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U.S. 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 (g) of the Securities Exchange Act of 1934
International Building Concepts, Ltd.
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(Name of Small Business Issuer in its charter)
MINNESOTA 41-1392942
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3040 4th Avenue South, Minneapolis, Minnesota 55408
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 824-3762
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.01 par value per share
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(Title of class)
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(Title of class)
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PART I
ALTERNATIVE 3
ITEM 1. DESCRIPTION OF BUSINESS.
(Item 101 of Regulation S-B)
ORGANIZATION
International Building Concepts, Ltd. (the "Company") is a corporation
which was formed under the laws of the State of Minnesota on October 3, 1980,
under the name TMI, Inc. The initial Articles of Incorporation of the
Company authorized it to issue 5,000,000 shares of common stock with a par
value of one cent ($.01) per share. On February 5, 1986, the Company's Board
of Directors and shareholders resolved to amend the Articles of Incorporation
to change the Company's name to R & A Capital Corporation and to authorize
the Company to issue 15,000,000 shares of common stock with a par value of
one tenth of one cent ($.001) per share; the Restated Articles of
Incorporation reflecting such amendments were filed in the Office of the
Secretary of State of Minnesota on March 12, 1986. On August 21, 1992, the
Company's Board of Directors and shareholders resolved to amend the Restated
Articles of Incorporation to change the Company's name back to TMI, Inc. and
to authorize the Company to issue 10,000,000 shares of common stock with a
par value of one cent ($.01) per share; the Restated Articles of
Incorporation reflecting such amendments were filed in the Office of the
Secretary of State of Minnesota on October 13, 1992. On January 24, 1996,
the Company executed a reverse stock split on the basis of one share for
every four shares previously outstanding. On April 1, 1996, the Company's
Board of Directors resolved to amend the Articles of Incorporation to change
the Company's name to International Building Concepts, Ltd., which action was
ratified by the Company's shareholders on June 10, 1996; such amendment to
the Restated Articles of Incorporation was filed in the Office of the
Secretary of State of Minnesota on June 11, 1996. At September 30, 1995, and
for several years prior to such date, the Company was an inactive shell
corporation. The Company has not been subject to any bankruptcies,
receiverships or similar proceedings.
On March 31, 1996, the Company purchased certain furniture, computers and
other personal property from Home Builders International, Inc., a Minnesota
corporation ("HBI"), which was engaged in the packaged residential home
business. In consideration for such assets and in recognition of the
technical capabilities and expected future contributions of Robert H. Leslie,
the President and a director of the Company as well as the inventor of the
Company's proprietary housing technology, the Company assumed certain
obligations and liabilities of HBI totalling $516,863. Mr. Leslie is also a
director and the President and Chairman of the Board of HBI, and Wayne E.
Densmore, a director of the Company and its Chairman of the Board and
Secretary, is a director and the Secretary of HBI. HBI has not conducted
business since September 1995, and it is currently negotiating with BDI
Systems, Inc., a publicly held Nevada corporation, to sell substantially all
of its remaining assets, including the patented UniHome-TM- technology, the
Enviroboard technology, customer leads, and a 32-unit rental housing project
built by HBI in Monte Alto, Texas.
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The principal executive offices of the Company are located at 3040 4th
Avenue South, Minneapolis, Minnesota, and the Company's telephone number is
(612) 824-3762.
BUSINESS OF ISSUER; PRINCIPAL PRODUCTS AND SERVICES
The Company manufactures and sells affordable packaged residential homes
with a proprietary post-and-beam frame design employing interlocking panels.
The Company offers component packages that can be assembled to create homes
of varying configurations and sizes, starting at 864 square feet, and the
homes are designed to be modular so that the homeowner can add on more rooms.
However, unlike standard modular homes, which are substantially built in the
factory and transported in large sections to the homeowner's site, the
Company's homes are constructed as free-standing monolithic structures by
assembling the packaged components on-site. The basic frame package includes
all panels, fasteners, rafters and I-beams, roof and floor decking, roof
vents, drip edge, fascia and trim, and all materials and hardware necessary
to assemble the structure, such as staples, screws and adhesives. A crew of
four can create an 1,152 square foot frame for a home in roughly 48 hours.
Once the basic frame is erected and securely anchored to the foundation, the
home can be finished to the homeowner's specifications using conventional
materials and labor.
The interlocking panels used in assembling the Company's homes are made
of Oriented Strand Board ("OSB"), a high performance composite material made
with cross-aligning layers of wood strands bonded together with resin under
intense heat and pressure. The quality of OSB is regulated by all major
North American building code organizations, and the Company uses only panels
made of OSB rated the highest in structural integrity. When assembled to
specification, management believes the Company's homes are generally stronger
than conventional stud-built housing and exceed Uniform Building Code
requirements. The Company's homes can be designed to withstand hurricane
force winds of 150 miles per hour and earthquakes registering 8.0 on the
Richter Scale, as well as snow loads weighing 80 pounds per square foot. On
February 10, 1996, a professional structural engineer registered by the State
of Minnesota certified that the Company's base proprietary packaged housing
unit was structurally sound and in compliance with Uniform Building Code
requirements. Management believes such certification improves the Company's
business prospects by enabling the Company to market its housing structures
nationwide.
DISTRIBUTION OF PRODUCTS AND SERVICES
The Company's products are currently marketed directly to end users by
the Company's employees and through select dealers. The Company's current
strategy is to concentrate its direct sales efforts within a five state
region around Minnesota to establish dealer relationships in an area where
the Company can provide prompt and personal service. The Company plans to
support these direct sales with technical training for buyers to build the
Company's packaged homes. During the fourth quarter of calendar 1996, the
Company intends to expand its sales efforts to Texas and California where it
has already identified dealers and distributors to engage in such activities.
The Company further intends to strengthen its network of dealers,
distributors and licensees in 1997 to the point that the Company is no longer
involved in selling directly to end users nor in providing technical training
to build the Company's proprietary packaged homes. In accordance with this
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strategy, management intends to focus its long-range activities on the
manufacture of packaged homes.
The Company is also evaluating distribution channels and dealer
relationships to facilitate national and international sales of its products.
The Company intends to use a variety of other marketing techniques,
including advertising in trade publications and targeted direct mailings as
well as participating in national and international trade shows.
COMPETITION
The housing market in general is highly competitive as there are hundreds
of companies throughout the United States competing in the industry. The
factory-built housing business in particular tends to be regional; few
manufacturers have been successful in marketing their houses nationwide or
creating a nationally accepted product. In targeting low income home buyers
as its main customer base, the Company competes with a number of companies
ranging from very small businesses to large companies, some of which have
substantially greater financial, manufacturing, marketing and product
development resources than the Company. The closest competing products to
those of the Company are referred to as "HUD Code" homes or trailer homes.
More than 20,000 HUD Code homes are built each month in the United States.
Competition in the Company's markets is based primarily on the price and
quality of the homes offered. In order to compete successfully against other
factory-built housing providers, the Company must be able to maintain
competitive pricing while offering high quality products. The Company
believes that its proprietary packaged homes, which can be built in both
urban and rural settings and financed with a conventional home mortgage, are
competitively priced and well-built, and in compliance with the Uniform
Building Code.
The Company believes that it has a competitive advantage over its
competitors in several respects. The Company has designed its range of
products so that they may be constructed to a variety of finishes, from a
basic model which can be sold internationally at less than twenty dollars per
square foot of home to a detailed, highly finished urban home model which can
be sold in the United States at sixty dollars per foot. Moreover, all
components for the Company's proprietary packaged homes are factory-built,
but assembled on-site; the advantages of volume production and precision
manufacturing are thereby realized, and the components can be readily
transported to the building site without special skills or equipment. In
addition, building the Company's packaged homes requires only the ordinary
tools and skills used by stud frame contractors; clients and contractor need
not be trained in new methods and procedures that are generally associated
with constructing factory-built housing.
The Company further believes that its products are favorably positioned
to compete against trailer homes through that industry's dealer network. In
order to reach a much wider segment of buyers, such dealers, who are
typically independent contractors, need new products, such as the Company's
packaged homes, that can be financed with a conventional mortgage, insured in
any market without resorting to disaster plans, and sold in any urban
setting.
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AVAILABILITY OF RAW MATERIAL; PRINCIPAL SUPPLIERS
The primary component of the Company's proprietary packaged home is OSB,
which is a low-cost, high quality substitute for plywood, and is manufactured
in many plants in the United States and Canada. Although the supply and
quality of dimensional lumber such as plywood is diminishing and its price is
increasing, the supply and quality of OSB has been improving and its price is
stable. The Company believes that the price of OSB will remain stable over
at least the next two years as existing OSB plants increase production and
several new plants begin operations in the United States and Canada.
The Company currently buys OSB from several suppliers, including
Louisiana-Pacific Corporation, Weyerhaeuser Company, Potlach Corporation,
Georgia-Pacific Corporation, McMillan Bloedel, Inc., and Canadian Mills.
PATENTS AND INTELLECTUAL PROPERTY
In February 1996, Robert H. Leslie, the Company's President, agreed to
assign all right, title and interest in and to his invention of the
monolithic shelter technology which is employed in the basic design of all of
the Company's packaged homes, for which a United States Patent application
was filed in February 1996 under Application Number 06/011,265 and entitled
"MONOLITHIC SHELTER." In connection with such assignment, which was
consummated on June 12, 1996, the Company issued 400,000 shares of common
stock to Mr. Leslie. See "Recent Sales of Unregistered Securities" at Part
II, Item 4. The Company may also apply for corresponding foreign patents for
its monolithic shelter technology. In addition, the Company intends to seek
patent protection for improvements and enhancements of the packaged homes and
other housing structures which the Company may develop. There can be no
assurance that any patents that may be applied for will be issued, or that
any other patents, if issued, will be valid if contested or will provide any
significant competitive advantage to the Company.
The Company is not aware that it is infringing on any patents or
intellectual property held by third parties. However, if the Company is
determined to have infringed on the rights of others, the Company may be
required to obtain licenses from such other parties. There can be no
assurance that the persons or organizations holding desired technology would
grant licenses at all or, if licenses were available, that the terms of such
licenses would be acceptable to the Company. In addition, the Company could
be required to expend significant resources to develop non-infringing
technology.
The Company also intends to rely on the registration of trademarks and
trade names, as well as on trade secret laws and confidentiality agreements
with its employees. While the Company intends to continue to seek to protect
its proprietary technology and developments through patents, trademark
registration, trade secret laws and confidentiality agreements, it does not
intend to rely on such protection to establish and maintain a position in the
marketplace. The Company's management believes that improvement of its
existing products, reliance upon trade secrets and on unpatented proprietary
know-how, and the development of new products will be as important as patent
protection in establishing and maintaining a competitive advantage.
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GOVERNMENT APPROVAL
The Company must obtain certain government approvals relating to housing
units for its packaged homes in most of the areas into which the Company
intends to enter. Although the standards underlying such approvals vary from
state to state and even city to city, they are usually modeled on the Uniform
Building Code. The broadest housing approval is granted pursuant to a
National Evaluation Report ("NER"), which format has been adopted by the
majority of states and is generally accepted by local building officials.
The Company intends to secure an NER at the first practical opportunity,
although the qualifying process is expensive and time consuming. To avoid
delay in getting its packaged homes to market, the Company is currently
obtaining approvals on a state-by-state basis in those states considered
strategic to its immediate plans. The various states' Uniform Building Codes
typically permit acceptance of products meeting the spirit of such Uniform
Building Code, provided the product claims are verified by the opinion of an
independent licensed engineer. This strategy has provided the Company with
approval in California, Texas and Florida, the states in which the Company
believes the market potential is large. The Company's packaged homes are also
approved in Minnesota and seven other states that are strategic to the
Company's plans.
EFFECTS OF GOVERNMENTAL REGULATIONS; COMPLIANCE WITH ENVIRONMENTAL LAWS
The housing industry is highly regulated. The Company must comply with
a variety of federal, state and local laws relating to, among other things,
its home-building and sales activities, the building materials it uses, and
the designs of its packaged homes. Proposed environmental laws could, if
enacted, result in production delays and cause the Company to incur
substantial compliance costs. While the Company believes it is presently in
material compliance with all such laws, in the event that it should be
determined that the Company is not in compliance with the law, the Company
could become subject to cease and desist orders, injunctive proceedings,
civil fines and other penalties.
In addition, the Company's customer base of low income families has
traditionally been assisted in obtaining home mortgages or affordable rental
plans through programs provided by the Department of Housing and Urban
Development, the Federal Housing Administration, the Veterans Administration
and other federal and state agencies. As many of these programs are being
cut back or eliminated, the Company recognizes that its customers will not be
able to rely on them for financing their homes. Accordingly, the Company is
working with several national and regional banks and mortgage companies to
qualify buyers who formerly would have needed a government-assisted mortgage
program.
RESEARCH AND DEVELOPMENT
The Company has been producing packaged homes under its proprietary
Monolithic Building System since January 1996. Research and development has
been ongoing since then in connection with, among other things, the plumbing and
electrical systems of such homes, as well as with the surface coating and sheet
rock techniques employed in the homes. These developments are aimed at making
construction of the Company's packaged homes faster and more efficient, and at
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increasing gross profit margin on sales of these homes. The Company intends
to continue research and development activities on its housing structure to
maintain a competitive edge over its competitors.
There can be no assurance that the Company will be successful in
developing, manufacturing and marketing new products or product enhancements
that may be required to respond to government regulations, technological
changes or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of such products, or that such products will
adequately meet the requirements of the marketplace and achieve market
acceptance. If the Company is unable, for technological or other reasons, to
develop new products or enhancements of existing products in a timely manner
in response to changing market conditions or customer requirements, the
Company's business, results of operations and financial condition would be
materially adversely affected. In addition, there can be no assurance that
services, products or technologies developed by others will not render the
Company's products or technologies uncompetitive or obsolete.
In the nine months ended June 30, 1996, the Company expended
approximately $74,000 on research and development activities. As noted
above, before January 1996 the Company was inactive.
EMPLOYEES
At September 30, 1996, the Company had 13 full-time employees, of whom
two were employed in sales, marketing and customer support, two were involved
in technical research and product development, six in manufacturing and
production, two in administration, and one in corporate operations and
finance. The Company anticipates hiring 8 to 12 more full-time employees in
manufacturing and production during the next year. Management believes the
production level required by any sudden increases in sales of the Company's
products can be met by subcontracting manufacturing work to companies
experienced in producing Oriented Strand Board products.
The Company's employees are not represented by any union or collective
bargaining group, and the Company has no history of any strikes, slow-downs
or other labor disputes. The Company believes its employee relations are
good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(Item 303 of Regulation S-B)
GENERAL
The Company was organized on October 3, 1980. However, during at least the
three years previous to October 1, 1995, the Company was inactive. The
following discussion covers the nine-month period commencing on October 1, 1995,
and ending on June 30, 1996. This discussion should
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be read in conjunction with the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Form 10-SB.
RESULTS OF OPERATIONS
During the nine-month period ended June 30, 1996, the Company's
activities were primarily directed to the development of the Company's
packaged housing structure and the implementation of its marketing
strategies. The Company also began developing its domestic distribution
network and established sales and administrative offices in Minneapolis,
Minnesota. The first housing structure employing the Company's proprietary
technology was produced in February 1996, and the first structure sold was
shipped in March 1996.
The Company realized total net sales of $57,230 during the nine-month
period ended June 30, 1996, consisting of the sale of four packaged home
units totaling $42,630 and distributor licensing fees of $14,600. One
packaged home unit was sold during this period for $12,690 in cash to
International Building Systems, Inc., a related corporation. This sale was
consummated at a price consistent with that available to unrelated parties.
Cost of sales for the period was $53,290, resulting in a gross profit of
$3,940 on the limited sales activity. Fixed manufacturing costs included in
cost of sales were $26,795.
The Company incurred product development expenses of $73,914 during this
period, while it continued to refine its proprietary housing structure and
increase its production staff. These expenses related to personnel, contract
engineering costs, tooling and start-up manufacturing expenses associated
with the development and initial production of the Company's proprietary
packaged home. As the Company moves further out of the development stage,
management plans to shift its focus to sales and marketing of its packaged
homes. However, the Company could incur additional research and development
expenses in the future associated with new product development and product
enhancements in order to remain competitive and expand its product offerings.
For the nine-month period ended June 30, 1996, general operating
expenses, in addition to the product development costs set forth above, and
after accounting for the minority interest in the loss of the Company's
consolidated subsidiary, were $402,643, including $48,036 related to the
Company's initial sales and marketing efforts. As the Company shifts its
focus to sales and marketing of its packaged homes, additional operating
expenses will be incurred to support this effort. The Company also incurred
$37,086 of interest expense for the nine-month period ended June 30, 1996.
