and evidence the intent of the parties hereto.
5.2 Capitalization. The authorized stock of Acquiror consists of (a) 50,000,000
shares of common stock and (b) 20,000,000 shares of preferred stock.
Immediately prior to the Closing, there will be approximately 11,663,500 shares
of ITI common stock issued and outstanding and no shares of preferred stock
issued and outstanding, prior to the issuance of the 100,000 ITI Shares to be
issued at Closing pursuant to this Agreement. Acquiror also anticipates issuing
an additional 1,800,000 shares of ITI common stock in its acquisition of
Emergent Technologies Corporation. Acquiror will provide a complete
shareholders list at or before Closing, to be attached as Exhibit 5.2a. At the
time of their issuance and delivery on the Closing Date, all ITI Shares to be
issued pursuant to the terms hereof shall be duly and validly authorized and
issued, fully paid and nonassessable. Acquiror does not have outstanding any
security convertible into, or any warrant, option or other right to subscribe
for or acquire any shares of stock of Acquiror, other than options granted
under Acquiror's "Employee Benefit and Consulting Services Compensation Plan"
(the "Plan") that allows Acquiror to grant options to acquire up to 2,000,000
shares of Acquiror's common stock, to persons eligible to participate in the
Plan. Acquiror will provide a copy of the Plan at or before Closing, to be
attached as Exhibit 5.2b.
5.3 Authority. Acquiror has the requisite corporate authority to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement by Acquiror and the consummation of the transactions
contemplated hereby will not violate or conflict with any provisions of the
Articles of Incorporation, as amended, or Bylaws of Acquiror or contravene any
law, rule, regulation, court or administrative order binding on it, or result
in the breach of or constitute a default in the performance of any material
obligation, agreement, covenant or condition contained in any material
contract, lease, judgment, decree, order, award, note, loan or credit agreement
or any other material agreement or instrument to which Acquiror is a party or
by which it is bound, the default or breach of which would have a
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<PAGE> 11
material adverse effect on the property and assets of Acquiror, considered as a
whole. Acquiror has taken all requisite corporate action to authorize and
approve the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. Upon due execution and
delivery of this Agreement, this Agreement will constitute a valid, legal and
binding obligation of Acquiror enforceable against it in accordance with its
terms.
5.4 Approvals and Consent. Except as set forth in Exhibit 5.4 hereto, no
approval, authorization or other action by, or filing with, any third-party,
including a governmental authority is required in connection with the
execution, delivery and performance by Acquiror of its obligations under this
Agreement and its performance of the transactions contemplated hereby.
5.5 Litigation. Acquiror is not involved in any pending litigation or
governmental investigation or proceeding and, to the best knowledge of
Acquiror, no litigation, claims, assessments, or governmental investigation or
proceeding is threatened against Acquiror, its stockholders or properties.
5.6 Breach of Contracts. Except as disclosed on Exhibit 5.6, Acquiror has not
breached, nor is there any pending or threatened claims or any legal basis for
a claim that Acquiror has breached, any of the terms or conditions of any
agreements, contracts or commitments to which it is a party or is bound and the
execution and performance hereof will not violate any provisions of applicable
law of any agreement to which Acquiror is subject.
5.7 Acquiror Disclosure. At the date of this Agreement, Acquiror has, and at
the Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of Acquiror. Acquiror has not
now and will not have, at the Closing Date, withheld disclosure of any such
events, conditions, and facts which it, through management, has knowledge of,
or has reasonable grounds to know, which may materially affect the business and
prospects of Acquiror.
6. Conduct of Acquiree's Business Pending Closing. Acquiree shall carry on its
business in the usual and ordinary course and not make or institute any unusual
method of purchase, sale, lease, management, accounting or operation. Further,
Acquiree shall not have entered into any material transactions, including any
material transactions with the respective officers, directors or stockholders,
other than in the ordinary course of business, except as expressly approved in
advance in writing by Acquiror.
6.1 Dividends and Distributions. Acquiree shall not declare or pay any
dividends or make any distribution in respect of its capital stock, and not,
directly or indirectly, issue or sell any additional shares of its capital
stock.
6.2 Preservation of Organization. Acquiree shall preserve its business
organizations in tact and use its best efforts to preserve its present
relationships with its employees, suppliers and customers and others having
business relations with it. In addition, Acquiree shall not do any act nor
admit to do any act nor permit any act or omission to act, which would cause a
breach of any material contract, commitment or obligation which would
materially and adversely affect its business or financial condition.
7. Indemnification. The parties hereby agree that for a period of two years
commencing the date hereof, and in accordance with the terms of Paragraph 12,
each party to this Agreement shall indemnify and hold harmless each other party
at all times after the date of this Agreement against and in respect of any
third-party liability, damage or deficiency, all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses, including attorney's fees,
incident to any of the foregoing, resulting from any misrepresentation, breach
of covenant or warranty or nonfulfillment of any agreement on the part of such
party under this Agreement or from any misrepresentation in or intentional
omission from any document or certificate furnished or to be furnished to a
party hereunder. Subject to the terms of this
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<PAGE> 12
Agreement, the defaulting party shall reimburse the other party or parties with
respect to such third-party's actions on demand, for any reasonable payment
made by said parties at any time after the Closing, in respect of any liability
or claim to which the foregoing indemnity relates, if such payment is made
after reasonable notice to the other party to defend or satisfy the same and
such party failed to defend or satisfy the same. In the event a third-party
action is threatened or commenced but not resolved within said two-year period,
the parties hereby agree to extend this indemnification through resolution of
the third-party action.
In addition, each party agrees to indemnify each other party for any
loss incurred as a result of the subsequent discovery of any liability that is
not disclosed in the financial statements or schedules provided under this
Agreement that was known to such knowledgeable party or parties at the time of
the Closing.
8. Joint Covenants of Acquiror and Acquiree. Acquiror and Acquiree and the
respective Stockholders each covenant and agree to execute any further
documents or agreements and to take any further acts that may be reasonably
necessary to effect the transactions contemplated hereunder, including, but not
limited to, obtaining any consents or approvals of any third-party required to
be obtained to consummate the transactions contemplated by this Agreement.
9. Restrictions on Transfer of Shares. The parties hereto acknowledge that the
ITI Shares issued in connection with the transactions contemplated hereby are
restricted as to transfer and the certificates therefore shall bear legends to
such effect and no transfer of any ITI Share may be effected, except pursuant
to an effective registration statement prepared and filed pursuant to the Act
or pursuant to an exemption from registration thereunder, as evidenced by an
opinion of counsel or as otherwise allowed under the laws of descent and
distribution.
10. Confidentiality. Unless and until the transactions contemplated hereby have
been consummated, the respective parties hereto shall hold in strict confidence
and not use or disclose to any other person any information heretofore or
hereafter obtained from the other parties' hereto, whether pertaining to the
financial condition, results of operations, methods of operations or otherwise
of such respective parties, except any of the same which was or is public or
published information or is otherwise a matter of public knowledge, or is
required to be disclosed by Acquiror or by its officers, agents or
representatives by law or in connection with any proceeding before any
governmental authority. If the transactions contemplated hereby are not
consummated, the respective parties shall return to the appropriate parties
hereto and shall not retain any copies of any written information and other
written material respecting the respective parties or their businesses obtained
by them from the other parties hereto or their respective officers, agents,
employees or representatives in connection with the negotiation of and the
transactions contemplated by this Agreement, or any such written information or
material prepared by any party hereto from oral information supplied by such
other parties hereto or any of their respective officers, agents, employees or
representatives, and each party hereto shall use all reasonable efforts to keep
confidential any information obtained by them in connection with this
Agreement, unless and until such information is ascertainable from public or
published information or trade sources or is otherwise a matter of public
knowledge.
11. Advances. Acquiree Acknowledges that Acquiror has advanced ninety thousand
dollars ($90,000.00) to Acquiree, pursuant to the terms of the Letter, to fund
Acquiree's operations pending consummation of this Agreement.
12. Nature and Survival of Representations. All representations, warranties and
covenants made by any party in this Agreement shall survive the Closing
hereunder and the consummation of the transactions contemplated hereby for two
years from the date hereof. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein
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<PAGE> 13
provided for and not upon any investigation upon which it might have made or
any representations, warranty, agreement, promise or information, written or
oral, made by the other party or any other person other than as specifically
set forth herein.
13. Conditions Precedent to the Obligations of Acquiree and Stockholders. All
obligations of Acquiree and Stockholders under this Agreement are subject to
the fulfillment by Acquiror, prior to or as of the Closing Date, of each of the
following conditions:
13.1 Representations and Warranties True at Closing. The representations and
warranties made by Acquiror shall be true on and as of the Closing Date as if
made on that date, and Acquiror shall have delivered a certificate of its
President so stating.
13.2 Resolutions by Directors of Acquiror. Acquiror shall have delivered to
Acquiree and Stockholders a copy of the resolutions of its Board of Directors
authorizing or ratifying the execution and performance of this Agreement and
approving the transactions contemplated hereby.
13.3 No Litigation. No suit, action or other proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
13.4 Delivery of ITI Shares. Acquiror shall have delivered to Acquiree and the
respective Stockholders stock certificates representing the ITI Shares as
described in Subparagraph 2.1 hereof and required hereunder to be delivered to
Acquiree and the respective Stockholders on the Closing Date.
13.5 Compliance. Acquiror shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing on the Closing Date.
14. Conditions Precedent to the Obligations of Acquiror. All obligations of
Acquiror under this Agreement are subject to the fulfillment by Acquiree and
Stockholders, prior to or as of the Closing Date, of each of the following
conditions:
14.1 Representations and Warranties True at Closing. The representations and
warranties made by Acquiree and by each respective Stockholder shall be true on
and as of the Closing Date as if made on that date, and Acquiree shall have
delivered a certificate from its President so stating.
14.2 Resolutions by Directors of Acquiree. Acquiree shall have delivered to
Acquiror a copy of the resolutions of its Board of Directors authorizing or
ratifying the execution and performance of this Agreement and approving the
transactions contemplated hereunder.
14.3 No litigation. No suit, action or other proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
14.4 Cancellation of Debt. All Debt Holders (as defined in Subparagraph 1.1
hereof) of the Acquiree shall have canceled all outstanding obligations owed to
them by Acquiree and released any liens in connection therewith on terms
satisfactory to Acquiror, in its sole discretion, including, but not limited
to, any UCC-1 financing statements filed against Acquiree.
14.5 Financial Conditions. Prior to the Closing Date there will not be any
substantial and material changes in the financial position of Acquiree as
represented, except changes arising in the ordinary
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<PAGE> 14
course of business, and as disclosed to and accepted by Acquiror, which changes
will in no event adversely affect the financial position of said Acquiree.
14.6 Delivery of IVSI Shares. Each respective Stockholder shall have delivered
to Acquiror all their IVSI Shares to Acquiror on or before the Closing Date,
with the stock transfer instructions thereon duly executed in blank and
satisfactory to Acquiror, free and clear of all liens and encumbrances. In
addition, each respective Stockholder shall have delivered to Acquiror an
executed subscription agreement substantially in the form attached hereto as
Exhibit 14.6 and such other documents required to be delivered by them on the
Closing Date.
14.7 Delivery of Records. Acquiror shall have received at or prior to the
Closing, the corporate financial records, minute books, and other documents and
records of Acquiree in their entirety as requested to date by Acquiror. Prior
to that time, Acquiror shall have access to the same at any time.
14.8 Compliance. Acquiree and each respective Stockholder shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
15. Termination.
15.1 Termination by Acquiror. Acquiror may, at any time prior to Closing,
terminate this Agreement if:
a) any of the material representations and warranties made by Acquiree
or any Stockholder as set forth herein or otherwise in connection
with this Agreement are found to be materially inaccurate, in the
opinions of Acquiror's legal counsel and/or independent certified
public accountants; or
b) Acquiree or any Stockholder fails to perform any of its respective
obligations pursuant to the terms of this Agreement on or before
the Closing Date; or
c) any Debt Holder fails to cancel the outstanding obligations owed it
by Acquiree or fails to release its liens in connection therewith
on terms satisfactory to Acquiror; or
d) the Closing Date does not occur within sixty (60) days of the date
of this Agreement for reasons other than Acquiror's failure to
perform its obligations hereunder.
15.2 Termination by Acquiree and Stockholders. Acquiree and Stockholders shall
have the right to terminate this Agreement at any time if:
a) any of the material representations and warranties made by Acquiror
as set forth herein or otherwise in connection with this Agreement
are found to be materially inaccurate, in the opinions of
Acquiree's or Stockholders' legal counsel and/or Acquiree's
independent certified public accountants; or
b) Acquiror fails to perform any of its obligations pursuant to the
terms of this Agreement on or before the Closing Date; or
c) the Closing Date does not occur within sixty (60) days of the date
of this Agreement for reasons other than Acquiree's or any
Stockholder's failure to perform its obligations hereunder.
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<PAGE> 15
15.3 Procedure Upon Termination. In the event of termination and abandonment by
any party hereunder, notice thereof shall forthwith be given to other parties
and the transactions contemplated by this Agreement shall be terminated and/or
abandoned without further action by the parties. Except as provided in
Paragraph 10 (which obligations shall survive any termination and/or
abandonment of this transaction) and except for breaches or the nonfulfillment
of the warranties, representations, covenants and agreements contained in this
Agreement by such party, none of the parties shall have any further liability
or obligation to the other.
16. Miscellaneous.
16.1 Undertakings and Further Assurances. At any time, and from time to time,
after the effective date, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party to carry
out the intent and purposes of this Agreement; and Acquiror agrees to bear all
reasonable additional costs incurred by all parties in connection therewith, on
the condition that Acquiror will not be obligated to reimburse or pay any
costs, expenses or fees incurred by Acquiree or Stockholders in excess of
$100.00, unless such costs, expenses or fees are authorized in advance, in
writing by Acquiror.
16.2 Waiver. Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in writing by
the party to whom such compliance is owed.
16.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested,
or by Federal Express or other means of overnight delivery to the addresses
below:
Acquiror: Integral Technologies, Inc.
c/o Futro & Associates, P.C.
707 - 17th St., 29th Fl.
Denver, CO 80202
Acquiree: Integral Vision Systems, Inc.
c/o Rhonda L. Miller, Esq.
McNeer, Highland, McNunn and Varner, L.C.
168 Chancery Row, P.O. Box 1615
Morgantown, WV 26507-1615
Stockholders: To the addresses specified on the books and records
of Acquiree or in their respective Subscription
Agreements to be delivered at Closing
16.4 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
16.5 Governing Law and Arbitration Provision. This Agreement shall be governed
by the laws of the State of Nevada. Any dispute arising directly or indirectly
from this Agreement shall be settled by arbitration within the State of
Washington (as designated by Acquiror), if arbitration is demanded by Acquiree
or the Shareholders; or within the State of West Virginia (as designated by
Acquiree), if arbitration is demanded by Acquiror. Any arbitration will be
conducted by the American Arbitration Association in accordance with its Rules
of Commercial Arbitration, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The parties
hereto agree that service by certified mail to their business addresses shall
constitute sufficient service of process of any proposed arbitration.
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<PAGE> 16
16.6 Binding Effect. This Agreement shall be binding upon the parties hereto
and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns. This Agreement shall not be
assigned by any party hereto, except upon the consent, in writing, of the other
parties hereto.
16.7 Entire Agreement. This Agreement, including the Exhibits hereto and other
documents delivered pursuant to the terms hereof, is the entire agreement of
the parties covering everything agreed upon or understood with respect to the
transactions contemplated hereby and supersedes all prior agreements,
covenants, representations or warranties, whether written or oral, by any party
hereto. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof.
16.8 Time. Time is of the essence. The parties each agree to proceed promptly
and in good faith to consummate the transactions contemplated herein.
16.9 Expenses. Each of the parties hereto shall pay its own expenses incurred
in connection with the authorization, preparation, execution and performance of
this Agreement and obtaining any necessary regulatory approvals, including,
without limitation, all fees and expenses of their respective counsel.
16.10 Severability. If any part of this Agreement is deemed to be unenforceable
the balance of the Agreement shall remain in full force and effect.
16.11 Counterparts and Facsimile Signatures. This Agreement and any Exhibits,
attachments, or documents ancillary hereto, may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. Execution
and delivery of this Agreement by exchange of facsimile copies bearing the
facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such facsimile copies
shall constitute enforceable original documents.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
--------------------------------------
William S. Robinson, President
Attest:
/s/ William A. Ince
- -----------------------------------
William A. Ince, Secretary
INTEGRAL VISION SYSTEMS, INC.
By: /s/ James E. Smith
--------------------------------------
James E. Smith, President
Attest:
/s/ Cheryl D. Smith
- -----------------------------------
Cheryl D. Smith, Secretary
STOCKHOLDERS OF ACQUIREE:
1. /s/ James E. Smith Shares: 57.14
--------------------------------------
James E. Smith
2. /s/ Robert P. Craven Shares: 14.29
--------------------------------------
Robert P. Craven
3. /s/ Theresa Glickstein Shares: 28.57
--------------------------------------
Theresa Glickstein
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<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
INTEGRAL TECHNOLOGIES, INC.
ACQUISITION OF
EMERGENT TECHNOLOGIES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
RECITALS
AGREEMENT
<TABLE>
<S> <C>
1. Plan of Reorganization
1.1 Liabilities
1.2 Acquisition
1.3 Exchange of Shares
1.4 Voting Rights and Irrevocable Proxies
1.5 Taxes
2. Closing
2.1 Delivery of Shares
2.2 Place and Time
2.3 Closing Requirements
2.4 Condition to Closing
3. Acquiror's Right to Unwind
4. Representations of Stockholders and Acquiree
4.1 Organization
4.2 Authority
4.3 Capitalization
4.4 Stockholders
4.5 Subsidiaries
4.6 Due Diligence
4.7 Approvals and Consent
4.8 Financial Statements
4.9 Undisclosed Liabilities
4.10 Assets
4.11 Environmental Matters
4.12 Insurance
4.13 Bank Accounts
4.14 Employees
4.15 Employment/Consulting Contracts
4.16 Litigation
4.17 Applicable Laws
4.18 Taxes
4.19 Breach of Contracts
4.20 Acquiree Disclosure
4.21 Stockholder Disclosure
4.22 Monthly Expenses
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
5. Representations of Acquiror
5.1 Organization
5.2 Capitalization
5.3 Authority
5.4 Approvals and Consent
5.5 Litigation
5.6 Breach of Contracts
5.7 Acquiror Disclosure
5.8 Financial Statements
5.9 Undisclosed Liabilities
5.10 Other Matters
6. Conduct of Acquiree's Business Pending Closing
6.1 Dividends and Distributions
6.2 Preservation of Organization
7. Indemnification
8. Joint Covenants of Acquiror and Acquiree
9. Restrictions on Transfer of Shares
10. Confidentiality
11. Advances
12. Nature and Survival of Representations
13. Conditions Precedent to the Obligations of Acquiree and Stockholders
13.1 Representations and Warranties True at Closing
13.2 Resolutions by Directors of Acquiror
13.3 No Litigation
13.4 Delivery of ITI Shares
13.5 Compliance
14. Conditions Precedent to the Obligations of Acquiror
14.1 Representations and Warranties True at Closing
14.2 Resolutions by Directors of Acquiree
14.3 No Litigation
14.4 Cancellation of Debt
14.5 Financial Conditions
14.6 Delivery of Emergent Shares
14.7 Delivery of Records
14.8 Compliance
14.9 Financial Statements of Acquiree
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
15. Termination
15.1 Termination by Acquiror
15.2 Termination by Acquiree and Stockholders
15.3 Procedure Upon Termination
16. Miscellaneous
16.1 Undertakings and Further Assurances
16.2 Waiver
16.3 Notices
16.4 Headings
16.5 Liquidated Damages
16.6 Governing Law and Arbitration Provision
16.7 Binding Effect
16.8 Entire Agreement
16.9 Time
16.10 Expenses
16.11 Severability
16.12 Counterparts and Facsimile Signatures
SIGNATURE PAGE
EXHIBITS
1.1 Schedule of Outstanding Debts Held By Stockholders of Acquiree
1.3 Schedule of Share Allocation
3 Summary of Technology Licenses Held By Acquiree
4.3 Convertible Promissory Note of Acquiree
4.7 Schedule of Approvals and Consents--Acquiree and Stockholders
4.8 Audited Financial Statements of Acquiree
4.9 Schedule of Liabilities of Acquiree
4.10 Schedule of Assets (and Encumbrances) of Acquiree
4.12 Insurance Policies
4.13 Schedule of Bank Accounts
4.16 Schedule of Litigation Matters
4.19 Breach of Contracts--Acquiree
4.22 Monthly Expenses of Acquiree
5.2a List of Registered Shareholders of Acquiree
5.2b Employee Benefit and Consulting Services Compensation Plan,
Revolving Credit Loan Agreement of Acquiror, and relevant
Provisions of Consulting Agreement with Evergreen Wireless,
Ltd.
5.4 Schedule of Approvals and Consents--Acquiror
5.6 Breach of Contracts--Acquiror
5.8 Financial Statements of Acquiror
5.9 Schedule of Liabilities of Acquiror
14.6 Form of Subscription Agreement--Stockholders
</TABLE>
iv
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is
entered into as of the 10th day of December, 1997, by and between INTEGRAL
TECHNOLOGIES, INC., a Nevada corporation ("Acquiror"); EMERGENT TECHNOLOGIES
CORPORATION, a West Virginia corporation ("Acquiree"); and the undersigned
stockholders of Acquiree ("Stockholders"):
RECITALS
WHEREAS, Stockholders own 90% of the issued and outstanding common
stock of Acquiree (an aggregate of 90 shares); and
WHEREAS, Acquiror owns 10% of the issued and outstanding shares of
common stock of Acquiree (10 shares), and desires to acquire all of the issued
and outstanding common stock of Acquiree owned by Stockholders, and
Stockholders desire to exchange all of their shares of common stock in Acquiree
for shares of common stock of Acquiror; and
WHEREAS, a letter agreement dated September 20, 1996, and an addendum
dated March 25, 1997 (collectively the "Letter"), were executed by and among
Acquiror, certain individual founders of Acquiror, and Acquiree, which Letter,
inter alia, made initial provisions for the consummation of this transaction,
and is superseded by this Agreement: and
WHEREAS, Acquiror has advanced six hundred fifty thousand dollars
($650,000.00) to Acquiree, pursuant to the terms of the Letter.
NOW, THEREFORE, for and in consideration of the mutual covenants and
representations and warranties of each other contained herein and other good
and valuable consideration, the receipt of which is hereby acknowledged,
Acquiror, Acquiree and Stockholders agree as follows:
1. Plan of Reorganization. The Plan of Reorganization is as follows:
1.1 Liabilities. At Closing (as hereinafter defined), Stockholders shall cancel
any and all outstanding debts (including promissory notes, accounts payable and
other obligations) of Acquiree held by Stockholders (collectively, the "Debt
Holders"), or their affiliates, with all such outstanding debts held by Debt
Holders, if any, more fully described in Exhibit 1.1 hereto.
1.2 Acquisition. At the Closing, Acquiror shall acquire from Stockholders, and
Stockholders shall sell, transfer, assign and convey to Acquiror, an aggregate
of 90 shares of common stock of Acquiree, which represents all of the shares of
common stock of Acquiree owned by Stockholders and 90% of all the issued and
outstanding shares of common stock of Acquiree, par value $1.00 per share, on
the date thereof (the "Emergent Shares"), in exchange for an aggregate of
1,800,000 restricted shares of Acquiror's common stock, par value $.001 per
share (the "ITI Shares"). The ITI Shares issued shall have the rights,
restrictions and privileges set forth in Acquiror's Articles of Incorporation
and in the stock certificates therefor. Upon the Closing, Acquiree shall become
a majority-owned subsidiary of Acquiror.
1.3 Exchange of Shares. To consummate the acquisition, the ITI Shares shall be
delivered by the Acquiror to the respective Stockholders as set forth in
Exhibit 1.3 hereto for the number of shares indicated across from their
respective names, in exchange for 100% of the Emergent Shares owned by each
Stockholder, as indicated on Exhibit 1.3 and the signature page hereto.
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<PAGE> 6
1.4 Voting Rights and Irrevocable Proxies. Upon execution of this Agreement,
the ITI Shares and the Emergent Shares shall be placed in escrow as provide in
Subparagraph 2.1, pending Closing. From the date of execution of this Agreement
until Closing, Acquiror shall have the right to vote the Emergent Shares, and
the Stockholders shall have the right to vote the ITI Shares, subject to the
following:
a) Acquiror, on its behalf and on behalf of any successor entity, and
with respect to any ITI Shares being issued to the Stockholders as
set forth on Exhibit 1.3, grants to Stockholders the absolute right
to vote all ITI Shares being issued to the Stockholders on any and
all matters that are presented to Acquiror's shareholders for a
vote. Acquiror agrees that the obligations hereunder shall attach
to all ITI Shares being issued to the Stockholders and shall,
unless terminated, be binding upon any successor entity of
Acquiror.
b) Each Stockholder, individually and on behalf of all of his
respective heirs, executors, administrators, and other legal
representatives, and with respect to any Emergent Shares
beneficially owned, directly or indirectly by such Stockholder,
grants to Acquiror the absolute right to vote all Emergent Shares
held by such Stockholder on any and all matters that are presented
to Acquiree's shareholders for a vote. Each Stockholder agrees that
the obligations hereunder shall attach to such Stockholder's
Emergent Shares and shall, unless terminated, be binding upon any
person to which legal or beneficial ownership of such Emergent
Shares shall pass, whether by operation of law or otherwise,
including without limitation such Stockholder's heirs, guardians,
administrators or successors. In order to insure the voting of the
Stockholders in accordance with this Agreement, each Stockholder
hereby irrevocably grants to, and appoints, Acquiror such
Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such
Stockholder, to vote such Stockholder's Emergent Shares on any and
all matters that are presented to Acquiree's shareholders for a
vote or to execute and deliver written consents in respect of all
Emergent Shares currently owned or hereinafter acquired.
c) Acquiror and each Stockholder hereby affirm that the voting rights
hereby granted and the irrevocable proxies are coupled with an
interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that the holder of
each irrevocable proxy may lawfully do or cause to be done by
virtue hereof.
d) Each Stockholder hereby represents and warrants to each of the
other Stockholders and to Acquiror that (i) Exhibit 1.3 hereto
includes all Emergent Shares owned beneficially, directly or
indirectly by him and that he has the right to vote all of the
Emergent Shares set forth therein; (ii) he has full power to enter
into this irrevocable proxy and has not, prior to the date of this
Agreement, executed or delivered any proxy or entered into any
voting agreement or similar arrangement other than one that has
expired or terminated prior to the date hereof; and (iii) he will
not take any action inconsistent with the purposes and provisions
of this Subparagraph 1.4.
e) The provisions of this Subparagraph 1.4 shall become effective upon
execution of this Agreement and delivery by all of the parties
hereto, and all rights and obligations of the parties hereunder,
shall terminate on either (i) the Closing of the transactions
contemplated by this Agreement, as set forth in Paragraph 2, upon
which the purpose and intent of this Subparagraph 1.4 shall become
moot; or (ii) Closing does not occur and this Agreement is
terminated in accordance with Paragraph 15.
1.5 Taxes. It is the desire of the Stockholders that this transaction qualify
as a tax-free reorganization under Section 368(a)(1)(B) of the United States
Internal Revenue Code, and related sections thereunder. Acquiror makes no
representations or warranties whatsoever to Acquiree or the
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<PAGE> 7
Stockholders regarding the tax consequences of this transaction. In the event
that this transaction is determined not to qualify as a tax-free
reorganization, each party shall be responsible for and shall pay any and all
taxes charges or fees attributable to such party, including individual state
and federal income taxes, arising out of, or by reason of, the exchange of the
ITI Shares for the Emergent Shares, or otherwise in connection with the
transactions contemplated hereby. Each party hereto represents and warrants
that he has relied solely on the opinions or advice of his own professional
advisors with respect to the tax consequences of this transaction, if any, and
has not relied on the opinions or advice of the other parties or their
professional advisors in any way with respect to the tax consequences of this
transaction.
2. Closing. At the Closing, Stockholders shall be deemed to have accepted
delivery of the certificates of the ITI Shares to be issued in their names, and
in connection therewith, shall make delivery of their Emergent Shares to
Acquiror.
2.1 Delivery of Shares. Upon execution of this Agreement, Stockholders shall
deliver their respective certificates representing the Emergent Shares duly
endorsed in blank, free and clear of all claims and encumbrances, to counsel to
Acquiree to be held in escrow pending Closing. Acquiror has already delivered
the ITI Shares, which are appropriately restricted as to transfer, to counsel
to Acquiree to be held in escrow pending Closing. The ITI Shares have been duly
issued in the names designated by the Stockholders in accordance with
Subparagraph 1.3 above, and shall be duly recorded on the books and records of
Acquiror.
2.2 Place and Time. The closing of the reorganization and the transactions
contemplated in this Agreement (the "Closing") shall take place within fifteen
(15) days following the satisfaction (or waiver) of the conditions set forth in
Paragraphs 13 and 14 hereof at such place and on such date as mutually agreed
upon by the parties (the "Closing Date").
2.3 Closing Requirements. At the Closing, each of the parties shall execute and
deliver such instruments and documents and take such other actions as may, in
the reasonable opinion of counsel for each, be required to complete the
transactions under this Agreement. The following documents shall have been
delivered and the following activities shall be deemed to have taken place
contemporaneously at the Closing:
a) the securities to be delivered pursuant to Subparagraph 2.1 have
been delivered to the respective parties duly endorsed or issued as
the case may be, pursuant to Subparagraphs 1.3 and 2.1.
b) delivery of all corporate records of Acquiree, including without
limitation, corporate minute books (which shall contain copies of
the Articles of Incorporation and Bylaws, as amended to the
Closing), stock books, stock transfer books, corporate seals,
contracts, licenses and sub-licenses, non-disclosure and
confidentiality agreements, and such other corporate books and
records as may be reasonably requested for review by Acquiror;
c) delivery of the evidence of cancellation of debts and release of
liens by the Debt Holders satisfactory to Acquiror pursuant to
Subparagraph 1.1 hereof;
d) a certificate of the President of Acquiree to the effect that all
representations and warranties of Acquiree made under this
Agreement are reaffirmed on the Closing Date, the same as though
originally given to Acquiror on said date as set forth herein;
e) the Subscription Agreements of the Stockholders;
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f) a certificate from the West Virginia Secretary of State dated at or
about the date of the Closing to the effect that Acquiree is in
good standing under the laws of said State;
g) copies of resolutions by Acquiree's Board of Directors authorizing
this Agreement;
h) a certificate of the President of Acquiror to the effect that all
representations and warranties of Acquiror made under this
Agreement are reaffirmed on the Closing Date, the same as though
originally given to Acquiree and Stockholders on said date;
i) copies of resolutions by Acquiror's Board of Directors authorizing
this Agreement;
j) a certificate from the Secretary of State of Nevada dated at or
about the date of Closing to the effect that Acquiror is in good
standing under the laws of said State;
k) audited financial statements of Acquiree for the year ended June
30, 1997, and unaudited financial statements for the quarter ended
September 30, 1997, meeting the requirements set forth in
Subparagraph 4.8; and
l) the parties hereto have signed and delivered such other instruments
and documents, if any, relating to and effecting the transactions
contemplated herein.