For the nine-month period ended June 30, 1996, the Company incurred a net
loss of $509,703 before the expensing of $442,308, which amount represents
the excess of liabilities assumed over assets acquired in connection with the
purchase of assets described in Item 7. The resulting net loss of $952,011
amounts to a net loss of $.42 per share (calculated using the weighted
number of shares outstanding) for the nine months ended June 30, 1996.
Because the Company has had limited sales to date, selling, general and
administrative expenses and research and development expenses as a percentage
of net sales have been particularly
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high. As sales increase, the Company anticipates that such categories of
expenditures, as a percentage of net sales, should decrease substantially.
Since the Company has been operating for only nine months, management
does not know the effect of seasonality on the Company's business operations.
However, management believes that, to the extent its purchases and sales base
are primarily in the upper Midwest, the Company will experience a slowdown in
December of 1996 and January and February of 1997. Management intends to
expand into other geographic areas, including Texas, California, Florida,
where it is contemplated that any effects of seasonality on revenues or
operating costs will be reduced.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities primarily from the sale of its
common stock and from loans from shareholders. During the nine-month period
ended June 30, 1996, the Company raised $411,951 through the sale of common
stock and received $200,000 in loans from investors. The Company intends to
fund most of its working capital needs through short term borrowings and
internally generated cash flow. Any material unfavorable deviation from the
assumptions in the Company's business plan or in its operating and other
expenses could significantly affect the timing, amount and availability of
further financing that will be required to continue operations. There can be
no assurance that additional financing will be available if and when required
or, if available, that it will be on terms acceptable to the Company.
At June 30, 1996, the Company's cash balance was $130,598. The Company's
net cash used in operating activities for the nine-month period ended June
30, 1996, was $484,242. As of June 30, 1996, the Company had other current
assets of $166,409, of which a significant portion consisted of accounts
receivable and finished goods and component inventory.
In addition to cash and other current assets, the Company had net
equipment, display model homes and leasehold improvements of $132,408 and
other net assets of $62,375, for a total asset value of $491,790 as of June
30, 1996. At June 30, 1996, the Company had $155,070 of current liabilities
and $185,000 of loans from stockholders. At June 30, 1996, after accounting
for the minority interests in the Company's consolidated subsidiary, net
stockholders' equity totaled $37,033.
The Company expects to expend approximately $65,000 to purchase capital
equipment, and to increase the number of full-time employees from 13
currently to approximately 18 by December 1996.
ITEM 3. DESCRIPTION OF PROPERTY.
(Item 102 of Regulation S-B)
The Company currently leases facilities comprising approximately 15,000
square feet in Minneapolis, Minnesota, where the Company conducts all of its
administrative, development, manufacturing, sales and marketing activities.
The monthly lease payment for such facilities is
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$3,487, and the lease expires on December 31, 1997. The Company considers
its leased facilities adequate for its current and reasonably foreseeable
needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(Item 403 of Regulation S-B)
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The table below sets
forth, as of September 30, 1996, all persons (including any "group," but
excluding members of the Company's management, whose holdings are set forth
in Item 4(b)) who are known to the Company to be the beneficial owner of more
than five percent of the common stock, $.01 par value, of the Company, which
is the only class of voting securities of the Company issued and outstanding.
<TABLE>
<CAPTION>
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Title of Class Name and Address Amount and Nature Percent
of Beneficial Holder of Beneficial of Class
Ownership
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<S> <C> <C> <C>
Common Stock Wayne E. Densmore 776,000 shares(1) 22.76
3611 Dunbar Knoll
Brooklyn Park, Minnesota 55443
Common Stock John C. Kagan and Elizabeth Kagan 350,000 shares 10.27
15890 S. Tamiami Trail
Fort Myers, Florida 33808
Common Stock Douglas K. Grobe and Maxine Grobe 325,000 shares 9.53
10513 Mt. Curve Road
Eden Prairie, Minnesota 55347
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</TABLE>
(1) Wayne E. Densmore, the Chairman of the Board, Secretary and a
director of the Company, owns approximately 66 percent of the capital stock
of International Building Systems, Inc., a Minnesota corporation ("IBS").
IBS owns 360,000 shares of the Company, which shares are included in Mr.
Densmore's holdings in light of his controlling interest in IBS. Mr.
Densmore is also the President and a director of IBS.
(b) SECURITY OWNERSHIP OF MANAGEMENT. The table below sets forth, as of
September 30, 1996, the holdings of common stock, $.01 par value, of the Company
owned by the Company's directors and executive officers.
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<TABLE>
<CAPTION>
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Title of Class Name and Address Amount and Nature Percent
of Beneficial Holder of Beneficial of Class
Ownership
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<S> <C> <C> <C>
Common Stock Wayne E. Densmore 776,000 shares (1) 22.76
Chairman of the Board, Secretary
and Director
Common Stock Robert H. Leslie 400,000 shares 11.73
President and Director
Common Stock Edmund Green 91,514 shares 2.68
Director
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</TABLE>
(1) Mr. Densmore owns approximately 66 percent of the capital stock of
International Building Systems, Inc., a Minnesota corporation ("IBS"). IBS
owns 360,000 shares of the Company, which shares are included in Mr.
Densmore's holdings in light of his controlling interest in IBS. Mr.
Densmore is also the President and a director of IBS.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(Item 401 of Regulation S-B)
The Company's Board of Directors is responsible for the management of the
Company, and directors are elected to serve until the next regular meeting of
shareholders or until their successors are elected and shall qualify.
Executive officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Currently, there are not formal committees of
the Board of Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of the Company are as follows:
NAME AGE POSITION(S)
---- --- -----------
Wayne E. Densmore. . . . . . . . 65 Chairman of the Board,
Secretary and Director
Robert H. Leslie . . . . . . . . 58 President and Director
Edmund Green . . . . . . . . . . 71 Director
WAYNE E. DENSMORE has been a director, the Chairman of the Board and
Secretary of the Company since July 1995. He has also been a director and the
Secretary of Home Builders International, Inc., a Minnesota corporation ("HBI"),
since July 1995. Home Builders International,
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Inc., which also manufactures and sells affordable panelized residential
homes, has not conducted business since December 1995; it is currently
pursuing the sale of substantially all of its remaining assets to BDI
Systems, Inc., a publicly held Nevada corporation. Mr. Densmore has also
been the President, a director, and the controlling shareholder of
International Building Systems, Inc., a Minnesota corporation, since November
1994. In addition, from 1968 through 1992, Mr. Densmore was the President of
Inetrnational Blending Corp.
ROBERT H. LESLIE has been the President and a director of the Company
since January 1996. Mr. Leslie's primary role with the Company is to
continue to design new low cost housing products for niche markets. He has
over twenty-eight years of experience as a designer and inventor for clients
throughout the world. His inventions and designs have ranged from large
scale agricultural equipment to cattle feed plants and farm alcohol
production facilities. Mr. Leslie has been developing a frame-free panelized
house constructed with Oriented Strand Board since the early 1980s, and he
obtained a United States patent in 1991 in connection with such research for
the UniHome-TM- Building System, a very low cost homebuilding technology. In
February 1996, Mr. Leslie applied for a United States patent for his
invention of the monolithic shelter technology which is employed in the basic
design of all of the Company's packaged homes, and in June 1996, Mr. Leslie
transferred his entire interest in that technology to the Company. Mr. Leslie
has also been the President and Chairman of the Board of Home Builders
International, Inc. since 1991. He is the father of Robert J. Leslie and
Penelope L. Thornberg, the Company's Technical Director and Operations
Manager, respectively.
EDMUND GREEN has been a director of the Company since January 1996. He
has also been a director of Home Builders International, Inc. since January
1996. In addition, since 1983 Mr. Green has been the President of KQ Courier
Service, Inc., which provides delivery services for the entertainment
industry in Los Angeles, California.
SIGNIFICANT EMPLOYEES
The following persons are key employees of the Company:
NAME AGE POSITIONS
---- --- ---------
Robert J. Leslie 32 Technical Director
Penelope L. Thornberg 31 Operations Manager
ROBERT J. LESLIE has been the Company's Technical Director since April
1996. He has over ten years of experience in the panelized housing industry,
having served in the following positions prior to joining the Company:
Director of Operations at Home Builders International, Inc. in Minneapolis,
Minnesota, from November 1994 to April 1996; Plant Manager at Bellcomb, Inc.
in Minneapolis, Minnesota, from October 1989 to November 1994; and Production
Manager at Paneltech, Inc. in Burnsville, Minnesota, from July 1986 to
October 1989.
PENELOPE L. THORNBERG has been the Company's Operations Manager since
April 1996, which position she held at Home Builders International, Inc. in
Minneapolis, Minnesota, another panelized housing company, from December 1995
until joining the Company. From November 1994
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through October 1995, Ms. Thornberg was employed by Baja Beach Clubs, Inc. in
Atlanta, Georgia, and from March 1992 through October 1994, she was employed
by Remy Amerique in Minneapolis, Minnesota, for which companies she served in
various managerial and promotional capacities.
ITEM 6. EXECUTIVE COMPENSATION.
(Item 402 of Regulation S-B)
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation paid or accrued for
services rendered in all capacities to the Company in 1995, to the Chief
Executive Officer of the Company (the "Named Executive").
SUMMARY COMPENSATION TABLE
FISCAL 1995 ANNUAL COMPENSATION
<TABLE>
<CAPTION>
Long-Term
Name and Principal Other Annual Compensation
Position Salary Bonus Compensation Awards
- - ------------------ ------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Robert H. Leslie................. $96,000 --- --- ---
President and Director
</TABLE>
The Company currently pays Robert H. Leslie, the Company's President, an
annual salary of $96,000 pursuant to an employment agreement effective June
10, 1996. Mr. Leslie's employment agreement is in effect for an initial term
of two years and shall renew automatically for successive one-year terms
unless it is terminated earlier according to the terms therein. The Company
and Mr. Leslie may each terminate such employment agreement at the end of the
initial term or any renewal term upon giving at least 30 days' notice prior
to the end of any such term. The Company also issued 400,000 shares of
common stock to Wayne E. Densmore, an officer and a director of the Company,
in consideration of certain services which he provided to the Company in
calendar year 1996, pursuant to a subscription agreement dated January 4,
1996. See Item 7 below, "Certain Relationships and Related Transactions -
Stock Issuances." The Company currently has no obligations or plans to
compensate any other of its executive officers or directors.
The Company is considering instituting an incentive stock option or stock
bonus plan for its executive officers. It currently has no such plan in
place.
13
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(Item 404 of Regulation S-B)
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with its President,
Robert H. Leslie, effective June 10, 1996. See Item 6 above, "Executive
Compensation."
STOCK ISSUANCES
In May 1996, the Company issued common stock to its officers and
directors as follows:
The Company issued 91,514 shares of common stock to Edmond Green, a
director of the Company, for $9,151.40 in cash, pursuant to a subscription
agreement dated January 4, 1996.
Pursuant to a subscription agreement dated February 7,1996, the
Company issued 400,000 shares of common stock to Robert H. Leslie, an
officer and director of the Company, in connection with his agreement to
assign his entire right, title and interest in and to his invention of the
monolithic shelter technology which is employed in the basic design of all
of the Company's packaged homes. Mr. Leslie's invention was disclosed and
claimed in the application for United States Letters Patent, filed on
February 7, 1996, under Application Number 06/011,265 and entitled
"MONOLITHIC SHELTER." The Company valued Mr. Leslie's assignment of the
invention and the shares of common stock issued at $40,000 or $.10 per
share.
The Company issued 400,000 shares of common stock to Wayne E.
Densmore, an officer and a director of the Company, in consideration of
certain services which he provided to the Company in calendar year 1996,
pursuant to a subscription agreement dated January 4, 1996. The Company
valued Mr. Densmore's services and the shares of common stock issued at
$40,000 or $.10 per share. The Company also issued 360,000 shares of
common stock to International Building Systems, Inc., a Minnesota
corporation ("IBS"), valued at $1.00 per share, in consideration for which
IBS cancelled a promissory note executed by Home Builders International,
Inc. ("HBI") in favor of IBS with an outstanding principal balance of
$360,000, which promissory note the Company had assumed in connection with
its acquisition of certain assets of HBI pursuant to an Asset Purchase
Agreement between the Company and HBI, dated March 31, 1996. Mr. Densmore
is the President and a director of IBS, as well as that corporation's
controlling shareholder, owning approximately 66 percent of IBS's capital
stock as of the date hereof. Mr. Densmore is also a director and the
Secretary of HBI, and Robert H. Leslie is a director and the President and
Chairman of the Board of HBI. HBI has not conducted business since
September 1995.
The Company issued 100,000 shares of common stock to Robert J. Leslie,
and 20,000 shares of common stock to Penelope L. Thornberg, in
consideration for their providing
14
<PAGE>
certain services to the Company in calendar year 1996, and as an
inducement for their continued employment with the Company, pursuant to
subscription agreements dated January 4, 1996. The Company valued the
services and inducement of Mr. Leslie, as well as the common stock
issued to him, at $10,000 or $.10 per share. The Company valued the
services and inducement of Ms. Thornberg, as well as the common stock
issued to her, at $2,000 or $.10 per share. Robert H. Leslie, the
President and a director of the Company, is the father of Mr. Leslie
and Ms. Thornberg.
PURCHASE OF ASSETS
On March 31, 1996, the Company purchased certain furniture, computers and
other personal property valued at $74,555 from Home Builders International,
Inc., a Minnesota corporation also in the packaged residential home business
("HBI"). In consideration for such assets and in recognition of the
technical capabilities and expected future contributions of Robert H. Leslie,
an officer and director of HBI as well as of the Company and the inventor of
HBI's proprietary housing technology, the Company assumed certain obligations
and liabilities of HBI totalling $516,863, including a promissory note
executed by HBI in favor of International Building Systems, Inc., a Minnesota
corporation ("IBS"), in the principal amount of $360,000. The Company
discharged such promissory note by issuing 360,000 shares of its common stock
to IBS. See "Stock Issuances" in this Item 7. The amount of the assumed
liabilities exceeding the value of the acquired assets were charged to
expense. The purchase of the such assets and the transactions related
thereto were duly authorized by a prior vote of the Company's shareholders.
Wayne E. Densmore, a director of the Company and its Chairman of the
Board and Secretary, is a director and the Secretary of HBI, as well as a
director, the President and the controlling shareholder of IBS. Robert H.
Leslie, a director of the Company and its President, is a director and the
President and Chairman of the Board of HBI. HBI has not conducted business
since September 1995, and it is currently negotiating with BDI Systems, Inc.,
a publicly held Nevada corporation, to sell substantially all of its
remaining assets, including the patented UniHome-TM- technology, the
Enviroboard technology, customer leads and a 32-unit rental housing project
built by HBI in Monte Alto, Texas.
ACQUISITION OF INVENTION
On February 7, 1996, the Company and Robert H. Leslie, the President and
a director of the Company, entered into a subscription agreement whereby the
Company agreed to issue 400,000 shares of common stock valued at $.10 per
share to Mr. Leslie in connection with his agreement to assign his entire
right, title and interest in and to his invention of the monolithic shelter
technology which is employed in the basic design of all of the Company's
packaged homes. Mr. Leslie's invention was disclosed and claimed in the
application for United States Letters Patent, filed on February 7, 1996,
under Application Number 06/011,265 and entitled "MONOLITHIC SHELTER." The
assignment of the invention was consummated on June 12, 1996.
15
<PAGE>
JOINT VENTURE
On June 13, 1996, the Company and the William C. Norris Institute, a
Minnesota nonprofit corporation, entered into a joint venture, in connection
with which they formed Innovative Homes, Inc., a Minnesota corporation, for
the purpose of exclusively manufacturing, marketing and selling homes
employing the Company's proprietary housing design in certain historically
low-income areas, including the Province of Manitoba, Canada, and various
Indian tribes in the United States and Canada. The Company will manufacture
the housing components and sell them to Innovative Homes, Inc. at cost plus
10 percent. Wayne E. Densmore and Robert H. Leslie, who are officers and
directors of the Company, are also directors of Innovative Homes, Inc. The
Company owns 375,000 shares, or 60 percent, of the issued and outstanding
Class A voting common stock of Innovative Homes, Inc., and the William C.
Norris Institute owns the remaining 250,000 shares, or 40 percent, of such
stock.
All future material affiliated transactions, loans and any forgiveness of
loans will be (i) made or entered into on terms that are no less favorable to
the Company than those that can be obtained from unaffiliated third parties,
and (ii) approved by a majority of the members of the Company's Board of
Directors who do not have an interest in the transaction.
NOTES PAYABLE TO STOCKHOLDERS
From December 30, 1995, through February 29, 1996, the Company received
advances under the terms of eight unsecured financing agreements with various
stockholders. The individual amounts advanced varied from $12,500 to $50,000
and totaled $200,000, the whole of which was outstanding at June 30, 1996.
The principal sums are repayable two years from the agreement dates and incur
interest at the rate of 10 percent per year. Interest was not payable for
the first three months of the loans but is due quarterly thereafter. As an
inducement to the various lenders, one share of common stock was issued for
each dollar advanced. The Company has valued the stock at $0.10 per share,
or $20,000 in total. Wayne E. Densmore, a director of the Company and its
Chairman of the Board, Secretary and principal shareholder, transferred his
own shares to the noteholders which was recorded as a contribution of
capital. The Company will accrete the notes payable to $200,000 over the
term of the notes.
ADVANCES TO OFFICER
In 1995, the Company made advances totalling $28,186 to Robert H. Leslie,
the Company's President. Such advances were unsecured and repayable on
demand, bearing interest at a rate of 10 percent per annum. Accrued interest
was also due and payable on demand. At September 30, 1996, all such advances
were repaid to the Company.
16
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
(Item 202 of Regulation S-B)
The Company has only one class of securities authorized, issued and
outstanding, namely, Common Stock with a par value of $.01 per share. The
Company's Articles of Incorporation authorize it to issue 10,000,000 shares
of Common Stock. As of September 30, 1996, a total of 3,409,300 shares were
issued and outstanding, held of record by 258 shareholders. There are no
outstanding options, warrants or calls to purchase any of the authorized
securities of the Company.
No share of Common Stock is entitled to preference over any other share
and each share of Common Stock is equal to any other share in all respects.
The holders of Common Stock are entitled to one vote for each share held of
record at each meeting of shareholders. In any distribution of assets,
whether voluntary or involuntary, holders are entitled to receive pro rata
the assets remaining after creditors have been paid in full and after any
liquidation preference of any other class of stock has been satisfied. The
outstanding Common Stock is fully paid and nonassessable.
The board of directors of the Company has the authority to issue the
remaining unissued authorized shares and to fix the powers, preferences,
rights and limitations of such shares or any class or series thereof, without
shareholder approval. Persons acquiring such shares could have preferential
rights with respect to voting, liquidation, dissolution or dividends over
existing shareholders. Shares could also be issued to deter or delay a
takeover or other change in control of the Company.
Holders of Common Stock have no preemptive rights to purchase additional
securities which may be offered by the Company. There is no cumulative
voting for the election of directors. Accordingly, the owners of a majority
of outstanding voting shares may elect all of the directors if they choose to
do so. All shares of Common Stock are entitled to participate equally in all
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor.
There is no provision in the Company's Articles of Incorporation or
Bylaws that would delay, defer, or prevent a change in control of the
Company. However, the Company is subject to the anti-takeover provisions of
Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act.
These provisions may eventually operate to deny shareholders the receipt of a
premium on their Common Stock and may also have a depressive effect on the
market price of the Company's Common Stock. In general, Section 302A.671
provides that the shares of a corporation acquired in a "control share
acquisition" have no voting rights unless voting rights are approved by the
shareholders in a prescribed manner. A "control share acquisition" is
defined as an acquisition of beneficial ownership of shares that would, when
added to all other shares beneficially owned by the acquiring person, entitle
the acquiring person to have voting power of 20 percent or more in the
election of directors. Section 302A.673 prohibits a Minnesota public
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions. An "interested
shareholder" is a person who is the beneficial owner of 10 percent or
17
<PAGE>
more of the corporation's voting stock. Reference is made to the detailed
terms of Sections 302A.671 and 302A.673 of the Minnesota Business Corporation
Act.
American Securities Transfer, Incorporated, Denver, Colorado, is the
transfer agent and registrar for the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
(Item 201 of Regulation S-B)
There is no public trading market for the Company's Common Stock. The
recent sales of unregistered securities set forth below in Item 4 of this
Part II constitute the only issuances and sales by the Company of its Common
Stock since 1990.
Upon effectiveness of this Form 10-SB, the Company plans to apply for
quotation of the Common Stock on the Electronic Bulletin Board operated by
the National Association of Securities Dealers, Inc. under the symbol "IBCL."
As of September 30, 1996, the Company had issued and outstanding 3,409,300
shares of Common Stock. Of such shares, 1,186,286 shares are eligible for
resale under Rule 144. At September 30, 1996, there were approximately 258
record holders of the Company's Common Stock. The Company presently has no
existing stock option or other plans nor are there any outstanding options,
warrants or securities convertible into Common Stock. In connection with
financing needs in the future, the Company may issue convertible securities.
The Company has never paid a dividend on its Common Stock. The Company
does not anticipate paying any dividend on its Common Stock in the
foreseeable future. Management anticipates that earnings, if any, will be
retained to fund the Company's working capital needs and the planned
expansion of its business. The payment of any dividends is in the discretion
of the Board of Directors.
ITEM 2. LEGAL PROCEEDINGS.
(Item 103 of Regulation S-B)
The Company is not a party to any material legal proceeding, nor is the
Company's property the subject of any material legal proceeding. However,
certain persons have demanded that the Company reimburse them for alleged
services rendered and expenses incurred by them on behalf of Home Builders
International, Inc., a Minnesota corporation for which Robert H. Leslie is
the President and Chairman of the Board, and Wayne E. Densmore is a director
and the Secretary. Although the Company has advised the persons making such
demands that they have no claims against the Company and that their demands
are misplaced, the Company's officers and directors will seek to resolve such
matters in the best interests of the Company.
18
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(Item 304 of Regulation S-B)
The Company's principal independent accountant has not resigned (or
declined to stand for re-election) or was dismissed during the Company's two
most recent fiscal years or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(Item 701 of Regulation S-B)
During the last three years, the Company has issued the following
securities (as adjusted for a 1-4 reverse stock split effective January 24,
1996) that were not registered under the Securities Act of 1933, as amended
(the "Act"):
1. On January 4, 1996, the Company entered into a subscription
agreement with Edmund Green, a director of the Company, and his wife,
whereby the Company agreed to issue 91,514 shares of common stock to the
Greens at a price of $.10 per share, for a total consideration of $9,151.40
in cash.
2. On January 4, 1996, the Company and Lennard Lindquist, D.D.S.,
entered into a subscription agreement whereby the Company agreed to issue
28,000 shares of common stock to Dr. Lindquist at a price of $.10 per
share, for a total consideration of $2,800 in cash.
3. On January 4, 1996, the Company and Douglas Grobe entered into a
subscription agreement whereby the Company agreed to issue to Mr. Grobe
200,000 shares of common stock valued at $.10 per share in consideration
for certain loans which he arranged to be provided to the Company in the
original principal aggregate amount of $200,000.
4. On January 4, 1996, the Company entered into a subscription
agreement with Stephen T. Nicoletti and his wife, Carolyn K. Nicoletti,
whereby the Company agreed to issue 126,000 shares of common stock to the
Nicolettis for services rendered by Mr. Nicoletti to the Company in
calendar year 1996. The Company valued Mr. Nicholetti's services and the
shares of common stock issued at $12,600 or $.10 per share.
5. On January 4, 1996, the Company and Robert J. Leslie entered into
a subscription agreement whereby the Company agreed to issue 100,000 shares
of common stock to Mr. Leslie for his providing certain services to the
Company in calendar year 1996, and as an inducement for his continued
employment with the Company. The Company valued such services and
inducement, as well as the common stock issued to Mr. Leslie, at $10,000 or
$.10 per share. Mr. Leslie is the son of Robert H. Leslie, the President
and a director of the Company.
6. On January 4, 1996, the Company and Penelope L. Thornberg entered
into a subscription agreement whereby the Company agreed to issue 20,000
shares of common stock to Ms. Thornberg for her providing certain services
to the Company in calendar year
19
<PAGE>
1996, and as an inducement for her continued employment with the
Company. The Company valued such services and inducement, as well as
the common stock issued to Ms. Thornberg, at $2,000 or $.10 per share.
Ms. Thornberg is the daughter of Robert H. Leslie, the President and a
director of the Company.
7. On January 4, 1996, the Company and Thomas Newton entered into a
subscription agreement whereby the Company agreed to issue 20,000 shares of
common stock to Mr. Newton for his providing certain services to the
Company in calendar year 1996, and as an inducement for his continued
employment with the Company. The Company valued such services and
inducement, as well as the common stock issued to Mr. Newton, at $2,000 or
$.10 per share.
8. On January 4, 1996, the Company and Joseph Brabbit entered into
a subscription agreement whereby the Company agreed to issue 2,500 shares
of common stock to Mr. Brabbit in consideration for services he rendered to
the Company in October, November and December of 1995. The Company valued
Mr. Brabbit's services and the shares of common stock issued at $250 or
$.10 per share.
9. On January 4, 1996, the Company entered into a subscription
agreement with Wayne E. Densmore, a director, the Chairman of the Board
and Secretary of the Company, whereby the Company agreed to issue 400,000
shares of common stock to Mr. Densmore for certain services which he
provided to the Company in calendar year 1996. The Company valued Mr.
Densmore's services and the shares of common stock issued at $40,000 or
$.10 per share.
10. On February 7, 1996, the Company and Robert H. Leslie, the
President and a director of the Company, entered into a subscription
agreement whereby the Company agreed to issue 400,000 shares of common
stock to Mr. Leslie in connection with his agreement to assign his entire
right, title and interest in and to his invention of the monolithic shelter
technology which is employed in the basic design of all of the Company's
packaged homes. Mr. Leslie's inventions was disclosed and claimed in the
application for United States Letters Patent, filed on February 7, 1996,
under Application Number 06/011,265 and entitled "MONOLITHIC SHELTER." The
Company valued Mr. Leslie's assignment of the invention and the shares of
common stock issued at $40,000 or $.10 per share, which assignment was
consummated on June 12, 1996.
11. On March 4, 1996, the Company entered into an agreement with Maven
Securities, Inc., a Minnesota corporation, whereby the Company agreed to
issue 50,000 shares of common stock to Maven Securities, Inc. for services
rendered as the Company's exclusive agent in creating a public-trading
market for the Company's common stock. The Company valued the services of
Maven Securities, Inc. and the shares of common stock issued at $50,000 or
$1.00 per share.
20
<PAGE>
12. On March 31, 1996, the Company and International Building Systems,
Inc., a Minnesota corporation ("IBS"), entered into a subscription
agreement whereby the Company agreed to issue 360,000 shares of common
stock to IBS valued at $1.00 per share. In consideration for such shares,
IBS cancelled a promissory note executed by Home Builders International,
Inc. ("HBI") in favor of IBS with an outstanding principal balance of
$360,000, which promissory note the Company had assumed in connection with
its acquisition of certain assets of HBI pursuant to an Asset Purchase
Agreement between the Company and HBI, dated March 31, 1996. Wayne E.
Densmore, a director, the Chairman of the Board and Secretary of the
Company, is the President and a director of IBS, as well as that
corporation's controlling shareholder, owning approximately 66 percent of
IBS's capital stock as of the date hereof. Mr. Densmore is also a director
and the Secretary of HBI, and Robert H. Leslie, the President and a
director of the Company, is a director and the President and Chairman of
the Board of HBI. HBI has not conducted business since September 1995.
13. On April 18, 1996, the Company entered into a subscription
agreement John C. Kagan and his wife, Elizabeth Kagan, whereby the Company
agreed to issue 350,000 shares of common stock to the Kagans at a price of
$1.00 per share, for a total consideration of $350,000 in cash.
14. On April 18, 1996, the Company and J. Donald Goodwin entered into
a subscription agreement whereby the Company agreed to issue 25,000 shares
of common stock to Mr. Goodwin for services rendered in securing investment
capital for the Company in calendar year 1996. The Company valued Mr.
Goodwin's services and the shares of common stock issued at $25,000 or
$1.00 per share.
15. On May 15, 1996, the Company and Lawrence Ihle entered into a
subscription agreement whereby the Company agreed to issue 50,000 shares of
common stock to Mr. Ihle at a price of $1.00 per share, for a total
consideration of $50,000 in cash.
On February 10, 1996, a professional structural engineer registered by the
State of Minnesota certified that the Company's proprietary packaged housing
unit was structurally sound and in compliance with the Uniform Building Safety
codes. Management believes that such certification significantly improved the
Company's business prospects as it enabled the Company to market its housing
structures nationwide. Accordingly, the Board of Directors redetermined the
value per share of its common stock from $.10 to $1.00 as of the date of such
certification.
No underwriting commissions or discounts were paid with respect to the
sales of unregistered securities identified above.
All of the above sales were made in reliance on Section 4(2) of the
Act for transactions not involving a public offering. With regard to
the reliance by the Company upon such exemption from registration,
certain inquiries are made by the Company to establish that such sales
qualified for such exemption from the registration requirements. In
particular, the Company confirmed that (i) each purchaser provided the
Company with written assurance of investment intent, and the
certificates for
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<PAGE>
the shares sold accordingly bear restrictive legends and (ii) sales were made
to a limited number of persons.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(Item 702 of Regulation S-B)
The Company's Restated Articles of Incorporation limit the liability of
its directors to the fullest extent permitted by the Minnesota Business
Corporation Act. Specifically, directors of the Company will not be
personally liable to the Company or any of its shareholders for monetary
damages for breach of fiduciary duty as directors, except liability for (i)
any breach of the duty of loyalty to the Company or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) violations of Minnesota Statutes Section
302A.559 (regarding distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions) or Section
80A.23; (iv) violations of certain Minnesota securities law; or for (v) any
transaction from which the director derived an improper personal benefit.
Liability under federal securities law is not limited by the Restated
Articles.
The Minnesota Business Corporation Act requires that the Company
indemnify any director, officer or employee made or threatened to be made a
party to a proceeding, by reason of the former or present official capacity
of the person, against judgments, penalties, fines, settlements and
reasonable expenses incurred in connection with the proceeding if certain
statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including a derivative action in the name of the Company.
Reference is made to the detailed terms of the Minnesota indemnification
statute (Minn. Stat. Section 302A.521) for a complete statement of such
indemnification rights.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company is
aware that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
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<PAGE>
PART F/S
Furnish the information required by Item 310 of Regulation S-B. However, if
audited financial statements of the registrant and its predecessors and the
financial statements required to be provided for any significant business
acquired or to be acquired are not otherwise available for each of the two
most recent fiscal years, only the financial statements for the latest fiscal
year must be audited.
23
<PAGE>
TMI, INC.
FINANCIAL REPORT
SEPTEMBER 30, 1995
24
<PAGE>
CONTENTS
- - --------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 26
- - --------------------------------------------------------------------------
FINANCIAL STATEMENTS
Balance sheets 27
Statements of operations 28
Statements of stockholders' equity (deficit) 29
Statements of cash flows 30
Notes to financial statements 31-33
- - ---------------------------------------------------------------------------
25
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
TMI, Inc.
Minneapolis, Minnesota
We have audited the accompanying balance sheets of TMI, Inc. as of September 30,
1995 and 1994 and the related statements of operations, stockholders' equity
(deficit) and cash flows for the years then ended. 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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principals 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, the financial statements referred to above present fairly, in
all material respects, the financial position of TMI, Inc. as of September 30,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
Sioux Falls, South Dakota
May 20, 1996
26
<PAGE>
TMI, INC.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
ASSETS 1995 1994
- - --------------------------------------------------------------------------
Assets $ - $ -
----------------------
----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- - --------------------------------------------------------------------------
Current Liabilities
Due to stockholder/officer (Note 2) $ 4,757 $ 3,861
Accrued compensation to stockholder/
officer (Note 2) - 37,500
----------------------
4,757 41,361
----------------------
Stockholders' Equity (Deficit) (Note 5)
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued
1,186,286 shares 11,863 11,863
Additional paid-in capital 608,634 571,134
Accumulated (deficit) (625,254) (624,358)
----------------------
(4,757) (41,361)
----------------------
----------------------
$ - $ -
----------------------
----------------------
See Notes to Financial Statements.
27
<PAGE>
TMI, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
- - --------------------------------------------------------------------------
Revenue $ - $ -
----------------------
Expenses:
Office and other expenses,
net of reimbursement (Note 4) 896 1,327
----------------------
896 1,327
----------------------
NET (LOSS) BEFORE INCOME TAXES (896) (1,327)
Income taxes (Note 3) - -
----------------------
NET (LOSS) $ (896) $ (1,327)
----------------------
----------------------
(Loss) per common share $ 0.00 $ 0.00
----------------------
----------------------
See Notes to Financial Statements.