2.4 Condition to Closing. All parties acknowledge that the shareholders of
Acquiree are obligated to amend Acquiree's Articles of Incorporation to
increase the authorized number of shares of common stock, $1.00 par value, from
one hundred (100) to one hundred twenty five (125) shares, and to issue the
twenty five (25) newly authorized shares to a group comprised of
non-affiliated, third parties ("Investor"). After issuance of the 25 shares to
Investor, Acquiror shall own 80% of Acquiree. Such amendment to the Articles of
Incorporation and issuance of the 25 shares to Investor shall be a condition to
Closing.
3. Technology Licenses Held By Acquiree. West Virginia University Research
Corporation ("WVURC") has licensed the rights to certain technologies to
Integral Concepts, Inc. ("ICI"), some of which have been further sub-licensed
to Acquiree. Copies of all such licenses from WVURC to ICI, sub-licenses from
ICI to Acquiree, and any further sub-licenses from Acquiree to any third-party
will be provided by Acquiree prior to Closing and identified on Exhibit 3.
Acquiror acknowledges the existence of the required royalty payments that exist
under the license from WVURC and that the royalty payments will continue to be
required to be paid after the consummation of this transaction.
4. Representations of Stockholders and Acquiree. Each of the Stockholders and
Acquiree hereby represents and warrants that effective this date and the
Closing Date, the representations and warranties listed below are true and
correct:
4.1 Organization. Acquiree is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of West Virginia with full
power and authority to own and use its properties and conduct its business as
presently conducted by it. Acquiree has furnished Acquiror or its counsel with
copies of the Articles of Incorporation and the Bylaws of Acquiree, including
all amendments thereto. Such copies are true, correct and complete and contain
all amendments through the date hereof, which, together with this Agreement,
are sufficient to effect the transactions hereunder and evidence the intent of
the parties hereto.
4.2 Authority. Acquiree has the requisite corporate authority to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement by Acquiree and the consummation of the transactions
contemplated hereby will not violate or conflict with any provisions of the
Articles of
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<PAGE> 9
Incorporation, as amended, or Bylaws of Acquiree or contravene any law, rule,
regulation, court or administrative order binding on it, or result in the
breach of or constitute a default in the performance of any material
obligation, agreement, covenant or condition contained in any material
contract, lease, judgment, decree, order, award, note, loan or credit agreement
or any other material agreement or instrument to which Acquiree is a party or
by which it is bound, the default or breach of which would have a material
adverse effect on the property and assets of Acquiree, considered as a whole.
Acquiree has taken all requisite corporate action to authorize and approve the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby. Upon due execution and delivery of this
Agreement, this Agreement will constitute a valid, legal and binding obligation
of Acquiree and the respective Stockholders enforceable against them in
accordance with its terms.
4.3 Capitalization. The authorized stock of Acquiree consists of (a) one
hundred (100) shares of common stock, par value $1.00 per share, and (b) no
shares of preferred stock. As set forth in Paragraph 2.4, after execution of
this Agreement and as a condition to Closing, Acquiree's Articles of
Incorporation will be amended to increase the authorized stock of Acquiree to
one hundred twenty five (125) shares of common stock, .par value $1.00 per
share, and (b) no shares of preferred stock, whereupon 25 shares shall be
issued to Investor. Therefore, immediately prior to the Closing, there will be
one hundred twenty five (125) shares of Emergent common stock issued and
outstanding and no shares of Emergent preferred stock issued and outstanding.
All such Emergent shares issued and outstanding are duly and validly authorized
and issued and are fully paid and nonassessable. Acquiree does not have
outstanding any security convertible into, or any warrant, option or other
right to subscribe for or acquire any equity interest in Acquiree, other than
the convertible promissory note to be issued by Acquiree in favor of Investor
and attached hereto as Exhibit 4.3.
4.4 Stockholders. The Stockholders listed on the attached Exhibit 1.3 are the
owners of 90% of the issued and outstanding common stock of Acquiree; such
Emergent Shares are free and clear from any security interests, claims, liens,
or other encumbrances; and Stockholders have the unqualified right to transfer
and dispose of their respective Emergent Shares. Stockholders will deliver,
upon reasonable demand of Acquiror, any approvals, consents or other
authorizations to Acquiror and said approvals, consents and other
authorizations will have been duly executed, valid and binding.
4.5 Subsidiaries. Acquiree owns 50% of the outstanding common stock of The
Eclipse Manufacturing Corporation ("TEAM"), a West Virginia corporation.
Acquiree has previously provided Acquiror with copies of the Articles of
Incorporation, Bylaws, and the Agreement among Shareholders of TEAM.
4.6 Due Diligence. In addition to the documents described in Subparagraph 4.1
hereof, Acquiree has furnished to Acquiror copies of all documents requested by
Acquiror. No "due diligence" investigations undertaken by Acquiror shall in any
event relieve Acquiree or the respective Stockholders of their responsibilities
for the accuracy and completeness of any representation or warranty of Acquiree
or of the respective Stockholders contained herein or the performance of any
covenant or agreement of Acquiree or of the respective Stockholders contained
herein.
4.7 Approvals and Consent. Except as set forth in Exhibit 4.7 hereto, no
approval, authorization or other action by, or filing with, any third-party,
including a governmental authority is required in connection with the
execution, delivery and performance by Acquiree and the respective Stockholders
of their obligations under this Agreement and their respective performance of
the transactions contemplated hereby.
4.8 Financial Statements. Acquiree has provided audited financial statements of
Acquiree prepared in accordance with the requirements of Regulation S-B of the
Securities Act of 1933, as amended (the "Act"), for the period of time since
commencing operations up to June 30, 1996, which are attached as Exhibit 4.8.
As a condition to Closing, Acquiree shall provide audited financial statements
for the year
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<PAGE> 10
ended June 30, 1997, and unaudited financial statements in accordance with the
requirements of Regulation S-B for the quarter ended September 30, 1997.
4.9 Undisclosed Liabilities. Acquiree has no material liabilities or
obligations whatsoever, either accrued, absolute, contingent or otherwise,
except: (i) as disclosed on the financial statements attached as Exhibit 4.8;
as disclosed on the financial statements required to be provided as a condition
to Closing, as set forth in Subparagraph 4.8; (iii) that do or may exceed
$1,000 per liability/obligation as shown on Exhibit 4.9 hereto; or (iv) those
incurred in or as a result of the ordinary course of business of Acquiree and
not exceeding $10,000 in the aggregate.
4.10 Assets. The assets of Acquiree as set forth in Exhibits 4.8 and/or 4.10
(including real, personal and intangible), and in the financial statements
required to be provided as a condition to Closing, as set forth in Subparagraph
4.8, have been acquired in bona fide transactions, fully supported by
appropriate instruments of assignment, sale, or transfer, where appropriate,
and are offset by no liabilities or contingencies, contractual or otherwise,
except as indicated in Exhibits 4.8 and/or 4.10.
4.11 Environmental Matters. The operations of Acquiree on the Closing Date will
be in substantial compliance with all applicable material federal, state or
local environmental statutes, rules and regulations; none of the operations of
Acquiree is subject to any pending judicial or administrative proceedings
alleging the violation of any federal, state or local environmental statute,
rule or regulation; and none of the real property owned or leased by Acquiree
is subject of a federal, state or local government investigation regarding or
in response to a release or threatened release of any hazardous substance into
the environment, which investigation or remedial action in response thereto
would materially adversely affect the operations or financial condition of the
Acquiree, considered as a whole.
4.12 Insurance. Acquiree's policies of insurance in force are listed on Exhibit
4.12 hereto. Such policies are in amounts and contain coverages sufficient to
satisfy all minimum requirements of law, are sufficient for the adequate
protection of the insurable interest of Acquiree and will be outstanding and in
force on the Closing Date hereunder.
4.13 Bank Accounts. Exhibit 4.13 hereto sets forth the name of each bank in
which Acquiree has an account or safe deposit box and the names of all persons
authorized thereon or to have access thereto. At the Closing hereunder, new
signature cards will be signed as directed by Acquiror.
4.14 Employees. No employee of Acquiree is represented by a union or a
collective bargaining agreement of any kind. Acquiree has complied in all
material respects with all applicable laws relating to the employment of labor
in connection with the operations of its business, including, without
limitation, those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity and the payment
and withholding of taxes, including income and social security taxes.
4.15 Employment/Consulting Contracts. Acquiree has no Employment/Consulting
Contracts or any contracts providing for bonus, profit sharing or pension
arrangements.
4.16 Litigation. Except as set forth in Exhibit 4.16 hereto, Acquiree is not
involved in any pending litigation or governmental investigation or proceeding
and, to the best knowledge of Acquiree and Stockholders, no litigation, claims,
assessments, or governmental investigation or proceeding is threatened against
Acquiree, its Stockholders or properties.
4.17 Applicable Laws. Acquiree has complied with all state, federal and local
laws in connection with its formation, issuance of securities, organization,
capitalization and operations, and no contingent
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<PAGE> 11
liabilities have been threatened or claims made, and no basis for the same
exists with respect to said operations, formation or capitalization, including
claims for violation of any state or federal securities laws.
4.18 Taxes. Acquiree has filed all governmental, tax or related returns and
reports due or required to be filed and has paid all taxes or assessments which
have become due as of the Closing Date, including any employment related taxes
and withholdings, and Acquiree, to the best of its knowledge, is not subject to
a tax audit by any federal, state or local tax authority and its properties are
not subject to any tax liens. Acquiree will cause to be filed or prepared, as
applicable, by the Closing Date, all federal, state, county and local income,
excise, property and other tax returns, forms, or reports, which are due or
required to be filed by it prior to the Closing Date.
4.19 Breach of Contracts. Except as disclosed on Exhibit 4.19, Acquiree has not
breached, nor is there any pending or threatened claims or any legal basis for
a claim that Acquiree has breached, any of the terms or conditions of any
agreements, contracts or commitments to which it is a party or is bound and the
execution and performance hereof will not violate any provisions of applicable
law of any agreement to which Acquiree is subject.
4.20 Acquiree Disclosure. At the date of this Agreement, Acquiree has, and at
the Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of Acquiree. Acquiree has not
now and will not have, at the Closing Date, withheld disclosure of any such
events, conditions, and facts which it, through management, has knowledge of,
or has reasonable grounds to know, which may materially affect the business and
prospects of Acquiree.
4.21 Stockholder Disclosure. Each Stockholder hereby represents that the
materials prepared and delivered by Acquiror to Stockholders will have been
read and understood by such Stockholder, including Paragraph 9 hereof, that he
is familiar with the business of Acquiror, that he is acquiring the ITI Shares
under Section 4(2) of the Act, commonly known as the private offering
exemption, and that the shares are restricted and may not be resold, except in
reliance upon an exemption under the Act.
4.22 Monthly Expenses. The figures set forth on Exhibit 4.22 represent an
estimate of the current material monthly expenses of Acquiree. The exhibit does
not include exact figures, nor does it include all monthly expenses, but simply
represents a good faith estimate of the most material monthly expenses, in the
opinions of Acquiree and the Stockholders. The exhibit is being presented for
the informational use of Acquiror for budgeting purposes only.
5. Representations of Acquiror. Acquiror hereby represents and warrants as
follows:
5.1 Organization. Acquiror is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada with full power and
authority to own and use its properties and conduct its business as presently
conducted by it. Acquiror is duly qualified and in good standing to do business
as a foreign corporation in any other jurisdiction where failure to so qualify
would have a material adverse effect on its business or assets. The Acquiror
has made available to Acquiree copies of the Articles of Incorporation and the
Bylaws of Acquiror, including all amendments thereto. Such copies are true,
correct and complete and contain all amendments through the date hereof,
together with this Agreement, which are sufficient to effect the transactions
hereunder and evidence the intent of the parties hereto.
5.2 Capitalization. The authorized stock of Acquiror consists of (a) 50,000,000
shares of common stock and (b) 20,000,000 shares of preferred stock.
Immediately prior to the Closing, there will be approximately 12,588,896 shares
of ITI common stock issued and outstanding and no shares of preferred stock
issued and outstanding, prior to the issuance of the 1,800,000 ITI Shares to be
delivered at Closing pursuant to this Agreement. Acquiror will provide a
complete list of registered shareholders, as
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<PAGE> 12
maintained by Acquiror's independent transfer agent, at or before Closing, to
be attached as Exhibit 5.2a. At the time of their issuance and delivery on the
Closing Date, all ITI Shares to be issued pursuant to the terms hereof shall be
duly and validly authorized and issued, fully paid and nonassessable. Acquiror
does not have outstanding any security convertible into, or any warrant, option
or other right to subscribe for or acquire any shares of stock of Acquiror,
other than 1) options to acquire up to 2,000,000 shares of Acquiror's common
stock, granted to persons eligible to participate in Acquiror's "Employee
Benefit and Consulting Services Compensation Plan" (the "Plan"), 2) a Revolving
Credit Loan Agreement dated July 15, 1996 ("Loan Agreement"), which is
convertible into shares of Acquiror's common stock, and 3) options to acquire
shares of common stock of Acquiror granted pursuant to a Consulting Agreement
dated October 6, 1997 with Evergreen Wireless, Ltd. (the "Consulting
Agreement"). Copies of the Plan, the Loan Agreement and the relevant provision
of the Consulting Agreement are attached hereto as Exhibit 5.2b.
5.3 Authority. Acquiror has the requisite corporate authority to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement by Acquiror and the consummation of the transactions
contemplated hereby will not violate or conflict with any provisions of the
Articles of Incorporation, as amended, or Bylaws of Acquiror or contravene any
law, rule, regulation, court or administrative order binding on it, or result
in the breach of or constitute a default in the performance of any material
obligation, agreement, covenant or condition contained in any material
contract, lease, judgment, decree, order, award, note, loan or credit agreement
or any other material agreement or instrument to which Acquiror is a party or
by which it is bound, the default or breach of which would have a material
adverse effect on the property and assets of Acquiror, considered as a whole.
Acquiror has taken all requisite corporate action to authorize and approve the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby. Upon due execution and delivery of this
Agreement, this Agreement will constitute a valid, legal and binding obligation
of Acquiror enforceable against it in accordance with its terms.
5.4 Approvals and Consent. Except as set forth in Exhibit 5.4 hereto, no
approval, authorization or other action by, or filing with, any third-party,
including a governmental authority is required in connection with the
execution, delivery and performance by Acquiror of its obligations under this
Agreement and its performance of the transactions contemplated hereby.
5.5 Litigation. Acquiror is not involved in any pending litigation or
governmental investigation or proceeding and, to the best knowledge of
Acquiror, no litigation, claims, assessments, or governmental investigation or
proceeding is threatened against Acquiror, its stockholders or properties.
5.6 Breach of Contracts. Except as disclosed on Exhibit 5.6, Acquiror has not
breached, nor is there any pending or threatened claims or any legal basis for
a claim that Acquiror has breached, any of the terms or conditions of any
agreements, contracts or commitments to which it is a party or is bound and the
execution and performance hereof will not violate any provisions of applicable
law of any agreement to which Acquiror is subject.
5.7 Acquiror Disclosure. At the date of this Agreement, Acquiror has, and at
the Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of Acquiror. Acquiror has not
now and will not have, at the Closing Date, withheld disclosure of any such
events, conditions, and facts which it, through management, has knowledge of,
or has reasonable grounds to know, which may materially affect the business and
prospects of Acquiror.
5.8 Financial Statements. Acquiror has provided audited financial statements of
Acquiree prepared in accordance with the requirements of Regulation S-B of the
Act, for the period of time since commencing operations up to June 30, 1996,
which are attached as Exhibit 5.8. As a condition to Closing, Acquiror
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shall provide audited financial statements for the year ended June 30, 1997,
and unaudited financial statements in accordance with the requirements of
Regulation S-B for the quarter ended September 30, 1997.
5.9 Undisclosed Liabilities. Acquiror has no material liabilities or
obligations whatsoever, either accrued, absolute, contingent or otherwise,
except: (i) as disclosed on the financial statements attached as Exhibit 5.8;
as disclosed on the financial statements required to be provided as a condition
to Closing, as set forth in Subparagraph 5.8; (iii) that do or may exceed
$5,000 per liability/obligation as shown on Exhibit 4.9 hereto; or (iv) those
incurred in or as a result of the ordinary course of business of Acquiror and
not exceeding $25,000 in the aggregate.
5.10 Other Matters. Upon execution of this Agreement, Acquiror represents,
warrants and agrees to the following matters:
a) Acquiror agrees to maintain Acquiree as a West Virginia corporation
located in West Virginia for a period of at least one year after
Closing. Acquiror has no present intention of re-domiciling,
merging, dissolving, or relocating Acquiree after the expiration of
the one year period.
b) Acquiror agrees to retain Mr. Denzil Jack Parsons, II as President
of Acquiree at least through Closing, and for such longer period of
time as is thereafter mutually agreed upon by the then existing
board of directors of Acquiree and Mr. Parsons. Acquiror has no
present intention of dismissing Mr. Parsons as President after
Closing.
c) After execution of this Agreement, Acquiror intends to exercise its
voting rights in accordance with Subparagraph 1.4 to cause the
shareholders of Acquiree to vote, in accordance with the Bylaws of
Acquiree and/or the corporate law of the State of West Virginia to
(i) amend the Bylaws of Acquiree and (ii) elect new directors for
Acquiree. Acquiror agrees to nominate and support Mr. Denzil Jack
Parsons, II as a director of Acquiree. Acquiror further agrees to
cause any new directors nominated by Acquiror (other than Mr.
Parsons) to agree to immediately resign in the event that this
transaction fails to Close.
d) Acquiror agrees to provide positions on Acquiror's board of
directors for either or both Mr. Denzil Jack Parsons, II and James
E. Smith based upon their (Messrs. Parsons' and Smith's)
discretion, at Closing.
6. Conduct of Acquiree's Business Pending Closing. Acquiree shall carry on its
business in the usual and ordinary course and not make or institute any unusual
method of purchase, sale, lease, management, accounting or operation. Further,
Acquiree shall not have entered into any material transactions, including any
material transactions with the respective officers, directors or stockholders,
other than in the ordinary course of business, except as expressly approved in
advance in writing by Acquiror.
6.1 Dividends and Distributions. Acquiree shall not declare or pay any
dividends or make any distribution in respect of its capital stock, and not,
directly or indirectly, issue or sell any additional shares of its capital
stock.
6.2 Preservation of Organization. Acquiree shall preserve its business
organizations intact and use its best efforts to preserve its present
relationships with its employees, suppliers and customers and others having
business relations with it. In addition, Acquiree shall not do any act nor
admit to do any act nor permit any act or omission to act, which would cause a
breach of any material contract, commitment or obligation which would
materially and adversely affect its business or financial condition.
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7. Indemnification. The parties hereby agree that for a period of two years
commencing the date hereof, and in accordance with the terms of Paragraph 12,
each party to this Agreement shall indemnify and hold harmless each other party
at all times after the date of this Agreement against and in respect of any
third-party liability, damage or deficiency, all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses, including attorney's fees,
incident to any of the foregoing, resulting from any misrepresentation, breach
of covenant or warranty or nonfulfillment of any agreement on the part of such
party under this Agreement or from any misrepresentation in or intentional
omission from any document or certificate furnished or to be furnished to a
party hereunder. Subject to the terms of this Agreement, the defaulting party
shall reimburse the other party or parties with respect to such third-party's
actions on demand, for any reasonable payment made by said parties at any time
after the Closing, in respect of any liability or claim to which the foregoing
indemnity relates, if such payment is made after reasonable notice to the other
party to defend or satisfy the same and such party failed to defend or satisfy
the same. In the event a third-party action is threatened or commenced but not
resolved within said two-year period, the parties hereby agree to extend this
indemnification through resolution of the third-party action.
In addition, each party agrees to indemnify each other party for any
loss incurred as a result of the subsequent discovery of any liability that is
not disclosed in the financial statements or schedules provided under this
Agreement that was known to such knowledgeable party or parties at the time of
the Closing.
8. Joint Covenants of Acquiror and Acquiree. Acquiror and Acquiree and the
respective Stockholders each covenant and agree to execute any further
documents or agreements and to take any further acts that may be reasonably
necessary to effect the transactions contemplated hereunder, including, but not
limited to, obtaining any consents or approvals of any third-party required to
be obtained to consummate the transactions contemplated by this Agreement.
9. Restrictions on Transfer of Shares. The parties hereto acknowledge that the
ITI Shares issued in connection with the transactions contemplated hereby are
restricted as to transfer and the certificates therefore shall bear legends to
such effect and no transfer of any ITI Share may be effected, except pursuant
to an effective registration statement prepared and filed pursuant to the Act
or pursuant to an exemption from registration thereunder, as evidenced by an
opinion of counsel or as otherwise allowed under the laws of descent and
distribution.
10. Confidentiality. Unless and until the transactions contemplated hereby have
been consummated, the respective parties hereto shall hold in strict confidence
and not use or disclose to any other person any information heretofore or
hereafter obtained from the other parties' hereto, whether pertaining to the
financial condition, results of operations, methods of operations or otherwise
of such respective parties, except any of the same which was or is public or
published information or is otherwise a matter of public knowledge, or is
required to be disclosed by Acquiror or by its officers, agents or
representatives by law or in connection with any proceeding before any
governmental authority. If the transactions contemplated hereby are not
consummated, the respective parties shall return to the appropriate parties
hereto and shall not retain any copies of any written information and other
written material respecting the respective parties or their businesses obtained
by them from the other parties hereto or their respective officers, agents,
employees or representatives in connection with the negotiation of and the
transactions contemplated by this Agreement, or any such written information or
material prepared by any party hereto from oral information supplied by such
other parties hereto or any of their respective officers, agents, employees or
representatives, and each party hereto shall use all reasonable efforts to keep
confidential any information obtained by them in connection with this
Agreement, unless and until such information is ascertainable from public or
published information or trade sources or is otherwise a matter of public
knowledge.
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11. Advances. Acquiree Acknowledges that Acquiror has advanced six hundred and
fifty thousand dollars ($650,000.00) to Acquiree, pursuant to the terms of the
Letter, to fund Acquiree's operations pending consummation of this Agreement.
12. Nature and Survival of Representations. All representations, warranties and
covenants made by any party in this Agreement shall survive the Closing
hereunder and the consummation of the transactions contemplated hereby for two
years from the date hereof. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for and not
upon any investigation upon which it might have made or any representations,
warranty, agreement, promise or information, written or oral, made by the other
party or any other person other than as specifically set forth herein.
13. Conditions Precedent to the Obligations of Acquiree and Stockholders. All
obligations of Acquiree and Stockholders under this Agreement are subject to
the fulfillment by Acquiror, prior to or as of the Closing Date, of each of the
following conditions:
13.1 Representations and Warranties True at Closing. The representations and
warranties made by Acquiror shall be true on and as of the Closing Date as if
made on that date, and Acquiror shall have delivered a certificate of its
President so stating.
13.2 Resolutions by Directors of Acquiror. Acquiror shall have delivered to
Acquiree and Stockholders a copy of the resolutions of its Board of Directors
authorizing or ratifying the execution and performance of this Agreement and
approving the transactions contemplated hereby.
13.3 No Litigation. No suit, action or other proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
13.4 Delivery of ITI Shares. Acquiror shall have delivered to the Stockholders
stock certificates representing the ITI Shares as described in Subparagraph 2.1
hereof and required hereunder to be delivered to the Stockholders on the
Closing Date.
13.5 Compliance. Acquiror shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing on the Closing Date.
14. Conditions Precedent to the Obligations of Acquiror. All obligations of
Acquiror under this Agreement are subject to the fulfillment by Acquiree and
Stockholders, prior to or as of the Closing Date, of each of the following
conditions:
14.1 Representations and Warranties True at Closing. The representations and
warranties made by Acquiree and by each respective Stockholder shall be true on
and as of the Closing Date as if made on that date, and Acquiree shall have
delivered a certificate from its President so stating.
14.2 Resolutions by Directors of Acquiree. Acquiree shall have delivered to
Acquiror a copy of the resolutions of its Board of Directors authorizing or
ratifying the execution and performance of this Agreement and approving the
transactions contemplated hereunder.
14.3 No litigation. No suit, action or other proceeding shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
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<PAGE> 16
14.4 Cancellation of Debt. All Debt Holders (as defined in Subparagraph 1.1
hereof) of the Acquiree shall have canceled all outstanding obligations owed to
them by Acquiree and released any liens in connection therewith on terms
satisfactory to Acquiror, in its sole discretion, including, but not limited
to, any UCC-1 financing statements filed against Acquiree.
14.5 Financial Conditions. Prior to the Closing Date there will not be any
substantial and material changes in the financial position of Acquiree as
represented, except changes arising in the ordinary course of business, and as
disclosed to and accepted by Acquiror, which changes will in no event adversely
affect the financial position of said Acquiree.
14.6 Delivery of Emergent Shares. Each respective Stockholder shall have
delivered to Acquiror all their Emergent Shares to Acquiror on or before the
Closing Date, with the stock transfer instructions thereon duly executed in
blank and satisfactory to Acquiror, free and clear of all liens and
encumbrances. In addition, each respective Stockholder shall have delivered to
Acquiror an executed subscription agreement substantially in the form attached
hereto as Exhibit 14.6 and such other documents required to be delivered by
them on the Closing Date.
14.7 Delivery of Records. Acquiror shall have received at or prior to the
Closing, the corporate financial records, minute books, and other documents and
records of Acquiree in their entirety as provided in Subparagraph 2.3b and/or
as otherwise requested to date by Acquiror. Prior to that time, Acquiror shall
have access to the same at any time.
14.8 Compliance. Acquiree and each respective Stockholder shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
14.9 Financial Statements of Acquiree. Acquiree shall have provided audited
financial statements for the year ended June 30, 1997, and unaudited financial
statements for the quarter ended September 30, 1997, as provided in
Subparagraph 4.8.
15. Termination.
15.1 Termination by Acquiror. Acquiror may, at any time prior to Closing,
terminate this Agreement if:
a) any of the material representations and warranties made by Acquiree
or any Stockholder as set forth herein or otherwise in connection
with this Agreement are found to be materially inaccurate, in the
opinions of Acquiror's legal counsel and/or independent certified
public accountants; or
b) Acquiree or any Stockholder fails to perform any of its respective
obligations pursuant to the terms of this Agreement on or before
the Closing Date; or
c) any Debt Holder fails to cancel the outstanding obligations owed it
by Acquiree or fails to release its liens in connection therewith
on terms satisfactory to Acquiror;
d) the Closing Date does not occur within sixty (60) days of the date
of this Agreement for reasons other than Acquiror's failure to
perform its obligations hereunder; or
e) the financial information contained in the audited financial
statements for the year ended June 30, 1997, and unaudited
financial statements for the quarter ended September 30, 1997, as
required to be provided in accordance with Subparagraph 4.8 is not,
in the sole
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<PAGE> 17
and reasonable discretion of Acquiror, substantially and materially
as represented and as compared with the audited financial
statements for Acquiree as of June 30, 1996 and with such other
financial information provided by Acquiree prior to the date of
this Agreement or the Closing Date.
15.2 Termination by Acquiree and Stockholders. Acquiree and Stockholders may,
at any time prior to Closing, terminate this Agreement if:
a) any of the material representations and warranties made by
Acquiror as set forth herein or otherwise in connection with
this Agreement are found to be materially inaccurate, in the
opinions of Acquiree's or Stockholders' legal counsel and/or
Acquiree's independent certified public accountants; or
b) Acquiror fails to perform any of its obligations pursuant to
the terms of this Agreement on or before the Closing Date; or
c) the Closing Date does not occur within sixty (60) days of the
date of this Agreement for reasons other than Acquiree's or
any Stockholder's failure to perform its obligations
hereunder.
15.3 Procedure Upon Termination. In the event of termination and abandonment by
any party hereunder, notice thereof shall forthwith be given to other parties
and the transactions contemplated by this Agreement shall be terminated and/or
abandoned without further action by the parties. Except as provided in
Paragraph 10 (which obligations shall survive any termination and/or
abandonment of this transaction) and except for breaches or the nonfulfillment
of the warranties, representations, covenants and agreements contained in this
Agreement by such party, none of the parties shall have any further liability
or obligation to the other under this Agreement; however, the parties shall
remain obligated to each other in accordance with the Letter, which shall
remain in full force and effect.
16. Miscellaneous.
16.1 Undertakings and Further Assurances. At any time, and from time to time,
after the effective date, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party to carry
out the intent and purposes of this Agreement; and Acquiror agrees to bear all
reasonable additional costs incurred by all parties in connection therewith, on
the condition that Acquiror will not be obligated to reimburse or pay any
costs, expenses or fees incurred by Acquiree or Stockholders in excess of
$100.00, unless such costs, expenses or fees are authorized in advance, in
writing by Acquiror.
16.2 Waiver. Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in writing by
the party to whom such compliance is owed.
16.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested,
or by Federal Express or other means of overnight delivery to the addresses
below:
Acquiror: Integral Technologies, Inc.
c/o Futro & Associates, P.C.
707 - 17th St., 29th Fl.
Denver, CO 80202
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<PAGE> 18
Acquiree: Emergent Technologies Corporation
c/o Rhonda L. Miller, Esq.
McNeer, Highland, McNunn and Varner, L.C.
168 Chancery Row, P.O. Box 1615
Morgantown, WV 26507-1615
Stockholders: To the addresses specified on the books and records
of Acquiree or in their respective Subscription
Agreements to be delivered at Closing
16.4 Headings. The paragraph and subparagraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
16.5 Liquidated Damages. The parties hereto acknowledge that in the event that
Acquiror (i) fails to executed the stockholders' resolution required to amend
the Articles of Incorporation of Acquiree as contemplated in Paragraph 2.4, or
(ii) acts to prevent Acquiree from issuing 25 newly authorized shares of common
stock of Acquiree to the Investor, or (iii) acts to prevent Acquiree from
issuing the convertible promissory note to the Investor as contemplated by
Paragraph 4.3, Acquiree may be damaged in an amount difficult to ascertain. In
the event of any of the above, the parties agree that Acquiror will be
obligated to pay liquidated damages in the lump sum of $1,000,000, which is a
reasonable and genuine pre-estimate of the actual damages which Acquiree would
suffer, and that such liquidated damages do not constitute a penalty. However,
Acquiror shall not be obligated to pay such liquidated damages in the event
that that Acquiror is prevented from acting (i) by Acquiree or the
Stockholders, or (ii) due to termination of this Agreement pursuant to
Paragraph 15 hereinabove. Nothing in this Paragraph shall otherwise limit any
other rights of each of the respective parties under this Agreement.
16.6 Governing Law and Arbitration Provision. This Agreement shall be governed
by the laws of the State of Nevada. Any dispute arising directly or indirectly
from this Agreement shall be settled by arbitration within the State of
Washington (as designated by Acquiror), if arbitration is demanded by Acquiree
or the Stockholders; or within the State of West Virginia (as designated by
Acquiree), if arbitration is demanded by Acquiror. Any arbitration will be
conducted by the American Arbitration Association in accordance with its Rules
of Commercial Arbitration, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The parties
hereto agree that service by certified mail to their business addresses shall
constitute sufficient service of process of any proposed arbitration.
16.7 Binding Effect. This Agreement shall be binding upon the parties hereto
and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns. This Agreement shall not be
assigned by any party hereto, except upon the consent, in writing, of the other
parties hereto.
16.8 Entire Agreement. This Agreement, including the Exhibits hereto and other
documents delivered pursuant to the terms hereof, is the entire agreement of
the parties covering everything agreed upon or understood with respect to the
transactions contemplated hereby and supersedes all prior agreements,
covenants, representations or warranties, whether written or oral, by any party
hereto. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof.
16.9 Time. Time is of the essence. The parties each agree to proceed promptly
and in good faith to consummate the transactions contemplated herein.
16.10 Expenses. Each of the parties hereto shall pay its own expenses incurred
in connection with the authorization, preparation, execution and performance of
this Agreement and obtaining any necessary regulatory approvals, including,
without limitation, all fees and expenses of their respective counsel.
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<PAGE> 19
16.11 Severability. If any part of this Agreement is deemed to be unenforceable
the balance of the Agreement shall remain in full force and effect.
16.12 Counterparts and Facsimile Signatures. This Agreement and any Exhibits,
attachments, or documents ancillary hereto, may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. Execution
and delivery of this Agreement by exchange of facsimile copies bearing the
facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such facsimile copies
shall constitute enforceable original documents.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
--------------------------------------
William S. Robinson, President
Attest:
/s/ William A. Ince
- -----------------------------------
William A. Ince, Secretary
EMERGENT TECHNOLOGIES CORPORATION
By: /s/ Denzil Jack Parsons, II
--------------------------------------
Denzil Jack Parsons, II, President
Attest:
/s/ Dena Lynn Seitz Parsons
- -----------------------------------
Dena Lynn Seitz-Parsons, Secretary
STOCKHOLDERS OF ACQUIREE:
1. /s/ James E. Smith Shares: 15
------------------------------
James E. Smith
2. /s/ Denzil Jack Parsons, II Shares: 75
------------------------------
Denzil Jack Parsons, II
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<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
INTEGRAL TECHNOLOGIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Incorporator being a
natural person of the age of twenty-one years or more and desiring to form a
body corporate under the laws of the state of Nevada does hereby sign, verify
and deliver to the Secretary of State of Nevada, these Articles of
Incorporation:
FIRST: NAME. The corporate name and style of this Corporation is
Integral Technologies, Inc.
SECOND: PURPOSES AND POWERS. The objects for which said Corporation is
formed and incorporated are as follows, to-wit:
1. The Corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Nevada. In addition, the Corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporate
purposes. The Corporation may conduct part or all of its business in any other
part of Nevada, of the U.S., of Canada or the world and may hold, purchase,
mortgage, lease and convey real and personal property in any of such places.
Additionally, by way of example and not limitation, the Corporation shall have
the power to:
a. Transact the business of investing on behalf of itself or
others, any part of its capital and such additional funds as it may
obtain, or any interest therein, either as tenants in common or
otherwise, and selling or otherwise disposing of the same, or any part
thereof, or interest therein.
b. Issue bonds, debentures, or obligations of the
Corporation, from time to time, for any of the objects or purposes of
this Corporation, and to secure them by mortgage or mortgages, or deed
or deeds of trust, or pledge or lien on any or all of the real and
personal property, rights acquired and to be acquired, and to sell or
otherwise dispose of any or all of them, all in such manner and upon
such terms as the Board of Directors may deem proper.
c. Lend or advance money or give credit to such persons,
firms, or corporations on such terms as may seem expedient and in
particular to customers and others having dealings with the
Corporation, and to give guarantees or to become security for any such
persons.
d. Make and enter into all kinds of contracts, agreements,
and operations by or with any person or persons, corporation or
corporations; to acquire and undertake all or any part of the business
assets and liabilities of any person or firm, association, or
corporation in connection therewith; to take, acquire, purchase, hold,
or rent, lease sell, exchange, mortgage, improve, renovate, develop
and otherwise deal in and dispose of any and all property, real and
personal, of every description incidental to or capable of being used
in connection with the aforesaid business or any of them.
e. Purchase or otherwise acquire and hold, sell, assign,
transfer, mortgage, pledge, or otherwise dispose of shares of the
capital stock and bonds, debentures or other evidences of indebtedness
created by any other corporation or corporations, domestic or foreign,
and while the holder thereof, to exercise all the rights and
privileges of ownership, including the right to vote thereon.
Page 1 of 7
<PAGE> 2
f. Purchase its own stock, when permitted by the laws of the
State in which it is incorporated or doing business; to guarantee
dividends on its own stock, and the stock of other corporations.
g. Do all and everything necessary, suitable, convenient or
proper for the accomplishment of any of the purposes or the attainment
of any one or more of the objects herein enumerated or incidental to
the powers herein named, or which shall, at any time, appear conducive
to or expedient for the protection or benefit of the Corporation,
either as holders of or interest in any property, or otherwise.
h. Acquire (for cash or in exchange for its assets or
securities or otherwise), operate, dispose of, and otherwise deal and
engage in any lawful business activity for which corporations may be
organized under the laws of Nevada.
THIRD: PERIOD OF DURATION. The said Corporation is to have perpetual
existence unless dissolved according to law.
FOURTH: CAPITAL STOCK. The total number of shares of all classes which
the Corporation shall have authority to issue is 70,000,000, of which
20,000,000 shares shall be Preferred Shares, par value $0.001 per share, and
50,000,000 shall be Common Shares, par value $0.001 per share, and the
designations, preferences, limitations, and relative rights of the shares of
each class are as follows:
1. Preferred Shares: The Corporation may divide and issue the
Preferred Shares in series. Preferred Shares of each series when
issued shall be designated to distinguish them from the shares of all
other series. The Board of directors is hereby expressly vested with
authority to divide the class of Preferred Shares into series and to
fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by these
Articles of Incorporation and the laws of the State of Nevada in
respect of the following:
a. The number of shares to constitute such series,
and the distinctive designations thereof;
b. The rate and preference of dividends, if any, the
time of payment of dividends, whether dividends are
cumulative and the date from which any dividend shall accrue;
c. Whether shares may be redeemed and, if so, the
redemption price and the terms and conditions of redemption;
d. The amount payable upon shares in event of
involuntary liquidation;
e. The amount payable upon shares in event of
voluntary liquidation;
f. Sinking fund or other provisions, if any, for the
redemption or purchase of shares;
g. The terms and conditions on which shares may he
converted, if the shares of any series are issued with the
privilege of conversion;
h. Special, conditional or limited voting powers, or
no right to vote, except to the extent prohibited by the laws
of the State of Nevada; and
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<PAGE> 3
i. Any other relative rights and preferences of shares of
such series including, without limitation, any restriction on
an increase in the number of shares of any series theretofore
authorized and any limitation or restriction of rights or
powers to which shares of any future series shall be subject.
2. Common Shares:
a. The rights of holders of Common Shares to receive
dividends or share in the distribution of assets in the event
of liquidation, dissolution, winding up of the affairs of the
Corporation shall be subject to the preferences, limitations,
and relative rights of the Preferred Shares fixed in the
resolution or resolutions which may be adopted from time to
time by the Board of Directors of the Corporation providing
for the issuance of one or more series of the Preferred
Shares.
b. The holders of the Common Shares shall be
entitled to one vote for each share of Common Shares held by
them of record at the time for determining the holders
thereof entitled to vote.
c. Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders a majority of
the Shareholders entitled to vote at such meeting,
represented in person or by proxy, shall constitute a quorum.
d. The shareholders, by vote or concurrence of a
majority of the outstanding shares of the Corporation, or any
class or series thereof, entitled to vote on the subject
matter, may take any action which, except for this provision,
would require a two-thirds vote under the Nevada Corporation
Code.
FIFTH: DENIAL OF CUMULATIVE VOTING. Cumulative voting in the election
of Directors shall not be permitted by this Corporation.
SIXTH: DENIAL OF PREEMPTIVE RIGHTS. A shareholder of the Corporation
shall not be entitled to a preemptive right to purchase, subscribe for, or
otherwise acquire any unissued or treasury shares of stock of the Corporation,
or any options or warrants to purchase, subscribe for or otherwise acquire any
such unissued or treasury shares or any shares, bonds, notes, debentures, or
other securities convertible into or carrying options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares.
SEVENTH: INITIAL BOARD OF DIRECTORS. The affairs and management of
this Corporation shall be under the control of the Corporation's Board of
Directors, which shall consist of not less than one (1) nor more than five (5)
directors. The following person(s) shall serve as director(s) until the first
annual shareholders meeting or until their successors are duly elected and
qualify:
Name Address
---- -------
William S Robinson 5843 Olympic St.
Vancouver, B.C. V6N 1Z7
William A. Ince #102-688 West 12th Ave.
Vancouver, B.C. V5Z 1M8
Robert Pratt 4604 - 46A Street
Delta, B.C. V4K 2M6
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<PAGE> 4
EIGHTH: TRANSACTIONS WITH INTERESTED DIRECTORS AND OFFICERS. None of
the directors or officers of this Corporation shall, in the absence of fraud,
be disqualified by his office from contracting, leasing, or otherwise dealing
with this Corporation, either as a vendor, lessor, purchaser, or otherwise, of
which he shall he a member or in which he may be pecuniarily interested in any
manner be disqualified form doing business with the Corporation. No director or
officer, nor any firm, association or corporation or with which he is connected
as aforesaid shall be liable to account to this Corporation or its stockholders
for any profit realized by him from or through any such contract, lease or
transaction, it being the express intent and purpose of this Article to permit
this Corporation to buy or lease from, sell to or otherwise deal with
partnerships, firms or corporations of which the directors and officers or in
which they or any of them may have a pecuniary interest, and the contracts or
leases of this Corporation, in the absence of fraud, shall not be void or
voidable or affected in any manner by reason of any such membership. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction.
NINTH: INDEMNIFICATION.
1. The Corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that he is or was a
director, officer, employee, fiduciary, or agent of the Corporation or
is or was serving at the request of the Corporation as a director,
officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
expenses (including attorney fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in the best interests of the
Corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or 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 reasonably believed
to be in the best interests of the Corporation and with respect to any
criminal action or proceeding, had reasonable cause to believe his
conduct was unlawful.
2. The Corporation may 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 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, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in
the best interests of the Corporation; but no indemnification shall be
made in respect of any claim, issue, or matter as to which such person
has been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the
extent that the court in which such action or suit was brought
determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person
is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
3. To the extent that a director, officer, employee,
fiduciary or agent of a corporation has been successful on the merits
in defense of any action, suit, or proceeding referred to in (a) or
(b) or this Article Ninth or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorney
fees) actually and reasonably incur red by him in connection
therewith.
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<PAGE> 5
4. Any indemnification under (a) or (b) of this Article Nine
(unless ordered by a court) and as distinguished from (c) of this
Article shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
director, officer, employee, fiduciary or agent is proper in the
circumstances because he has met the applicable standard of conduct
set forth in (a) or (b) above. Such determination shall be made by the
Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding,
or, if such a quorum is not obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or by the shareholders.
5. Expenses (including attorney fees) incurred in defending a
civil or criminal action, suit, or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit,
or proceeding as authorized in (c) or (d) above, upon receipt of an
undertaking by or on behalf of the director, officer, employee,
fiduciary or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article Nine.
6. The indemnification provided by this Article Nine shall
not be deemed exclusive of any other rights to which those indemnified
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, and any procedure provided for
by any of the foregoing, both as to action in his official capacity
and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee, fiduciary or agent and shall inure to the benefit
of heirs, executors, and administrators of such a person.
7. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee,
fiduciary or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary
or agent of another corporation, partnership, joint venture, trust, or
other enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under provisions of this Article Nine.
8. Anything herein to the contrary notwithstanding, to the
fullest extent permitted by the Nevada Corporation Code, as the same
exists or may hereafter be amended, a director or officer of this
Corporation shall not be liable to the Corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director or
officer.
TENTH: LOCATIONS OF MEETINGS. The Board of Directors and stockholders
of this Corporation shall have the right to hold their meetings outside of the
State of Nevada when deemed most convenient or to the best interests of the
Corporation.
ELEVENTH: RESIDENT AGENT. The name of the Corporation's Registered
Agent and the street address in Nevada for such Resident Agent where service of
process may be served are:
The Corporation Trust Company
One East First Street
Reno, Nevada 89501
TWELFTH: DISPOSITION OF CORPORATE ASSETS. The Board of Directors may
at any meeting, by a majority vote, sell, lease, exchange, and/or convey all of
its property and assets, including its good will and/or its corporate
franchises, upon such terms and conditions and for such consideration or
considerations as the Board of Directors in their sole discretion deem
expedient and for the best interest of the Corporation and said consideration
or considerations may consist in whole or in part of shares of stock
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<PAGE> 6
and/or securities of any other corporation or corporations; provided, however,
in all such cases the affirmative vote of the holders of a majority of the
Common Stock of said Corporation then issued and outstanding shall be voted in
ratification of the Board of Directors action, said vote to be taken at a
special stockholders' meeting of the Corporation, duly called for that purpose.
Nothing herein shall be construed to limit the power of the Board of Directors
of the Corporation and said Board shall have power in its sole discretion to
sell, lease, exchange and/or convey such parts or parcels of land or personal
property or assets as the Board of Directors determine are no longer necessary
or expedient to be held by the Corporation. It is, however, specifically
understood that the Board of Directors may at their discretion create a lien or
mortgage on any or all of the assets of the Corporation in order to borrow
money should the Board of Directors feel that it is necessary for the conduct
of the business.
THIRTEENTH: ACCESS TO CORPORATIONS BOOKS AND RECORDS BY SHAREHOLDERS.
Stockholders shall at all times have the right to examine the books of the
Corporation except as limited by these Articles of Incorporation. Such
examination as hereinafter provided shall be made only by the stockholder in
person, and no extract from the books or records of the Corporation shall be
permitted to be made by any stockholder(s) of the Corporation. Such stockholder
shall give assurance in writing satisfactory to the Board of Directors that he
does not desire the information required or to be obtained by such inspection
for the purpose of communicating the same to others who are not stockholders
and, further, that he will not directly or indirectly disclose the Company's
business or affairs to any person or persons whomsoever.
No information in regard to the business or operations of the Corporation and
no copy of, or extract from, any of the books or records of the Corporation
shall be furnished to any person by any officer or director of the Corporation
except by direction and/or approval by the Board of Directors. Stockholders
desiring information in regard to the business or operations of the
Corporation, or desiring to make inspection of the books or records, shall
first make application in writing to the Board of Directors stating the
specific purpose of the application, the particular information desired and the
books and records required for that purpose by such stockholder before such
examination, and shall further satisfy the Board of Directors that said
application is made in good faith and that said examination will not be
detrimental to the interests of the Corporation.
FOURTEENTH: REGISTERED HOLDER OF SHARES TREATED AS OWNER THEREOF. The
Corporation shall be entitled to treat the registered holder of any shares of
the Corporation as the owner thereof for all purposes, including all rights
deriving from such shares, and the Corporation shall not be bound to recognize
any equitable or other claim to, or interest in, such shares or rights deriving
from such shares on the part of any other person including without limiting the
generality hereof, a purchaser, assignee or transferee of such shares or rights
deriving from such shares, unless and until such other person becomes the
registered holder of such shares, whether or not the Corporation shall have
either actual or constructive notice of the claimed interest of such other
person. by way of example and not of limitation, until such other person has
become the registered holder of such shares, he shall not be entitled: to
receive notice of the meetings of the shareholders; to vote at such meetings;
to examine a list of the shareholders; to be paid dividends or other sums
payable to shareholders; or to own, enjoy and exercise any other rights
deriving from such shares against the Corporation.
FIFTEENTH: CONTROL OVER BYLAWS. The Board of Directors shall have the
power to make and amend such prudential Bylaws as they deem proper and not
inconsistent with the Constitution or the laws of the United States or of this
State for the management of the property of this Corporation, the regulation
and government of its affairs, and for the certification and transfer of its
stock.
Page 6 of 7
<PAGE> 7
SIXTEENTH: INCORPORATOR. The name and address of the Incorporator is:
Hiedi M. Liesch
1675 Broadway
Denver, CO 80202
Dated this 12 day of February, 1996.
INCORPORATOR:
Signature: /s/ Hiedi M. Liesch
---------------------------------
Hiedi M. Liesch
Page 7 of 7
<PAGE> 8
[STATE OF NEVADA LETTERHEAD]
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
FOR PROFIT NEVADA CORPORATIONS
(PURSUANT TO NRS 78.385 AND 78.390 - AFTER ISSUANCE OF STOCK)
1. Name of Corporation: INTEGRAL TECHNOLOGIES, INC.
2. The articles have been amended as follows (provide article numbers, if
available): Pursuant to Article Fourth of the Corporation's Articles of
Incorporation, the Corporation does hereby designate 1,000,000 of the
20,000,000 authorized shares of $.001 par value Preferred Stock as Series
A Convertible Preferred Stock, in accordance with the attached
"Designation of Rights and Preferences of Series A Convertible Preferred
Stock of Integral Technologies, Inc. dated September 30, 1999."
3. This amendment was adopted on September 30, 1999, by resolution of the
board of directors without shareholder action and shareholder action was
not required.
4. Signed this 9th day of November, 1999:
/s/ William S. Robinson
- ----------------------------------
William S. Robinson, Chairman
ATTEST:
/s/ William A. Ince
- ----------------------------------
William A. Ince, Secretary
*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.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
<PAGE> 9
DESIGNATION OF RIGHTS AND PREFERENCES OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
INTEGRAL TECHNOLOGIES, INC.
SEPTEMBER 30, 1999
Integral Technologies, Inc., a corporation organized and existing
under the laws of the State of Nevada (the "Corporation"), DOES HEREBY CERTIFY
that pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the Nevada Corporation Code, the Corporation's
Board of Directors has duly adopted the following resolution creating a series
of the class of its authorized Preferred Stock, designated as Series A
Convertible Preferred Stock.
RESOLVED THAT:
Whereas, by virtue of the authority contained in its Articles of
Incorporation, as amended, the Corporation has the authority to issue Twenty
Million (20,000,000) shares of $.001 par value Preferred Stock, the designation
and amount thereof and series, together with the preferences, rights, and
restrictions thereof, to be determined by the Corporation's Board of Directors
pursuant to the applicable laws of the State of Nevada.
Now, therefore, the Corporation's Board of Directors hereby
establishes a series of the class of Preferred Stock authorized to be issued by
the Corporation as above stated, with the designations and amounts thereof,
together with the preferences, conversion and other rights, and relative
participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, to be as follows:
1. Designations and Amounts. One Million (1,000,000) shares of the
Corporation's authorized Preferred Stock are designated as Series A Convertible
Preferred Stock.
2. Definitions. For the purposes of this Resolution the following
definitions shall apply:
(i) "Board" shall mean the Board of Directors of the
Corporation.
(ii) "Corporation" shall mean Integral Technologies, Inc., a
Nevada corporation.
(iii) "Common Stock" shall refer to the Corporation's common
stock, $.001 par value per share.
(iv) "Subsidiary" shall mean any corporation, over 50% of
whose outstanding voting stock shall at the time be owned directly or
indirectly by the Corporation or by one or more Subsidiaries.
3. Dividends. The holder of each issued and outstanding share of
Series A Convertible Preferred Stock shall be entitled to receive distributions
at the rate of five percent (5%) simple interest per annum based on a $1.00 per
share stated value, payable in cash or in shares of restricted Common Stock, at
the election of the Corporation. Such dividend shall be come due annually, in
arrears, on June 30 of each year. Any dividends that the Corporation fails to
declare and pay on the date due shall accumulate and accrue until later paid or
upon conversion of the Series A Convertible Preferred Stock pursuant to the
terms hereof. In the event that the Corporation elects to make a payment of a
dividend in the form of shares of restricted Common Stock in lieu of cash, the
number of shares of Common Stock to be issued shall be determined by
PAGE 1 OF 7
<PAGE> 10
dividing the dollar amount of the dividend as of the date declared or accrued b
the market price per share of Common Stock for the "Trading Period" (as defined
in paragraph 5(C)(ii)) prior to the date the dividend was declared or accrued.
All dividends on the Series A Convertible Preferred Stock shall be paid before
any other distributions shall be declared, paid or set aside upon the Common
Stock or any other class of stock of the Corporation.
4. Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, the holders of the issued and outstanding Series A Convertible
Preferred Stock shall be entitled to receive for each share of Series A
Convertible Preferred Stock, before any distribution of the assets of the
Corporation shall be made to the holders of any other capital stock, a dollar
amount equal to the stated value of $1.00 per share plus all accrued and unpaid
distributions declared thereon, without interest. After such payment shall have
been made in full to the holders of the issued and outstanding Series A
Convertible Preferred Stock, or funds necessary for such payment shall have
been set aside in trust for the account of the holders of the issued and
outstanding Series A Convertible Preferred Stock so as to be and continue to be
available therefor, then, before any further distribution of the assets of the
Corporation shall be made, a dollar amount equal to that already distributed to
the holders of the Series A Convertible Preferred Stock shall be distributed
pro-rata to the holders of the other issued and outstanding capital stock of
the Corporation, subject to the rights of any other class of capital stock set
forth in the Articles of Incorporation of the Corporation or Amendments to the
Articles of Incorporation filed by the Corporation. After such payment shall
have been made in full to the holders of such other issued and outstanding
capital stock, or funds necessary for such payment shall have been set aside in
trust for the account of the holders of such other issued and outstanding
capital stock so as to be and continue to be available therefor, the holders of
the issued and outstanding Series A Convertible Preferred Stock shall be
entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the remaining assets of
the Corporation, and, subject to any rights of any other class of capital stock
set forth in the Articles of Incorporation of the Corporation or any Amendments
to the Articles of Incorporation filed by the Corporation, the remaining assets
of the Corporation shall be divided and distributed ratably among the holders
of both the Series A Convertible Preferred Stock and the other capital stock
then issued and outstanding according to the proportion by which their
respective record ownership of shares of the Series A Convertible Preferred
Stock and such capital stock bears to the total number of shares of the Series
A Convertible Preferred Stock and such capital stock then issued and
outstanding. If, upon such liquidation, dissolution, or winding up, the assets
of the Corporation distributable, as aforesaid, among the holders of the Series
A Convertible Preferred Stock shall be insufficient to permit the payment to
them of said amount, the entire assets shall be distributed ratably among the
holders of the Series A Convertible Preferred Stock. A consolidation or merger
of the Corporation, a share exchange, a sale, lease, exchange or transfer of
all or substantially all of its assets as an entirety, or any purchase or
redemption of stock of the Corporation of any class, shall not be regarded as a
"liquidation, dissolution, or winding up of the affairs of the Corporation"
within the meaning of this paragraph 4.
5. Conversion Privilege. Series A Convertible Preferred Stock shall be
convertible into restricted Common Stock as hereinafter provided and, when so
converted, shall be canceled and retired and shall not be reissued as such:
(A) Any holder of the Series A Convertible Preferred Stock may at any
time after issuance, convert, in whole or in part, such stock into the Common
Stock of the Corporation, on presentation and surrender to the Corporation of
the certificates of the Series A Convertible Preferred Stock to be so
converted. In order to convert Series A Convertible Preferred Stock into Common
Stock, the holder thereof shall on any business day surrender at the
Corporation's principal office the certificate or certificates representing all
such shares, duly endorsed to the Corporation or in blank. Series A Convertible
Preferred
PAGE 2 OF 7
<PAGE> 11
Stock shall be deemed to have been converted immediately prior to the close of
business on the day of such surrender for conversion, and the person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable after the date of any conversion, the
Corporation shall issue and deliver a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion to the
person or persons entitled to receive same.
(B) The Series A Convertible Preferred Stock shall be converted into
shares of Common Stock at the conversion rate, determined as hereinafter
provided, in effect at the time of conversion. Unless such conversion rate
shall be adjusted as hereinafter provided, the conversion rate shall be equal
to such number of shares of Common Stock for such shares of Series A
Convertible Preferred Stock so converted determined by a fraction, the
numerator of which shall be the number of shares of Series A Convertible
Preferred Stock to be converted, and the denominator of which shall be the
current market price (as defined in paragraph 5(C)(ii)).
(C) The conversion rate as hereinabove provided shall be subject to
adjustment as follows:
(i) In case the Corporation shall (a) make a distribution in
shares of its capital stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares, or (c) combine its outstanding shares of
Common Stock into a smaller number of shares, the conversion rate in effect
immediately prior thereto shall be adjusted so that the holder of a share of
Series A Convertible Preferred Stock surrendered for conversion after the
record date fixing stockholders to be affected by such event shall be entitled
to receive, upon conversion, the number of shares of Common Stock which such
holder would have owned or have been entitled to receive after the happening of
such event had such share of Series A Convertible Preferred Stock been
converted immediately prior to the record date in the case of such dividend or
the effective date in the case of any such subdivision, combination or
reclassification. An adjustment made pursuant to this subparagraph 5(C)(i)
shall be made whenever any of such events shall happen, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to shares of Series A Convertible Preferred Stock converted
between such record date or effective date and the date of happening of any
such event.
(ii) For the purpose of any computation under subparagraph
5(B) above, the current market price per share of Common Stock at any date
shall be (a) if the Common Stock is listed on any national securities exchange,
the average of the daily closing prices for the ten consecutive business days
before the day in question (the "Trading Period"); (b) if the Common Stock is
not listed on any national securities exchange but is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or the OTC Bulletin Board, the average of the high and low bids as reported
thereon for the Trading Period; and (c) if the Common Stock is neither listed
on any national securities exchange nor quoted on NASDAQ or the Electronic
Bulletin Board, the price shall be determined in any reasonable manner approved
by the Board of Directors of the Company.
(D) No adjustment of the conversion rate shall be made in any of the
following cases:
(i) upon the grant or exercise of stock options or warrants
outstanding on the date hereof or hereafter granted, or under any employee
stock option plan now or hereafter authorized, or as otherwise approved by the
Board of Directors;
(ii) shares of Common Stock issued upon the conversion of
Series A Convertible Preferred Stock;
PAGE 3 OF 7
<PAGE> 12
(iii) shares issued in connection with the acquisition by the
Corporation or by any subsidiary of the Corporation of 80% or more of the
assets of another corporation, and shares issued in connection with the
acquisition by the Corporation or by any subsidiary of the Corporation of 80%
or more of the voting shares of another corporation (including shares issued in
connection with such acquisition of voting shares of such other corporation
subsequent to the acquisition of an aggregate of 80% of such voting shares),
shares issued in a merger of the Corporation or a subsidiary of the Corporation
with another corporation in which the Corporation or the Corporation's
subsidiary is the surviving corporation, and shares issued upon the conversion
of other securities issued in connection with any such acquisition or in any
such merger; or
(iv) shares issued by way of dividend or other distribution
on Common Stock excluded from the calculation of the adjustment under this
subparagraph 5(D) or on Common Stock resulting from any subdivision or
combination of Common Stock so excluded.
(E) Whenever the conversion rate is adjusted as herein provided, the
Corporation shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted conversion rate and showing in
reasonable detail the facts upon which such adjustment is based. As promptly as
practicable, the Corporation shall cause a copy of the certificate referred to
in this subparagraph 5(E) to be mailed to each holder of record of issued and
outstanding Series A Convertible Preferred Stock at the address of such holder
appearing on the Corporation's books.
(F) The Corporation shall pay all taxes that may be payable in respect
of the issue or delivery of Common Stock on conversion of Series A Convertible
Preferred Stock pursuant hereto, but shall not pay any tax which may be payable
with respect to income or gains of the holder of any Series A Convertible
Preferred Stock or Common Stock or any tax which may be payable in respect of
any transfer involved in the issue and delivery of the Common Stock in a name
other than that in which the Series A Convertible Preferred Stock so converted
was registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid to the Corporation the amount of any
such tax, or has established, to the satisfaction of the Corporation, that such
tax has been paid.
(G) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of any shares of Series A Convertible Preferred
Stock. If the conversion shares of Series A Convertible Preferred Stock results
in a fraction, the fraction shall be rounded up to the nearest whole share.
(H) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized Common Stock, for the
purpose of effecting the conversion of the issued and outstanding Series A
Convertible Preferred Stock, the full number of shares of Common Stock then
deliverable in the event and upon the conversion of all of the Series A
Convertible Preferred Stock then issued and outstanding.
(I) The Series A Convertible Preferred Stock and all shares of Common
Stock issued or issuable upon conversion of the Series A Convertible Preferred
Stock shall be restricted and bear a restrictive legend.
6. Voting Powers, Restrictions and Limitations.
(A) Except as otherwise expressly provided in subparagraph 6(B)
hereof, or as required by law, each holder of Series A Convertible Preferred
Stock shall be entitled to vote on all matters and shall be entitled to that
number of votes equal to the largest number of whole shares of Common Stock
into which
PAGE 4 OF 7
<PAGE> 13
such holder's shares of Series A Convertible Preferred Stock could be
converted, pursuant to the provisions of Section (5) hereof, at the record date
for the determination of stockholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided
herein or as required by law, the holders of shares of Series A Convertible
Preferred Stock and Common Stock shall be entitled to vote together as a class
on all matters.
(B) Except as expressly provided herein or as required by law, so long
as any shares of the Series A Convertible Preferred Stock remain outstanding,
the Corporation shall not, and shall not permit any subsidiary (which shall
mean any corporation or trust of which the Corporation directly or indirectly
owns at the time a majority of the voting power) to, without the vote or
written consent by the holders of at least a majority of the then outstanding
shares of the Series A Convertible Preferred Stock, each share of Series A
Convertible Preferred Stock to be entitled to one vote in each instance:
(i) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose), any share or shares of
Series A Convertible Preferred Stock;
(ii) authorize or issue, or obligate itself to authorize or
issue, any other equity security senior to or on a parity with the Series A
Convertible Preferred Stock as to liquidation preferences, conversion rights,
voting rights or otherwise; or
(iii) effect any sale, lease, exchange or transfer of all or
substantially all of the assets of the Corporation or any subsidiary thereof,
or any merger or share exchange involving the Corporation or any subsidiary
thereof, or any reclassification or other change of stock, or any
recapitalization or any dissolution, liquidation or winding up of the
Corporation.