28
<PAGE>
TMI, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
Additional
Common Paid-In Accumulated
Stock Capital (Deficit)
- - -------------------------------------------------------------------------------
Balance, September 30, 1993 $ 11,863 $ 571,134 $ (623,031)
Net (loss) - - (1,327)
-------------------------------------------
Balance, September 30, 1994 $ 11,863 571,134 (624,358)
Net (loss) - - (896)
Cancellation of accrued
compensation liability to
stockholder/officer (Note 2) - 37,500 -
-------------------------------------------
Balance, September 30, 1995 $ 11,863 $ 608,634 $ (625,254)
-------------------------------------------
-------------------------------------------
See Notes to Financial Statements.
29
<PAGE>
TMI, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
- - --------------------------------------------------------------------------
Cash Flows From Operating Activities
Net (loss) $ (896) $ (1,327)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Change in assets and liabilities:
Decrease in due from stockholder/officer - 4,655
(Decrease) in expense advance - (4,655)
-----------------------
NET CASH (USED IN) OPERATING ACTIVITIES (896) (1,327)
-----------------------
Cash Flows From Financing Activities
Advances from stockholder/officer 896 1,327
-----------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 896 1,327
-----------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS - -
Cash and Cash Equivalents
Beginning - -
-----------------------
Ending $ - $ -
-----------------------
-----------------------
Supplemental Schedule of Noncash Financing
Activities Cancellation of accrued
compensation liability to stockholder/officer
recorded as additional paid-in capital $ 37,500 $ -
See Notes to Financial Statements.
30
<PAGE>
TMI, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: At September 30, 1995 and for several years preceding, the
Company was not engaged in any business. The only activity of the Company in
1995 and 1994 was an effort by a stockholder/officer to reconstruct Company
records and search for business opportunities (See Note 5).
A summary of the Company's significant accounting policies is as follows:
INCOME TAXES: Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
(LOSS) PER COMMON SHARE: (Loss) per common share is computed based on the
Company's net (loss) and the weighted average number of outstanding shares of
common stock. For the years ended September 30, 1995 and 1994, the weighted
average number of common stock shares outstanding was 1,186,286 shares.
NOTE 2. RELATED PARTY TRANSACTIONS
The Company owes a stockholder/officer for expense advances made on behalf of
the Company by the Company's former president. The former president assigned
this liability in connection with the stock sale discussed in Note 5. The funds
were advanced in order to pay certain general and administrative expenses in the
amount of $896 in 1995 and $1,327 in 1994.
The Company had an employment agreement with its former president under which he
earned $5,000 per month from July 1992 to September 1992 and $2,000 per month
from October 1992 to September 1993. Beginning October 1993, accruals of
additional compensation were suspended pending further activity in the Company.
In connection with the stock sale discussed in Note 5, this liability was
canceled by the former president and was recorded as an increase to additional
paid-in capital.
31
<PAGE>
TMI, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. INCOME TAXES
At September 30, 1995, the Company had net operating loss carryforwards for
financial statement and income tax reporting purposes of approximately
$591,000. These carryforwards expire in varying amounts from 1999 through
2010. No income tax benefit is provided for the net operating loss
carryforwards due to the uncertainty in realization of the tax benefits.
Accordingly, the deferred tax asset of approximately $201,000 is offset
entirely by a valuation allowance. Tax regulations provide restrictions and
limitations on utilization of net operating losses including limitations when
a change in ownership occurs.
NOTE 4. TERMINATED ACQUISITION AGREEMENT
In July 1993, TMI, Inc. tentatively agreed to a business combination arrangement
with Monarch Casinos, Inc. Holdings (Monarch) whereby the Company would be
acquired by Monarch in a transaction which would be accounted for as a reverse
acquisition. Monarch advanced TMI, Inc. $5,000 in 1993 for operating expenses
in connection with the acquisition. The Company's president held the unexpended
portion of the expense advance of $4,655 at September 30, 1993. During the year
ended September 30, 1994, the remaining $4,655 was utilized for reimbursable
operating expenses and accounted for as a reduction in office and other
expenses.
During 1995, the principal controlling shareholder of Monarch informed the
Company that Monarch had decided not to close the transaction with TMI, Inc. and
that the agreement was terminated. The Company's president commenced legal
proceedings against Monarch Casinos, Inc. and its shareholders as a result of
the termination. On July 18, 1995, TMI, Inc. s claims against Monarch Casinos,
Inc. and related shareholders were assigned to an affiliated company of the then
TMI, Inc. president in exchange for $3,083 in reduction of amount due to the
officer for expenses incurred on the matter.
NOTE 5. CHANGE IN CONTROL AND SUBSEQUENT EVENTS
In July 1995, an individual, unrelated to the Company, purchased approximately
62% of the outstanding shares of common stock of the Company from existing
shareholders. The Company then began to investigate business opportunities in
the residential housing industry and subsequent to September 30, 1995 has
entered into negotiations, discussions and informal agreements with the intent
to acquire certain assets, including patents, related to the manufacture of
single family housing structures. In connection therewith, the Company's Board
of Directors approved a reverse split of 1 share for 4 shares of Company stock
and also approved a name change to International Building
32
<PAGE>
TMI, INC.
NOTES TO FINANCIAL STATEMENTS
Concepts Ltd. The reverse stock split was executed on January 24, 1996, and the
effect has been retroactively reflected in the financial statements for all
periods presented. The Board of Directors has also approved subscription
agreements to various entities and individuals for the issuance of approximately
537,000 shares of common stock (after the 1 for 4 share reverse split). The
shares are to be issued for cash, assets acquired, compensation for services and
other purposes. At the date of this report $350,000 of cash was received but no
additional shares have been issued. In addition, subsequent to September 30,
1995, the Company has acquired assets, incurred significant long-term debt and
recorded substantial expenses in connection with its activities.
33
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1996
34
<PAGE>
CONTENTS
- - --------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheet (unaudited) 36-37
Statements of operations (unaudited) 38
Statement of stockholders' equity (unaudited) 39
Statements of cash flows (unaudited) 40-41
Notes to consolidated financial statements (unaudited) 42-44
- - --------------------------------------------------------------------------
35
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
ASSETS
Current Assets
Cash $ 130,598
Accounts receivable 18,000
Inventories 55,964
Prepaid expenses and other 64,259
Advances to officer/stockholder (Note 3) 28,186
------------
TOTAL CURRENT ASSETS 297,007
------------
Other Assets
Debt issuance costs, net of $5,000 amortization 15,000
Patent application 40,000
Organization costs 7,375
------------
TOTAL OTHER ASSETS 62,375
------------
Property and Equipment, at cost
Equipment 76,448
Model homes 55,394
Leasehold improvements 10,166
------------
TOTAL PROPERTY AND EQUIPMENT 142,008
Accumulated depreciation 9,600
NET PROPERTY AND EQUIPMENT 132,408
------------
TOTAL ASSETS $ 491,790
------------
------------
See Notes to Consolidated Financial Statements.
36
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ---------------------------------------------------------------------
Current Liabilities
Notes payable (Note 9) $ 22,775
Accounts payable 40,142
Accrued expenses 68,753
------------
TOTAL CURRENT LIABILITIES 131,670
------------
Deferred Revenue (Note 4) 23,400
------------
Notes Payable to Stockholders (Note 7) 185,000
------------
Minority Interests in Consolidated Subsidiary (Note 5) 114,687
------------
Stockholders' Equity
Common stock, par value $0.01 per share;
authorized 10,000,000 shares; issued
3,409,300 shares 34,093
Additional paid-in capital 1,580,205
Accumulated deficit (1,577,265)
------------
TOTAL STOCKHOLDERS' EQUITY 37,033
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 491,790
------------
------------
37
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
1996 1996 1995 1995
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 37,680 $ 57,230 $ - $ -
Cost of sales 30,214 53,290 - -
--------------------------------------------------------------------
GROSS PROFIT 7,466 3,940 - -
Selling and administrative
expenses 273,030 486,870 - (896)
--------------------------------------------------------------------
Loss from operations (265,564) (482,930) - (896)
Interest expense, principally
to related parties 9,490 37,086 - -
Cost of agreement (Note 6) - 442,308 - -
--------------------------------------------------------------------
LOSS BEFORE MINORITY
INTEREST (275,054) (962,324) - (896)
Minority interest in loss
of subsidiary 10,313 10,313 - -
--------------------------------------------------------------------
Net loss $ (264,741) $ (952,011) $ - $ (896)
--------------------------------------------------------------------
--------------------------------------------------------------------
Net loss per common share $ (0.08) $ (0.42) $ - $ -
Weighted average common
shares outstanding 3,310,399 2,287,751 1,186,286 1,186,286
</TABLE>
See Notes to Consolidated Financial Statements.
38
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1995 (Note 8) 1,186,286 $ 11,863 $ 608,634 $ (625,254) $ (4,757)
Issuance of common stock for
cancellation of promissory note
(Note 6) 360,000 3,600 356,400 - 360,000
Issuance of common stock to Company
officers and employees for services 668,500 6,685 60,165 - 66,850
Common stock issued to officer for
patent application 400,000 4,000 36,000 - 40,000
Common stock issued to others for
services 275,000 2,750 92,250 - 95,000
Sale of common stock for cash 519,514 5,195 406,756 - 411,951
Transfer of stock for Company obligation
by a stockholder (Note 7) - - 20,000 - 20,000
Net loss - - - (952,011) (952,011)
-----------------------------------------------------------------
Balance June 30,1996 3,409,300 $ 34,093 $1,580,205 $(1,577,265) $ 37,033
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
39
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
- - --------------------------------------------------------------------------
Cash Flows From Operating Activities
Net loss $ (952,011) $ (896)
Adjustments to reconcile net loss to
net cash used in operating activities
Accretion of principle on notes
payable to stockholders 5,000 -
Depreciation and amortization 14,600 -
Minority interest in net loss of
consolidated subsidiary (10,313) -
Issuance of common stock to officers
and employees for services 66,850 -
Deferred revenue 23,400 -
Cost of agreement (Note 6) 442,308 -
Changes in current assets and liabilities:
Accounts receivable (18,000) -
Inventories (55,964) -
Prepaid expenses and other 3,366 -
Accounts payable 8,180 -
Accrued expenses (13,648) -
-------------------------
NET CASH USED IN OPERATING
ACTIVITIES (486,232) (896)
-------------------------
Cash Flows From Investing Activities
Purchase of property and equipment (67,453) -
Advances to officer/stockholder (28,186) -
-------------------------
NET CASH USED IN INVESTING ACTIVITIES (95,639) -
-------------------------
Cash Flows From Financing Activities
Proceeds from notes payable to stockholders
and contributions by stockholders 200,000 896
Principal payments on note payable to officer (4,757) -
Principal payments on notes payable (19,725) -
Proceeds from sale of common stock in
consolidated subsidiary 125,000 -
Proceeds from sale of common stock 411,951 -
-------------------------
NET CASH FROM FINANCING ACTIVITIES 712,469 896
-------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 130,598 -
Cash and Cash Equivalents
Beginning of period - -
-------------------------
End of period $ 130,598 $ -
-------------------------
-------------------------
(Continued)
40
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
- - ------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 21,772 $ -
------------------------
------------------------
Supplemental Schedule of Noncash Investing and
Financing Activities
Asset purchase agreement-assets acquired and
liabilities assumed:
Property and equipment acquired $ 74,555 $ -
Promissory note assumed (360,000) -
Other notes payable assumed (42,500) -
Accounts payable and other liabilities assumed (114,363) -
Common stock issued in cancellation of
promissory note 360,000 -
Common stock issued to officer/stockholder in
connection with patent application 40,000 -
Common stock issued to others for services 95,000 -
Shareholder contribution of capital (Note 7) 20,000 -
Cancellation of accrued compensation liability
to officer/stockholder recorded as additional
paid-in capital - 37,500
------------------------
------------------------
See Notes to Consolidated Financial Statements.
41
<PAGE>
INTERNATIONAL BUILDING CONCEPTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended June 30, 1996, are not necessarily indicative of the
results that may be expected for the year ended September 30, 1996. For
further information, refer to the financial statements and footnotes included
in the Company's financial statements for the year ended September 30, 1995.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
a 60 percent owned subsidiary, Innovative Homes, Inc. All material
intercompany accounts and transactions are eliminated in consolidation. The
minority interest amounts in the accompanying financial statements represent
the losses and equity attributable to the portion of Innovative Homes, Inc.
owned by others.
Total assets of Innovative Homes, Inc. were $290,800 at June 30, 1996, and
total revenues were $-0- during the nine months ended June 30, 1996.
3. RELATED-PARTY TRANSACTIONS
Advances to officer/stockholder are unsecured and repayable on demand,
bearing interest at a rate of 10 percent per annum. Accrued interest is also
due and payable on demand. On and before August 23, 1996, all such advances
have been repaid to the Company.
As discussed in Note 6, the Company acquired certain assets of and assumed
certain liabilities of Home Builders International, Inc., a company related
through management, stockholders, and creditors. In April 1996, the Company
sold one packaged home unit for $12,690 to International Building Systems,
Inc., a company related through management and stockholders. This sale was
transacted at a price consistent with those available to unrelated parties.
The Company issued 400,000 shares, valued at $40,000, to the president for
assignment of the patent of housing technology.
42
<PAGE>
4. DEFERRED REVENUE
The deferred revenue is in respect of a licensing agreement entered into on
October 13, 1995, granting sales rights to an agent of the Company. The
total consideration received was $27,000 for a license with a term of five
years. The income is being recognized in equal monthly installments over the
period of the license.
5. INVESTMENT IN SUBSIDIARY
On June 13, 1996, the Company acquired 375,000, or 60 percent, of the issued
and outstanding Class A voting common stock of Innovative Homes, Inc., a
Minnesota corporation. The Company has contributed product rights and
licenses along with a commitment to provide management, marketing, and
manufacturing assistance. Innovative Homes, Inc. was formed on June 13, 1996,
for the purpose of manufacturing, marketing, and selling homes using
components manufactured by International Building Concepts, Ltd.
6. ASSET PURCHASE AGREEMENT
On March 31, 1996, the Company purchased certain furniture, computers, and
other personal property valued at $74,555 from Home Builders International,
Inc. (HBI), a company related through management, stockholders, and
creditors. In consideration for such assets and in recognition of the
technical capabilities and expected future contributions of Robert H. Leslie,
an officer and director of the Company and the inventor of the Company's
proprietary housing technology, the Company assumed certain obligations and
liabilities of HBI totaling $516,863, including a promissory note executed by
HBI in favor of International Building Systems, Inc. (IBS), a related
corporation, in the principal amount of $360,000. The Company discharged
such promissory note by issuing 360,000 shares of its common stock to IBS.
The amount of the excess of assumed liabilities over the value of the
acquired assets has been recorded in expense in the nine months ended June
30, 1996, to recognize that this amount was an inducement to attract Mr.
Leslie to the Company.
A summary of the assets acquired and liabilities assumed in connection with
the transaction is as follows:
Assets:
Cash $ 749
Equipment 35,251
Model houses 20,000
Office equipment 18,555
-------------
74,555
-------------
43
<PAGE>
Liabilities:
Promissory note 360,000
Other notes payable 42,500
Accounts payable 31,962
Accrued expenses 37,799
Payable taxes 44,602
-------------
516,863
-------------
Excess of liabilities assumed over assets acquired --
cost of agreement $ (442,308)
-------------
-------------
7. NOTES PAYABLE TO STOCKHOLDERS
During the period from December 30, 1995, through February 29, 1996, the
Company received advances under the terms of eight unsecured financing
agreements with various stockholders. The individual amounts advanced varied
from $12,500 to $50,000 and totaled $200,000, the whole of which was
outstanding at June 30, 1996. The principal sums are repayable two years
from the agreement dates and incur interest at the rate of 10 percent per
year. Interest was not payable for the first three months of the loans but
is due quarterly thereafter. As an inducement to the various lenders, one
share of common stock was issued for each dollar advanced. The Company has
valued the stock at $0.10 per share, or $20,000 in total. The Company's
principal shareholder transferred his own shares to the noteholders which was
recorded as a contribution of capital. The Company will accrete the notes
payable to $200,000 over the term of the notes.
8. STOCKHOLDERS' EQUITY
On January 24, 1996, the Company executed a reverse stock split on the basis
of one share for every four shares previously outstanding. All references to
share and per share amounts give retroactive effect to this reverse stock
split.
The Company has issued stock for services and other purposes to both related
parties and non-related parties. The stock was valued at fair market value
as determined by the Board of Directors on the date of the issuance.
9. NOTES PAYABLE
Notes payable at June 30, 1996, consist of the following:
Unsecured note payable, due on demand, including interest
at 10% per annum $ 2,881
Unsecured note payable, due on demand, including interest
at 8% per annum 11,500
Unsecured note payable, due on demand, including interest
at 10.5% 8,394
--------------
$ 22,775
--------------
--------------
44
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE NO.