(C) The Corporation shall not amend its Articles of Incorporation
without the approval by vote or written consent by the holders of at least a
majority of the then outstanding shares of Series A Convertible Preferred
Stock, each share of Series A Convertible Preferred Stock to be entitled to one
vote in each instance, if such amendment would change any of the rights,
preferences, privileges of or limitations provided for herein for the benefit
of any shares of Series A Convertible Preferred Stock. Without limiting the
generality of the next preceding sentence, the Corporation will not amend its
Articles of Incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Series A Convertible Preferred Stock
if such amendment would:
(i) change the relative seniority rights of the holders of
Series A Convertible Preferred Stock as to the payment of distributions in
relation to the holders of any other capital stock of the Corporation; or
(ii) reduce the amount payable to the holders of Series A
Convertible Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or change the relative seniority
of the liquidation preferences of the holders of Series A Convertible Preferred
Stock to the rights upon liquidation of the holders of any other capital stock
of the Corporation or change the distribution rights of the holders of Series A
Convertible Preferred Stock; or
(iii) cancel or modify the conversion rights of the holders
of Series A Convertible Preferred Stock provided for in Section (5) herein.
PAGE 5 OF 7
<PAGE> 14
7. Redemption by the Corporation. The Corporation, at the option of the
Board, may redeem, in whole or in part, the Series A Convertible Preferred Stock
at any time outstanding by paying to the holders of record a per share cash
redemption price based on the following schedule:
(i) If the Corporation redeems within one year after the date
the Series A Convertible Preferred Stock is issued to the holder, the
redemption price shall be $1.50 for each share of Series A Convertible
Preferred Stock so redeemed.
(ii) If the Corporation redeems after one year but less than
two years after the date the Series A Convertible Preferred Stock is issued to
the holder, the redemption price shall be $2.00 for each share of Series A
Convertible Preferred Stock so redeemed.
(iii) If the Corporation redeems after two years but less
than three years after the date the Series A Convertible Preferred Stock is
issued to the holder, the redemption price shall be $2.50 for each share of
Series A Convertible Preferred Stock so redeemed.
(iv) If the Corporation redeems after three years but less
than four years after the date the Series A Convertible Preferred Stock is
issued to the holder, the redemption price shall be $3.00 for each share of
Series A Convertible Preferred Stock so redeemed.
(v) If the Corporation redeems after four years but less than
five years after the date the Series A Convertible Preferred Stock is issued to
the holder the redemption price shall be $3.50 for each share of Series A
Convertible Preferred Stock so redeemed.
If the Corporation elects to exercise this redemption right, the
Corporation shall give written notice of the date fixed for redemption at least
14 days prior thereto to the holders of record of the Series A Convertible
Preferred Stock to be redeemed. Upon redemption, holders shall be paid the
applicable redemption price per share of Series A Convertible Preferred Stock
plus all accrued and unpaid distributions declared or accrued, at the date
fixed for redemption. At any time prior to the date fixed for redemption,
holders may elect to convert, in whole or in part, the Series A Convertible
Preferred Stock pursuant to paragraph 5. The Board shall have full power and
authority, subject to the limitations and provisions herein contained, to
prescribe the manner in which and the terms and conditions upon which the
Series A Convertible Preferred Stock shall be redeemed. In addition, on such
date the holders of Series A Convertible Preferred Stock shall no longer be
entitled to any distributions and shall not have any rights or interests as
holders of said shares, except to receive the payment herein designated,
without interest thereon, upon presentation and surrender of their certificates
therefor.
8. No Preemptive Rights. No holder of the Series A Convertible
Preferred Stock shall be entitled, as of right, to purchase or subscribe for
any part of the unissued capital stock of the Corporation or of any capital
stock of the Corporation to be issued by reason of any increase of the
authorized capital stock of the Corporation, or to purchase or subscribe for
any bonds, certificates of indebtedness, debentures or other securities
convertible into or carrying options or warrants to purchase stock or other
securities of the Corporation or to purchase or subscribe for any stock of the
Corporation purchased by the Corporation or by its nominee or nominees, or to
have any other preemptive rights now or hereafter defined by the laws of the
State of Nevada.
9. Changes In Terms of Series A Convertible Preferred Stock. The terms
of the Series A Convertible Preferred Stock may not be amended, altered or
repealed, and no class of capital stock or securities convertible into capital
stock shall be authorized which has superior rights to the Series A
PAGE 6 OF 7
<PAGE> 15
Convertible Preferred Stock as to distributions or liquidation, without the
consent of the holders of at least 51% of the outstanding shares of Series A
Convertible Preferred Stock, voting as a separate series.
10. No Implied Limitations. Except as otherwise provided by express
provisions of this Designation of Rights and Preferences of Series A
Convertible Preferred Stock, nothing herein shall limit, by inference or
otherwise, the discretionary right of the Board to classify and reclassify and
issue any shares of Preferred Stock and to fix or alter all terms thereof to
the full extent provided in the Articles of Incorporation of the Corporation.
11. General Provisions. In addition to the above provisions with
respect to the Series A Convertible Preferred Stock, such Series A Convertible
Preferred Stock shall be subject to, and entitled to the benefits of, the
provisions set forth in the Corporation's Articles of Incorporation with
respect to Series A Convertible Preferred Stock generally.
12. Notices. All notices required or permitted to be given by the
Corporation with respect to the Series A Convertible Preferred Stock shall be
in writing, and if delivered by first class United States mail, postage
prepaid, to the holders of the Series A Convertible Preferred Stock at their
last addresses as they shall appear upon the books of the Corporation, shall be
conclusively presumed to have been duly given, whether or not the stockholder
actually receives such notice; provided, however, that failure to duly give
such notice by mail, or any defect in such notice, to the holders of any stock
designated for redemption, shall not affect the validity of the proceedings for
the redemption of any other shares of Series A Convertible Preferred Stock.
IN WITNESS WHEREOF, Integral Technologies, Inc. has caused this
Designation of Rights and Preferences of Series A Convertible Preferred Stock
to be duly executed by its Chairman and attested by its Secretary the day and
year first written above.
INTEGRAL TECHNOLOGIES, INC.
/s/ Willliam S. Robinson
----------------------------------
William S. Robinson, Chairman
Attest:
/s/ William A. Ince
- ----------------------------------
William A. Ince, Secretary
PAGE 7 OF 7
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
INTEGRAL TECHNOLOGIES, INC.
(as restated December 31, 1997)
<PAGE> 2
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TABLE OF CONTENTS
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ARTICLE I
OFFICES
1.1 Business Office ........................................................................................1
1.2 Registered Office and Registered Agent .................................................................1
ARTICLE II
SHARES AND TRANSFER THEREOF
2.1 Regulation .............................................................................................1
2.2 Stock Certificates: Facsimile Signatures and Validation ................................................1
2.3 Fractions of Shares: Insurance; Payment of Value or Issuance of Scrip ..................................1
2.4 Cancellation of Outstanding Certificates and Issuance of New Certificates: Order of
Surrender; Penalties for Failure to Comply ........................................................2
2.5 Consideration for Shares: Types; Adequacy; Effect of Receipt; Actions of Corporation
Pending Receipt in Future .........................................................................2
2.6 Stockholder's Liability: No Individual Liability Except for Payment for which Shares were Authorized to
be Issued or which was Specified in Subscription Agreement.........................................3
2.7 Lost, Stolen, or Destroyed Certificates ................................................................3
2.8 Transfer of Shares .....................................................................................3
2.9 Restrictions on Transfer of Shares .....................................................................3
2.10 Transfer Agent .........................................................................................3
2.11 Close of Transfer Book and Record Date .................................................................4
ARTICLE III
STOCKHOLDERS AND MEETINGS THEREOF
3.1 Stockholders of Record .................................................................................4
3.2 Meetings ...............................................................................................4
3.3 Annual Meeting .........................................................................................4
3.4 Special Meetings .......................................................................................4
3.5 Actions at Meetings not Regularly Called: Ratification and Approval ....................................5
3.6 Notice of Stockholders' Meeting: Signature; Contents; Service .........................................5
3.7 Waiver of Notice .......................................................................................6
3.8 Voting Record ..........................................................................................6
3.9 Quorum 6
3.10 Organization ...........................................................................................6
3.11 Manner of Acting .......................................................................................6
3.12 Stockholders' Proxies ..................................................................................6
3.13 Voting of Shares .......................................................................................7
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3.14 Voting by Ballot .......................................................................................7
3.15 Cumulative Voting ......................................................................................7
3.16 Consent of Stockholders in Lieu of Meeting .............................................................8
3.17 Maintenance of Records at Registered Office; Inspection and Copying
of Records ........................................................................................8
ARTICLE IV
DIRECTORS, POWERS AND MEETINGS
4.1 Board of Directors .....................................................................................9
4.2 General Powers .........................................................................................9
4.3 Regular Meetings .......................................................................................9
4.4 Special Meetings .......................................................................................9
4.5 Actions at Meetings Not Regularly Called: Ratification and Approval....................................10
4.6 Notice of Directors' Meetings .........................................................................10
4.7 Waiver of Notice ......................................................................................10
4.8 Quorum 10
4.9 Organization ..........................................................................................10
4.10 Manner of Acting ......................................................................................11
4.11 Participation by Telephone or Similar Method...........................................................11
4.12 Consent of Directors in Lieu of Meeting ...............................................................11
4.13 Vacancies .............................................................................................11
4.14 Compensation ..........................................................................................11
4.15 Removal of Directors ..................................................................................11
4.16 Resignations ..........................................................................................12
ARTICLE V
OFFICERS
5.1 Number 12
5.2 Election and Term of Office ...........................................................................12
5.3 Removal ...............................................................................................12
5.4 Vacancies .............................................................................................12
5.5 Powers, Duties and Functions ..........................................................................12
5.6 Compensation ..........................................................................................14
5.7 Bonds ..............................................................................................14
ARTICLE VI
PROVISIONS APPLICABLE TO OFFICERS AND DIRECTORS GENERALLY
6.1 Exercise of Powers and Performance of Duties by Directors and Officers ................................14
6.2 Restrictions on Transactions Involving Interested Directors or Officers;
Compensation of Directors ........................................................................15
6.3 Indemnification of Officers, Directors, Employees and Agents; Advancement of Expenses .................15
</TABLE>
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ARTICLE VII
DIVIDENDS; FINANCE
7.1 Dividends .............................................................................................17
7.2 Reserve Funds .........................................................................................17
7.3 Banking ...............................................................................................17
ARTICLE VIII
CONTRACTS, LOANS, AND CHECKS
8.1 Execution of Contracts ................................................................................18
8.2 Loans ...............................................................................................18
8.3 Checks ............................................................................................... 18
8.4 Deposits ..............................................................................................18
ARTICLE IX
FISCAL YEAR
...............................................................................................18
ARTICLE X
CORPORATE SEAL
...............................................................................................18
ARTICLE XI
AMENDMENTS
...............................................................................................18
ARTICLE XII
COMMITTEES
12.1 Appointment ...........................................................................................19
12.2 Name ...............................................................................................19
12.3 Membership ............................................................................................19
12.4 Procedure .............................................................................................19
12.5 Meetings ..............................................................................................19
12.6 Vacancies .............................................................................................19
12.7 Resignations and Removal ..............................................................................19
CERTIFICATE
...............................................................................................20
</TABLE>
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ARTICLE I
OFFICES
1.1 Principal Office. The principal office and place of business of
the corporation shall be located in the Province of British Columbia, Canada.
Other offices and places of business may be established from time to time by
resolution of the Board of Directors or as the business of the corporation may
require.
1.2 Registered Office and Registered Agent. The corporation shall have
and continuously maintain in the State of Nevada a registered office, which may
be the same as its principal office, and a registered agent whose business
office is identical with such registered office. The initial registered office
and the initial registered agent are specified in the Articles of
Incorporation. The registered office or registered agent of the corporation may
be changed from time to time by the Board of Directors in accordance with the
procedures set forth in the Nevada Business Corporation Act.
ARTICLE II
SHARES AND TRANSFER THEREOF
2.1 Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer, and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
2.2 Stock Certificates: Facsimile Signatures and Validation.
(A) Every stockholder shall be entitled to have a
certificate, signed by officers or agents designated by the corporation for the
purpose, certifying the number of shares owned by him in the corporation.
(B) Whenever any certificate is countersigned or
otherwise authenticated by a transfer agent or transfer clerk, and by a
registrar, then a facsimile of the signatures of the officers or agents of the
corporation may be printed or lithographed upon such certificate in lieu of the
actual signatures.
(C) In the event any officer or officers who shall have
signed, or whose facsimile signature shall have been used on, any certificate
or certificates for stock shall cease to be such officer or officers of the
corporation, whether because of death, resignation or other reason, before such
certificate or certificates shall have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates, or whose facsimile signature shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
2.3 Fractions of Shares: Issuance; Payment of Value or Issuance of
Scrip. The corporation is not obligated to, but may, execute and deliver a
certificate for or including a fraction of a share. In lieu of executing and
delivering a certificate for a fraction of a share, the corporation may, upon
resolution of the Board of Directors:
(A) make payment to any person otherwise entitled to
become a holder of a fractional share, which payment shall be in accordance
with the provisions of the Nevada Business Corporation Act; or
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(B) issue such additional fraction of a share as is
necessary to increase the fractional share to a full share; or
(C) execute and deliver registered or bearer scrip over
the manual or facsimile signature of an officer of the corporation or of its
agent for that purpose, exchangeable as provided on the scrip for full share
certificates, but the scrip does not entitle the holder to any rights as a
stockholder except as provided on the scrip. The scrip may contain any other
provisions or conditions, as permitted by the Nevada Business Corporation Act,
that the corporation, by resolution of the Board of Directors, deems advisable.
2.4 Cancellation of Outstanding Certificates and Issuance of New
Certificates: Order of Surrender; Penalties for Failure to Comply. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificates shall be issued in lieu thereof until the former
certificate for a like number of shares shall have been surrendered and
canceled, except as hereinafter provided with respect to lost, stolen or
destroyed certificates.
When the Articles of Incorporation are amended in any way affecting
the statements contained in the certificates for outstanding shares, or it
becomes desirable for any reason, in the discretion of the Board of Directors,
to cancel any outstanding certificate for shares and issue a new certificate
therefor conforming to the rights of the holder, the Board of Directors may
order any holders of outstanding certificates for shares to surrender and
exchange them for new certificates within a reasonable time to be fixed by the
Board of Directors. Such order may provide that no holder of any such
certificate so ordered to be surrendered shall be entitled to vote or to
receive dividends or exercise any of the other rights of stockholders of record
until he shall have complied with such order, but such order shall only operate
to suspend such rights after notice and until compliance. The duty of surrender
of any outstanding certificates may also be enforced by action at law.
2.5 Consideration for Shares: Types; Adequacy; Effect of Receipt;
Actions of Corporation Pending Receipt in Future.
(A) The Board of Directors may authorize shares to be
issued for consideration consisting of any tangible or intangible property or
benefit to the corporation, including, but not limited to, cash, promissory
notes, services performed, contracts for services to be performed, or other
securities of the corporation.
(B) Before the corporation issues shares, the Board of
Directors must determine that the consideration received or to be received for
the shares to be issued is adequate. The judgment of the Board of Directors as
to the adequacy of the consideration received for the shares issued is
conclusive in the absence of actual fraud in the transaction.
(C) When the corporation receives the consideration for
which the Board of Directors authorized the issuance of shares, the shares
issued therefor are fully paid.
(D) The corporation may place in escrow shares issued
for a contract for future services or benefits or a promissory note, or make
any other arrangements to restrict the transfer of the shares. The corporation
may credit distributions made for the shares against their purchase price,
until the services are performed, the benefits are received or the promissory
note is paid. If the services are
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not performed, the benefits are not received or the promissory note is not
paid, the shares escrowed or restricted and the distributions credited may be
canceled in whole or in part.
2.6 Stockholder's Liability: No Individual Liability Except for
Payment for which Shares were Authorized to be Issued or which was Specified in
Subscription Agreement. Unless otherwise provided in the articles of
incorporation, no stockholder of the corporation is individually liable for the
debts or liabilities of the corporation. A purchaser of shares of stock from
the corporation is not liable to the corporation or its creditors with respect
to the shares, except to pay the consideration for which the shares were
authorized to be issued or which was specified in the written subscription
agreement.
2.7 Lost, Stolen, or Destroyed Certificates. Any stockholder claiming
that his certificate for shares is lost, stolen, or destroyed may make an
affidavit or affirmation of the fact and lodge the same with the Secretary of
the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation, a new certificate may be issued of the same tenor and representing
the same number of shares as were represented by the certificate alleged to be
lost, stolen or destroyed. The necessity for such bond and the amount required
to be determined by the President and Treasurer of the corporation, unless the
corporation shall have a transfer agent, in which case the transfer agent shall
determine the necessity for such bond and the amount required.
2.8 Transfer of Shares. Subject to the terms of any stockholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares. Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificates in lieu thereof. As against the corporation, a
transfer of shares can be made only on the books of the corporation and in the
manner hereinabove provided, and the corporation shall be entitled to treat the
holder of record of any share as the owner thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of Nevada.
2.9 Restrictions on Transfer of Shares. A written restriction on the
transfer or registration of transfer of a security of the corporation, if
permitted by the provisions of the Nevada Business Corporation Act, may be
enforced against the holder of the restricted security or any successor or
transferee of the holder.
A restriction on the transfer or registration of transfer of the
securities of the corporation may be imposed either by the Articles of
Incorporation, these Bylaws, or by an agreement among any number of security
holders or between one or more such holders and the corporation. No restriction
so imposed is binding with respect to securities issued prior to the adoption
of the restriction, unless the holders of the securities are parties to an
agreement or voted in favor of the restriction.
2.10 Transfer Agent. Unless otherwise specified by the Board of
Directors by resolution, the Secretary of the corporation shall act as transfer
agent of the certificates representing the shares of stock of the corporation.
He shall maintain a stock transfer book, the stubs of which shall set forth
among other things, the names and addresses of the holders of all issued shares
of the corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer.
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Subject to Section 3.7, the names and addresses of the stockholders as they
appear on the stubs of the stock transfer book shall be conclusive evidence as
to who are the stockholders of record and as such entitled to receive notice of
the meetings of stockholders; to vote at such meetings; to examine the list of
the stockholders entitled to vote at meetings; to receive dividends; and to
own, enjoy and exercise any other property or rights deriving from such shares
against the corporation. Each stockholder shall be responsible for notifying
the Secretary in writing of any change in his name or address and failure so to
do will relieve the corporation, its directors, officers and agents, from
liability for failure to direct notices or other documents, or pay over or
transfer dividends or other property or rights, to a name or address other than
the name and address appearing on the stub of the stock transfer book.
2.11 Close of Transfer Book and Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or stockholders entitled to receive
payment of any dividend, or in order to make a determination of stockholders
for any other proper purpose, the Board of Directors may prescribe a period not
exceeding sixty (60) days prior to any meeting of the stockholders during which
no transfer of stock on the books of the corporation may be made, or may fix a
day not more than sixty (60) days prior to the holding of any such meeting as
the day as of which stockholders entitled to notice of and to vote at such
meetings shall be determined; and only stockholders of record on such day shall
be entitled to notice or to vote at such meeting. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
ARTICLE III
STOCKHOLDERS AND MEETINGS THEREOF
3.1 Stockholders of Record. Only stockholders of record on the books
of the corporation shall be entitled to be treated by the corporation as
holders in fact of the shares standing in their respective names, and the
corporation shall not be bound to recognize any equitable or other claim to, or
interest in, any shares on the part of any other person, firm or corporation,
whether or not it shall have express or other notice thereof, except as
expressly provided by the Nevada Business Corporation Act.
3.2 Meetings. Meetings of stockholders shall be held at the principal
office of the corporation, or at such other place, either within or without the
State of Nevada, as specified from time to time by the Board of Directors. If
the Board of Directors shall specify another location such change in location
shall be recorded on the notice calling such meeting.
3.3 Annual Meeting. The annual meeting of stockholders of the
corporation for the election of directors, and for the transaction of such
other business as may properly come before the meeting, shall be held on such
date, and at such time and place as the Board of Directors shall designate by
resolution. If the election of directors shall not be held within the time
period designated herein for any annual meeting of the stockholders, the Board
of Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as may be convenient. Failure to hold the
annual meeting at the designated time shall not work a forfeiture or
dissolution of the corporation.
3.4 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman, the Chief Executive Officer, the President, by a majority of the
Board of Directors, or by the person or persons authorized by resolution of the
Board of Directors.
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3.5 Actions at Meetings Not Regularly Called: Ratification and
Approval. Whenever all stockholders entitled to vote at any meeting consent,
either by (i) a writing on the records of the meeting or filed with the
Secretary; or (ii) presence at such meeting and oral consent entered on the
minutes; or (iii) taking part in the deliberations at such meeting without
objection; the doings of such meeting shall be as valid as if had at a meeting
regularly called and noticed. At such meeting any business may be transacted
which is not excepted from the written consent or to the consideration of which
no objection for want of notice is made at the time.
If a meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity
or defect therein waived by a writing signed by all stockholders having the
right to vote at such meeting.
Such consent or approval of stockholders may be made by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
3.6 Notice of Stockholders' Meeting: Signature; Contents; Service.
(A) The notice of stockholders' meetings shall be in
writing and signed by the Chief Executive Officer, President or a Vice
President, or the Secretary, or the Assistant Secretary, or by such other
person or persons as designated by the Board of Directors. Such notice shall
state the purpose or purposes for which the meeting is called and the time
when, and the place, which may be within or without the State of Nevada, where
it is to be held.
A copy of such notice shall be either delivered personally to, or
shall be mailed postage prepaid to, or shall be sent by telecopy to, each
stockholder of record entitled to vote at such meeting not less than ten (10)
nor more than sixty (60) days before such meeting. If mailed, it shall be
directed to a stockholder at his address as it appears on the records of the
corporation, and upon such mailing of any such notice the service thereof shall
be complete, and the time of the notice shall begin to run from the date upon
which such notice is deposited in the mail for transmission to such
stockholder. Personal delivery of any such notice to any officer of a
corporation or association, or to any member of a partnership, shall constitute
delivery of such notice to such corporation, association, or partnership. If
sent by telecopy, it shall be evidenced by proof of transmission to the
intended recipient.
Notice duly delivered or mailed to a stockholder in accordance with
the provisions of this section shall be deemed sufficient, and in the event of
the transfer of his stock after such delivery or mailing and prior to the
holding of the meeting, it shall not be necessary to deliver or mail notice of
the meeting upon the transferee.
(B) Unless otherwise provided in the Articles of
Incorporation or these Bylaws, whenever notice is required to be given, under
any provision of Nevada law or the Articles of Incorporation or Bylaws of the
corporation, to any stockholder to whom:
(i) Notice of two consecutive annual meetings, and
all notices of meetings or of the taking of action by written consent
without a meeting to him during the period between those two
consecutive annual meetings; or
(ii) All, and at least two, payments sent by
first-class mail of dividends or interest on securities during a
twelve (12) month period, have been mailed addressed to him at
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his address as shown on the records of the corporation and have been
returned undeliverable, the giving of further notices to him is not
required. Any action or meeting taken or held without notice to such a
stockholder has the same effect as if the notice had been given. If
any such stockholder delivers to the corporation a written notice
setting forth his current address, the requirement that notice be
given to him is reinstated.
3.7 Waiver of Notice. Whenever any notice whatever is required to be
given to stockholders, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
3.8 Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten (10) days
before such meeting of stockholders, a complete record of the stockholders
entitled to vote at each meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. The record, for a period of ten (10) days prior to such meeting,
shall be kept on file at the principal office of the corporation, whether
within or without the State of Nevada, and shall be subject to inspection by
any stockholder for any purpose germane to the meeting at any time during usual
business hours. 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 stockholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as
to who are the stockholders entitled to examine the record or transfer books or
to vote at any meeting of stockholders.
3.9 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of stockholders, except as otherwise provided by the Nevada
Business Corporation Act and the Articles of Incorporation. In the absence of a
quorum at any such meeting, a majority of the shares so represented may adjourn
the meeting from time to time for a period not to exceed sixty (60) days
without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
3.10 Organization. The Board of Directors shall elect a chairman from
among the directors to preside at each meeting of the stockholders. The Board
of Directors shall elect a secretary to record the discussions and resolutions
of each meeting.
3.11 Manner of Acting. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of Incorporation or these Bylaws.
3.12 Stockholders' Proxies.
(A) At any meeting of the stockholders of the corporation
any stockholder may designate another person or persons to act as a proxy or
proxies. If any stockholder designates two or more persons to act as proxies, a
majority of those persons present at the meeting, or, if only one is present,
then that one has and may exercise all of the powers conferred by the
stockholder upon all of the persons so designated unless the stockholder
provides otherwise.
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(B) Without limiting the manner in which a stockholder
may authorize another person or persons to act for him as proxy pursuant to
subsection (A), the following constitute valid means by which a stockholder may
grant such authority:
(i) A stockholder may execute a writing authorizing
another person or persons to act for him as proxy. Execution may be
accomplished by the signing of the writing by the stockholder or his
authorized officer, director, employee, or agent or by causing the
signature of the stockholder to be affixed to the writing by any
reasonable means, including, but not limited to, a facsimile
signature.
(ii) A stockholder may authorize another person or
persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a
firm that solicits proxies or like agent who is authorized by the
person who will be the holder of the proxy to receive the
transmission. Any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that the telegram, cablegram, or
other electronic transmission is valid, the persons appointed by the
corporation to count the votes of stockholders and determine the
validity of proxies and ballots or other persons making those
determinations must specify the information upon which they relied.
(C) Any copy, communication by telecopier, or other
reliable reproduction of the writing or transmission created pursuant to
subsection (B), may be substituted for the original writing or transmission for
any purpose for which the original writing or transmission could be used, if
the copy, communication by telecopier, or other reproduction is a complete
reproduction of the entire original writing or transmission.
(D) No such proxy is valid after the expiration of six
(6) months from the date of its creation, unless it is coupled with an
interest, or unless the stockholder specifies in it the length of time for
which it is to continue in force, which may not exceed seven (7) years from the
date of its creation. Subject to these restrictions, any proxy properly created
is not revoked and continues in full force and effect until another instrument
or transmission revoking it or a properly created proxy bearing a later date is
filed with or transmitted to the secretary of the corporation or another person
or persons appointed by the corporation to count the votes of stockholders and
determine the validity of proxies and ballots.
3.13 Voting of Shares. Unless otherwise provided by the Articles of
Incorporation or these Bylaws, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
stockholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
3.14 Voting by Ballot. Voting on any question or in any election may
be by voice vote unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
3.15 Cumulative Voting. No stockholder shall be permitted to cumulate
his votes in the election of directors or for any other matter voted upon by
stockholders.
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3.16 Consent of Stockholders in Lieu of Meeting. Any action required
or permitted to be taken at a meeting of the stockholders may be taken without
a meeting if a written consent thereto is signed by stockholders holding at
least a majority of the voting power, except that:
(A) If any greater proportion of voting power is required
for such action at a meeting, then the greater proportion of written
consents is required; and
(B) This general provision for action by written consent
does not supersede any specific provision for action by written consent
contained in the Articles of Incorporation, these Bylaws, or the Nevada
Business Corporation Act.
In no instance where action is authorized by written consent need a
meeting of stockholders be called or notice given. The written consent must be
filed with the minutes of the proceedings of the stockholders.
3.17 Maintenance of Records at Registered Office; Inspection and
Copying of Records.
(A) The corporation shall keep a copy of the following
records at its registered office:
(i) a copy certified by the Nevada Secretary of
State of its Articles of Incorporation, and all amendments thereto;
(ii) a copy certified by an officer of the
corporation of its Bylaws and all amendments thereto; and
(iii) a stock ledger or a duplicate stock ledger,
revised annually, containing the names, alphabetically arranged, of all
persons who are stockholders of the corporation, showing their places
of residence, if known, and the number of shares held by them
respectively. In lieu of the stock ledger or duplicate stock ledger,
the corporation may keep a statement setting out the name of the
custodian of the stock ledger or duplicate stock ledger, and the
present and complete post office address, including street and number,
if any, where the stock ledger or duplicate stock ledger specified in
this section is kept.
(B) The corporation shall maintain the records required
by subsection (A) in written form or in another form capable of conversion into
written form within a reasonable time.
(C) Any person who has been a stockholder of record of
the corporation for at least six (6) months immediately preceding his demand,
or any person holding, or thereunto authorized in writing by the holders of, at
least five (5) percent of all of its outstanding shares, upon at least five (5)
days' written demand is entitled to inspect in person or by agent or attorney,
during usual business hours, the stock ledger or duplicate stock ledger,
whether kept in the registered office of the corporation in Nevada or
elsewhere, and to make extracts therefrom. Holders of voting trust certificates
representing shares of the corporation must be regarded as stockholders for the
purpose of this subsection.
(D) An inspection authorized by subsection (C) may be
denied to a stockholder or other person upon his refusal to furnish to the
corporation an affidavit that the inspection is not desired for a purpose which
is in the interest of a business or object other than the business of the
corporation and that he has not at any time sold or offered for sale any list
of stockholders of any domestic or foreign
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corporation or aided or abetted any person in procuring any such record of
stockholders for any such purpose.
(E) In every instance where an attorney or other agent
of the stockholder seeks the right of inspection, the demand must be
accompanied by a power of attorney executed by the stockholder authorizing the
attorney or other agent to inspect on behalf of the stockholder.
(F) The right to copy records under subsection (C)
includes, if reasonable, the right to make copies by photographic, photocopy,
or other means.
(G) The corporation may impose a reasonable charge to
recover the costs of labor and materials and the cost of copies of any
documents provided to the stockholder.
ARTICLE IV
DIRECTORS
4.1 Board of Directors. The business and affairs of the corporation
shall be managed by a board of not less than one (1) nor more than seven (7)
directors who shall be natural persons of at least eighteen (18) years of age
but who need not be stockholders of the corporation or residents of the State
of Nevada and who shall be elected at the annual meeting of stockholders or
some adjournment thereof. Each director shall hold office until the next
succeeding annual meeting of stockholders and until his successor shall have
been elected and shall qualify or until his death or until he shall resign or
shall have been removed. The Board of Directors may increase or decrease the
number of directors by resolution.
4.2 General Powers. The business and affairs of the corporation shall
be managed by the Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders. The directors shall pass upon any and
all bills or claims of officers for salaries or other compensation and, if
deemed advisable, shall contract with officers, employees, directors,
attorneys, accountants, and other persons to render services to the
corporation.
Any contract or conveyance, otherwise lawful, made in the name of the
corporation, which is authorized or ratified by the Board of Directors, or is
done within the scope of the authority, actual or apparent, given by the Board
of Directors, binds the corporation, and the corporation acquires rights
thereunder, whether the contract is executed or is wholly or in part executory.
4.3 Regular Meetings. A regular, annual meeting of the Board of
Directors shall be held at the same place as, and immediately after, the annual
meeting of stockholders, and no notice shall be required in connection
therewith. The annual meeting of the Board of Directors shall be for the
purpose of electing officers and the transaction of such other business as may
come before the meeting. The Board of Directors may provide, by resolution, the
time and place, either within or without the State of Nevada, for the holding
of additional regular meetings without other notice than such resolution.
4.4 Special Meetings. Special meetings of the Board of Directors or
any committee thereof may be called by or at the request of the Chairman, Chief
Executive Officer, President or any two directors or, in the case of a
committee, by any member of that committee. The person or persons authorized to
call special meetings of the Board of Directors or committee may fix any place,
either within or without the State of Nevada, the date, and the hour of the
meeting and the business proposed to
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be transacted at the meeting as the place for holding any special meeting of
the Board of Directors or committee called by them.
4.5 Actions at Meetings Not Regularly Called: Ratification and
Approval. Whenever all directors entitled to vote at any meeting consent,
either by (i) a writing on the records of the meeting or filed with the
Secretary; or (ii) presence at such meeting and oral consent entered on the
minutes; or (iii) taking part in the deliberations at such meeting without
objection; the doings of such meeting shall be as valid as if had at a meeting
regularly called and noticed. At such meeting any business may be transacted
which is not excepted from the written consent or to the consideration of which
no objection for want of notice is made at the time.
If a meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity
or defect therein waived by a writing signed by all directors having the right
to vote at such meeting.
4.6 Notice of Directors' Meetings. Written notice of any special
meeting of the Board of Directors or any committee thereof shall be given as
follows:
(A) By mail to each director at his business address at least
three (3) days prior to the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, so
addressed, with postage thereon prepaid;
(B) By personal delivery or telegram at least twenty-four
(24) hours prior to the meeting to the business address of each
director, or in the event such notice is given on a Saturday, Sunday,
or holiday, to the residence address of each director. If notice be
given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company; or
(C) By telecopy providing proof of transmission to the
intended recipient.
Such notice shall state the place, date, and hour of the meeting and
the business proposed to be transacted at the meeting.
4.7 Waiver of Notice. Whenever any notice whatever is required to be
given to directors, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
4.8 Quorum. Unless the Articles of Incorporation or these Bylaws
provide for a different proportion, a majority of the number of directors then
holding office or, in the case of a committee, then constituting such
committee, at a meeting duly assembled is necessary to constitute a quorum for
the transaction of business, but a smaller number may adjourn from time to time
without further notice, until a quorum is secured.
4.9 Organization. The Board of Directors shall elect a chairman from
among the directors to preside at each meeting of the Board of Directors and
committee thereof. The Board of Directors or committee shall elect a secretary
to record the discussions and resolutions of each meeting.
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4.10 Manner of Acting. The act of directors holding a majority of the
voting power of the Board of Directors or, in the case of a committee of the
Board of Directors, present at a meeting at which a quorum is present, shall be
the act of the Board of Directors, unless the act of a greater number is
required by the Nevada Business Corporation Act or by the Articles of
Incorporation or these Bylaws.
4.11 Participation by Telephone or Similar Method. Unless otherwise
restricted by the Articles of Incorporation or these Bylaws, members of the
Board of Directors or any committee designated by the Board of Directors may
participate in a meeting of such board or committee by means of a telephone
conference or similar method of communication by which all persons
participating in the meeting can hear and converse with each other.
Participation in a meeting pursuant to this section constitutes presence in
person at such meeting. Each person participating in the meeting shall sign the
minutes thereof. The minutes may be signed in counterparts.
4.12 Consent of Directors in Lieu of Meeting. Unless otherwise
restricted by the Articles of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if, before or after the
action, a written consent thereto is signed by all the members of the board or
such committee. Such written consent shall be filed with the minutes of
proceedings of the board or committee.
4.13 Vacancies.
(A) Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and shall hold such office until his successor is duly elected and shall
qualify. Any directorship to be filled by reason of an increase in the number
of directors shall be filled by the affirmative vote of a majority of the
directors then in office, though less than a quorum, or by an election at an
annual meeting, or at a special meeting of stockholders called for that
purpose. A director chosen to fill a position resulting from an increase in the
number of directors shall hold office only until the next election of directors
by the stockholders, and until his successor shall be elected and shall
qualify.
(B) Unless otherwise provided in the Articles of
Incorporation, when one or more directors give notice of his or their
resignation to the board, effective at a future date, the board may fill the
vacancy or vacancies to take effect when the resignation or resignations become
effective, each director so appointed to hold office during the remainder of
the term of office of the resigning director or directors.
4.14 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
4.15 Removal of Directors. Any director may be removed from office by
the vote of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to voting power, except that
the Articles of Incorporation may require the concurrence of a larger
percentage of the stock entitled to voting power in order to remove a director.
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4.16 Resignations. A director of the corporation may resign at any
time by giving written notice to the Board of Directors, President or Secretary
of the corporation. The resignation shall take effect upon the date of receipt
of such notice, or at such later time specified therein. The acceptance of such
resignation shall not be necessary to make it effective, unless the resignation
requires such acceptance to be effective.
ARTICLE V
OFFICERS
5.1 Number. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, all of whom shall be elected by the Board of
Directors. In addition, the Board of Directors may elect a Chairman, a Chief
Executive Officer, one or more Vice Presidents, Assistant Secretaries or
Assistant Treasurers, and such other subordinate officers as they shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors. Any two or more offices may be held by the same person,
except the offices of President and Secretary.
5.2 Election and Term of Office. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after the annual
meeting of the stockholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as practicable.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided. The officers of the
corporation shall be natural persons of the age of eighteen years or older.
5.3 Removal and Resignation. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors, for cause or without cause, whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any officer may resign at any time by giving
written notice of his or her resignation to the President or to the Secretary,
and acceptance of such resignation shall not be necessary to make it effective,
unless the notice so provides.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise, may be filled by the Board of
Directors for the unexpired portion of the term. In the event of absence or
inability of any officer to act, the Board of Directors may delegate the powers
or duties of such officer to any other officer, director, or person whom it may
select.
5.5 Powers, Duties and Functions. The officers of the corporation
shall exercise and perform the respective powers, duties and functions as are
stated below, and as may be assigned to them by the Board of Directors.
(A) Chairman. The Board of Directors may appoint a Chairman
as an officer of the corporation. The Chairman shall preside at all
meetings of shareholders and of the Board of Directors and shall be
the officer primarily responsible for pursuing financing for the
corporation. The Chairman shall also perform such other functions and
duties as the Board of Directors may prescribe from time to time.
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(B) Chief Executive Officer. The Board of Directors may
appoint a Chief Executive Officer ("CEO"). The CEO shall be the
officer primarily responsible for developing and implementing the
evolving business plan of the corporation, and shall oversee and
supervise the other officers, except the Chairman, if any, who shall
report directly to the Board of Directors. In the absence or
non-election of a Chairman, the CEO shall preside at all meetings of
shareholders and of the Board of Directors. The CEO may execute
contracts, deeds and other instruments on behalf of the corporation as
is necessary and appropriate, and shall also perform such other
functions and duties as the Board of Directors may prescribe from time
to time.
(C) President. The President shall be the chief executive
officer of the corporation unless a separate CEO has been appointed by
the Board of Directors in accordance with this Article. Subject to the
direction and control of the Board of Directors, the President shall
be responsible for the general and active management of the business
and day-to-day operations of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into
effect. In the absence or non-election of a Chairman of CEO, the
President shall preside at all meetings of shareholders and of the
Board of Directors. In the absence or non-election of a CEO, the
President may execute contracts, deeds and other instruments that the
Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these Bylaws to some other officer or
agent of the corporation, or shall be required by law to be otherwise
signed or executed. The President shall also perform such additional
functions and duties as the Board of Directors or the CEO, if a
separate CEO has been appointed, may prescribe from time to time.
(D) Vice President. The Vice President, or, if there shall be
more than one, the Vice Presidents in the order determined by the
Board of Directors, shall be the officer(s) next in seniority after
the President and the CEO, if one has been appointed by the Board of
Directors. Each Vice President shall also perform such duties and
exercise such powers as are appropriate and as are prescribed by the
Board of Directors or President. Upon the death, absence or disability
of the President, the Vice President, or if there shall be more than
one, the Vice Presidents in the order determined by the Board of
Directors, shall perform the duties and exercise the powers of the
President.
(E) Secretary. The Secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings
of the Board of Directors, keep the minutes of such meetings, have
charge of the corporate seal and stock records, be responsible for the
maintenance of all corporate records and files and the preparation and
filing of reports to governmental agencies, other than tax returns,
have authority to affix the corporate seal to any instrument requiring
it (and, when so affixed, it may be attested by his or her signature),
and perform such other functions and duties as are appropriate and
customary for the office of Secretary as the Board of Directors or the
President may prescribe from time to time.
(F) Assistant Secretary. The Assistant Secretary, or if there
shall be more than one, the Assistant Secretaries in order determined
by the Board of Directors or the President, shall in the death,
absence, or disability of the Secretary or in case such duties are
specifically delegated to him by the Board of Directors, President or
Secretary, perform the duties and exercise the powers of the Secretary
and shall, under the supervision of the Secretary, perform such other
duties and have such other powers as may be prescribed from time to
time by the Board of Directors or the President.
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(G) Treasurer. The Treasurer shall have control of the funds
and the care and custody of all stocks, bonds, and other securities
owned by the corporation; shall receive all moneys paid to the
corporation, and shall have authority to give receipts and vouchers,
to sign and endorse checks and warrants in the name of the corporation
and on its behalf, and give full discharge for the same; and shall
have charge of disbursement of the funds of the corporation, shall
keep full and accurate records of the receipts and disbursements, and
shall deposit all moneys and other valuable effects in the name and to
the credit of the corporation in such depositories as shall be
designated by the Board of Directors. He or she shall perform such
other duties and have such other powers as are appropriate and
customary for the office of Treasurer as the Board of Directors or
President may prescribe from time to time.
(H) Assistant Treasurer. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors or the President, shall, in the
death, absence, or disability of the Treasurer or in case such duties
are specifically delegated to him or her by the Board of Directors,
President or Treasurer, perform the duties and exercise the powers of
the Treasurer, and shall, under the supervision of the Treasurer,
perform such other duties and have such other powers as the Board of
Directors or the President may prescribe from time to time.
5.6 Compensation. All officers of the corporation may receive salaries
or other compensation if so ordered and fixed by the Board of Directors. The
Board of Directors shall have authority to fix salaries and other compensation
in advance for stated periods or render the same retroactive as the Board of
Directors may deem advisable. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the corporation.
5.7 Bonds. If the Board of Directors by resolution shall so require,
any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
ARTICLE VI
PROVISIONS APPLICABLE TO OFFICERS AND DIRECTORS GENERALLY
6.1 Exercise of Powers and Performance of Duties by Directors and
Officers. Directors and officers of the corporation shall exercise their
powers, including, in the case of directors, powers as members of any committee
of the board upon which they may serve, in good faith, in a manner he
reasonably believes to be in the best interests of the corporation, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. In performing their respective duties, directors and
officers shall be entitled to rely on information, opinions, reports books of
account or statements, including financial statements and other financial data,
in each case prepared or presented by persons and groups listed in subsections
(A), (B) and (C) of this section; but a director or officer shall not be
entitled to rely on such information if he has knowledge concerning the matter
in question that would cause such reliance to be unwarranted. Those persons and
groups on whose information, opinions, reports, and statements a director or
officer is entitled to rely upon are:
(A) One or more officers or employees of the corporation
whom the director or officer reasonably believes to be reliable and competent
in the matters prepared or presented;
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(B) Counsel, public accountants, or other persons as to
matters which the director or officer reasonably believes to be within such
persons' professional or expert competence; or
(C) A committee of the board upon which he does not
serve, duly established in accordance with the provisions of the Articles of
Incorporation or these Bylaws, as to matters within its designated authority
and matters on which committee the director or officer reasonably believes to
merit confidence.
6.2 Restrictions on Transactions Involving Interested Directors or
Officers; Compensation of Directors.
(A) No contract or other transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any corporation, firm, or association in which one or more of
its directors or officers are directors or officers or are financially
interested, is void or voidable solely for this reason or solely because any
such director or officer is present at the meeting of the Board of Directors or
a committee thereof that authorizes or approves the contract or transaction, or
because the vote or votes of common or interested directors are counted for
that purpose, if the circumstances specified in any of the following paragraphs
exist:
(i) The fact of the common directorship, office or
financial interest is disclosed or known to the Board of Directors or
committee and noted in the minutes, and the board or committee
authorizes, approves, or ratifies the contract or transaction in good
faith by a vote sufficient for the purpose without counting the vote
or votes of the common or interested director or directors.
(ii) The fact of the common directorship, office or
financial interest is disclosed or known to the stockholders, and they
approve or ratify the contract or transaction in good faith by a
majority vote of stockholders holding a majority of the voting power.
The votes of the common or interested directors or officers must be
counted in any such vote of stockholders.
(iii) The fact of the common directorship, office or
financial interest is not disclosed or known to the director or
officer at the time the transaction is brought before the Board of
Directors of the corporation for action.
(iv) The contract or transaction is fair as to the
corporation at the time it is authorized or approved.
(B) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof that authorizes, approves, or ratifies a contract or transaction, and
if the votes of the common or interested directors are not counted at the
meeting, then a majority of the disinterested directors may authorize, approve,
or ratify a contract or transaction.
6.3 Indemnification of Officers, Directors, Employees and Agents;
Advancement of Expenses.
(A) The corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding,
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whether civil, criminal, administrative, or investigative, except an action by
or in the right of the corporation, by reason of the fact that he 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 in connection with the
action, suit, or proceeding if he acted in good faith and in a manner which he
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 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, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
(B) The corporation may 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 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 amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation. Indemnification may not be made for any claim, issue, or
matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
(C) To the extent that a director, officer, employee, or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in subsections (A) and
(B), or in defense of any claim, issue, or matter therein, he must be
indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
(D) Any indemnification under subsections (A) and (B),
unless ordered by a court or advanced pursuant to subsection (E), must be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee, or agent is proper in
the circumstances. The determination must be made:
(i) By the stockholders;
(ii) By the Board of Directors by majority vote of a
quorum consisting of directors who were not parties to the act, suit
or proceeding;
(iii) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion; or
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(iv) If a quorum consisting of directors who were
not parties to the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(E) The Articles of Incorporation, these Bylaws, or an
agreement made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit, or proceeding
must be paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit, or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
(F) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation or any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise, for
either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless
ordered by a court pursuant to subsection (B) or for the advancement
of expenses made pursuant to subsection (E), may not be made to or on
behalf of any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud, or
a knowing violation of the law and was material to the cause of
action.
(ii) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the
heirs, executors, and administrators of such a person.
ARTICLE VII
DIVIDENDS; FINANCE
7.1 Dividends. The Board of Directors from time to time may declare
and the corporation may pay dividends on its outstanding shares upon the terms
and conditions and in the manner provided by the Nevada Business Corporation
Act and the Articles of Incorporation.
7.2 Reserve Funds. The Board of Directors, in its discretion, may set
aside from time to time, out of the net profits or earned surplus of the
corporation, such sum or sums as it deems expedient as a reserve fund to meet
contingencies, for equalizing dividends, for maintaining any property of the
corporation, and for any other purpose.
7.3 Banking. The moneys of the corporation shall be deposited in the
name of the corporation in such bank or banks or trust company or trust
companies, as the Board of Directors shall designate, and may be drawn out only
on checks signed in the name of the corporation by such person or persons as
the Board of Directors, by appropriate resolution, may direct. Notes and
commercial paper, when authorized by the Board of Directors, shall be signed in
the name of the corporation by such officer or officers or agent or agents as
shall be authorized from time to time.
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ARTICLE VIII
CONTRACTS, LOANS, AND CHECKS
8.1 Execution of Contracts. Except as otherwise provided by statute or
by these Bylaws, the Board of Directors may authorize any officer or agent of
the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf of the corporation. Such authority may
be general or confined to specific instances. Unless so authorized, no officer,
agent, or employee shall have any power to bind the corporation for any
purpose, except as may be necessary to enable the corporation to carry on its
normal and ordinary course of business.
8.2 Loans. No loans shall be contracted on behalf of the corporation
and no negotiable paper or other evidence of indebtedness shall be issued in
its name unless authorized by the Board of Directors. When so authorized, any
officer or agent of the corporation may effect loans and advances at any time
for the corporation from any bank, trust company, or institution, firm,
corporation, or individual. An agent so authorized may make and deliver
promissory notes or other evidence of indebtedness of the corporation and may
mortgage, pledge, hypothecate, or transfer any real or personal property held
by the corporation as security for the payment of such loans. Such authority,
in the Board of Directors' discretion, may be general or confined to specific
instances.
8.3 Checks. Checks, notes, drafts, and demands for money or other
evidence of indebtedness issued in the name of the corporation shall be signed
by such person or persons as designated by the Board of Directors and in the
manner prescribed by the Board of Directors.
8.4 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be the year adopted by
resolution of the Board of Directors.
ARTICLE X
CORPORATE SEAL
The Board of Directors may provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL."
ARTICLE XI
AMENDMENTS
Any Article or provision of these Bylaws may be altered, amended or
repealed, and new Bylaws may be adopted by a majority of the directors present
at any meeting of the Board of Directors of the corporation at which a quorum
is present.
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ARTICLE XII
COMMITTEES
12.1 Appointment. The Board of Directors by resolution adopted by a
majority of the full Board, may designate one or more committees, which, to the
extent provided in the resolution or resolutions or in these Bylaws, have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation, and may have power to authorize the
seal of the corporation to be affixed to all papers on which the corporation
desires to place a seal. The designation of such committee and the delegation
thereto of authority shall not operate to relieve the Board of Directors, or
any member thereof, of any responsibility imposed by law.
12.2 Name. The committee or committees must have such name or names as
may be stated in these Bylaws or as may be determined from time to time by
resolution adopted by the Board of Directors.
12.3 Membership. Each committee must include at least one director.
Unless the Articles of Incorporation or these Bylaws provide otherwise, the
Board of Directors may appoint natural persons who are not directors to serve
on committees.
12.4 Procedure. A committee shall elect a presiding officer from its
members and may fix its own rules of procedure which shall not be inconsistent
with these Bylaws. It shall keep regular minutes of its proceedings and report
the same to the Board of Directors for its information at the meeting thereof
held next after the proceedings shall have been taken.
12.5 Meetings. Regular meetings of a committee may be held without
notice at such time and places as the committee may fix from time to time by
resolution. Provisions relating to the call of special meetings, notice
requirements for special meetings, waiver of notice, quorum requirements
relating to meetings, and method of taking action by a committee, are provided
in Article IV hereof.
12.6 Vacancies. Any vacancy in a committee may be filled by a
resolution adopted by a majority of the full Board of Directors.
12.7 Resignations and Removal. Any member of a committee may be
removed at any time with or without cause by resolution adopted by a majority
of the full Board of Directors. Any member of a committee may resign from such
committee at any time by giving written notice to the President or Secretary of
the corporation, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
[CERTIFICATION PAGE FOLLOWS]
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CERTIFICATE
I hereby certify that the foregoing Bylaws, consisting of 20 pages,
including this page, constitute the Bylaws of Integral Technologies, Inc., as
restated and adopted by the Board of Directors of the corporation effective as
of December 31, 1997.
/s/ William A. Ince
--------------------------------
William A. Ince, Secretary
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<PAGE> 1
EXHIBIT 10.1
THIS SUBLICENSE, made this 2nd day of January , 1996, by and between
INTEGRAL CONCEPTS, INC., a West Virginia corporation (hereinafter referred to
as "ICI"), Sublicensor; and EMERGENT TECHNOLOGIES CORPORATION, a West Virginia
corporation (hereinafter referred to as "ETC"), Sublicensee.
WITNESSETH
WHEREAS, ICI has a License Agreement from West Virginia University
Research Corporation of Morgantown, West Virginia (hereinafter referred to as
"WVURC"), for certain technologies related to the design, construction and
operation of the Toroidal Helical Antenna, U.S. Patent No. 5,442,369 and
defined herein to be embraced within the expression "The Technology"; and,
WHEREAS, ETC understands and recognizes the terms and conditions of
the License Agreement between WVURC and ICI for The Technology and wishes to
incorporate said terms and conditions into this Sublicense, a copy of which is
attached hereto as Exhibit A; and,
WHEREAS, ETC wishes to obtain an exclusive sublicense from ICI of its
right, title and interest in and to all worldwide government and military
applications and resulting procurement interests in The Technology, subject to
the terms and conditions hereof;
1
<PAGE> 2
- 2 -
NOW, THEREFORE, in consideration of the payment of moneys as
hereinafter required, and of the mutual exchange of promises recited herein,
the parties hereto intending to be legally bound hereby agree as follows:
I. DEFINITIONS
1.1 As used in this Sublicense, the following terms shall have the
following meanings:
(a) "The Technology" shall mean that process and equipment related
to the design, construction and operation of the Toroidal Helical Antenna as
set forth and identified in Exhibit B and its attachments and amendments, if
any, all of which are, or if attachment or amendments shall be, attached hereto
and made a part hereof. The Technology specifically includes, regardless of the
date of initiation or completion, modifications or enhancements to such process
or equipment developed or performed independently by ICI, its agents, servants,
employees, contractors, assigns or successors, which are subject to patent or
copyright protection in their own right, whether so protected or not. The
Technology also includes modifications or enhancements to such process or
equipment developed or performed independently by ETC, its agents, servants,
employees, contractors, assigns or successors, which are subject to patent or
copyright protection in their own right, whether so protected or not.
<PAGE> 3
- 3 -
(b) "Net Revenues" means any and all money or the monetary value of
other consideration received by ETC from the sale, leasing or sublicensing of
The Technology pursuant to which third parties are permitted to use or market
The Technology, less customer discounts and returns and less sales commissions
and royalty payments (other than royalty payments due under Article III hereof)
and less actual operational expenses incurred.
(c) "Gross Revenues" means any and all money or the monetary value
of other consideration received by ETC from the sale, leasing or sublicensing
of The Technology pursuant to which third parties are permitted to use or
market The Technology.
(d) "Royalty Statements" means a written statement made within
thirty (30) days of the end of each calendar quarter certified by a duly
authorized officer of ETC and setting forth a full enumeration of:
(i) model numbers, type designations, and trade or brand names
of all Items sold by ETC that incorporate The Technology;
(ii) the total number of Items of each model or type of
equipment produced and the total number sold during the preceding quarter;
(iii) the Selling Price for each Item;
(iv) the Discounts and Shipping Charges for each Item;
<PAGE> 4
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(v) the Net Revenue from each Item; and
(vi) the amount of the royalties payable thereon as provided in
this Sublicense.
<PAGE> 5
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II. SUBLICENSE
2.1 ICI hereby grants to ETC the exclusive worldwide right and
sublicense (i) to manufacture, sell copies of, sublicense and distribute any
and all worldwide government and military applications and resulting
procurement interests in The Technology; and (ii) to sublicense others to
manufacture, sell copies of, license and distribute any and all government and
military applications and resulting procurement interests in The Technology.
Specifically, ETC or their sublicensees may not manufacture, market or sell any
products for other than government and military applications.
2.2 ETC will assign any and all developments and enhancements made by
ETC, whether before or after execution of this Sublicense, to WVURC and WVURC
will grant the license to such developments and enhancements to ICI pursuant to
the conditions of the WVURC-ICI License, which in turn will grant back to ETC
the worldwide, exclusive government and military application sublicense, to use
and license such developments and enhancements pursuant to the terms of this
Sublicense. The royalties to be paid to WVURC provided in this Sublicense will
also apply to such developments and enhancements.
2.3 ICI reserves the nonterminable, royalty-free right to manufacture,
use and copy The Technology for research, development and noncommercial ICI
purposes.
<PAGE> 6
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2.4 WVURC reserves the nonterminable, royalty-free right to
manufacture, use and copy The Technology for research, development and
noncommercial WVURC purposes.
III. PAYMENTS
3.1 ETC shall pay to ICI as a nonrefundable, noncreditable sublicense
fee the sum of Three Thousand Dollars ($3,000.00) due upon the execution of
this Sublicense or, at the option of the Sublicensee, upon and from the first
net profits of ETC.
3.2 ETC shall assume the responsibility for payments from ICI to WVURC
pursuant to Section 3.2 of the License Agreement between WVURC and ICI and pay
to WVURC as a minimum annual royalty on December 31, 1996, and each December 31
thereafter during the term of this Sublicense, or any renewals thereof, the sum
of Three Thousand Dollars ($3,000.00).
3.3 ETC shall pay to WVURC as an earned royalty on sales, leases or
sublicenses by ETC as to The Technology a sum equal to ten percent (10%) of the
Net Revenues as above defined, less a credit for annual royalty. In any year
which the earned royalties exceed the minimum royalty, no additional payment of
the annual minimum royalty shall be required.
3.4 Royalties as set forth herein will be paid by ETC to ICI and WVURC
with a Royalty Statement within thirty (30) days of the end of each calendar
quarter.
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3.5 ETC agrees that it will keep and maintain financial records
showing all sales, leases and subleases for a period of at least five (5)
years. ETC agrees to maintain its business transaction records, e.g., invoices,
cost documents, etc. needed to determine royalties as provided herein, for a
period of two (2) years or as long as required by applicable tax laws,
whichever is longer. All such records will be maintained in sufficient detail
to enable authorized representatives and/or certified public accountants of
WVURC and ICI to determine royalties payable to WVURC and ICI under this
Sublicense. ETC will permit WVURC and ICI such investigation of its operations
and records as may be necessary to verify ETC's compliance with this Sublicense
and the accuracy of its records and of the Royalty Statements to be furnished
hereunder.
IV. MARKETING
4.1 It is understood by the parties that further work may be required
to complete The Technology and that ETC will, at its own expense, seek to
effect such completion using such efforts and resources as it, in its sole
discretion, determines appropriate under the then existing circumstances. The
parties agree that WVURC shall participate as an owner in any subsequent
development work and will own or have assigned all intellectual property
resulting from this license under the terms set forth in Section 2.2 herein.
<PAGE> 8
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4.2 ETC shall have the right to prepare, copy, edit, publish, sell,
distribute and license all government and military applications and resulting
procurement interests in The Technology throughout the world in any variety of
forms or applications. ETC shall provide WVURC and ICI with a written
comprehensive report providing details of the status of the work under this
Sublicense, including, but not limited to, documentation, support, packaging,
advertising and promotion concepts and designs related to The Technology and as
to sublicenses. Such written comprehensive reports are to be provided to WVURC
and ICI on an annual basis no later than thirty (30) days after the year end
and at such other times as WVURC and ICI may reasonably request. ETC agrees to
provide WVURC and ICI with at least two (2) copies of all material concerning
the Technology it provides to its shareholders.
V. CONFIDENTIALITY, INFRINGEMENT AND PROTECTION
5.1 ETC acknowledges that ICI has a proprietary interest in the
Technology and agrees to use all reasonable efforts to protect any and all
trade secrets disclosed to ETC from unauthorized disclosure, use or release,
including, without limitation, (i) providing reasonable physical security at
ETC's facilities and (ii) taking the same care to prevent unauthorized
disclosure that ETC takes to protect information, data or other tangible and
intangible property of its own that it regards as proprietary or confidential.
ETC agrees that it will not sell,
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disclose or otherwise make the Technology available to others except: (i) as
authorized by the license rights granted to ETC under this Sublicense and (ii)
to its employees, agents, contractors, consultants or others with a need to
have access to the Technology to reasonably enable ETC to fully exercise its
rights under this Sublicense. ETC will neither knowingly nor negligently allow
its employees, agents, consultants or independent contractors to sell or
disclose the trade secrets disclosed to ETC except: (i) that ETC may provide
the trade secrets of the Technology to third parties in connection with
exercising ETC's sublicense rights hereunder, provided each such party executes
a written agreement binding it to confidentiality obligations similar to ETC's
obligations under this Sublicense and (ii) as otherwise permitted by this
Sublicense. In execution of its confidentiality obligation, ETC will indemnify
and hold ICI harmless from any and all damages caused by a breach of
confidentiality by ETC or any of ETC's employees, agents, contractors, officers
or directors. Because damages may be difficult to assess, ETC agrees to pay as
liquidated damages (and not as a penalty) the sum of $50,000.00 for each
disclosure in breach of this confidentiality obligation.
5.2 ETC will use reasonable efforts to enforce any patent or
copyright, if any is issued for the Technology, and to protect its trade
secrets, but ETC will be the sole judge in its absolute discretion of what
efforts are reasonable and
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appropriate. In this regard, ETC will exercise its best efforts to keep ICI
fully advised of any and all commercial threats to the Technology. If ETC is
unwilling or unable to protect the Technology, ICI may do so at its own expense
and cost.
5.3 During the term of this Sublicense, ETC will not directly or
indirectly contest the validity or ICI's ownership of any trade secret,
knowhow, copyright or any patent issued for the Technology to ICI or to WVURC.
5.4 The obligations of this Section V shall survive the expiration or
termination of this Sublicense.
VI. PROPRIETARY RIGHTS
6.1 WVURC, ICI and ETC acknowledge that The Technology is of a
character which is or may be protectable by patent, trade secret and/or
copyright under the laws of the United States and other countries. WVURC and
ICI have, at their own expense, made application to obtain patent and/or
copyright or other statutory protection of the original Technology described in
Exhibit B.
It is explicitly recognized that developments and enhancements of the
Technology may be developed and such developments and enhancements of the
Technology will be incorporated by amendment or attachment to Exhibit B of this
Sublicense pursuant to the procedure set forth in Article 2.2 of this
Sublicense. Neither WVURC nor ICI will be responsible for obtaining patent
and/or copyright or other statutory protection
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of such developments and enhancements of the Technology. ETC will be solely
responsible for obtaining patent and/or copyright or other statutory protection
of all forms of The Technology as defined in Exhibit B which are developed in
the future and incorporated by amendment to this Sublicense. All such patents
and/or copyrights or other statutory protection shall name WVURC as the owner
of each so protected Technology, which will then be licensed through ICI to ETC
pursuant to the terms of the License Agreement between WVURC and ICI and this
Sublicense.
ETC shall treat documentation regarding The Technology, including
listings of source code for The Technology but not including instructions,
manuals or other elements of any publicly marketed material from The
Technology, as proprietary, confidential information. ETC shall use reasonable
efforts to obtain and maintain proprietary protection for The Technology
consistent with ETC's ability to effectively market The Technology in each
country in which The Technology is distributed. ICI agrees to cooperate with
ETC, at ETC's expense, and where necessary ETC agrees to obtain patent,
copyright or other statutory protection for The Technology in each country in
which the same are sold, distributed or sublicensed; and ICI hereby authorizes
ETC to execute and prosecute in WVURC's name as authors or inventors an
application for patent, copyright or similar protection of The Technology; and
WVURC and ICI shall execute such other documents of registration and
recordation as
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may be necessary to perfect in ETC, or protect, the exclusive rights granted
ETC hereunder in each country in which such items are sold or distributed.