---------- ----------- -------
3.1 Articles of Incorporation, as amended
3.2 Bylaws, as amended
4 Portion of Articles of Incorporation, as
amended, defining the rights of stockholders
10.1 Asset Purchase Agreement, dated March 31,
1996, between Home Builders International, Inc.
and the Company
10.2 Employment Agreement, dated June 12, 1996,
between Robert H. Leslie and the Company
10.3 Assignment of Invention and Patent, dated
June 12, 1996, executed by Robert H. Leslie
in favor of the Company
10.4 Agreement regarding Assignment of Invention
and Patent, dated June 12, 1996, between
Robert H. Leslie and the Company
10.5 Shareholder Control Agreement, dated June 13,
1996, between the William C. Norris Institute
and the Company regarding control of their joint
venture entity, Innovative Homes, Inc.
10.6 License Agreement, dated June 13, 1996, between
the William C. Norris Institute and the Company
10.7 Order for ten of the Company's packaged homes,
dated September 11, 1996, obtained by Innovative
Homes, Inc. from the Lakota Fund, in the amount
of $571,400
45
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTERNATIONAL BUILDING CONCEPTS, LTD.
(Registrant)
Date: By:
-------------------------------- ----------------------------------
Robert H. Leslie
President and Director
Date: By:
-------------------------------- ----------------------------------
Wayne E. Densmore
Chairman of the Board, Secretary
and Director
46
<PAGE>
Exhibit 3.1
Articles of Incorporation, as amended
<PAGE>
MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME: (List the name of the company prior to any desired name change)
International Building Concepts Ltd.
----------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form ONE.)
ARTICLE 1.
NAME
1.1) The name of the corporation shall be International Building
Concepts, Ltd.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
__________________________________
(Signature of Authorized Person)
Wayne E. Densmore, Secretary
______________________________________________________________________________
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made payable to the
Secretary of State.
3. Return completed forms to: Secretary of State, 180 State Office Building,
100 Constitution Ave., St. Paul, MN 55155-1299. (612) 296-2803
<PAGE>
MINNESOTA SECRETARY OF STATE
AMENDMENT OF ARTICLES OF INCORPORATION
BEFORE COMPLETING THIS FORM, PLEASE READ INSTRUCTIONS LISTED BELOW.
CORPORATE NAME: (List the name of the company prior to any desired name change)
T.M.I., Inc. .
-----------------------------------------------------------
This amendment is effective on the day it is filed with the Secretary of
State, unless you indicate another date, no later than 30 days after filing
with the Secretary of State.
The following amendment(s) of articles regulating the above corporation were
adopted: (Insert full text of newly amended article(s) indicating which
article(s) is (are) being amended or added.) If the full text of the
amendment will not fit in the space provided, attach additional numbered
pages. (Total number of pages including this form ______)
ARTICLE _________
INTERNATIONAL BUILDING CONCEPTS LTD.
This amendment has been approved pursuant to MINNESOTA STATUTES CHAPTER 302A
OR 317A. I certify that I am authorized to execute this amendment and I
further certify that I understand that by signing this amendment, I am
subject to the penalties of perjury as set forth in section 609.48 as if I
had signed this amendment under oath.
__________________________________
(Signature of Authorized Person)
Wayne E. Densmore, Secretary
________________________________________________________________________________
INSTRUCTIONS FOR OFFICE USE ONLY
1. Type or print with black ink.
2. A Filing Fee of: $35.00, made payable to the
Secretary of State.
3. Return completed forms to:
Secretary of State
180 State Office Building
100 Constitution Ave.
St. Paul, MN 55155-1299
(612) 296-2803
<PAGE>
State of Minnesota
Office of the Secretary of State
Notice of Change of
Registered Office - Registered Agent or Both
by
- - -------------------------------------------------------------------------------
Name of Corporation TMI, INC.
- - -------------------------------------------------------------------------------
Pursuant to Minnesota Statutes, Section 302A.123. 303.10. 317.19. 317A.123 or
308A.025 the undersigned hereby certifies that the Board of Directors of the
above named Corporation has resolved to change the corporation's registered
office and/or agent to:
- - -------------------------------------------------------------------------------
Agent's If you do not wish to designate an agent, you must list "NONE"
DO NOT in this box.
Name LIST THE CORPORATE NAME.
The Prentice-Hall Corporation System, Inc.
- - -------------------------------------------------------------------------------
Address (You may not list a P.O. Box, but you may use a rural route and
(No.& box number.)
Street) Multifoods Tower, 33 South Sixth Street
- - -------------------------------------------------------------------------------
City County Zip
Minneapolis Hennepin MN 55402
- - -------------------------------------------------------------------------------
Mailing (If different than address above - P.O. Box is acceptable)
Address Do NOT list a different street address or location.
- - -------------------------------------------------------------------------------
City County Zip
MN
- - -------------------------------------------------------------------------------
The new address may not be a post office box. It must be a street address,
pursuant to Minnesota Statutes. Section 302A.011. Subd. 3.303.02. Subd.
5.317.02 Subd. 13., 317A.01 Subd.2.
This change is effective on the day it is filed with the Secretary
of State, unless you indicate another date, no later than 30 days
after filing with the Secretary of State in this box:
-------------------------------------
I certify that I am authorized to execute this certificate and I further
certify that I understand that by signing this certificate I am subject to
the penalties of perjury as set forth in section 609.48 as if I had signed
this certificate under oath.
<PAGE>
- - -------------------------------------------------------------------------------
Name of Officer or Other Signature
Authorized Agent of Corporation
George N. Berger
Please Print
- - -------------------------------------------------------------------------------
Title or Office Date
President April 5, 1995
- - -------------------------------------------------------------------------------
Do not write below this line. For Secretary of State's use only.
- - -------------------------------------------------------------------------------
Receipt Number File Data
- - -------------------------------------------------------------------------------
Filing Fee $35.00
Return to Business Services Division
Office of the Secretary of State
180 State Office Building
St. Paul, MN 55155
(612) 296-2803
Make checks payable to Secretary of State.
<PAGE>
CERTIFICATE OF AMENDMENT STATE OF MINNESOTA
TO ARTICLES OF INCORPORATION OFFICE OF THE SECRETARY OF STATE
Current Corporate Name as known to the Minnesota Secretary of State: R&A
Capital Corporation
Date of Adoption of Amendment: August 21, 1992
Effective Date: Filing Date
Amendment Approved by Corporate: Shareholders
Pursuant to the provisions of Minnesota Statutes, Chapter 302A, "R&A Capital
Corporation" hereby amends its Articles of Incorporation, in their entirety,
by replacing all its previous Articles, as amended, with the following:
RESTATED
ARTICLES OF INCORPORATION
of a Minnesota corporation, known to the
Minnesota Secretary of State as
R & A Capital Corporation
-------------------------------
ARTICLE I
NAME
The name of the corporation is TMI, Inc.
ARTICLE II
REGISTERED OFFICE
The location and post office address of the registered office of this
corporation in Minnesota is 1173 Osborne Road N.E., Minneapolis, MN 55432 or
as the Board of Directors, in its discretion, may determine from time to time.
ARTICLE III
AUTHORIZED CAPITAL
The number of shares which the corporation shall have authority to
issue, itemized by class, number of share and par value, if any, is as
follows:
Class Number of Shares Par Value Per Share
Common 10,000,000 $.01
<PAGE>
ARTICLE IV
NO PREEMPTIVE RIGHTS
No holder of any class of stock in the corporation shall have a
preemptive right as defined in the Minnesota Statutes, Section 302A.413, to
acquire any rights to purchase securities of the Corporation or a certain
fraction of the unissued securities before the Corporation may offer them to
other person(s), other than such rights (if any) as the Board of Directors,
in its discretion, may determine from time to time.
ARTICLE V
NO CUMULATIVE VOTING
No shareholder shall have the right to cumulative voting in the election
of directors or in any and all other matter(s) to come to a vote before the
shareholders.
ARTICLE VI
LIMITATION OF LIABILITY
No director of the corporation shall be personally liable to the
corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director, provided, that such limitation upon a
director's liability shall not eliminate or limit the liability of a
director: (i) for any breach of the director's duty of loyalty to the
corporation or its shareholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (iii)
under Section 302A.599 or 80A.23 of the Minnesota Statutes; (iv) for any
transaction from which the director derived an improper personal benefit; or
(v) for any act or omission occurring prior to the date this provision
becomes effective.
ARTICLE VII
DIRECTOR
The name and post office address of the sole director at the time these
articles were restated is as follows:
George N. Berger
600 South Conklin Avenue
Sioux Falls, South Dakota 57103-1931
The undersigned swears that the foregoing is true and accurate and that
he has the authority to sign this document on behalf of the corporation.
____________________________________
George N. Berger, Corporate Secretary
Date: October 9, 1992
<PAGE>
State of Minnesota
Office of the Secretary of State
MODIFICATION OF STATUTORY REQUIREMENTS
OR AMENDMENT OF ARTICLES
TMI, Inc.
February 5, 1986
Amendments/Modifications Approved by Corporate: Shareholders
Pursuant to the provisions of Minnesota Statutes, Sections 302A.133 and
302A.135, the following amendments of articles or modifications to the
statutory requirements regulating the above corporation were adopted: (Insert
full text of newly amended or modified article(s), indicating which
article(s); being amended or added. If the full text of the amendment will
not fit into the space provided, do not use this form. Instead, retype the
amendment on a separate sheet or sheets, using this form.
ARTICLE____
See Attached Exhibit A.
The attached restated articles of incorporation supersede and take
the place of all previously filed articles and amendments thereto.
Note: Effective date may be any date within 30 days after the filing date.
If no date is specified, the effective date is the filing date.
I swear that the foregoing is true and accurate and that I have the authority
to sign this document behalf of the corporation.
Signed:______________________________
Position: President
STATE OF ILLINOIS ) The foregoing instrument was acknowledged
County of PEORIA ) ss. before on this ____ day of ________, 19__.
(Notarial Seal) __________________________________________
Notary Public
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
TMI, INC.
ARTICLE 1 - NAME
1.1) The name of the corporation shall be TMI, Inc.
ARTICLE 2 - REGISTERED OFFICE
2.1) The location and post office address of the registered office
of the corporation in this state shall be 7101 York Avenue South, Edina,
Hennepin County, Minnesota 55435.
ARTICLE 3 - DURATION
3.1) The duration of the corporation shall be perpetual.
ARTICLE 4 - PURPOSES AND POWERS
4.1) PURPOSES. The corporation shall have general business
purposes and may engage in any lawful activities.
4.2) POWERS. The corporation shall specifically, but without
limiting the generality of the foregoing, have the power, upon due
authorization by its Board of Directors, (i) to acquire, hold, mortgage,
pledge or dispose of the shares, bonds, securities and other evidences of i
indebtedness of any domestic or foreign corporation, and (ii) to promote or
assist, financially or otherwise, or guarantee or otherwise become liable for
and give security for the debts, liabilities and obligations of, any general
partnership or limited partnership of which the corporation is a general
partner or of any corporation which is a majority owned subsidiary of the
corporation or which is the holder of a majority of the outstanding common
stock of the corporation or which is affiliated with the corporation through
direct or indirect common control or ownership of a majority of the
outstanding common stock of the respective corporations.
ARTICLE 5 - CAPITAL STOCK
5.1) AUTHORIZED SHARES. The total authorized number of shares of
the corporation shall be _?, 000,000 shares of Common Stock, par value $.01.
5.2) ISSUANCE OF STOCK. The Board of Directors of the corporation
is authorized from time to time to accept subscriptions for, allot, issue,
sell and deliver shares of stock of any class
<PAGE>
of the corporation, including stock issued as a stock dividend, to such
persons, at such times and upon such terms and conditions as the Board shall
determine.
5.3) ISSUANCE OF STOCK RIGHTS. The Board of Directors is further
authorized from time to time to grant and issue rights to convert securities
of the corporation into shares of stock of the corporation of any class or
classes, options to purchase or subscribe for such shares of stock, and
warrants to purchase or subscribe for such shares of stock, and to fix the
terms, provisions and conditions of such rights, options or warrants,
including the conversion basis or bases and the option price or prices at
which such shares may be purchased or subscribed for.
ARTICLE 6 - RIGHTS OF SHAREHOLDERS
6.1) PREEMPTIVE RIGHTS. No holder of any stock of the corporation
shall have any preemptive right to subscribe for or purchase his
proportionate share of any stock of the corporation now or hereafter
authorized or issued.
6.2) VOTING RIGHTS. At each meeting of the shareholders and with
respect to any matter upon which the shareholders shall have a right to vote,
each holder of record of shares of Common Stock shall be entitled to one (1)
vote for each share of Common Stock so held. No shareholder shall have the
right to cumulate his votes for the election of directors and there shall be
no cumulative voting for any purpose whatsoever.
ARTICLE 7 - DIRECTORS
7.1) NAMES. The names and post office addresses of the members of
the Board of Directors on the date of adoption of these Restated Articles of
Incorporation are as follows:
George E. Kline 14715 Minnehaha Place
Wayzata, Minnesota 55391
Peter R. Peterson 6005 Erin Terrace
Edina, Minnesota 55435
David P. Savoie 5625 Aldrich Avenue South
Minneapolis, Minnesota 55419
H. Michael Tingelhoff Route 1, Box 190
Prior Lake, Minnesota 55372
7.2) NUMBER AND TERM. The management of the corporation shall be
vested in a Board of Directors. The number of directors shall be fixed by
the Bylaws and may be altered by amending the Bylaws but shall never be less
than required by law. The term of office of each of the
<PAGE>
first directors shall be one(1) year or until his successor shall have been
elected and qualified, and thereafter the term of office of each of the
directors shall be fixed by the Bylaws.
ARTICLE 8 - BYLAWS
8.1) The Board of Directors is expressly authorized to make and
alter Bylaws of this corporation, in the manner provided in the Bylaws,
subject to the power of the shareholders to change or repeal such Bylaws and
subject to any other limitations on such authority provided by the Minnesota
Business Corporation Act.
ARTICLE 9 - MISCELLANEOUS
9.1) INTERESTED DIRECTORS. In the absence of fraud, no contract or
other transaction between the corporation and any other corporation, and no
act of the corporation, shall in any way be affected or invalidated by the
fact that any of the directors of the corporation are pecuniarily or
otherwise interested in, or are directors or officers of, such other
corporation; and, in the absence of fraud, any director, individually, or any
firm of which any director may be a member, may be a party to, or may be
pecuniarily or otherwise interest in, any contract or transaction of the
corporation; provided, in any case, that the fact that he or such firm is so
interested shall be disclosed or shall have been known to the Board of
Directors or a majority thereof; and any director of the corporation who is
also a director of officer of any such other corporation or who is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the corporation which shall authorize
any such contract, act or transaction, with like force and effect as if he
were not such director or officer of such other corporation or not so
interested.
9.2) RATIFICATION BY SHAREHOLDERS. Any contract, act or
transaction of the corporation or of the directors may be ratified by a vote
of a majority of the shares having voting power at any meeting of
shareholders and such ratification shall, so far as permitted by law and by
these Articles of Incorporation, be as valid and as binding as though
ratified by every shareholder of the corporation.
9.3) INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
Except s otherwise provided in the Bylaws, directors, officers, employees and
agents of the corporation shall be indemnified to the maximum extent
permitted by the Minnesota Business Corporation Act, as from time to time
amended, for expenses and liabilities arising by reason of their position
with, or by acts in such capacities on behalf of, the corporation or another
corporation which they may serve at the request of the corporation.
ARTICLE 10 - MERGER, CONSOLIDATION AND SALE OF ASSETS
10.1) When and if authorized by the affirmative vote of the holders
of record of shares of Common Stock entitling them to exercise at least a
majority of the total voting power of all shareholders authorized under these
Articles to vote, the corporation may merge or consolidate
<PAGE>
into or with another corporation or sell, lease, exchange or otherwise
dispose of all or substantially all of its property and assets, including its
good will, upon such terms and conditions and for such consideration (which
may be money, stock, bonds or other instructions for the payment of money or
other property) as the Board of Directors shall deem advisable.
ARTICLE 11 - AMENDMENT OF ARTICLES OF INCORPORATION
11.1) RESERVATION OF RIGHTS. The corporation reserves the right
to amend, alter, change or repeal any provisions contained in these Articles
of Incorporation in the manner now or hereafter prescribed by statute, and
all rights conferred upon shareholders herein are granted subject to this
reservation.