6.2 Any trademark used by ETC to identify The Technology shall be
owned by WVURC, ICI and ETC to the same extent and in the same proportions as
the underlying technology.
6.3 ETC may identify WVURC and ICI as owners or participants in The
Technology and its development, provided that such use of the WVURC and ICI
identification is an accurate statement of WVURC's and ICI's role and notice
thereof has been given to WVURC and ICI at the address indicated herein not
less than thirty (30) days prior to the first such identification.
VII. TERM, TERMINATION AND CONVERSION
7.1 The term of this Sublicense shall commence on the date first set
forth above and shall continue until December 31, 1996, unless earlier
terminated as provided in this Sublicense or by the terms of the license by and
between ICI and WVURC.
7.2 This Sublicense shall be renewed for one year periods after
December 31, 1996, so long as payments to ICI and WVURC equal or exceed the
minimum royalty payment specified in Articles 3.1, 3.2 and 3.3 and those
conditions of ICI's license as renewed by its licensors are satisfied.
7.3 In the event of the bankruptcy of either party or a breach of a
material provision hereof, which breach is not
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cured within sixty (60) days after written notice thereof by the nonbreaching
party, then said party may, effective sixty (60) days after written notice
thereof to the other, terminate this Sublicense, and the rights granted
hereunder shall thereupon revert to the appropriate party as provided in
Section 7.5 hereof. In addition to or in lieu of their rights to terminate this
Sublicense upon material breach, the nonbreaching party shall have the right to
pursue any remedies available to them under the law.
7.4 Waiver of a particular instance of a breach shall not preclude a
party from objecting to future breaches of the same or any other type.
7.5 Upon any termination of this Sublicense: (1) all rights, title and
interest of ETC in and to The Technology as conveyed hereby, including, but not
limited to, design drawings and production materials relating thereto in ETC's
possession will terminate and revert to ICI; (2) all rights and sublicenses
granted by ETC to third parties shall continue in full force and effect, and
monies due thereunder shall be received by ETC and royalties paid to WVURC and
ICI as provided herein; (3) WVURC and ICI shall in any event have the right to
retain copies of any version of The Technology for WVURC's and ICI's own use;
and (4) ETC's obligation to pay WVURC and ICI earned royalties then due shall
continue.
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VIII. MISCELLANEOUS
8.1 Each party will notify the other of any infringements of rights in
The Technology that come to such party's attention and shall cooperate fully
with the other in determining what action, if any, should be taken.
8.2 This Sublicense states the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements between the parties hereto
concerning the subject matter hereof. No amendment or modification of this
Sublicense shall be made except by an instrument in writing signed by all
parties.
8.3 ICI represents: (i) this Sublicense has been duly executed and
delivered and is a valid and binding agreement; and (ii) the execution and
delivery of this Sublicense, and the performance by ICI of its obligations
hereunder, are not to the best of the undersigned's belief in violation of and
will not conflict with any agreement, law, order or other restriction binding
on ICI concerning The Technology.
8.4 The parties' rights and obligations hereunder shall be binding
upon and inure to the benefit of their respective successors and assigns. Each
party hereto will notify the other party in writing of any transfer of its
rights or obligations hereunder within thirty (30) days of such transfer,
provided, however, that ETC or its assignee will not be required
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to give notice of any transfer made pursuant to a sublicense agreement or other
transaction in the ordinary course of its business and recognized in this
Sublicense.
8.5 This Sublicense shall be governed by and interpreted in accordance
with the laws of the State of West Virginia.
8.6 Should any provision of this Sublicense be held to be void,
invalid or inoperative, the remaining provisions of this Sublicense shall not
be affected and shall continue in effect as though such provisions were
deleted.
8.7 All payments to others, as required by WVURC's "Patent and
Trademark Policy," shall be the sole responsibility of WVURC, and such payments
shall be made from WVURC's royalties received under this Sublicense.
8.8 All royalty payments and other conditions as outlined in the
original WVURC/ICI License Agreement and this Sublicense due to WVURC will be
paid directly by ETC to WVURC.
8.9 ETC, with the execution of this Sublicense, assumes all financial
responsibilities for the development and protection of the government and
military applications of The Technology, agrees to pay all existing patent and
license fees now in effect for the government and military applications of The
Technology, and will continue with existing efforts to extend said protection.
8.10 ETC agrees to be maintained as a West Virginia corporation.
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8.11 Any notice required or permitted to be sent hereunder shall be
deemed given (a) if hand delivered when received, or (b) if mailed when mailed
by postage prepaid, by registered or certified mail, return receipt requested,
to any party at the following address or such other addresses which either
party may from time to time identify:
Dr. James E. Smith
Integral Concepts, Inc.
Route #7, Box 145
Morgantown, West Virginia 26505
Mr. Jack Parsons
Emergent Technologies Corporation
1407 Love Point Road
Stevensville, MD 21666
IN WITNESS WHEREOF, the parties hereto have executed this Sublicense
on the dates shown below but with effect as of the date first above written.
INTEGRAL CONCEPTS, INC.,
a West Virginia corporation
(CORPORATE SEAL)
BY: /s/ James E. Smith
---------------------------------------
JAMES E. SMITH
Its President
DATE: 1/2/96
---------------------------------
EMERGENT TECHNOLOGIES CORPORATION,
a West Virginia corporation
(CORPORATE SEAL)
BY: /s/ Jack Parsons
---------------------------------------
JACK PARSONS
Its President
DATE: 1/2/96
---------------------------------
<PAGE> 1
EXHIBIT 10.2
AGREEMENT BETWEEN
INTEGRAL TECHNOLOGIES, INC.
AND
WEST VIRGINIA UNIVERSITY RESEARCH CORPORATION
ON BEHALF OF
WEST VIRGINIA UNIVERSITY
This Agreement effective as of this 9th day of February 1996 by and
between Integral Technologies, Inc. a corporation having its principal place of
business at #102-688 West 12th Ave., Vancouver, BC, Canada hereinafter referred
to as "Sponsor" and the West Virginia University Research Corporation on behalf
of West Virginia University, an institution having an address of P.O. Box 6845,
Morgantown, WV 26506-6845, hereinafter referred to as "University".
RECITALS
1. University has on its staff James E. Smith, who has proposed a
research Project (hereinafter defined) entitled "RF Quarter-Wave Coaxial Cavity
Resonator".
2. Sponsor desires to support the research Project by providing
financial support sufficient to pay costs of the research Project.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.00. General. When used in this Agreement, each of the
following terms shall have the meaning as set forth in this Article 1.
Section 1.01. "Project" means research under the direction of
James E. Smith, West Virginia University. A detailed description of the Project
is provided in Appendix 1, which is incorporated herein and made a part of this
Agreement.
Section 1.02. "Project Leader" means James E. Smith.
Section 1.03. "Project Team" means the Project Leader and person(s)
working under his direction and control.
Section 1.04. "Project Funds" means funds provided by Sponsor in
support of the Project.
ARTICLE II
FUNDING OF PROJECT
Section 2.00. Duration of Funding. Subject to the fulfillment of all
terms and conditions of this Agreement, Sponsor shall provide Project Funds for
the period February 1, 1996, to January 31, 1997, in accordance with the budget
set forth in Appendix 1, which is incorporated herein and made a part of this
Agreement. The University and Project Leader shall use the Project Funds in
substantially the manner designated in said budget.
Section 2.01. Scheduling of Payments. Project Funds during this
Agreement shall be paid to University monthly based on invoices submitted by the
University.
Section 2.02. Reporting. In order to enable Sponsor to comply with
applicable federal tax laws and regulations, the University, if requested by
Sponsor, shall report within sixty (60) days after the close of each calendar
year, the dollar amount of the Project Funds which were expended on research
activities during the year.
<PAGE> 2
ARTICLE III
PLANNING AND EXECUTION OF PROJECT
Section 3.00. Planning and Review. Upon execution of the Agreement and
form time to time during the term of the Agreement, the Project Leader and
representative of Sponsor shall meet to discuss the progress of the Project.
Section 3.01. Conduct of Studies. All work done in connection with the
Project shall be carried out in strict compliance with all applicable laws,
regulations, or guidelines governing the conduct of research at the site where
such studies are being conducted.
Section 3.02. Personnel of Project Team. Upon initiation of the
Project shall, the Project Leader shall provide Sponsor with a roster of
personnel comprising the Project Team, and shall thereafter update the roster
whenever the composition of the Project team changes. If for any reason the
Project Leader ceases to be associated with University or otherwise becomes
unavailable to work on the Project, Sponsor at its option, may terminate this
Agreement. Upon termination, Sponsor shall be relieved of its obligation to make
any further payments of Project Funds.
ARTICLE IV
RESULTS OF PROJECT
Section 4.00. Reports. The Project Leader, upon completion of the
Project, shall promptly provide Sponsor with a comprehensive written report.
Section 4.01. Patented Inventions. In the event that a patentable
invention is conceived or reduced to practice or improvements made thereof in
the course of the Project by one or more members of the Project Team, said
inventions or improvements shall be owned by the University and managed in
accordance with the pre-existing license agreement between the University and
Integral Concepts Incorporated (ICI) provided as Attachment 2 to this Agreement
and the sublicense between ICI and the Sponsor. The University shall file or
cause to have filed a patent application covering such invention(s) upon the
request of Sponsor and at Sponsor's expense. University shall have title to any
such patent applications and to any paten or patents maturing therefrom.
University shall have the right to file at its own expense any patent
applications if Sponsor does not request such filings. Out-of-pocket expenses
incurred by Sponsor in the filing, prosecution, or maintenance of patent
applications or patents relating of the Project (Patent Costs) shall be credited
against any royalties which may become payable to University by Sponsor.
Section 4.02. Filing and Prosecution of Patent Applications. Filing
and prosecution of patent applications on inventions, the coverage of which is
requested by Sponsor, shall be carried out by counsel mutually agreeable to both
parties.
Section 4.03. Confidentiality. Except as otherwise expressly provided
in the Agreement, University and the members of the Project Team shall use their
best efforts to retain in confidence, for a period sufficient for steps to be
taken to secure adequate patent protection, all information generated under the
Project or received from Sponsor during the course of the Project. Such
information may however, be disclosed insofar as such disclosure is necessary to
allow University or the Project Team and its individual members to defend
against litigation, to file and prosecute patent applications, or to comply with
governmental regulations. Such obligation of confidentiality shall be waived as
to information which (i) is in the public domain, (ii) comes into the public
domain through no fault of the party claiming waiver, (iii) was known to the
party claiming waiver prior to its disclosure by ______ (iv) is disclosed to the
party claiming waiver by a third party having a lawful right to make such
disclosure or (v) both the University and Sponsor agree, in writing to make a
disclosure. Approval or disapproval shall be given within ten (10) working days
of receipt of the request and neither party shall unduly
<PAGE> 3
withhold their approval. Requests for disclosure approval shall be submitted to
the parties identified below:
Requests from Sponsor to University shall be sent to William W. Reeves, Office
of Sponsored Programs, West Virginia University, 617 North Spruce Street, P.O.
Box 6845, Morgantown, WV 26506.
Request form University to Sponsor shall be sent to
William Ince /s/, William Robinson /s/, or Robert Pratt /s/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE V
TERM AND TERMINATION
Section 5.00. Term. This agreement shall remain in effect unless
sooner terminated in accordance with the provisions of Section 3.02, 5.02, or
extended pursuant to Section 5.01.
Section 5.01. Extension. By mutual agreement of the Project Leader,
University, and Sponsor, this Agreement may be extended for additional periods
with additional funding.
Section 5.02. Voluntary Termination. Either party may terminate this
Agreement at any time upon ninety (90) days advance written notice.
Section 5.03. Termination for Breach. If either party shall be in
default of any of its obligations under this Agreement and shall fail to remedy
such default within sixty (60) days after receipt of written notice thereof, the
party not in default shall have the option of terminating this Agreement by
giving written notice of termination.
Section 5.04. Effect of Termination of Expiration. Termination or
expiration of this Agreement shall not affect the rights and obligations of the
parties accrued prior to termination or expiration. Sponsor shall reimburse the
University for all costs incurred to date of termination and the parties shall
negotiate settlement for non-cancelable obligations made prior to termination.
ARTICLE VI
DISCLOSURE OF AGREEMENT
Section 6.00. Disclosure of Agreement. Except as required by law,
neither University nor Sponsor shall release any information to any third party
with respect to the existence or terms of this Agreement without the prior
written consent of the other. This prohibition includes, but is not limited to,
press release, educational and scientific conferences, promotional materials,
government filings, and discussions with lenders, investment bankers, public
officials, and the media.
If either party determines a release of such information is required by
law, it shall notify the other in writing as soon as possible before the date of
the proposed release. The notice shall include the exact text of the proposed
release and the time and manner of the release. If requested, the party seeking
to release information shall furnish to the other an opinion of counsel that the
release of all information is required by law. At the other party's request and
before the release, the party desiring to release the information shall consult
with the other party on the necessity for the disclosure and the text of the
proposed release. In no event shall a release include information regarding the
existence of terms of this Agreement that is not required by law.
ARTICLE VII
MISCELLANEOUS PROVISION
Section 7.00. No Agency. It is understood and agreed that University
shall have the status of any independent contractor under this Agreement and
that nothing in this Agreement
<PAGE> 4
shall be construed as authorization for either party to act as agent for the
other. Members of the Project Team shall be and shall remain employees of
University, and Sponsor shall not incur any liability for any act or failure to
act by members of the Project Team individually or collectively. Members of the
Project Team, employees of University, and University shall not incur any
liability for any act by employees of the Sponsor.
Section 7.01. Force Majeure. Each party hereto shall be relieved of
its obligations hereunder to the extent that fulfillment of any such obligation
shall be prevented by acts beyond the reasonable control of the party affected
thereby.
Section 7.02. Amendment. This Agreement may not be amended,
supplemented, or otherwise modified except by instrument in writing signed by
both parties.
Section 7.03. Applicable Tax Law. This Agreement shall be construed
and the rights of the parties determined in accordance with the laws of the
State of West Virginia.
Section 7.04. Titles. The titles of the Articles and Sections of this
Agreement are for general information and referenced only, and this Agreement
shall not be construed by reference to such titles.
Section 7.05. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes hereof if mailed by first class certified or
registered mail, postage prepaid, addressed to the party to be notified at its
address shown at the beginning of this Agreement or such other address as may
have been furnished in writing to the notifying party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate originals, by their respective officers thereunto duly authorized, the
day and year herein written.
WEST VIRGINIA UNIVERSITY INTEGRAL TECHNOLOGIES, INC.
RESEARCH CORPORATION ON BEHALF
OF WEST VIRGINIA UNIVERSITY
ATTEST: ATTEST:
BY: WILLIAM W. REEVES /s/ BY: WILLIAM A. INCE /s/
--------------------------- ----------------------------
SIGNATURE SIGNATURE
TYPED NAME: WILLIAM W. REEVES TYPED NAME: WILLIAM A. INCE
TITLE: SECRETARY TITLE: PRESIDENT
DATE: 02/06/96 DATE: FEBRUARY 9, 1996
-------- ----------------
<PAGE> 1
EXHIBIT 10.3
AGREEMENT BETWEEN
INTEGRAL TECHNOLOGIES, INC.
AND
WEST VIRGINIA UNIVERSITY RESEARCH CORPORATION
ON BEHALF OF
WEST VIRGINIA UNIVERSITY
This Agreement effective as of this 9th day of February 1996 by and
between Integral Technologies, Inc. a corporation having its principal place of
business at #102-688 West 12th Ave., Vancouver, BC, Canada hereinafter referred
to as "Sponsor" and the West Virginia University Research Corporation on behalf
of West Virginia University, an institution having an address of P.O. Box 6845,
Morgantown, WV 26506-6845, hereinafter referred to as "University".
RECITALS
1. University has on its staff James E. Smith, who has proposed a
research Project (hereinafter defined) entitled "Counterfeit Currency
Determination Prototype".
2. Sponsor desires to support the research Project by providing
financial support sufficient to pay costs of the research Project.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.00. General. When used in this Agreement, each of the
following terms shall have the meaning as set forth in this Article 1.
Section 1.01. "Project" means research under the direction of
James E. Smith, West Virginia University. A detailed description of the Project
is provided in Appendix 1, which is incorporated herein and made a part of this
Agreement.
Section 1.02. "Project Leader" means James E. Smith.
Section 1.03. "Project Team" means the Project Leader and person(s)
working under his direction and control.
Section 1.04. "Project Funds" means funds provided by Sponsor in
support of the Project.
ARTICLE II
FUNDING OF PROJECT
Section 2.00. Duration of Funding. Subject to the fulfillment of all
terms and conditions of this Agreement, Sponsor shall provide Project Funds for
the period January 16, 1996, to January 15, 1997, in accordance with the budget
set forth in Appendix 1, which is incorporated herein and made a part of this
Agreement. The University and Project Leader shall use the Project Funds in
substantially the manner designated in said budget.
Section 2.01. Scheduling of Payments. Project Funds during this
Agreement shall be paid to University monthly based on invoices submitted by the
University.
Section 2.02. Reporting. In order to enable Sponsor to comply with
applicable federal tax laws and regulations, the University, if requested by
Sponsor, shall report within sixty (60) days after the close of each calendar
year, the dollar amount of the Project Funds which were expended on research
activities during the year.
<PAGE> 2
ARTICLE III
PLANNING AND EXECUTION OF PROJECT
Section 3.00. Reports. Upon execution of the Agreement and form time
to time during the term of the Agreement, the Project Leader and representative
of Sponsor shall meet to discuss the progress of the Project.
Section 3.01. Conduct of Studies. All work done in connection with the
Project shall be carried out in strict compliance with all applicable laws,
regulations, or guidelines governing the conduct of research at the site where
such studies are being conducted.
Section 3.02. Personnel of Project Team. Upon initiation of the Project
shall, the Project Leader shall provide Sponsor with a roster of personnel
comprising the Project Team, and shall thereafter update the roster whenever the
composition of the Project team changes. If for any reason the Project Leader
ceases to be associated with University or otherwise becomes unavailable to work
on the Project, Sponsor at its option, may terminate this Agreement. Upon
termination, Sponsor shall be relieved of its obligation to make any further
payments of Project Funds.
ARTICLE IV
RESULTS OF PROJECT
Section 4.00. Reports. The Project Leader, upon completion of the
Project, shall promptly provide Sponsor with a comprehensive written report.
Section 4.01. Patented Inventions. In the event that a patentable
invention is conceived or reduced to practice or improvements made thereof in
the course of the Project by one or more members of the Project Team, said
inventions or improvements shall be owned by the University and managed in
accordance with the pre-existing license agreement between the University and
Integral Concepts Incorporated (ICI) provided as Attachment 2 to this Agreement
and the sublicense between ICI and the Sponsor. The University shall file or
cause to have filed a patent application covering such invention(s) upon the
request of Sponsor and at Sponsor's expense. University shall have title to any
such patent applications and to any paten or patents maturing therefrom.
University shall have the right to file at its own expense any patent
applications if Sponsor does not request such filings. Out-of-pocket expenses
incurred by Sponsor in the filing, prosecution, or maintenance of patent
applications or patents relating of the Project (Patent Costs) shall be credited
against any royalties which may become payable to University by Sponsor.
Section 4.02. Filing and Prosecution of Patent Applications. Filing and
prosecution of patent applications on inventions, the coverage of which is
requested by Sponsor, shall be carried out by counsel mutually agreeable to both
parties.
Section 4.03. Confidentiality. Except as otherwise expressly provided
in the Agreement, University and the members of the Project Team shall use their
best efforts to retain in confidence, for a period sufficient for steps to be
taken to secure adequate patent protection, all information generated under the
Project or received from Sponsor during the course of the Project. Such
information may however, be disclosed insofar as such disclosure is necessary to
allow University or the Project Team and its individual members to defend
against litigation, to file and prosecute patent applications, or to comply with
governmental regulations. Such obligation of confidentiality shall be waived as
to information which (i) is in the public domain, (ii) comes into the public
domain through no fault of the party claiming waiver, (iii) was known
<PAGE> 3
to the party claiming waiver prior to its disclosure by ______ (iv) is disclosed
to the party claiming waiver by a third party having a lawful right to make such
disclosure or (v) both the University and Sponsor agree, in writing to make a
disclosure. Approval or disapproval shall be given within ten (10) working days
of receipt of the request and neither party shall unduly withhold their
approval. Requests for disclosure approval shall be submitted to the parties
identified below:
Requests from Sponsor to University shall be sent to William W. Reeves, Office
of Sponsored Programs, West Virginia University, 617 North Spruce Street, P.O.
Box 6845, Morgantown, WV 26506.
Request form University to Sponsor shall be sent to
William Ince /s/, William Robinson /s/, or Robert Pratt /s/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE V
TERM AND TERMINATION
Section 5.00. Term. This agreement shall remain in effect unless
sooner terminated in accordance with the provisions of Section 3.02, 5.02, or
extended pursuant to Section 5.01.
Section 5.01. Extension. By mutual agreement of the Project Leader,
University, and Sponsor, this Agreement may be extended for additional periods
with additional funding.
Section 5.02. Voluntary Termination. Either party may terminate this
Agreement at any time upon ninety (90) days advance written notice.
Section 5.03. Termination for Breach. If either party shall be in
default of any of its obligations under this Agreement and shall fail to remedy
such default within sixty (60) days after receipt of written notice thereof, the
party not in default shall have the option of terminating this Agreement by
giving written notice of termination.
Section 5.04. Effect of Termination of Expiration. Termination or
expiration of this Agreement shall not affect the rights and obligations of the
parties accrued prior to termination or expiration. Sponsor shall reimburse the
University for all costs incurred to date of termination and the parties shall
negotiate settlement for non-cancelable obligations made prior to termination.
ARTICLE VI
DISCLOSURE OF AGREEMENT
Section 6.00. Disclosure of Agreement. Except as required by law,
neither University nor Sponsor shall release any information to any third party
with respect to the existence or terms of this Agreement without the prior
written consent of the other. This prohibition includes, but is not limited to,
press release, educational and scientific conferences, promotional materials,
government filings, and discussions with lenders, investment bankers, public
officials, and the media.
If either party determines a release of such information is required by
law, it shall notify the other in writing as soon as possible before the date of
the proposed release. The notice shall include the exact text of the proposed
release and the time and manner of the release. If requested, the party seeking
to release information shall furnish to the other an opinion of counsel that the
release of all information is required by law. At the other party's request and
before the release, the party desiring to release the information shall consult
with the other party
<PAGE> 4
on the necessity for the disclosure and the text of the proposed release. In no
event shall a release include information regarding the existence of terms of
this Agreement that is not required by law.
ARTICLE VII
MISCELLANEOUS PROVISION
Section 7.00. No Agency. It is understood and agreed that University
shall have the status of any independent contractor under this Agreement and
that nothing in this Agreement shall be construed as authorization for either
party to act as agent for the other. Members of the Project Team shall be and
shall remain employees of University, and Sponsor shall not incur any liability
for any act or failure to act by members of the Project Team individually or
collectively. Members of the Project Team, employees of University, and
University shall not incur any liability for any act by employees of the
Sponsor.
Section 7.01. Force Majeure. Each party hereto shall be relieved of its
obligations hereunder to the extent that fulfillment of any such obligation
shall be prevented by acts beyond the reasonable control of the party affected
thereby.
Section 7.02. Amendment. This Agreement may not be amended,
supplemented, or otherwise modified except by instrument in writing signed by
both parties.
Section 7.03. Applicable Tax Law. This Agreement shall be construed
and the rights of the parties determined in accordance with the laws of the
State of West Virginia.
Section 7.04. Titles. The titles of the Articles and Sections of this
Agreement are for general information and referenced only, and this Agreement
shall not be construed by reference to such titles.
Section 7.05. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes hereof if mailed by first class certified or
registered mail, postage prepaid, addressed to the party to be notified at its
address shown at the beginning of this Agreement or such other address as may
have been furnished in writing to the notifying party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate originals, by their respective officers thereunto duly authorized, the
day and year herein written.
WEST VIRGINIA UNIVERSITY INTEGRAL TECHNOLOGIES, INC.
RESEARCH CORPORATION ON BEHALF
OF WEST VIRGINIA UNIVERSITY
ATTEST: ATTEST:
BY: WILLIAM W. REEVES /S/ BY: WILLIAM A. INCE /S/
---------------------------- --------------------------
SIGNATURE SIGNATURE
TYPED NAME: WILLIAM W. REEVES TYPED NAME: WILLIAM A. INCE
TITLE: SECRETARY TITLE: PRESIDENT
DATE: 02/06/96 DATE: FEBRUARY 9, 1996
------------ ----------------
<PAGE> 1
EXHIBIT 10.4
THIS SUBLICENSE, made this 15th day of February, 1996, by and between INTEGRAL
CONCEPTS, INC., a West Virginia corporation (hereinafter referred to as "ICI"),
Sublicensor; and Integral Technologies, Inc., a Nevada corporation (hereinafter
referred to as "ITI"), Sublicensee.
WITNESSETH
WHEREAS, ICI has a License Agreement from West Virginia University
Research Corporation of Morgantown, West Virginia (hereinafter referred to as
"WVURC"), for certain technologies related to the design, construction and
operation of a Plasma Ignition System,. U.S. Patent No. 5,361,737 and defined
herein to be embraced within the expression "The Technology"; and
WHEREAS, ITI understands and recognizes the terms and conditions of the
License Agreement between WVURC and ICI for The Technology and wishes to
incorporate said terms and conditions into this Sublicense, a copy of which is
attached hereto as Exhibit A; and, interest in and to all worldwide applications
and result in procurement interest in The Technology, subject to the terms and
conditions hereof;
NOW, THEREFORE, in consideration of the payment of moneys as
hereinafter required, and of the mutual exchange of promises recited herein, the
parties hereto intending to be legally bound hereby agree as follows:
I. DEFINITIONS
1.1 As used in this Sublicense, the following terms shall have the
following meanings:
(a) "The Technology" shall mean that process and equipment
related to the design, construction and operation of the Plasma Ignition System
as set forth and identified in Exhibit B and its attachments and amendments, if
any, all of which are, or if attachments of amendments shall be, attached hereto
and made a part hereof. The Technology specifically includes the, regardless of
the date of initiation or completion, modifications or enhancements to such
process or equipment developed or performed independently by ICI, its agents,
servants, employees, contractors, assigns or successors, which are subject to
patent or copyright protection in their own right, whether so protected or not.
The Technology also include modifications or enhancements to such process or
equipment developed or performed independently by ITI, its agents, servants,
employees, contractors, assigns or successors, which are subject to patent or
copyright protection in their own right, whether so protected or not.
(b) "Net Revenues" means any and all money or the monetary
value of other consideration received by ITI form the sale, leasing or
sublicensing of The Technology pursuant to which third parties are permitted to
use or market The Technology, less customer discounts and returns and less sales
commissions and royalty payments (other than royalty payments due under Article
III hereof) and less actual operational expenses incurred.
(c) "Gross Revenues" means any and all money or the monetary
value of other consideration received by ITI from the sale, leasing or
sublicensing of The Technology pursuant to which third parties are permitted to
use or market The Technology.
(d) "Royalty Statements" means a written statement made within
thirty (30) days of the end of each calendar quarter certified by a duly
authorized officer of ITI and setting forth a full enumeration of:
(i) model numbers, type designations, and trade or brand
names of all Items sold by ITI that incorporate The
Technology;
(ii) the total number of Items of each model or type
of equipment produced and the total number sold
during the preceding quarter;
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<PAGE> 2
(iii) the Selling Price for each Item;
(iv) the Discounts and Shipping Charges for each Item;
(v) the Net Revenue from each Item; and
(vi) the amount of the royalties payable thereon as
provided in this Sublicense.
II. SUBLICENSE
2.1 ICI hereby grants to ITI the exclusive worldwide right and
sublicense (i) to manufacture, sell copies of, sublicense and distribute any and
all worldwide applications and resulting procurement interests in The
Technology; and (ii) to sublicense others to manufacture, sell copies of,
license and distribute any and all applications and resulting procurement
interests in The Technology.
2.2 ITI will assign any and all developments and enhancements made by
ITI, whether before or after execution of this Sublicense, to WVURC and WVURC
will grant the license to such developments and enhancements to ICI pursuant to
the conditions of the WVURC-ICI License, which in turn will grant back to ITI
the worldwide, exclusive sublicense, to use and license such developments and
enhancements pursuant to the terms of this Sublicense. The royalties to be paid
to WVURC provided in this Sublicense will also apply to such developments and
enhancements.
2.3 ICI reserves the nonterminable, royalty-free right to manufacture,
use and copy The Technology for research, development and noncommercial ICI
purposes.
2.4 WVURC reserves the nonterminable, royalty-free right to
manufacture, use and copy The Technology for research, development and
noncommercial WVURC purposes.
III. PAYMENTS
3.1 ITI shall pay to ICI as a nonrefundable, noncreditable sublicense
fee the sum of Eight Thousand Two Hundred Fifty Dollars ($8,250.00) due upon the
execution of this Sublicense.
3.2 ITI shall assume the responsibility for payments from ICI to WVURC
pursuant to ** 3.2 of the License Agreement between WVURC and ICI and pay to
WVURC as a minimum annual royalty on December 31, 1996 and each December 31
thereafter during the term of this Sublicense, or any renewals thereof, the sum
of Three Thousand Dollars ($3,000.00).
3.3 ITI shall pay to WVURC pursuant to ** 3.3 of the License Agreement
between WVURC and ICI as an earned royalty on sales, lease or sublicenses by ITI
as to The Technology a sum equal to ten percent (10%) of the Net Revenues as
above defined, less a credit for annual royalty. In any year which the earned
royalties exceed the minimum royalty, no additional payment of the annual
minimum shall be required.
3.4 In addition ITI shall pay to ICI an earned royalty on all sales,
leases or sublicenses by ITI as to The Technology a sum equal to one percent
(1%) of the Gross Revenues as above defined.
3.5 Royalties as set forth herein will be paid by ITI to ICI and WVURC
with a Royalty Statement within thirty (30) days of the end of each calendar
quarter.
3.6 ITI agrees that it will keep and maintain financial records showing
all sales, leases and subleases for a period of at least five (5) years. ITI
agrees to maintain its business transaction records, e.g., invoices, cost
documents, etc. needed to determine royalties as provided herein, for a period
of two (2) years or as long as required by applicable tax laws, whichever is
longer. All such records will be maintained in sufficient detail to enable
authorized representatives and/or certified public accountants of WVURC and ICI
to determine royalties payable to WVURC and ICI under this Sublicense. ITI will
permit WVURC and ICI such investigation of its operations and records as may be
necessary to verify ITI's compliance with
2
<PAGE> 3
this Sublicense and the accuracy of its records and of the Royalty Statements to
be furnished hereunder.
IV. MARKETING
4.1 It is understood by the parties that further work may be required
to complete The Technology and that ITI will, at its own expense, seek to effect
such completion using efforts and resources as it, in sole discretion,
determines appropriate under the then existing circumstances. The parties agree
that WVURC shall participate as an owner in any subsequent development work and
will own or have assigned all intellectual property resulting form this license
under the terms set forth in ** 2.2 herein.
4.2 ITI shall have the right to prepare, copy, edit, publish, sell,
distribute and license all government and military applications and resulting
procurement interests in The Technology throughout the world in any variety of
forms or applications. ITI shall provide WVURC and ICI with a written
comprehensive report providing details of the status of the work under this
Sublicense, including, but not limited to, documentation, support, packaging,
advertising and promotion concepts and designs related to The Technology and as
to sublicenses. Such written comprehensive reports are to be provided to WVURC
and ICI on an annual basis no later than thirty (30) days after the year end and
at such other times as WVURC and ICI may reasonably request. ITI agrees to
provide WVURC and ICI with at least two (2) copies of all material concerning
The Technology it provides to its shareholders.
V. CONFIDENTIALITY, INFRINGEMENT AND PROTECTION
5.1 ITI acknowledges that ICI has a proprietary interest in the
Technology and agrees to use all reasonable efforts to protect any and all trade
secrets disclosed to ITI from unauthorized disclosure, use or release,
including, without limitation, (i) providing reasonable physical security at
ITI's facilities and (ii) taking the same care to prevent unauthorized
disclosure that ITI takes to protect information, data or other tangible and
intangible property of its own that its regards as proprietary or confidential.
ITI agrees that it will not sell, disclose or otherwise make The Technology
available to others except: (i) as authorized by the license rights granted to
ITI under this Sublicense and (ii) to its employees, agents, contractors,
consultants or others with a need to have access to The Technology to reasonably
enable ITI to fully exercise its rights under this Sublicense. ITI will neither
knowingly nor negligently allow its employees, agents, consultants or
independent contractors to sell or disclose the trade secrets disclosed to ITI
except: (i) that ITI may provide the trade secrets of The Technology to third
parties in connection with exercising ITI's sublicense rights hereunder,
provided each such party executes a written agreement binding it to
confidentiality obligations similar to ITI's obligations under this Sublicense
and (ii) as otherwise permitted by this Sublicense. In execution of its
confidentiality obligation, ITI will indemnify and hold ICI harmless from any
and all damages caused by a breach of confidentiality by ITI or any of ITI's
employees, agents, contractors, officers or directors. Because damages may be
difficult to assess, ITI agrees to pay as liquidated damages (and not as a
penalty) the sum of $50,000.00 for each disclosure in breach of this
confidentiality obligation.
5.2 ITI will use reasonable efforts to enforce any patent or copyright,
if any is issued for The Technology, and to protect its trade secrets, but ITI
will be the sole judge in its absolute discretion of what efforts are reasonable
and appropriate. In this regard, ITI will exercise its best efforts to keep ICI
fully advised of any and all commercial threats to The Technology. If ITI is
unwilling or unable to protect The Technology, ICI may do so at its own expense
and cost.
5.3 During the term of the Sublicense, ITI will not directly or
indirectly contest the validity or ICI's ownership of any trade secret, know
how, copyright or any patent issued for The Technology to ICI or to WVURC.
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<PAGE> 4
5.4 The obligations of this Section V shall survive the expiration or
termination of this Sublicense.
VI. PROPRIETARY RIGHTS
6.1 WVURC, ICI, and ITI acknowledge that The Technology is a character
which is or may be protectable by patent, trade secret and/or copyright under
the laws of the United States and other countries. WVURC and ICI have, at their
own expense, made applications to obtain patent and/or copyright or other
statutory protection of the original Technology described in Exhibit B.
It is explicitly recognized that developments and enhancements of The
Technology will be incorporated by amendment or attachment to Exhibit B of this
Sublicense pursuant to the procedure set forth in Article 2.2 of this
Sublicense. Neither WVURC nor ICI will be responsible for obtaining patent
and/or copyrights or other statutory protection shall name WVURC as the owner of
each so protected Technology, which will then be licensed through ICI to ITI
pursuant to the terms of the License Agreement between WVURC and ICI and this
Sublicense.
ITI shall treat documentation regarding The Technology, including
listings of source code for The Technology but not including instructions,
manuals or other elements of any publicly marketed material from The Technology,
as proprietary, confidential information. ITI shall use reasonable efforts to
obtain and maintain proprietary protection for The Technology consistent with
ITI's ability to effectively market The Technology in each country in which The
Technology is distributed. ICI agrees to cooperate with ITI, at ITI expense, and
where necessary ITI agrees to obtain patent, copyright or other statutory
protection for The Technology in each country in which the same are sold,
distributed or sublicensed; and ICI hereby authorizes ITI to execute and
prosecute in WVURC's name as authors or inventors an application for patent,
copyright or similar protection of The Technology; and WVURC and ICI shall
execute such other documents of registration and recordation as may be necessary
to perfect in ITI, or protect, the exclusive rights granted ITI hereunder in
each country in which such items are sold or distributed.
6.2 Any trademark used by ITI to identify The Technology shall be owned
by WVURC, ICI, and ITI to the same extent and in the same proportions as the
underlying technology.
6.3 ITI may identify WVURC and ICI as owners or participants in The
Technology and its development, provided that such use of the WVURC and ICI
identification is an accurate statement of WVURC's and ICI's role and notice
thereof has been given to WVURC and ICI at the address indicated herein not less
than thirty (30) days prior to the first such identification.
VII. TERM, TERMINATION AND CONVERSION
7.1 The term of this Sublicense shall commence on the date first set
forth above and shall continue until December 31, 1996, unless earlier
terminated as provided in this Sublicense or by the terms of the license by and
between ICI and WVURC.
7.2 This Sublicense shall bee renewed for one year periods after
December 31, 1996, so long as payments to ICI and WVURC equal or exceed the
minimum royalty payment specified in Articles 3.2, 3.3, 3.4 and those conditions
of ICI's license as renewed by its licensors are satisfied.
7.3 In the event of the bankruptcy of either party or a breach of a
material provision hereof, which breach is not cured within sixty (60) days
after written notice thereof by the nonbreaching party, then said party may,
effective sixty (60) days after written notice thereof to the other, terminate
this Sublicense, and the rights granted hereunder shall thereupon revert to the
appropriate party as provided in Section 7.5 hereof. In addition to or in lieu
of their rights to
4
<PAGE> 5
terminate this Sublicense upon material breach, the nonbreaching party shall
have the right to pursue any remedies available to them under the law.
7.4 Waiver of a particular instance of a breach shall not preclude a
party from objecting to future breaches of the same or any other type.
7.5 Upon any termination of this Sublicense: (1) all rights, title and
interest of ITI in and to The Technology as conveyed hereby, including, but not
limited to, design drawings and production materials relating thereto in ITI's
possession will terminate and revert to ICI; (2) all rights and sublicense
granted by ITI to third parties shall continue in full force an effect, and
monies due thereunder shall be received by ITI and royalties paid to WVURC and
ICI as provided herein; (3) WVURC and ICI shall in any event have the right to
retain copies of any version of The Technology for WVURC's and ICI's own use;
and (4) ITI's obligation to pay WVURC and ICI earned royalties then due shall
continue.
VIII. MISCELLANEOUS
8.1 Each party will notify the other of any infringements of rights in
The Technology that come to such party's attention and shall cooperate fully
with the other in determining what action, if any, should be taken.
8.2 This Sublicense states the entire agreement between parties with
respect to the subject matter hereof and supersedes all prior negotiations,
understandings and agreements between the parties hereto concerning the subject
matter hereof. No amendment or modification of this Sublicense shall be made
except by an instrument in writing signed by all parities.
8.3 ICI represents: (i) this Sublicense has been duly executed and
delivered and is a valid and binding agreement; and (ii) the execution and
delivery of this Sublicense, and the performance by ICI of its obligations
hereunder, are not to the best of the undersigned's belief in violation of and
will not conflict with any agreement, law, order or other restriction binding on
ICI concerning The Technology.
8.4 The parties' rights and obligations hereunder shall be binding upon
and inure to the benefit of their respective successors and assigns. Each party
hereto will notify the other party in writing of any transfer of its rights or
obligations hereunder within thirty (30) days of such transfer, provided,
however, that the ITI or its assignee will not be required to give notice of any
transfer made pursuant to a sublicense agreement or other transaction in the
ordinary course of its business and recognized in this Sublicense.
8.5 This Sublicense shall be governed by and interpreted in accordance
with the laws of the State of West Virginia.
8.6 Should any provision of this Sublicense be held to be void, invalid
or inoperative, the remaining provisions of this Sublicense shall not be
affected and shall continue in effect as though such provisions were deleted.
8.7 All payments to others, as required by WVURC's "Patent and
Trademark Policy," shall be the sole responsibility of WVURC, and such payments
shall be made from WVURC's royalties received under this Sublicense.
8.8 All royalty payments and other conditions as outlined in the
original WVURC/ICI License Agreement and this Sublicense due to WVURC will be
paid directly by ICI to WVURC.
8.9 ITI, with the execution of this Sublicense, assumes all financial
responsibilities for the development and protection of the worldwide, exclusive
applications of The Technology, agrees to pay all existing patent and license
fees now in effect for the worldwide, exclusive applications of The Technology,
and will continue with existing efforts to extend said protection.
8.10 ITI agrees to become licensed to do business in the State of West
Virginia.
8.11 Any notice required or permitted to be sent hereunder shall be
deemed given (a) if hand delivered when received, or (b) if mailed when mailed
by postage prepaid, by registered or
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<PAGE> 6
certified mail, return receipt requested, to any party at the following address
or such other addresses which either party may from time to time identify:
Dr. James E. Smith William Reeves
Integral Concepts, Inc. West Virginia University Research Corp.
Route #7, Box 145 P.O. Box 6845
Morgantown, WV 26505 Morgantown, WV 26506-6845
William Robinson
Integral Technologies
1070 West Pender St., Suite 3
Vancouver, BC
Canada V6E 2N7
IN WITNESS WHEREOF, the parties hereto have executed this Sublicense on
the dates shown below but with the effect as of the date first above written.
INTEGRAL CONCEPTS, INC.,
a West Virginia corporation
(Corporate Seal)
by: James E. Smith /s/
-----------------------------------
JAMES E. SMITH
Its President
DATE: 4/24/96
---------------------------------
INTEGRAL TECHNOLOGIES INCORPORATED,
a Nevada Corporation
(Corporate Seal)
By: William S. Robinson
-----------------------------------
WILLIAM ROBINSON
Its President
DATE: "96"
--------------------------------
6
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made this 1st day of October 1997 (the
"Agreement"), by and between INTEGRAL TECHNOLOGIES, INC., a Nevada corporation,
with principal executive offices located at 1070 West Pender Street, Suite #3,
Vancouver, British Columbia, Canada V6E-2N7 (hereinafter referred to as the
"Company"), and William S.. Robinson an Individual residing at 5843 Olympic
Ave., Vancouver, B.C. (hereinafter referred to as the "Executive").
ARTICLE I
EMPLOYMENT
The Company hereby employs the Executive; and the Executive hereby
accepts such employment and agrees to serve as an employee and Director of the
Company, subject to and upon the terms and conditions set forth in this
Agreement.
ARTICLE II
TITLE AND DUTIES
(A) During the term of employment with the Company, and subject to the
direction of its Board of Directors, the Executive shall perform duties and
functions consistent with his employment hereunder as an officer of the Company
in the capacity of Vice-president, and as further defined in the Company's
Bylaws.
(B) The Executive agrees to devote his best efforts to the performance
of his duties for the Company; to render his services to any joint venture,
subsidiary or affiliated business of the Company; to participate in
establishing the direction of the Company's business; and to promote the
Company's relationships with its employees, customers and others in the
business and financial communities.
ARTICLE III
COMPENSATION
(A) The Company shall pay to the Executive for all services to be rendered
pursuant to the terms of this Agreement, a base salary at the following rates
in accordance with the Company's normal payroll procedures:
<TABLE>
<CAPTION>
ANNUAL(US$) MONTHLY(US$)
----------- ------------
<S> <C> <C>
Year 1( July 1,1997 to June 30,1998) 90,000 6,250
Year 2( July 1,1998 to June 30,1999) 105,000 8,750
Year 3( July 1,1999 to June 30,2000) 120,000 10,000
</TABLE>
Compensation may be increased by the Company's Compensation Committee or by the
other members of the Board of Directors.
(B)The Board of Directors of the Company may at its discretion from time to
time grant to the Executive options for the right to purchase common stock of
the company.
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<PAGE> 2
ARTICLE IV
WORKING CONDITIONS AND BENEFITS
(A) The Executive shall be entitled to paid vacations during each year
of his employment with the Company in accordance with Company practice in that
year.
(B) The Executive is authorized to incur reasonable and necessary
expenses for promoting the business of the Company, including authorized
expenses for entertainment, travel and similar items. The Company shall
reimburse the Executive in accordance with the policies of the Company in
effect from time to time for all such expenses, upon presentation by the
Executive of an itemized account of such authorized expenditures.
(C) The Executive shall be employed by the Company at executive
offices maintained by the Company in Vancouver, British Columbia, Canada. The
Executive shall travel on the Company's behalf to the extent reasonable and
necessary.
(D) To the full extent provided for under the laws of the State of
Nevada and the Company's Bylaws, the Company shall provide indemnification to
the Executive for any claim or lawsuit which may be asserted against the
Executive when acting in such capacity for the Company, provided that said
indemnification is not in violation of any of the following: (i) federal or
state laws; or (ii) rules or regulations of the Securities and Exchange
Commission.
ARTICLE V
OTHER BENEFITS
During the term hereof, the Executive shall be entitled to receive
such of the following other benefits of employment available to other
employees: major medical health benefits, life insurance benefits, pension,
profit sharing and income protection or disability plans, in each instance,
consistent with the Executive's position.
ARTICLE VI
TERM
The term of this Agreement shall commence as of July 1, 1997, and
continue until June 30,2000, unless this Agreement is otherwise terminated
pursuant to the terms hereof. Accordingly, this Agreement replaces and
supersedes all prior agreements between the Executive and the Company.
ARTICLE VII
TERMINATION
(A) The Company may terminate this Agreement upon written notice to
the Executive if the Executive becomes disabled or suffers an illness and as a
result of such disability or illness is substantially unable to perform the
Executive's duties hereunder for a period of three (3) consecutive months or an
aggregate of ninety (90) working days over a consecutive twelve (12) month
period; such notice shall be forwarded to the Executive by the
2 of 6
<PAGE> 3
Company upon and after a resolution of the Company's Board of Directors
authorizing such notification. In the event of the Executive's death, this
Agreement shall terminate upon the date of death.
(B) The Company may terminate this Agreement for cause upon written
notice from the Company to the Executive if the Executive has materially
violated the terms of this Agreement or committed acts of misconduct or
willfully fails to carry out the policies of the Company's Board of Directors
or commits acts which have a material adverse affect on the business of the
Company. Such notice shall be forwarded to the Executive by the Company upon
and after a resolution of the Company's Board of Directors authorizing such
notification.
(C) In the event that the Company terminates the employment of the
Executive without cause, then the Executive shall be entitled to severance pay
equal to twelve (12) month's base salary based on the base salary then in
effect at the termination date. Such severance pay shall be made in one lump
sum or in monthly installments on the first day of each month at the option of
the Company;
(ii) $5,000 relocation payment to be paid on the first day of the
next month following the Executive's termination; and
The consideration set forth in this sub-paragraph (C) together with
any prior unpaid salary and unreimbursed expenses, shall completely relieve the
Company of any liability to the Executive for any compensation that would have
otherwise been payable to the Executive under the terms of this Agreement.
ARTICLE VIII
CONFIDENTIALITY AND NON-COMPETITION
(A) All Company trade secrets, proprietary information, software,
software codes, advertising, sales, marketing and other materials or articles
of information, including without limitation customer and supplier lists, data
processing reports, customer sales analyses, invoices, price lists or
information, samples, or any other materials or data of any kind furnished to
Executive by Company or developed by the Executive on behalf of Company or at
Company's direction or for Company's use or otherwise in connection with the
Executive's employment hereunder, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of
such materials at any time during or after the termination of the Executive's
employment, the Executive shall immediately deliver the same to Company.
(B) During the term of this Agreement and for a period of two ( 2 )
months thereafter, Executive shall not, directly or indirectly, either
individually or as owner, partner, agent, employee, consultant or otherwise,
except for the account of and on behalf of the Company or its affiliates,
engage in any activity competitive with the business of the Company or its
affiliates, nor shall he, in competition with the Company or its affiliates,
solicit or otherwise attempt to establish for himself or any other person, firm
or entity, any business relationships with any person, firm or corporation,
which was, at any time during the term of this Agreement, a customer or
employee of the Company or one of its affiliates.
3 of 6
<PAGE> 4
(C) During the term of this Agreement and at all times thereafter, the
Executive shall not use for personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or entity other than the Company, any material referred to in
paragraph (A) above or any information regarding the business methods, business
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes used or developed by the Company
or any names and addresses of customers or clients or any other confidential
information relating to or dealing with the business operations or activities
of the Company, made known to the Executive or learned or acquired by Executive
while in the employ of the Company.
ARTICLE IX
SEVERABILITY
If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE X
ARBITRATION
Any controversy, claim or dispute arising out of the terms of this
Agreement, or the breach thereof, shall be settled by arbitration in the
Province of Vancouver, British Columbia, Canada and the award rendered thereon
shall be final, binding and conclusive as to all parties and may be entered in
any court of competent jurisdiction.
ARTICLE XI
NOTICE
Any notice, request, demand or other communication provided for by
this Agreement shall be sufficient if in writing and if delivered in person or
sent by registered or certified mail to Executive at the last resident address
he has filed in writing with the Company or, in the case of the Company, at its
principal executive offices.
ARTICLE XII
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company and the heirs and personal
representatives of the Executive.
ARTICLE XIII
WAIVER
The waiver of either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
4 of 6
<PAGE> 5
ARTICLE XIV
GOVERNING LAW
This Agreement has been negotiated and executed in the Province of
Vancouver, British Columbia, Canada and the law of this Province shall govern
its construction and validity.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement contains the entire Agreement between the parties
hereto; no change, addition or amendment shall be made hereto except by written
agreement signed by the parties hereto. This Agreement supersedes all prior
Agreements and understandings between the Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and affixed their hands and seal the day and year first above written.
EXECUTIVE:
/s/ William S. Robinson
----------------------------------
William S. Robinson
COMPANY:
INTEGRAL TECHNOLOGIES, INC.
By:/s/ William A. Ince
-------------------------------
William A. Ince
5 of 6
<PAGE> 6
ADDENDUM (DATED MARCH 15, 1999)
TO THE EMPLOYMENT AGREEMENT (DATED OCTOBER 1, 1997)
BETWEEN INTEGRAL TECHNOLOGIES, INC. AND WILLIAM S. ROBINSON
Pursuant to the employment agreement entered into on the 1st day of October,
1997, between Integral Technologies, Inc. and William S. Robinson, the
following amendments to such agreement are agreed to by both parties as
evidenced by their signatures below.
ARTICLE II
EMPLOYMENT
(AMENDED AS FOLLOWS)
During the term of employment with the Company, and subject to the direction of
its Board of Directors, the Executive shall perform duties and functions
consistent with his employment hereunder as an officer of the Company in the
capacity of Chief Executive Officer, as further defined in the Company's
Bylaws. The Executive shall also perform duties and functions consistent with
his employment hereunder as an officer of Emergent Technologies Corp. ( a
subsidiary of Integral Technologies, Inc.) in the capacity of Chief Executive
Officer, as further defined in the Company's Bylaws.
ARTICLE III
COMPENSATION
(AMENDED AS FOLLOWS)
(A) The Company shall pay to the Executive for all services to be rendered
pursuant to the terms of this Agreement, a base salary at the following rates
in accordance with the Company's normal payroll procedures:
<TABLE>
<CAPTION>
Annual(US$) Monthly(US$)
<S> <C> <C>
Year 1 (July 1, 1997 to June 30, 1998) 90,000 6,250
Year 2 (July 1, 1998 to June 30, 1999) 105,000 8,750
Year 3 (July 1, 1999 to June 30, 2000) 120,000 10,000
Year 4 (July 1, 2000 to June 30, 2001) 120,000 10,000
Year 5 (July 1, 2001 to June 30, 2002) 120,000 10,000
</TABLE>
Compensation may be increased by the Company's Compensation Committee or by the
other members of the Board of Directors.
(B) In the event that the Company is indebted to the Executive for a minimum of
three months salary the Executive shall have the option to convert such unpaid
salary into common stock of the Company at market price. Market price shall be
defined as the average daily closing bid price over the month.
ARTICLE VI
TERM
(AMENDED AS FOLLOWS)
The term of this Agreement shall commence as of July 1, 1997, and
continue until June 30, 2002, unless this Agreement is otherwise terminated
pursuant to the terms
1
<PAGE> 7
hereof. Accordingly, this Agreement replaces and supersedes all prior
agreements between the Executive and the Company.
EXECUTIVE:
/s/ William S. Robinson
-------------------------------------
William S. Robinson
COMPANY
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William A. Ince
----------------------------------
William A. Ince
2
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made this 1st day of October 1997 (the
"Agreement"), by and between INTEGRAL TECHNOLOGIES, INC., a Nevada corporation,
with principal executive offices located at 1070 West Pender Street, Suite #3,
Vancouver, British Columbia, Canada V6E-2N7 (hereinafter referred to as the
"Company"), and William A. Ince an Individual residing at 525 Sudden Valley
Bellingham. Washington, USA (hereinafter referred to as the "Executive").
ARTICLE I
EMPLOYMENT
The Company hereby employs the Executive; and the Executive hereby
accepts such employment and agrees to serve as an employee and Director of the
Company, subject to and upon the terms and conditions set forth in this
Agreement.
ARTICLE II
TITLE AND DUTIES
(A) During the term of employment with the Company, and subject to the
direction of its Board of Directors, the Executive shall perform duties and
functions consistent with his employment hereunder as an officer of the Company
in the capacity of Vice-president, and as further defined in the Company's
Bylaws.
(B) The Executive agrees to devote his best efforts to the performance
of his duties for the Company; to render his services to any joint venture,
subsidiary or affiliated business of the Company; to participate in
establishing the direction of the Company's business; and to promote the
Company's relationships with its employees, customers and others in the
business and financial communities.
ARTICLE III
COMPENSATION
(A) The Company shall pay to the Executive for all services to be rendered
pursuant to the terms of this Agreement, a base salary at the following rates
in accordance with the Company's normal payroll procedures:
<TABLE>
<CAPTION>
ANNUAL(US$) MONTHLY(US$)
<S> <C> <C>
Year 1 (July 1, 1997 to June 30, 1998) 90,000 6,250
Year 2 (July 1, 1998 to June 30, 1999) 105,000 8,750
Year 3 (July 1, 1999 to June 30, 2000) 120,000 10,000
</TABLE>
Compensation may be increased by the Company's Compensation Committee or by the
other members of the Board of Directors.
1 of 5
<PAGE> 2
(B) The Board of Directors of the Company may at its discretion from time to
time grant to the Executive options for the right to purchase common stock of
the company.
ARTICLE IV
WORKING CONDITIONS AND BENEFITS
(A) The Executive shall be entitled to paid vacations during each year
of his employment with the Company in accordance with Company practice in that
year.
(B) The Executive is authorized to incur reasonable and necessary
expenses for promoting the business of the Company, including authorized
expenses for entertainment, travel and similar items. The Company shall
reimburse the Executive in accordance with the policies of the Company in
effect from time to time for all such expenses, upon presentation by the
Executive of an itemized account of such authorized expenditures.
(C) The Executive shall be employed by the Company at executive
offices maintained by the Company in Vancouver, British Columbia, Canada. The
Executive shall travel on the Company's behalf to the extent reasonable and
necessary.
(D) To the full extent provided for under the laws of the State of
Nevada and the Company's Bylaws, the Company shall provide indemnification to
the Executive for any claim or lawsuit which may be asserted against the
Executive when acting in such capacity for the Company, provided that said
indemnification is not in violation of any of the following: (i) federal or
state laws; or (ii) rules or regulations of the Securities and Exchange
Commission.
ARTICLE V
OTHER BENEFITS
During the term hereof, the Executive shall be entitled to receive
such of the following other benefits of employment available to other
employees: major medical health benefits, life insurance benefits, pension,
profit sharing and income protection or disability plans, in each instance,
consistent with the Executive's position.
ARTICLE VI
TERM
The term of this Agreement shall commence as of July 1, 1997, and
continue until June 30,2000, unless this Agreement is otherwise terminated
pursuant to the terms hereof. Accordingly, this Agreement replaces and
supersedes all prior agreements between the Executive and the Company.
ARTICLE VII
TERMINATION
(A) The Company may terminate this Agreement upon written notice to
the Executive if the Executive becomes disabled or suffers an illness and as a
result of such disability or illness is substantially unable to perform the
Executive's duties hereunder for a
2 of 5
<PAGE> 3
period of three (3) consecutive months or an aggregate of ninety (90) working
days over a consecutive twelve (12) month period; such notice shall be
forwarded to the Executive by the Company upon and after a resolution of the
Company's Board of Directors authorizing such notification. In the event of the
Executive's death, this Agreement shall terminate upon the date of death.
(B) The Company may terminate this Agreement for cause upon written
notice from the Company to the Executive if the Executive has materially
violated the terms of this Agreement or committed acts of misconduct or
willfully fails to carry out the policies of the Company's Board of Directors
or commits acts which have a material adverse affect on the business of the
Company. Such notice shall be forwarded to the Executive by the Company upon
and after a resolution of the Company's Board of Directors authorizing such
notification.
(C) In the event that the Company terminates the employment of the
Executive without cause, then the Executive shall be entitled to severance pay
equal to twelve (12) month's base salary based on the base salary then in
effect at the termination date. Such severance pay shall be made in one lump
sum or in monthly installments on the first day of each month at the option of
the Company;
(ii) $5,000 relocation payment to be paid on the first day of the
next month following the Executive's termination; and
The consideration set forth in this sub-paragraph (C) together with
any prior unpaid salary and unreimbursed expenses, shall completely relieve the
Company of any liability to the Executive for any compensation that would have
otherwise been payable to the Executive under the terms of this Agreement.
ARTICLE VIII
CONFIDENTIALITY AND NON-COMPETITION
(A) All Company trade secrets, proprietary information, software,
software codes, advertising, sales, marketing and other materials or articles
of information, including without limitation customer and supplier lists, data
processing reports, customer sales analyses, invoices, price lists or
information, samples, or any other materials or data of any kind furnished to
Executive by Company or developed by the Executive on behalf of Company or at
Company's direction or for Company's use or otherwise in connection with the
Executive's employment hereunder, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of
such materials at any time during or after the termination of the Executive's
employment, the Executive shall immediately deliver the same to Company.
(B) During the term of this Agreement and for a period of two (2)
months thereafter, Executive shall not, directly or indirectly, either
individually or as owner, partner, agent, employee, consultant or otherwise,
except for the account of and on behalf of the Company or its affiliates,
engage in any activity competitive with the business of the Company or its
affiliates, nor shall he, in competition with the Company or its affiliates,
solicit or otherwise attempt to establish for himself or any other person, firm
or entity, any business relationships with any person, firm or corporation,
which was, at any time during the term of this Agreement, a customer or
employee of the Company or one of its affiliates.
3 of 5
<PAGE> 4
(C) During the term of this Agreement and at all times thereafter, the
Executive shall not use for personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or entity other than the Company, any material referred to in
paragraph (A) above or any information regarding the business methods, business
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes used or developed by the Company
or any names and addresses of customers or clients or any other confidential
information relating to or dealing with the business operations or activities
of the Company, made known to the Executive or learned or acquired by Executive
while in the employ of the Company.
ARTICLE IX
SEVERABILITY
If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE X
ARBITRATION
Any controversy, claim or dispute arising out of the terms of this
Agreement, or the breach thereof, shall be settled by arbitration in the
Province of Vancouver, British Columbia, Canada and the award rendered thereon
shall be final, binding and conclusive as to all parties and may be entered in
any court of competent jurisdiction.
ARTICLE XI
NOTICE
Any notice, request, demand or other communication provided for by
this Agreement shall be sufficient if in writing and if delivered in person or
sent by registered or certified mail to Executive at the last resident address
he has filed in writing with the Company or, in the case of the Company, at its
principal executive offices.
ARTICLE XII
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company and the heirs and personal
representatives of the Executive.
ARTICLE XIII
WAIVER
The waiver of either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
4 of 5
<PAGE> 5
ARTICLE XIV
GOVERNING LAW
This Agreement has been negotiated and executed in the Province of
Vancouver, British Columbia, Canada and the law of this Province shall govern
its construction and validity.
ARTICLE XV
ENTIRE AGREEMENT
This Agreement contains the entire Agreement between the parties
hereto; no change, addition or amendment shall be made hereto except by written
agreement signed by the parties hereto. This Agreement supersedes all prior
Agreements and understandings between the Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and affixed their hands and seal the day and year first above written.
EXECUTIVE:
/s/ William A. Ince
------------------------------------
William A. Ince
COMPANY:
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
---------------------------------
William S. Robinson
5 of 5
<PAGE> 6
ADDENDUM (DATED MARCH 15, 1999)
TO THE EMPLOYMENT AGREEMENT (DATED OCTOBER 1, 1997)
BETWEEN INTEGRAL TECHNOLOGIES, INC. AND WILLIAM A. INCE
Pursuant to the employment agreement entered into on the 1st day of October,
1997, between Integral Technologies, Inc. and William Allan Ince, the following
amendments to such agreement are agreed to by both parties as evidenced by
their signatures below.
ARTICLE II
EMPLOYMENT
(AMENDED AS FOLLOWS)
During the term of employment with the Company, and subject to the direction of
its Board of Directors, the Executive shall perform duties and functions
consistent with his employment hereunder as an officer of the Company in the
capacity of President, as further defined in the Company's Bylaws. The
Executive shall also perform duties and functions consistent with his
employment hereunder as an officer of Emergent Technologies Corp. ( a
subsidiary of Integral Technologies, Inc.) in the capacity of Chief Financial
Officer, as further defined in the Company's Bylaws.
ARTICLE III
COMPENSATION
(AMENDED AS FOLLOWS)
(A) The Company shall pay to the Executive for all services to be rendered
pursuant to the terms of this Agreement, a base salary at the following rates
in accordance with the Company's normal payroll procedures:
<TABLE>
<CAPTION>
Annual(US$) Monthly(US$)
<S> <C> <C>
Year 1 (July 1, 1997 to June 30, 1998) 90,000 6,250
Year 2 (July 1, 1998 to June 30, 1999) 105,000 8,750
Year 3 (July 1, 1999 to June 30, 2000) 120,000 10,000
Year 4 (July 1, 2000 to June 30, 2001) 120,000 10,000
Year 5 (July 1, 2001 to June 30, 2002) 120,000 10,000
</TABLE>
Compensation may be increased by the Company's Compensation Committee or by the
other members of the Board of Directors.