11.2) AMENDMENT PROCEDURE. Any amendment may be adopted by the
affirmative vote of the holders of record of shares of Common Stock entitling
them to exercise at least a majority of the total voting power of all
shareholders authorized under these Articles to vote, except as may be
otherwise prescribed by the Statutes of the State of Minnesota.
<PAGE>
CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION
OF
TMI, INC.
We, the undesigned, DAVID P. SAVOIE, President, and GEORGE E. KLINE,
Secretary, of TMI, Inc., a Minnesota corporation subject to the provisions of
Chapter 301 of the Minnesota Statutes, do hereby certify that, acting
pursuant to the provisions of the Minnesota Statutes, Section 301.26, subd.
11, the shareholders of said corporation duly adopted by unanimous written
consent on the 8th day of January, 1981, Restated Articles of Incorporation
in the form attached hereto, pursuant to Section 301.37, Subd. 3(5) of the
Minnesota Statutes, which Restated Articles of Incorporation shall supersede
and take the place of the existing Articles of Incorporation and all
amendments thereto of TMI, Inc.
IN WITNESS WHEREOF, we have hereunto subscribed our names hereto this
___ day of January, 1981.
------------------------------------------
David P. Savoie, President
------------------------------------------
George E. Kline, Secretary
(No Corporate Seal)
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this 13th day of
January, 1981, by DAVID P. SAVOIE, President, and GEORGE E. KLINE, Secretary,
of TMI, Inc., a Minnesota corporation, on behalf of the corporation.
----------------------------
Notarial Seal
(Notarial Seal)
<PAGE>
ARTICLES OF INCORPORATION
OF
TMI, INC.
I, the undersigned, of full age, for the purpose of forming a
corporation under and pursuant to the provisions of Minnesota Statutes,
Chapter 301, known as the Minnesota Business Corporation Act, and the laws
amendatory thereof and supplementary thereto, do hereby constitute myself as
a body corporate and adopt the following Articles of Incorporation.
ARTICLE 1.
NAME
1.1) The name of the corporation shall be TMI, Inc.
ARTICLE 2.
REGISTERED OFFICE
2.1) The location and post office address of the registered office
of the corporation shall be at 7101 York Avenue South, Edina, Minnesota
55435.
ARTICLE 3.
DURATION
3.1) The duration of this corporation shall be perpetual.
ARTICLE 4.
PURPOSES AND POWERS
The purposes and powers of the corporation shall be:
4.1) General business purposes.
4.2) To engage in various forms of consulting activities to
corporations and businesses of all types. Those consulting activities will
include, but not be limited to, the business functions of marketing,
financial planning, new product design and development, promotion and
advertising, public relations, real estate analysis and merger / acquisition
analysis.
4.3) To develop, manufacture, trade and deal in and with goods and
services of any kind and nature whatsoever, to acquire the assets, tangible
or intangible, of any proprietorship,
<PAGE>
partnership or corporation, and to assume, in whole or in part, the
liabilities or obligations of any such proprietorship, partnership or
corporation.
4.4) To borrow money and issue, sell or pledge bonds, promissory
notes, bills of exchange, debentures and other securities and obligations,
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by a
mortgage, pledge, or otherwise, or unsecured.
4.5) To purchase, hold, sell, and transfer shares of the capital
stock, bonds, and other obligations of this corporation from time to time to
such extent, in such manner and upon such terms as its Board of Directors may
determine.
4.6) To subscribe for, purchase, or otherwise acquire, and hold
with the same rights of ownership therein, including the right to vote, as
may be permitted to natural persons, the shares, bonds, and obligations of
any corporation organized under the laws of any state or the Federal
government.
4.7) To have and exercise all powers incident and necessary to
effect all the purposes of the corporation, including the acquisition,
retention, improvement, selling, dealing in and exercising all rights of
ownership over any and all kinds of personal and real property whatsoever and
wheresoever situated.
4.8) To have and exercise all the powers, rights and privileges now
or hereafter conferred by the laws of the State of Minnesota, and to do all
things set forth in these Articles to the same extent as natural persons
might do.
4.9) The foregoing purposes and powers shall be construed liberally
and shall in no way be limited or restricted by reference to or inference
from the enumeration of specific powers or any other clause or paragraph of
these Articles.
ARTICLE 5.
STATED CAPITAL
5.1) The minimum amount of stated capital with which the
corporation will commence business is One Thousand Dollars ($1,000.00).
ARTICLE 6.
CAPITAL STOCK
6.1) AUTHORIZED CAPITAL STOCK - The authorized capital stock of
this corporation shall be Fifty Thousand Dollars ($50,000.00) divided into
Five Million (5,000,000) shares of common
<PAGE>
stock with a par value of One Cent ($0.01) per share to be sold, and paid for
at such times and in such manner as the Board of Directors may from time to
time determine, in accordance with the Statues of Minnesota. All of the
stock of the corporation shall be of the same class and series.
6.2) VOTING RIGHTS - Each holder of record of the common stock of
the corporation shall be entitled to one (1) vote for each share of common
stock held by him at each meeting of the shareholders and in respect to any
matter on which the shareholders have a right to vote. The right to vote
shall be subject to the provisions of the by-laws of the corporation in
effect from time to time with respect to closing the transfer books and
fixing a record date for the determination of shareholders entitled to vote.
Cumulate voting for directors is not permitted.
6.3) PRE-EMPTIVE RIGHTS - The shareholders of the corporation shall
not have the pre-emptive right of subscription to any shares of common stock
of the corporation to be allotted or sold, or hereafter authorized, or any
obligations or securities exchangeable for or convertible into stock of the
corporation of any class, including capital stock of the corporation which
has not yet been authorized.
6.4) STOCK RIGHTS AND OPTIONS - The Board of Directors shall have
the power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its capital
stock of any class or series, upon such terms and conditions and at such
times and prices as the Board of Directors may provide, which terms and
conditions shall be incorporated in an instrument or instruments evidencing
such rights.
6.5) Dividends - The holders of the common stock shall be entitled
to receive, when and as declared by the Board of Directors, out of earnings
or surplus legally available therefor, dividends, payable either in cash, in
property or in shares of the capital stock of the corporation.
6.6) BOARD OF DIRECTORS' POWERS - The common stock may be allotted
as and when the Board of Directors shall determine, and, under and pursuant
to the laws of the State of Minnesota, the Board of Directors shall have the
power to fix or alter, from time to time, in respect to shares then
unallotted, any or all of the following: Dividend rate; redemption price;
the liquidation price; the conversion rights and the sinking or purchase fund
rights of shares of any class, or of any series of any class, or the number
of shares constituting any series of any class.
ARTICLE 7.
INCORPORATOR
7.1) The name and post office address of the person acting as
incorporator of this corporation is as follows:
<PAGE>
David P. Savoie
5625 Aldrich Avenue South
Minneapolis, Minnesota 55391
ARTICLE 8.
DIRECTORS
8.1) The names and post office addresses of the members of the
first Board of Directors, who shall serve until the first annual meeting of
the shareholders or until their successors shall be elected and qualified are
as follows:
George E. Kline Peter R. Peterson
14715 Minnehaha Place 6005 Erin Terrace
Wayzata, Minnesota 55391 Edina, Minnesota 55435
David P. Savoie
5625 Aldrich Avenue South
Minneapolis, Minnesota 55391
8.2) The Board of Directors is expressly authorized to make and
alter by-laws of this corporation subject to the power of the shareholders to
change or repeal such by-laws provided, the Board of Directors shall not make
or alter any by-laws fixing their number, qualification, or term of office.
ARTICLE 9.
VOLUNTARY TRANSFER OF CORPORATE ASSETS
9.1) A majority of all the shareholders entitled to vote at any
duly constituted meeting of the shareholders shall have the power to
authorize the Board of Directors to sell, lease, exchange or otherwise
dispose of all or substantially all of the property and assets of this
corporation, including its goodwill, upon such terms and conditions and for
such consideration as the Board of Directors deems advisable; to adopt or
reject an agreement of consolidation or merger, provided, however, that
notice of such proposal shall have been mailed to each shareholder entitled
to vote at such meeting at least ten (10) days prior to such meeting, or the
written consent of such shareholder is given to such action as provided by
statute.
ARTICLE 10
AMENDMENT OF ARTICLES
<PAGE>
10.1) A majority of all shareholders entitled to vote at any duly
constituted meeting of the shareholders shall have the power to amend, alter
or repeal the Articles of Incorporation to the extent and manner prescribed
by the laws of the State of Minnesota.
IN WITNESS WHEREOF, I have subscribed my name this ________ day of
September, 1980.
IN THE PRESENCE OF: ---------------------------------
David P. Savoie
- - -------------------------
- - -------------------------
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this 23rd day of September, 1980, before me, a notary public,
within and for Carver County, personally appeared David P. Savoie, to me
known to be the person described in and who executed the foregoing instrument
and acknowledged that he executed the same as his free act and deed.
----------------------------
Notary Public
Susan E. Schmid
<PAGE>
STATE OF MINNESOTA
DEPARTMENT OF STATE
To all to whom these presents shall come, greeting:
WHEREAS, Articles of Incorporation, duly signed and acknowledged
under oath, have been filed for record in the office of the Secretary of
State, on the 3rd day of October, A.D. 1980, for the incorporation of
TMI, INC.
under and in accordance with the provisions of the Minnesota Business
Corporation Act, Minnesota Statutes, Chapter 301.
NOW, THEREFORE, by virtue of the powers and duties vested in me by
law, as Secretary of State of the State of Minnesota, I do hereby certify
that the said
TMI, INC.
is a legally organized corporation under the laws of this state.
Witness my official signature hereunto subscribed
and the Great Seal of the State of Minnesota
hereunto affixed this third day of October in
the year of our Lord one thousand nine hundred
and eighty.
-------------------------------------
Secretary of State
<PAGE>
EXHIBIT 3.2
Bylaws, as amended
<PAGE>
BYLAWS
OF
INTERNATIONAL BUILDING CONCEPTS, LTD.,
A MINNESOTA CORPORATION,
FORMERLY KNOWN AS TMI, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Executive Office. . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . 1
Section 1. Time and Place of Meetings. . . . . . . . . . . . 1
Section 2. Regular Meetings. . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings. . . . . . . . . . . . . . . . . 2
Section 4. Notice of Shareholder's Meetings. . . . . . . . . 2
Section 5. Waiver of Notice. . . . . . . . . . . . . . . . . 3
Section 6. Validation of Defectively Called or Noticed
Meetings. . . . . . . . . . . . . . . . . . . . . 3
Section 7. Notice Defined. . . . . . . . . . . . . . . . . . 3
Section 8. Voting. . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Quorum. . . . . . . . . . . . . . . . . . . . . . 4
Section 10. Action Without Meeting . . . . . . . . . . . . . 4
Section 11. Proxies. . . . . . . . . . . . . . . . . . . . . 4
Section 12. Inspectors of Election . . . . . . . . . . . . . 5
ARTICLE III DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Powers. . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Number and Qualification of Directors . . . . . . 7
Section 3. Term of Office. . . . . . . . . . . . . . . . . . 7
Section 4. No Cumulative Voting. . . . . . . . . . . . . . . 7
Section 5. Resignation and Removal . . . . . . . . . . . . . 7
Section 6. Vacancies . . . . . . . . . . . . . . . . . . . . 7
Section 7. Place of Meeting. . . . . . . . . . . . . . . . . 8
Section 8. Organization Meeting. . . . . . . . . . . . . . . 8
Section 9. Regular Meetings and Special Meetings;
Notice and Waiver . . . . . . . . . . . . . . . . 8
Section 10. Presence at a Meeting . . . . . . . . . . . . . . 8
Section 11. Absent Director . . . . . . . . . . . . . . . . . 9
Section 12. Quorum . . . . . . . . . . . . . . . . . . . . . 9
Section 13. Action of the Board . . . . . . . . . . . . . . . 9
Section 14. Action Without a Meeting . . . . . . . . . . . . 9
Section 15. Adjournment . . . . . . . . . . . . . . . . . . . 9
Section 16. Fees and Compensation . . . . . . . . . . . . . 10
Section 17. Committees . . . . . . . . . . . . . . . . . . 10
Section 18. Committee of Disinterested Persons . . . . . . 10
Section 19. Secrecy Agreement . . . . . . . . . . . . . . . 10
ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Officers. . . . . . . . . . . . . . . . . . . . 12
Section 2. Election. . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PAGE
Section 3. Subordinate Officers, Etc . . . . . . . . . . . 12
Section 4. Removal and Resignation . . . . . . . . . . . . 12
Section 5. Vacancies . . . . . . . . . . . . . . . . . . . 12
Section 6. Chairman of the Board . . . . . . . . . . . . . 13
Section 7. President and Chief Executive Officer . . . . . 13
Section 8. Vice President. . . . . . . . . . . . . . . . . 13
Section 9. Secretary . . . . . . . . . . . . . . . . . . . 13
Section 10. Chief Financial Officer . . . . . . . . . . . . 14
Section 11. Assistant Secretaries and Assistant Financial
Officers. . . . . . . . . . . . . . . . . . . . 14
ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Definitions . . . . . . . . . . . . . . . . . . 15
Section 2. Indemnification . . . . . . . . . . . . . . . . 15
Section 3. Advances. . . . . . . . . . . . . . . . . . . . 16
Section 4. Reimbursement to Witnesses. . . . . . . . . . . 17
Section 5. Determination of Eligibility. . . . . . . . . . 17
Section 6. Change in Applicable Law. . . . . . . . . . . . 17
Section 7. Shareholder Disclosure. . . . . . . . . . . . . 17
Section 8. Nonexclusive Rights . . . . . . . . . . . . . . 18
Section 9. Insurance . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1. Record Date . . . . . . . . . . . . . . . . . . 18
Section 2. Certificate for Shares. . . . . . . . . . . . . 19
ARTICLE VII CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . 19
Section 1. Books and Records . . . . . . . . . . . . . . . 19
Section 2. Inspection of Corporate Records . . . . . . . . 21
Section 3. Financial Statements. . . . . . . . . . . . . . 21
ARTICLE VIII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 1. Power of Board of Directors . . . . . . . . . . 22
Section 2. Power of Shareholders . . . . . . . . . . . . . 22
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 22
Section 1. Checks, Drafts, Etc . . . . . . . . . . . . . . 22
Section 2. Contracts, Etc., How Executed . . . . . . . . . 22
Section 3. Representation of Shares of
Other Corporations. . . . . . . . . . . . . . . 23
Section 4. Construction and Definitions. . . . . . . . . . 23
<PAGE>
BYLAWS
OF
TMI, INC.
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The Board of Directors
shall fix, and may from time to time change, the location of the principal
executive office of TMI, Inc. (the "Corporation"), at any place within or
outside the State of Minnesota. If the principal executive office is outside
the State of Minnesota, and if the Corporation has one or more business
offices in Minnesota, the Board of Directors may fix and designate a
principal business office in Minnesota.
SECTION 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board of directors or the Corporation's President
and Chief Executive Officer at any place or places where the Corporation is
qualified to transact business or where the Board or the Corporation's
President and Chief Executive Officer deem necessary or desirable.
ARTICLE II
MEETINGS OF THE SHAREHOLDERS
SECTION 1. TIME AND PLACE OF MEETINGS. All regular and special
meetings of shareholders shall be held on the day or date and time and place,
within or without the State of Minnesota as may be designated by the
President and Chief Executive Officer or by the Board of Directors or a
person authorized by these Bylaws to call a meeting; PROVIDED, HOWEVER, that
a meeting called by or at the demand of a shareholder pursuant to Sections 2
and 3 of this Article II shall be held in the county where the principal
executive offices of the Corporation is located.
SECTION 2. REGULAR MEETINGS. Regular meeting of shareholders may,
in the Board's sole discretion, be held annually on a date and at such time
as the Board of Directors shall determine. At each regular meeting of the
shareholders, qualified successors for directors who serve an indefinite term
or whose terms have expired or are due to expire within six months after the
meeting shall be elected, reports of the affairs of the Corporation shall be
considered, and any other business may be transacted which is within the
power of the shareholders.
If a regular meeting of shareholders has not been held during the
immediately preceding 15 month period, a shareholder or shareholders holding
three percent (3%) or more of the
<PAGE>
voting power of all shares entitled to vote may demand a regular meeting of
shareholders by written notice of demand given to the President and Chief
Executive Officer or the Chief Financial Officer of the Corporation. Within
30 days after receipt of the demand by one of those officers, the Board shall
cause a regular meeting of shareholders to be called and held on notice no
lat er than ninety (90) days after receipt of the demand, all at the expense
of the Corporation. If the Board fails to cause a regular meeting to be
called and held as required by this paragraph, the shareholder or
shareholders making the demand may call the regular meeting by giving notice
as required by Section 4 of this Article II, all at the expense of the
Corporation.
SECTION 3. SPECIAL MEETINGS. Except as otherwise provided by the
Minnesota Business Corporation Act, a special meeting of the shareholders may
be called at any time and for any purpose by (i) two or more Directors, (ii)
the Chairman of the Board, (iii) the President and Chief Executive Officer,
(iv) the Chief Financial Officer, or (v) by one or more shareholders holding
ten percent (10%) or more of the voting power of all shares entitled to vote,
except that one or more shareholders may only call a special meeting for the
purpose of considering an action to directly or indirectly facilitate or
effect a business combination, including any action to change or otherwise
affect the composition of the board of directors for that purpose, if they
hold 25 percent or more of the voting power of all shares entitled to vote.
A shareholder or shareholders holding the voting power specified in
the preceding paragraph may demand a special meeting of shareholders by
written notice of demand given to the President and Chief Executive Officer
or the Chief Financial Officer of the Corporation and containing the purposes
of the meeting. Within thirty (30) days after receipt of the demand by one of
those officers, the Board shall cause a special meeting of shareholders to be
called and held no later than ninety (90) days after receipt of the demand,
all at the expense of the Corporation. If the Board fails to cause a special
meeting to be called and held as required by this paragraph, the shareholder
or shareholders making the demand may call the meeting by giving notice as
required by Section 4 of this Article II, all at the expense of the
Corporation.
The business transacted at a special meeting is limited to the
purposes stated in the notice of the meeting. Any business transacted at a
special meeting that is not included in those stated purposes is voidable by
or on behalf of the Corporation, unless all the shareholders have waived
notice of the meeting in accordance with Section 5 of this Article II.
SECTION 4. NOTICE OF SHAREHOLDER'S MEETINGS. Notice of all meeting
of shareholders shall be given to every holder of shares entitled to vote,
except where the meeting is an adjourned meeting and the dat e, time and
place of the meeting were announced at the time of adjournment. Unless
otherwise provided by law, all notices of meetings of shareholders shall be
sent or otherwise given not less than five (5) nor more than sixty (60) days
before the date of the meeting. The notice shall specify the date, time and
place of the meeting, and in the case of a special meeting, a statement of
the purposes of the meeting.
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An affidavit of mailing or other means of giving any notice of a
shareholder's meeting may be executed by the Secretary, Assistant Secretary
or agent of the Corporation giving the notice, may be filed and maintained in
the minute book of the Corporation, and, if utilized, shall constitute
conclusive and binding evidence that such notices are mailed or delivered as
specified therein.
SECTION 5. WAIVER OF NOTICE. A shareholder may waive notice of a
meeting of shareholders. A waiver of notice by a shareholder entitled to
notice is effective whether given before, at, or after the meeting, and
whether given in writing, orally, or by attendance. Attendance by a
shareholder at a meeting is a waiver of notice of that meeting, except where
the shareholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened, or object
before a vote on an item of business because the meeting is not lawfully
called or convened, or object before a vote on an item of business because
the item may not lawfully be considered at that meeting and does not
participate in the consideration of the item at the meeting.
SECTION 6. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS.
The transactions of any meeting of shareholders, either regular or special,
however called and noticed, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum be present either in person or
by proxy, and if, either before, during or after the meeting each of the
persons entitled to vote, not present in person or by proxy, or who, though
present, has, at the beginning of the meeting, properly objected to the
transaction of any business because the meeting was not lawfully called or
convened, or to particular matters of business of any business because the
meeting was not lawfully called or convened, or to particular matters of
business legally required to be included in the notice, but not so included,
signs a written waiver of notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SECTION 7. NOTICE DEFINED. "Notice" is given by a shareholder to
the Corporation or an officer of the Corporation when in writing and mailed
or delivered to the Corporation or the officer at the registered office or
principal executive office of the Corporation. In all other cases, "notice"
is given to a person when mailed to the person at an address designated by
the person or at the last known address of the person, or when communicated
to the person orally, or when handed to the person, or when left at the
office of the person with a clerk or other person in charge of the office, or
if there is no one in charge, when left in a conspicuous place in the office,
or if the office is closed or the person to be notified has no office, when
left at the dwelling house or usual place of abode of the person with some
person of suitable age and discretion then residing therein. Notice by mail
is given when deposited in the United States mail with sufficient postage
affixed. Notice is deemed received when it is given.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at that address, all future notices or reports shall be deemed to
have been duly given without further mailing if such notices or reports shall
be available to the shareholder upon written
<PAGE>
demand by the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the
notice.
SECTION 8. VOTING. The shareholders entitled to vote at any meeting
of the shareholders shall be determined in accordance with the provisions of
Section 1 of Article VI. Unless otherwise provided in the Corporation's
Articles of Incorporation, each shareholder has one vote for each share held,
and the vote may be by voice vote or by ballot. The shareholders shall take
action by the affirmative vote of the holders of a majority of the voting
power of the shares present and entitled to vote, unless the vote of a
greater number or voting by classes is required by the Articles of
Incorporation or law. Except as provided in the immediately following
paragraph, a holder of shares entitled to vote may vote any portion of the
shares in any way the shareholder chooses. If a shareholder votes without
designating the portion or number of shares voted in a particular way, the
shareholder is deemed to have voted all of the shares in that way.
Shares owned by two or more shareholders may be voted by any one of
them unless the Corporation receives written notice from any one of them
denying the authority of that person to vote those shares. Unless the
Articles of Incorporation or these Bylaws specifically provide otherwise, no
shareholder shall be entitled to cumulate votes for directors or for any
other matters to come before a vote of the shareholders.
SECTION 9. QUORUM. Unless otherwise provided in the Corporation's
Articles of Incorporation, the presence in person or by proxy of the holders
of a majority of the voting power of shares entitled to vote at any meeting
shall constitute a quorum for the transaction of business. If a quorum is
present when a duly called or held meeting is convened, the shareholders
present may continue to transact business until adjournment, even though the
withdrawal of a number of shareholders originally present leaves less than
the proportion or numbers otherwise required for a quorum.
SECTION 10. ACTION WITHOUT MEETING. Any action permitted or
required to be taken at a meeting of the shareholders may be taken without a
meeting by written action signed by all of the shareholders entitled to vote
on that action. The written action is effective when it has been signed by
all of those shareholders, unless a different effective time is provided in
the written action. Such written action or actions shall be filed with the
minutes of the proceedings of the shareholders and shall have the same force
and effect as a unanimous vote of the shareholders.
SECTION 11. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so either in person or by casting or
authorizing the casting of a vote by filing a written appointment of proxy
with the Secretary of the Corporation at or before the meeting at which the
appointment is to be effective. An appointment of a proxy for shares held
jointly by two or more shareholders is valid if signed by any one of them,
unless the Secretary of the Corporation receives from any of those
shareholders written notice either denying the authority of that person to
appoint a proxy or appointing a different proxy. Any proxy duly executed is
not revoked and continues in full force and effect until, (i) a written
notice of the termination of appointment is filed with the
<PAGE>
Secretary of the Corporation, (ii) a new written notice of the termination of
appointment is filed with the Secretary of the Corporation, or (iii) written
notice of the death or incapacity of the maker of such proxy is received by
the Secretary of the Corporation before the proxy exercises the authority
under the appointment; PROVIDED, HOWEVER, that no such proxy shall be valid
after the expiration of eleven (11) months from the date if its execution
unless a longer period is expressly provided in the appointment, and,
PROVIDED, FURTHER, that an appointment is not revocable if coupled with an
interest except in accordance with the terms of an agreement, if any, between
the parties to the appointment.
Unless the appointment specifically provides otherwise, if two (2)
or more persons are appointed as proxies for a shareholder (i) any one of
them may vote the shares on each item of business in accordance with the
specific instructions contained in the appointment and (ii) if no specific
instructions are contained in the appointment with respect to voting the
shares on a particular item of business, the shares shall be voted as a
majority of such appointed persons determine.
SECTION 12. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or any
adjournment thereof. If inspectors of election are not appointed, the
chairman of any such meeting may make such appointment at the meeting. The
number of inspectors shall be either one or three. In case any person
appointed as an inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the Board of Directors in advance of
the meeting, or at the meeting by the chairman of the meeting.
The duties of such inspector(s) shall be as follows:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and resolve all challenges and questions in any way arising
in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
<PAGE>
The inspector(s) of electio shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspector(s) is prima facie
evidence of the facts stated therein.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the limitation of the Corporation's
Articles of Incorporation, these Bylaws and the Minnesota Business
Corporation Act as to action to be or which may be authorized or approved by
the shareholders, and subject to the provisions of any shareholder control
agreement pursuant to Subdivision 2 of Section 302A.457 of the Minnesota
Business Corporations Act, all corporate powers shall be exercised by or
under the direction of, and the business and affairs of the Corporation shall
be managed by or under the direction of, the Board of Directors. The Board
of Directors may delegate the management of the day-to-day operations of the
business of the Corporation to a management company or other person provided
that the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised under the direction of the Board of
Directors. Subject to the above limitations, it is hereby expressly declared
that the directors shall have the following powers in addition to the other
powers enumerated in these Bylaws or the Minnesota Business Corporation Act:
(a) To select and remove all officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with the law, the Articles of Incorporation or the Bylaws,
fix their compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not
inconsistent with law, or the Articles of Incorporation or the Bylaws,
as they may deem best.
(c) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock; and to alter the form of such seal and of
such certificates from time to time, as in their judgment they may deem
best, provided such seal and such certificates shall at all times comply
with the provision of law.
(d) To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be lawful in consideration of
money paid, labor done or services actually rendered, debts or securities
cancelled or tangible or intangible property actually received;
(e) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes,
<PAGE>
bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or
other evidences of debt and securities therefor.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors to be elected by the incorporates shall be two (2).
Thereafter, the number of directors to be elected at any regular or special
meeting of shareholders, or by appointment by the directors if a vacancy
exists, shall be determined by the Board of Directors. A director must be a
natural person, but need not be a shareholder.
SECTION 3. TERM OF OFFICE. The directors shall be elected at each
regular meeting of shareholders, but, if any such regular meeting is not held
or the directors are not elected thereat, the directors may be elected at any
special meeting of the shareholders held for that purpose. All directors
shall hold office until the next succeeding regular meeting and until their
respective successors are elected and qualified, or until their death,
resignation, removal or disqualification.
SECTION 4. NO CUMULATIVE VOTING. No shareholder shall have the
right to cumulative voting in the election of directors or in any and all
other matter(s) to come to a vote before the shareholders.
SECTION 5. RESIGNATION AND REMOVAL. Unless the notice specifies a
later time for the effectiveness of such resignation, any director may resign
effective upon giving written notice to the President and Chief Executive
Officer, the Chief Financial Officer or the Board of Directors of the
Corporation. If the resignation is effective at a future time, the Board or
the shareholders shall have the power to elect a successor to take office
when the resignation is to become effective. The resignation is effective
without acceptance.
A director may be removed at any time, with or without cause, by the
Board of Directors if a majority of remaining directors present affirmatively
vote to remove the director.
Any one or all of the directors may be removed at any time, with or
without cause, by the affirmative vote of the holders of the proportion or
number of the voting power of the shares of the classes or series the
directors represent sufficient to elect them.
New directors may be elected at a meeting at which directors are
removed.
Notwithstanding any other provisions of these Bylaws to the
contrary, no reduction of the authorized number of directors shall have the
effect of removing any directory prior to the expiration of his term of
office.
SECTION 6. VACANCIES. A vacancy in the Board of Directors shall be
deemed to exist in case of the death, resignation, removal or
disqualification of any director, or if the Board of Directors by resolution
declares vacant the office of a director who has been declared of unsound
mind by order of court or convicted of a felony, if the authorized number of
directors be increased,
<PAGE>
or if the shareholders fail, at any regular or special meeting of
shareholders at which any director or directors are to be elected, to elect
the full authorized number of directors to be voted for at that meeting.
Vacancies in the Board of Directors may be filled by a majority of
the remaining directors, though less than a quorum, or by the sole remaining
director, and each director so elected shall hold office until his successor
is elected at a regular or special meeting of the shareholders and qualifies.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors.
SECTION 7. PLACE OF MEETING. Regular and special meetings of the
Board of Directors may be held at any place, within or without the State of
Minnesota, designated in the notice of the meeting or, if not stated in the
notice, or if there is no notice, at any place designated by resolution of
the Board or by written consent of all members of the Board. In the absence
of such designation, regular or special meetings shall be held at the
principal executive office of the Corporation.
SECTION 8. ORGANIZATION MEETING. Immediately following each regular
meeting of shareholders, the Board of Directors shall hold a regular meeting
at the place of regular meeting of shareholders or at such other place as
shall be fixed by the Board of Directors for the purposes of organization,
any desired election of officers, and the transaction of other business.
Notice of such meeting shall not be required.
SECTION 9. REGULAR MEETINGS AND SPECIAL MEETINGS; NOTICE AND WAIVER.
The organization, other regular and all special meetings of the Board of
Directors may be called by any director by giving five (5) days' notice to
all directors of the time and place of the meeting. The notice need not
state the purpose of the meeting unless the Articles of Incorporation
otherwise require.
A director may waive notice of a meeting of the Board. A waiver of
notice by a director entitled to notice is effective whether given before,
at, or after the meeting, and whether given in writing, orally, or by
attendance. Attendance by a director at a meeting is a waiver of notice of
that meeting, except where the director objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened and does not participate thereafter in the meeting.
SECTION 10. PRESENCE AT A MEETING. A director shall be deemed
present and in attendance at a meeting if he attends in person or through
electronic communications. A conference among directors by any means of
communication through which the directors may simultaneously hear each other
during the conference constitutes a Board meeting, if the same notice is
given of the conference as would be required for a meeting, and if the number
of directors participating in the conference would be sufficient to
constitute a quorum at a meeting. Participation in a meeting by that means
constitutes attendance in person at the meeting.
<PAGE>
A director may participate in a Board meeting not described in the
immediately preceding paragraph by any means of communicating through which
the director, other directors so participating, and all directors physically
present at the meeting may simultaneously hear each other during the meeting.
Participation in a meeting by that means constitutes attendance in person at
the meeting.
SECTION 11. ABSENT DIRECTOR. A director may give advance written
consent or opposition to a proposal to be acted on at a Board meeting. If
the director is not present at the meeting, consent or opposition to a
proposal does not constitute attendance for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote
in favor of or against the proposal and shall be entered in the minutes or
other record of action at the meeting, if the proposal acted on at the
meeting is substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected.
SECTION 12. QUORUM. Attendance at a meeting of the Board of
Directors of a majority of the directors currently holding offices
constitutes a quorum for the transaction of business. If a quorum is in
attendance when a duly called or held meeting is convened, the directors
originally in attendance may continue to transact business until adjournment,
even though the withdrawal of a number of directors originally in attendance
leaves less than the number otherwise required for a quorum.
SECTION 13. ACTION OF THE BOARD. Except where the Minnesota
Business Corporations Act or the Articles of Incorporation require the
affirmative vote of a larger portion or number, the Board of Directors shall
take action by the affirmative vote of a majority of directors present at a
duly held meeting.
SECTION 14. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at a meting of the Board of Directors may be taken by
written action signed by all of the directors. Unless a different date is
provided in the written action, the written action is effective when signed
by the required number of directors.
When written action is taken by less than all directors, all
directors shall be notified immediately of its text and effective date.
Failure to provide the notice does not invalidate the written action. A
director who does not sign or consent to the written action has no liability
for the action or actions taken thereby. Such written consent or consents
may be filed with the minutes of the proceedings of the Board.
SECTION 15. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place until a quorum is present. Notice of the time and place of holding
an adjourned meeting need not be given, other than by announcement at the
meeting at which adjournment is taken.
<PAGE>
SECTION 16. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and
such reimbursement for expenses, as may be filed or determined by resolution
of the Board.
SECTION 17. COMMITTEES. The Board of Directors may, by a resolution
adopted by a majority of the authorized member of directors, establish an
executive and other committees having the authority of the Board in the
management of the business of the Corporation only to the extent provided in
the resolution. Each committee shall consist of two or more natural persons,
who need not be directors, who shall serve at the pleasure of the Board. The
Board may designate one or more natural persons as alternate members. The
appointment of members or alternate members of a committee requires the vote
of a majority of the number of directors present. Committees are subject a
tall times to the direction and control of the Board except as provided in
this Section 17. In the absence of any such direction or control, such
committee shall have the power to prescribe the manner i which its
proceedings shall be conducted. Unless the Board or such committee shall
otherwise provide, the provisions of these Bylaws and the Minnesota Business
Corporations Act applicable to meetings and actions of the Board shall
govern. Minutes shall be kept of each meeting of each committee and shall be
made available upon request to members of the committee and to any director.