(B) In the event that the Company is indebted to the Executive for a minimum of
three months salary the Executive shall have the option to convert such unpaid
salary into common stock of the Company at market price. Market price shall be
defined as the average daily closing bid price over the month
ARTICLE VI
TERM
(AMENDED AS FOLLOWS)
The term of this Agreement shall commence as of July 1, 1997, and
continue until June 30, 2002, unless this Agreement is otherwise terminated
pursuant to the terms
1
<PAGE> 7
hereof. Accordingly, this Agreement replaces and supersedes all prior
agreements between the Executive and the Company.
EXECUTIVE:
/s/ William A. Ince
------------------------------------
William A. Ince
COMPANY
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
---------------------------------
William S. Robinson
2
<PAGE> 1
EXHIBIT 10.7
INTEGRAL TECHNOLOGIES, INC.
EMPLOYEE BENEFIT AND CONSULTING SERVICES
COMPENSATION PLAN
(AS RESTATED JANUARY 10, 1999)
SECTION 1. INTRODUCTION
1.1 Establishment. Effective as provided in Section 17, Integral
Technologies, Inc., a Nevada corporation (the "Company"), hereby establishes a
restated plan of long-term stock-based compensation incentives for selected
Eligible Participants of the Company and its affiliated corporations. Such a
plan was originally adopted on December 30, 1996. The plan as restated herein
and adopted by the Board of Directors on January 10, 1999, shall be known as
the Integral Technologies, Inc. Employee Benefit and Consulting Services
Compensation Plan (the "Plan").
1.2 Purpose. The purpose of the Plan is to promote the best interest
of the Company, and its stockholders by providing a means of non-cash
remuneration to selected Eligible Participants who contribute most to the
operating progress and earning power of the Company.
SECTION 2. DEFINITIONS
The following definitions shall be applicable to the terms used in the
Plan:
2.1 "Affiliated Corporation" means any corporation that is either a
parent corporation with respect to the Company or a subsidiary corporation with
respect to the Company (within the meaning of Sections 424(e) and (f),
respectively, of the Internal Revenue Code).
2.2 "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
2.3 "Committee" means a committee designated by the Board of Directors
to administer the Plan or, if no committee is so designated, the Board of
Directors. Any Committee Member who is also an Eligible Participant may receive
a grant only if he abstains from voting in favor of a grant to himself, and the
grant is determined and approved by the remaining Committee Members. The Board
of Directors, in its sole discretion, may at any time remove any member of the
Committee and appoint another Director to fill any vacancy on the Committee.
2.4 "Common Stock" means the Company's $.001 par value voting common
stock.
2.5 "Company" means Integral Technologies, Inc., a Nevada corporation
and its subsidiaries.
2.6 "Effective Date" means the effective date of the Plan, as set
forth in Section 17 hereof.
2.7 "Eligible Participant" or "Participant" means any employee,
director, officer, consultant, or advisor of the Company who is determined (in
accordance with the provisions of Section 4 hereof) to be eligible to receive
stock and exercise stock options hereunder.
2.8 "Fair Market Value" means with respect to Common Stock, as of any
date, the closing price of a share of Common Stock as reported on such exchange
on which the Company's Common Stock may be listed.
PAGE 1 OF 6
<PAGE> 2
2.9 "Option" means the grant to an Eligible Participant of a right to
acquire shares of Restricted Stock of the Company, unless said shares are duly
registered or exempt pursuant to Rule 701 of the Securities Act of 1933, as
amended (the "Securities Act"), and thus freely tradable, pursuant to a Grant
of Option approved by the Committee and executed and delivered by the Company.
2.10 "Plan" means this Integral Technologies, Inc. Employee Benefit
and Consulting Services Compensation Plan as restated on January 10, 1999.
2.11 "Unrestricted Stock" means shares of common stock, $.001 par
value, of the Company underlying an Option which, if specified in the written
Option are, upon issuance, freely tradable by virtue of having been registered
with the Securities and Exchange Commission ("SEC") under cover of Form S-8, or
another appropriate registration statement, or become freely tradable by virtue
of Rule 701, and which shares have been issued subject to the "blue sky"
provisions of any appropriate state jurisdiction. Special resale restrictions
may, however, apply to officers, directors, control shareholders and affiliates
of the Company and such individuals or entities will be required to obtain an
opinion of counsel as regards their ability to resell shares received pursuant
to this Plan. The Company is not obligated by this Plan to obtain any required
opinions of counsel, or to file any type of registration statement with the SEC
on any state of other jurisdiction.
2.12 "Stock" or "Restricted Stock" means shares of common stock, $.001
par value, of the Company issuable directly under the Plan or underlying a
Grant of Option, which shall, upon issuance, be subject to the restrictions set
forth in Section 11 hereof.
Wherever appropriate, words used in the Plan in the singular may mean
the plural, the plural may mean the singular, and the masculine may mean the
feminine.
SECTION 3. ADOPTION AND ADMINISTRATION OF THE PLAN
This plan of long-term stock-based compensation incentives for
selected Eligible Participants of the Company and its affiliated corporations
was originally adopted on December 30, 1996 (the "Plan"). In the absence of
contrary action by the Board of Directors, and except for action taken by the
Committee pursuant to Section 4 in connection with the determination of
Eligible Participants, any action taken by the Committee or by the Board of
Directors with respect to the implementation, interpretation or administration
of the Plan shall be final, conclusive and binding.
SECTION 4. ELIGIBILITY AND AWARDS
The Committee shall determine at any time and from time to time after
the effective date of the Plan: (i) the Eligible Participants; (ii) the number
of shares of Common Stock issuable directly or to be granted pursuant to the
Option which an Eligible Participant may exercise; (iii) the price per share at
which each option may be exercised, in cash or cancellation of fees for
services for which the Company is liable, if applicable, or the value per share
if a direct issue of stock; and (iv) the terms on which each option may be
granted. Such determination, as may from time to time be amended or altered at
the sole discretion of the Committee. Notwithstanding the provisions of Section
3 hereof, no such determination by the Committee shall be final, conclusive and
binding upon the Company unless and until the Board of Directors has approved
the same; provided, however, that if the Committee is composed of a majority of
the persons then comprising the Board of Directors of the Company, such
approval by the Board of Directors shall not be necessary.
SECTION 5. GRANT OF OPTION
Subject to the terms and provisions of this Plan, the terms and
conditions under which the Option may be granted to an Eligible Participant
shall be set forth in a written agreement (i.e., a Consulting Agreement,
Services Agreement, Fee Agreement, or Employment Agreement) or a written Grant
of Option
PAGE 2 OF 6
<PAGE> 3
in the form attached hereto as Exhibit A and made a part hereof and containing
such modifications thereto and such other provisions as the Committee, in its
sole discretion, may determine. Notwithstanding the foregoing provisions of
this Section 5, each Grant of Option shall incorporate the provisions of this
Plan by reference.
SECTION 6. TOTAL NUMBER OF SHARES OF COMMON STOCK
The total number of shares of Common Stock reserved for issuance by
the Company either directly or underlying Options granted under this Plan shall
not, on any given date, exceed 15% of the outstanding shares of Common Stock of
the Company. The total number of shares of Common Stock reserved for such
issuance may be increased only by a resolution adopted by the Board of
Directors and amendment of the Plan. Such Common Stock may be authorized and
unissued or reacquired Common Stock of the Company.
SECTION 7. PURCHASE OF SHARES OF COMMON STOCK
7.1 As soon as practicable after the determination by the Committee
and approval by the Board of Directors (if necessary, pursuant to Section 4
hereof) of the Eligible Participants and the number of shares an Eligible
Participant may be issued directly or granted pursuant to an Option, the
Committee shall give notice (written or oral) thereof to each Eligible
Participant, which notice may be accompanied by the Grant of Option, if
appropriate, to be executed by such Eligible Participant. Upon receipt, an
Eligible Participant may exercise his right to an Option to purchase Common
Stock by providing written notice as specified in the Grant of Option.
7.2 The negotiated cost basis of stock issued directly or the exercise
price for each option to purchase shares of Common Stock pursuant to paragraph
7.1 shall be as determined by the Committee, it being understood that the price
so determined by the Committee may vary from one Eligible Participant to
another. In computing the negotiated direct issue price or the Option exercise
price of a share of Common Stock, the Committee shall take into consideration,
among other factors, the restrictions set forth in Section 11 hereof.
SECTION 8. PAYMENT UPON EXERCISE OF OPTION OR DIRECT ISSUANCE
The Committee shall determine the terms of the Grant of Option and the
exercise price or direct issue price for payment by each Participant for his
shares of Common Stock granted thereunder. Such terms shall be set forth or
referred to in the Grant of Option or Board Resolution authorizing the share
issuance. The terms and/or exercise price so set by the Committee may vary from
one Participant to another. In the event that all the Committee approves an
Option grant permitting deferred payments, the Participant's obligation to pay
for such Common Stock shall be evidenced by a Promissory Note executed by such
Participant and containing such modifications thereto and such other provisions
as the Committee, in its sole discretion, may determine.
SECTION 9. DELIVERY OF SHARES OF COMMON STOCK UPON EXERCISE
The Company shall deliver to or on behalf of each Participant such
number of shares of Common Stock as such Participant elects to purchase upon
direct issuance or upon exercise of the Option. Such shares, which shall be
fully paid and nonassessable upon the issuance thereof (unless a portion or all
of the purchase price shall be paid on a deferred basis) shall be represented
by a certificate or certificates registered in the name of the Participant and
stamped with an appropriate legend referring to the restrictions thereon, if
any, as may be set forth in the Grant of Option. Subject to the terms and
provisions of the Nevada Business Corporation Act and the Grant of Option to
which he is a party, a Participant shall have all the rights of a stockholder
with respect to such shares, including the right to vote the shares and to
receive all dividends or other distributions paid or made with respect thereto
(except to the extent such Participant defaults under the promissory note, if
any, evidencing the deferred purchase price for such
PAGE 3 OF 6
<PAGE> 4
shares), provided that such shares shall be subject to the restrictions
hereinafter set forth. In the event of a merger or consolidation to which the
Company is a party, or of any other acquisition of a majority of the issued and
outstanding shares of common stock of the Company involving an exchange or a
substitution of stock of an acquiring corporation for common stock of the
Company, or of any transfer of all or substantially all of the assets of the
Company in exchange for stock of an acquiring corporation, a determination as
to whether the stock of the acquiring corporation so received shall be subject
to the restrictions set forth in Section 11 shall be made solely by the
acquiring corporation.
SECTION 10. RIGHTS OF EMPLOYEES; PARTICIPANTS
10.1 Employment. Nothing contained in the Plan or in any Stock Option,
Restricted Stock award or other Common Stock award granted under the Plan shall
confer upon any Participant any right with respect to the continuation of his
or her employment by the Company or any Affiliated Corporation, or interfere in
any way with the right of the Company or any Affiliated Corporation, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of a Stock
Option or other Common Stock award. Whether an authorized leave of absence, or
absence in military or government service, shall constitute termination of
employment shall be determined by the Committee at the time.
10.2 Non-transferability. No right or interest of any Participant in a
Stock Option award shall be assignable or transferable during the lifetime of
the Participant, either voluntarily or involuntarily, or subjected to any lien,
directly or indirectly, by operation of law, or otherwise, including execution,
levy, garnishment, attachment, pledge or bankruptcy. In the event of a
Participant's death, a Participant's rights and interest in Stock Option awards
shall be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the Plan shall be made to,
and exercise of any Stock Options may be made by, the Participant's legal
representatives, heirs or legatees. If in the opinion of the Committee a person
entitled to payments or to exercise rights with respect to the Plan is unable
to care for his or her affairs because of mental condition, physical condition,
or age, payment due such person may be made to, and such rights shall be
exercised by, such person's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to the
Committee of such status.
SECTION 11. GENERAL RESTRICTIONS
11.1 Restrictive Legend. All shares of Common Stock issued or issuable
under this plan, unless qualified as Unrestricted Stock as defined in Section 2
hereinabove, shall be restricted, and certificates representing the shares
shall bear the following restrictive legend:
The shares represented by this certificate have not been registered
under the Securities Act of 1933 ("the Act") and are "restricted
securities" as that term is defined in Rule 144 under the Act. the
shares may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Act
or pursuant to an exemption from registration under the Act, the
availability of which is to be established to the satisfaction of the
Company.
11.2 Investment Representations. The Company may require any person to
whom a Stock Option, Restricted Stock award, or other Common Stock award is
granted, as a condition of exercising such Stock Option, or receiving such
Restricted Stock award, or other Common Stock award, to give written assurances
in substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Common Stock subject to the Stock Option,
Restricted Stock award, or other Common Stock award for his or her own account
for investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.
PAGE 4 OF 6
<PAGE> 5
11.3 Compliance with Securities Laws. Each Stock Option shall be
subject to the requirement that if at any time counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such Stock Option upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or purchase of
shares thereunder, such Stock Option may not be accepted or exercised in whole
or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to the
Committee. Nothing herein shall be deemed to require the Company to apply for
or to obtain such listing, registration or qualification.
11.4 Changes in Accounting Rules. Notwithstanding any other provision
of the Plan to the contrary, if, during the term of the Plan, any changes in
the financial or tax accounting rules applicable to Stock Options, Restricted
Stock awards or other Common Stock awards shall occur that, in the sole
judgment of the Committee, may have a material adverse effect on the reported
earnings, assets or liabilities of the Company, the Committee shall have the
right and power to modify as necessary, or cancel, any then outstanding and
unexercised Stock Options, any then outstanding Restricted Stock awards as to
which the applicable employment restriction has not been satisfied and any
other Common Stock awards.
SECTION 12. WITHHOLDING REQUIREMENT
The Company's obligations to deliver shares of Common Stock upon the
exercise of any Stock Option granted under the Plan or pursuant to any other
Common Stock award, shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements. The Company may, in its sole discretion, withhold the appropriate
number of shares of Common Stock from Participant's option exercise to satisfy
such tax requirements.
SECTION 13. PLAN BINDING UPON ASSIGNS OR TRANSFEREES
In the event that, at any time or from time to time, any shares of
Common Stock are sold, exchanged, assigned or transferred to any party (other
than the Company) pursuant to the provisions of Section 10.2 hereof, such party
shall take such shares of Common Stock pursuant to all provisions and
conditions of this Plan, and, as a condition precedent to the transfer of such
shares of Common Stock, such party shall agree (for and on behalf of himself or
itself, his or its legal representatives and his or its transferees and
assigns) in writing to be bound by all provisions of this Plan.
SECTION 14. COSTS AND EXPENSES
All costs and expenses with respect to the adoption, implementation,
interpretation and administration of the Plan shall be borne by the Company.
SECTION 15. CHANGES IN CAPITAL STRUCTURE OF THE COMPANY
Unless otherwise consented to by the Company in writing or unless
otherwise required by law, the shares of Restricted Stock issuable upon
exercise of the Option which are held by a Participant shall not be adjusted in
any manner for: (i) a subdivision or combination of any of the shares of
capital stock of the Company; (ii) a dividend payable in shares of capital
stock of the Company; (iii) a reclassification of any shares of capital stock
of the Company; or (iv) any other change in the capital structure of the
Company.
SECTION 16. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board, upon recommendation of the Committee or at its own
initiative, at any time may terminate and at any time and from time to time and
in any respect, may amend or modify the Plan, including:
PAGE 5 OF 6
<PAGE> 6
(a) Increase the total amount of Common Stock that may be
awarded under the Plan, except as provided in Section 15 of the Plan;
(b) Change the classes of Eligible Employees from which
Participants may be selected or materially modify the requirements as
to eligibility for participation in the Plan;
(c) Increase the benefits accruing to Participants; or
(d) Extend the duration of the Plan.
Any Stock Option or other Common Stock award granted to a Participant
prior to the date the Plan is amended, modified or terminated will remain in
effect according to its terms unless otherwise agreed upon by the Participant;
provided, however, that this sentence shall not impair the right of the
Committee to take whatever action it deems appropriate under Section 11 or
Section 15. The termination or any modification or amendment of the Plan shall
not, without the consent of a Participant, affect his rights under a Stock
Option, Restricted Stock Award or other Common Stock award previously granted
to him. With the consent of the Participant, the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan. The
Board shall have the right to amend or modify the terms and provisions of the
Plan and of any outstanding Stock Options granted under the Plan.
SECTION 17. EFFECTIVE DATE OF THE PLAN
17.1 Effective Date. The Plan as restated herein is effective as of
January 10, 1999.
17.2 Duration of the Plan. The Plan shall terminate at midnight on
December 29, 2001, which is the day before the fifth anniversary of the
original Effective Date, and may be terminated prior thereto by action of the
Board of Directors; and no Stock Option, Restricted Stock Award or other Common
Stock award shall be granted after such termination. Stock Options, Restricted
Stock Awards and other Common Stock awards outstanding at the time of the Plan
termination may continue to be exercised, or become free of restrictions, in
accordance with their terms.
SECTION 18. BURDEN AND BENEFIT
The terms and provisions of this Plan shall be binding upon, and shall
inure to the benefit of, each Participant, his executives or administrators,
heirs, and personal and legal representatives.
Executed as a sealed instrument as of the 10th day of January, 1999.
INTEGRAL TECHNOLOGIES, INC.
By: /s/ William S. Robinson
-----------------------------------
William S. Robinson, Chairman
ATTEST:
William A. Ince
- --------------------------------
William A. Ince, Secretary
PAGE 6 OF 6
<PAGE> 7
EXHIBIT A
FORM OF
GRANT OF OPTION PURSUANT TO THE
INTEGRAL TECHNOLOGIES, INC.
EMPLOYEE BENEFIT AND CONSULTING SERVICES COMPENSATION PLAN
Integral Technologies, Inc., a Nevada corporation (the "Company"),
hereby grants to ________________________________ ("Optionee") an option to
purchase _________ shares of common stock, $.001 par value (the "Shares") of
the Company at the purchase price of US$______ per share (the "Purchase Price")
in accordance with and subject to the terms of the Company's Employee Benefit
and Consulting Services Compensation Plan. This Grant of Option is exercisable
in whole or in part, and upon payment in cash or cancellation of fees, or other
form of payment acceptable to the Company, to the offices of the Company at
Suite #3, 1070 West Pender Street, Vancouver, British Columbia, Canada V6E 2N7.
In the event that Optionee's employee or consultant status with the
Company or any of its subsidiaries ceases or terminates for any reason
whatsoever, including, but not limited to, death, disability, or voluntary or
involuntary cessation or termination, this Grant of Option shall terminate with
respect to any portion of this Grant of Option that has not been validly
exercised prior to the date of cessation or termination of employee or
consultant status, as determined in the sole discretion of the Company, and no
rights hereunder may be exercised after said date.
Subject to the preceding paragraph, this Grant of Option, or any
portion hereof, may be exercised only to the extent vested per the attached
schedule, and must be exercised by Optionee no later than
____________________________ (the "Expiration Date") by (i) notice in writing,
sent by facsimile copy to the Company at its address set forth above; and (ii)
payment of the Purchase Price pursuant to the terms of this Grant of Option and
the Company's Employee Benefit and Consulting Services Compensation Plan. Any
portion of this Grant of Option that is not exercised on or before to the
Expiration Date shall lapse. The notice must refer to this Grant of Option, and
it must specify the number of shares being purchased, and recite the
consideration being paid therefor. Notice shall be deemed given on the date on
which the notice is delivered to the Company by facsimile transmission bearing
an authorized signature of Optionee.
This Grant of Option shall be considered validly exercised once
payment therefor has cleared the banking system or the Company has issued a
credit memo for services in the appropriate amount, or receives a duly executed
acceptable promissory note, if this Grant of Option is granted with deferred
payment, and the Company has received written notice of such exercise.
If Optionee fails to exercise this Grant of Option in accordance with
this Agreement, then this Agreement shall terminate and have no force and
effect, in which event Optionor and Optionee shall have no liability to each
other with respect to this Grant of Option.
This Grant of Option may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Execution and delivery
of this Grant of Option by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding execution and
delivery of this Grant of Option by such party. Such facsimile copies shall
constitute enforceable original documents.
The validity, construction and enforceability of this Grant of Option
shall be construed under and governed by the laws of the State of Nevada,
without regard to its rules concerning conflicts of laws, and
PAGE A-1
<PAGE> 8
any action brought to enforce this Grant of Option or resolve any controversy,
breach or disagreement relative hereto shall be brought only in a court of
competent jurisdiction in Vancouver, British Columbia, Canada.
The shares of stock issued upon exercise of this Grant of Option (the
"Underlying Shares") are not subject to adjustment due to any changes in the
capital structure of the Company as set forth in Section 15 of the Plan.
Further, the Underlying Shares may not be sold, exchanged, assigned,
transferred or permitted to be transferred, whether voluntarily, involuntarily
or by operation of law, delivered, encumbered, discounted, pledged,
hypothecated or otherwise disposed of until (i) the Underlying Shares have been
registered with the Securities and Exchange Commission pursuant to an effective
registration statement on Form S-8, or such other form as may be appropriate,
in the discretion of the Company; or (ii) an Opinion of Counsel, satisfactory
to the Company, has been received, which opinion sets forth the basis and
availability of any exemption for resale or transfer from federal and/or state
securities registration requirements, such as federal Rules 144 or 701.
IN WITNESS WHEREOF, this Grant of Option has been executed effective
as of ____________________, 19___.
INTEGRAL TECHNOLOGIES, INC.
BY THE BOARD OF DIRECTORS
OR A SPECIAL COMMITTEE THEREOF
NOT FOR EXECUTION
By:
-------------------------------
NOT FOR EXECUTION
By:
-------------------------------
NOT FOR EXECUTION
By:
-------------------------------
OPTIONEE:
NOT FOR EXECUTION
- -------------------------------
PAGE A-2
<PAGE> 9
GRANT OF OPTION PURSUANT TO THE INTEGRAL TECHNOLOGIES, INC. EMPLOYEE
BENEFIT AND CONSULTING SERVICES COMPENSATION PLAN, RESTATED JANUARY
10, 1999
OPTIONEE: ___________________
OPTION GRANTED: _____________ Shares
PURCHASE PRICE: US$_______ per Share
DATE OF GRANT: ___________________
EXPIRATION DATE: ___________________
<TABLE>
<CAPTION>
VESTING SCHEDULE: OPTION ON
#SHARES DATE VESTED (ASSUMING CONTINUED
------- ----------- EMPLOYEE OR CONSULTANT
STATUS, ETC.)
<S> <C> <C>
---------- -----------
---------- -----------
---------- -----------
---------- -----------
---------- -----------
</TABLE>
VESTED OPTIONS EXERCISED TO DATE: _________ (INCLUDING THIS EXERCISE)
BALANCE OF VESTED OPTIONS TO BE EXERCISED: _________
===============================================================================
NOTICE OF EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF THE OPTION)
TO: Integral Technologies, Inc. ("Optionor")
The undersigned, the holder of the Option described above, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, _________ shares of the Common Stock of
Integral Technologies, Inc., and herewith makes payment of
_______________________ therefor. Optionee requests that the certificates for
such shares be issued in the name of Optionee and be delivered to Optionee at
the address of __________________________________________________, and if such
shares shall not be all of the shares purchasable hereunder, represents that a
new Subscription of like tenor for the appropriate balance of the shares, or a
portion thereof, purchasable under the Grant of Option pursuant to the Integral
Technologies, Inc. Employee Benefit and Consulting Services Compensation Plan
restated January 10, 1999, be delivered to Optionor when and as appropriate.
OPTIONEE:
Dated:
-------------------------- -----------------------------------
PAGE A-3
<PAGE> 10
GRANT OF OPTION PURSUANT TO THE
INTEGRAL TECHNOLOGIES, INC.
EMPLOYEE BENEFIT AND CONSULTING SERVICES COMPENSATION PLAN
Integral Technologies, Inc., a Nevada corporation (the "Company"),
hereby grants to ________________________________ ("Optionee") an option to
purchase _________ shares of common stock, $.001 par value (the "Shares") of
the Company at the purchase price of US$______ per share (the "Purchase Price")
in accordance with and subject to the terms of the Company's Employee Benefit
and Consulting Services Compensation Plan. This Grant of Option is exercisable
in whole or in part, and upon payment in cash or cancellation of fees, or other
form of payment acceptable to the Company, to the offices of the Company at
Suite #3, 1070 West Pender Street, Vancouver, British Columbia, Canada V6E 2N7.
In the event that Optionee's employee or consultant status with the
Company or any of its subsidiaries ceases or terminates for any reason
whatsoever, including, but not limited to, death, disability, or voluntary or
involuntary cessation or termination, this Grant of Option shall terminate with
respect to any portion of this Grant of Option that has not been validly
exercised prior to the date of cessation or termination of employee or
consultant status, as determined in the sole discretion of the Company, and no
rights hereunder may be exercised after said date.
Subject to the preceding paragraph, this Grant of Option, or any
portion hereof, may be exercised only to the extent vested per the attached
schedule, and must be exercised by Optionee no later than
____________________________ (the "Expiration Date") by (i) notice in writing,
sent by facsimile copy to the Company at its address set forth above; and (ii)
payment of the Purchase Price pursuant to the terms of this Grant of Option and
the Company's Employee Benefit and Consulting Services Compensation Plan. Any
portion of this Grant of Option that is not exercised on or before to the
Expiration Date shall lapse. The notice must refer to this Grant of Option, and
it must specify the number of shares being purchased, and recite the
consideration being paid therefor. Notice shall be deemed given on the date on
which the notice is delivered to the Company by facsimile transmission bearing
an authorized signature of Optionee.
This Grant of Option shall be considered validly exercised once
payment therefor has cleared the banking system or the Company has issued a
credit memo for services in the appropriate amount, or receives a duly executed
acceptable promissory note, if this Grant of Option is granted with deferred
payment, and the Company has received written notice of such exercise.
If Optionee fails to exercise this Grant of Option in accordance with
this Agreement, then this Agreement shall terminate and have no force and
effect, in which event Optionor and Optionee shall have no liability to each
other with respect to this Grant of Option.
This Grant of Option may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Execution and delivery
of this Grant of Option by exchange of facsimile copies bearing the facsimile
signature of a party hereto shall constitute a valid and binding execution and
delivery of this Grant of Option by such party. Such facsimile copies shall
constitute enforceable original documents.
The validity, construction and enforceability of this Grant of Option
shall be construed under and governed by the laws of the State of Nevada,
without regard to its rules concerning conflicts of laws, and any action
brought to enforce this Grant of Option or resolve any controversy, breach or
disagreement relative hereto shall be brought only in a court of competent
jurisdiction in Vancouver, British Columbia, Canada.
<PAGE> 11
The shares of stock issued upon exercise of this Grant of Option (the
"Underlying Shares") are not subject to adjustment due to any changes in the
capital structure of the Company as set forth in Section 15 of the Plan.
Further, the Underlying Shares may not be sold, exchanged, assigned,
transferred or permitted to be transferred, whether voluntarily, involuntarily
or by operation of law, delivered, encumbered, discounted, pledged,
hypothecated or otherwise disposed of until (i) the Underlying Shares have been
registered with the Securities and Exchange Commission pursuant to an effective
registration statement on Form S-8, or such other form as may be appropriate,
in the discretion of the Company; or (ii) an Opinion of Counsel, satisfactory
to the Company, has been received, which opinion sets forth the basis and
availability of any exemption for resale or transfer from federal and/or state
securities registration requirements, such as federal Rules 144 or 701.
IN WITNESS WHEREOF, this Grant of Option has been executed effective
as of ____________________, 19___.
INTEGRAL TECHNOLOGIES, INC.
BY THE BOARD OF DIRECTORS
OR A SPECIAL COMMITTEE THEREOF
By:
-----------------------------------
WILLIAM S. ROBINSON
By:
-----------------------------------
WILLIAM A. INCE
OPTIONEE:
- -----------------------------------
<PAGE> 12
GRANT OF OPTION PURSUANT TO THE INTEGRAL TECHNOLOGIES, INC. EMPLOYEE
BENEFIT AND CONSULTING SERVICES COMPENSATION PLAN, RESTATED JANUARY
10, 1999
OPTIONEE: ___________________
OPTION GRANTED: _____________ Shares
PURCHASE PRICE: US$_______ per Share
DATE OF GRANT: ___________________
EXPIRATION DATE: ___________________
<TABLE>
<CAPTION>
VESTING SCHEDULE: OPTION ON
#SHARES DATE VESTED (ASSUMING CONTINUED
------- ----------- EMPLOYEE OR CONSULTANT
STATUS, ETC.)
<S> <C> <C>
---------- -----------
---------- -----------
---------- -----------
---------- -----------
---------- -----------
</TABLE>
VESTED OPTIONS EXERCISED TO DATE: _________ (INCLUDING THIS EXERCISE)
BALANCE OF VESTED OPTIONS TO BE EXERCISED: _________
===============================================================================
NOTICE OF EXERCISE
(TO BE SIGNED ONLY UPON EXERCISE OF THE OPTION)
TO: Integral Technologies, Inc. ("Optionor")
The undersigned, the holder of the Option described above, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, _________ shares of the Common Stock of
Integral Technologies, Inc., and herewith makes payment of
_______________________ therefor. Optionee requests that the certificates for
such shares be issued in the name of Optionee and be delivered to Optionee at
the address of __________________________________________________, and if such
shares shall not be all of the shares purchasable hereunder, represents that a
new Subscription of like tenor for the appropriate balance of the shares, or a
portion thereof, purchasable under the Grant of Option pursuant to the Integral
Technologies, Inc. Employee Benefit and Consulting Services Compensation Plan
restated January 10, 1999, be delivered to Optionor when and as appropriate.
OPTIONEE:
Dated:
-------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. NextAntennas.Com, Inc., a wholly-owned subsidiary of the Registrant,
was incorporated in the State of Delaware on November 2, 1999.
2. Emergent Technologies Corp. was incorporated in the State of West
Virginia on September 29, 1995. The Registrant holds an 80% equity interest in
Emergent.
3. Integral Vision Systems Inc. was incorporated in the State of West
Virginia on January 20, 1994. The Registrant acquired a 100% equity interest
in Integral Vision in March 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM A
REGISTRATION STATEMENT ON FORM 10-SB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-SB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 647
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 647
<PP&E> 81,075
<DEPRECIATION> 38,837
<TOTAL-ASSETS> 1,665,813
<CURRENT-LIABILITIES> 1,021,219
<BONDS> 376,170
0
0
<COMMON> 4,016,267
<OTHER-SE> (3,747,843)
<TOTAL-LIABILITY-AND-EQUITY> 1,665,813
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 837,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 566,456
<INCOME-PRETAX> (1,404,021)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,404,021)
<EPS-BASIC> (0.08)
<EPS-DILUTED> 0
</TABLE>