The establishment of, delegation of authority to, and action by a
committee does not alone constitute compliance by a director with his or her
required standard of conduct. Committee members are deemed to be directors
for purposes of Article V of these bylaws and Article VII of the Articles of
Incorporation and for purposes of Sections 302A.251, 302A.255 and 302A.521 of
the Minnesota Business Corporations Act.
SECTION 18. COMMITTEE OF DISINTERESTED PERSONS. The Board may
establish a committee composed of two or more disinterested directors or
other disinterested persons to determine whether it is in the best interests
of the Corporation to pursue a legal right or remedy of the Corporation and
whether to cause the dismissal or discontinuance of a particular proceeding
that seeks to assert a right or remedy on behalf of the Corporation. For
purposes of this section, a director or other person is "disinterested" if
the director or other person is not the owner of more than one percent of the
outstanding shares of, or a present or former officer, employee, or agent of,
the Corporation or of a related corporation and has not been made or
threatened to be made party to the proceeding in question. The committee,
once established, is not subject to the direction or control of, or
termination by, the Board of Directors. A vacancy on the committee may be
filled by a majority vote of the remaining committee members. The good-faith
determinations of the committee are binding upon the Corporation and its
directors, officers and shareholders. The committee terminates when it
issues a written report of its determination to the Board of Directors.
SECTION 19. SECRECY AGREEMENT. By accepting the nomination or
position as a director of the Corporation, each director agrees to be bound
by the provisions of these Bylaws including the secrecy provisions of the
Section 19.
<PAGE>
While serving as a director of the Corporation, each director shall
not, without the express prior authorization of the Corporation's Board of
Directors, directly or indirectly, other than in the performance of his
duties required by these Bylaws or by law:
(a) perform or render any services of a business, professional or
commercial nature, relating to services or products similar to those of
the Corporation;
(b) engage in any activity directly or indirectly in competition
with or adverse to the Corporation's business or welfare, whether
individually or as a shareholder, partner, officer, director, employee or
agent;
(c) engage in any activity for the purpose of influencing or
attempting to influence the Corporation's customers either directly or
indirectly, to conduct business with any business enterprise in
competition with the Corporation;
(d) undertake or participate in any planning for or organization of
any business activity that is or will be in competition with the
Corporation in any field(s) or area(s) in which the director has worked or
with which the director has come into contact or of which the director has
gained knowledge during the term of office as a director with the
Corporation.
No director shall at any time while serving as a director of the
Corporation either directory or indirectly use or divulge, disclose or
communicate to any person, firm or corporation, in any manner whatsoever,
any confidential information of any kind, nature or description concerning
any matters affecting or relating to the business of the Corporation unless
the Corporation gives its prior written consent or the disclosure is part of
the director's performance of his duties with the Corporation. By way of
example only and without limiting the generality of the foregoing, the term
"confidential information" as used in this Bylaw provision includes (i) the
names or practices of any o the Corporation's customers or clients, (ii) the
name of any of its vendors, suppliers or subcontractors, (iii) the names or
practices of any of its investors, owners, stockholders, creditors, employees
or persons associated directly or indirectly with the Corporation, (iv) any
and all ideas, concepts, notes, documentation, etc. relating to the business
activity of the Corporation, (v) the cost of materials or other items
purchased by the Corporation and the prices it obtains or has obtained or at
which it sells or has sold its products or services, (vi) descriptions of
organizational techniques or topics, (vii) lists or other written records of
any kind used in the Corporation's business, (viii) proprietary information
paid to employees and other terms of employment, (ix) any and all trade
secrets and proprietary information connected with the Corporation's
business, or (x) any other confidential or proprietary information, about or
concerning the Corporation's business, its manner of operation, or other
confidential data of any kind, nature or description.
Each director shall promptly disclose to the Corporation all
discoveries, designs, improvements, inventions, ideas and data, whether or
not patentable or registerable under copyright or similar statutes, made or
conceived or reduced to practice or learned by the director whether alone
<PAGE>
or jointly with others, during the term of his relationship with the
Corporation that (a) are related to or useful in the business of the
Corporation, (b) result from tasks performed by the director or (c) result
from the use of premises or information owned, leased or contracted for by
the Corporation (all such items being referred to as "inventions"). All
inventions shall be the sole property of the Corporation and its assigns, and
the Corporation and its assigns shall be the sole owner of all patents,
copyrights, and other rights in connection therewith.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President and Chief Executive Officer, a Chief Financial Officer, a Secretary
and, if desired, one or more Vice Presidents. The Corporation may also have,
at the discretion of the Board of Directors, a Chairman of the Board, one or
more assistant financial officers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article.
Any number of offices may be held by the same person.
SECTION 2. ELECTION. The officers of the Corporation, except such
officers as may be appointed by the President and Chief Executive Officer in
accordance with the provisions of Section 3 or Section 5 of this Article,
shall be chosen by the Board of Directors, and each shall serve at the
pleasure of the Board.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint, and may empower the President and Chief Executive Officer to
appoint, such other officers as the business of the Corporation may require,
each of whom shall hold office, for such period, have such authority and
perform such duties as are provided in the Bylaws or as the Board of
Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Subject to the rights, if any,
of any officer under any contract of employment, any officer may be removed,
at any time, with or without cause, by resolution approved by the affirmative
vote of a majority of the directors present, or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, to the President and Chief Executive Officer, or to the
Secretary, if any, of the Corporation, without prejudice, however, to the
rights, if any, of the Corporation under any contract to which such officer
is a party. Any such resignation shall take effect without acceptance on the
date of the receipt of such notice unless a later time is specified therein.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may, or in the case
of a vacancy in the office of President
<PAGE>
and Chief Executive Officer or Chief Financial Officer shall be filled for
the unexpired portion of the term in the manner prescribed in the Bylaws for
regular appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors and exercise and perform such other powers and duties
as may be from time to time assigned to him by the Board of Directors or
prescribed in the Bylaws. He shall preside at all meetings of the
shareholders.
SECTION 7. PRESIDENT AND CHIEF EXECUTIVE OFFICER. Subject to such
supervisory powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, if there be such an officer, the President and Chief
Executive Officer shall be the general manager of the business of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of
the Corporation. The President and Chief Executive Officer shall have the
general powers and duties of management usually vested in the office of the
President and Chief Executive Officer of a Corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
Bylaws as prescribed by the Statute.
SECTION 8. VICE PRESIDENT. In the absence or disability of the
President, the Executive Vice President, if any, or if not such Executive
Vice President be elected, the Vice Presidents, if any, in order of their
rank as fixed by the Board of Directors or, if not ranked, the Vice President
designated by the Board of Directors, shall perform all the duties of the
President and Chief Executive Officer, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President and
Chief Executive Officer. The Vice Presidents shall have such other powers
and perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or the Bylaws.
SECTION 9. SECRETARY. The Secretary, if any, shall record or cause
to be recorded, and shall keep or cause to be kept, at the principal
executive office and such other place as the Board of Directors may order, a
book of minutes of actions taken at all meetings of shareholders, the Board
of Directors and its committees, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at Board and committee meetings, the number
of shares present or represented at shareholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent, if
any, a share register, or duplicate share register, showing the names of the
shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
Bylaws to be given, and he shall keep the
<PAGE>
seal of the Corporation, if one be adopted, in safe custody, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or by the Bylaws.
The Secretary may keep, or cause to be kept, as the Corporation's
principal executive office, or if its principal executive office is not in
the State of Minnesota, at its principal business office in Minnesota, the
original or a copy of the Bylaws as amended to date, which shall be open to
inspection by shareholders at all reasonable times during office hours. If
the principal executive office of the Corporation is outside the State of
Minnesota and the Corporation has no principal business office in Minnesota,
the Secretary shall, upon the written request of any shareholder, furnish to
that shareholder a copy of the Bylaws as amended to date.
SECTION 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct amounts and financial records of the properties and business
transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares and, subject to the control of the Board of Directors,
shall have the general powers and duties of management usually vested in the
office of the Chief Financial Officer or Treasurer.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the President and Chief Executive Officer and
directors, whenever they request it, an account of all of his transactions as
Chief Financial Officer and of the financial condition of the Corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
SECTION 11. ASSISTANT SECRETARIES AND ASSISTANT FINANCIAL OFFICERS.
In the absence of the Secretary or in the event of his death, inability or
refusal to act, the assistant secretaries, if any, in order of their rank as
fixed by the Board of Directors or, if not ranked, the assistant Secretary
designated by the President and Chief Executive Officer or Board of
Directors, shall perform the duties and exercise the authority of the
Secretary.
In the absence of the Chief Financial Officer or in the event of his
death, inability or refusal to act, the assistant financial officers, if any,
in order of their rank as fixed by the Board of Directors, or if not ranked,
the assistant Secretary designated by the President and Chief Executive
Officer or Board of Directors, shall perform the duties and exercise the
authority of the Chief Financial Officer.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
SECTION 1. DEFINITIONS. For purposes of this Article, the following
definitions apply:
(a) "corporation" or "Corporation" includes a domestic or foreign
corporation that was the predecessor of the Corporation in a merger or other
transaction in which the predecessor's existence ceased upon consummation of
the transaction.
(b) "official capacity" means (i) with respect to a director, the
position of director in a corporation; (ii) with respect to a person other
than a director, the elective or appointive office or position held by an
officer, member of a committee of the Board, or the employment relationship
undertaken by an employee of the Corporation; and (iii) with respect to a
director, officer, or employee of the Corporation who, while a director,
officer, or employee of the Corporation, is or was serving at the request of
the Corporation or whose duties in that position involved or involved service
as a director, officer, partner, trustee, employee or agent of another
organization or employee benefit plan, the position of that person as a
director, officer, partner, trustee, employee, or agent, as the case may be,
of the other organization or employee benefit plan.
(c) "proceeding" means a threatened, pending or completed civil,
criminal, administrative, arbitration, or investigative proceeding, including
a proceeding by or in the right of the Corporation.
(d) "special legal counsel" means counsel who has not represented
the Corporation or a related corporation, or a director, officer, member of a
committee of the Board, or employee, whose indemnification is in issue.
SECTION 2. INDEMNIFICATION. At the discretion of the Board of
Directors, the Corporation may indemnify any person made or threatened to be
made a party to any proceeding by reason of the former or present official
capacity of the person against judgments, penalties, fines (including,
without limitation, excise taxes assessed against the person with respect to
an employee benefit plan), settlements, and reasonable expenses (including
attorneys' fees and disbursements), incurred by the person in connection with
the proceeding, if, with respect to acts or omissions of the person
complained of in the proceeding, the person:
(i) has not been indemnified by another organization or employee
benefit plan for the same judgements, penalties, fines (including,
without limitation, excise taxes assessed against the Director with
respect to an employee benefit plan), settlements, and reasonable
expenses (including attorneys' fees and disbursements)
<PAGE>
incurred by the person in connection with the proceeding with respect
to the same acts or omissions;
(ii) acted in good faith;
(iii) received no improper personal benefits and complied with
the conflict of interest provisions of Minnesota Statutes
Section 302A.255, if applicable;
(iv) in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful;
(v) in the case of acts or omissions occurring in the official
capacity described in Section 1, paragraph (b), clause (i) or (ii)
of this Article V, reasonably believed that the conduct was in the
best interest of the Corporation; and
(vi) in the case of acts or omissions occurring in the official
capacity described in Section 1, paragraph (b), clause (i) or (iii)
of this Article V, reasonably believed that the conduct was not
opposed to the best interest of the Corporation.
If the person's acts or omissions complained of in the proceeding
relate to conduct as a director, officer, trustee, employee or agent of an
employee benefit plan, the conduct is not considered to be opposed to the
best interests of the Corporation if the person reasonably believed that the
conduct was in the best interest of the participants or beneficiaries of the
employee benefit plan.
The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent does not, of
itself, establish that the person did not meet the criteria set forth in this
Section 2.
SECTION 3. ADVANCES. At the discretion of the Board of Directors,
if a person is made or threatened to be made a party to a proceeding, the
Director is entitled, upon written request to the Corporation, to payment tor
reimbursement by the Corporation or reasonable expenses, including attorneys'
fees and disbursements, incurred by the Director in advance of the final
disposition of the proceeding (i) upon receipt by the Company of a written
affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 1 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Company, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (ii) after determination that the facts then
known to those making the determination would not preclude indemnification
under this Article V. The written undertaking require by clause (i) of this
Section 3 is an unlimited general obligation of the person making it, but
need not be secured and shall be accepted without reference to financial
ability to make the repayment.
<PAGE>
SECTION 4. REIMBURSEMENT TO WITNESSES. Notwithstanding anything in
this Article V to the contrary, at the discretion of the Board of Directors,
the Corporation may reimburse expenses, including, without limitation,
attorneys' fees and disbursements, incurred by a person in connection with an
appearance as a witness in a proceeding at a time when the person has not
been made or threatened to be made a party to a proceeding.
SECTION 5. DETERMINATION OF ELIGIBILITY. All determinations whether
indemnification of a person is required because the criteria set forth in
Section 2 have been satisfied and whether a person is entitled to payment or
reimbursement of expenses in advance of the final disposition of a proceeding
as provided in Section 3 shall be made: (i) by the Board of Directors by a
majority of a quorum (directors who are at the same time parties to the
proceeding shall not be counted for determining either a majority or the
presence of a quorum); (ii) if a quorum under clause (i) cannot be obtained,
by a majority of a committee of the Board, consisting solely of two or more
directors not at the time panties to the proceeding, duly designated to act
in the matter by a majority of the full Board including directors who are
parties; (iii) if a determination is not made under clause (i) or (ii), by a
special legal counsel, selected either by a majority of the Board or a
committee by vote pursuant to clause (i) or (ii) or, if the requisite quorum
of the full Board cannot be obtained and the committee cannot be established,
by a majority of the full Board including directors who are parties; (iv) if
a determination is not made under clauses (i) to (iii), by the shareholders,
excluding the votes of shares held by parties to the proceeding; or (v) if an
adverse determination is not made under clauses (i) to (iv) or under the
following paragraph within 60 days after the termination of a proceeding or
after a request for an advancement of expenses, as the case may be, by a
court in the State of Minnesota, which may be the same court in which the
proceeding involving the person's liability took place, upon application of
the person and any notice the court requires.
With respect to a person who is not, and was not at the time of the
acts or omissions complained of in the proceedings, a director, officer, or
person possessing, directly or indirectly, the power to direct or cause the
direction of the management or policies of the Corporation, the determination
whether indemnification of this person is required because the criteria set
forth in Section 2 have been satisfied and whether this person is entitled to
payment or reimbursement of expenses in advance of the final disposition of a
proceeding as provided in Section 3 may be made by an annually appointed
committee of the Board, having at least one member who is a director. The
committee shall report at least annually to the Board of Directors concerning
its actions.
SECTION 6. CHANGE IN APPLICABLE LAW. Notwithstanding anything in
this Article V to the contrary, at the discretion of the Board of Directors,
the Corporation may provide the maximum indemnification of a person by the
Corporation permissible under Minnesota law, including to the extent
Minnesota law is revised, amended or interpreted to permit broader
indemnification protection of a person than that which this Article provides
(this Article shall be deemed to allow for such broader indemnification of
the person by the Company).
SECTION 7. SHAREHOLDER DISCLOSURE. If the Corporation indemnifies
or advances expenses to a person in accordance with this article in
connection with a proceeding by or on behalf
<PAGE>
of the Corporation, the Corporation shall report to the shareholders in
writing the amount of the indemnification or advance and to whom and on whose
behalf it was paid not later than the next meeting of shareholders.
SECTION 8. NONEXCLUSIVE RIGHTS. Indemnification provided by this
Article is not exclusive to any other rights to which a person may be
entitled under the Articles of Incorporation, Bylaws, Agreement, vote of
disinterested Directors, or otherwise, both as to actions in the person's
official capacity and as to actions in another capacity while holding such
office, and shall continue after the person has ceased to serve in an
official capacity and shall inure to the benefits of the heirs and
administrators of such a person.
SECTION 9. INSURANCE. In the event of a determination by the Board
of Directors of the Corporation to purchase such insurance, the Corporation
may purchase and maintain insurance on behalf of a person in that person's
official capacity against any liability asserted against or incurred by the
person in or arising from that capacity, whether or not the Corporation would
have been required to indemnify the person against that liability under the
provisions of this Article V.
ARTICLE VI
CAPITAL STOCK
SECTION 1. RECORD DATE. The Board of Directors may fix a date in
the future as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders or entitled
to give consent to corporate action in writing without a meeting, to receive
any report, to receive any dividend or distribution, or any allotment of
rights, or to exercise rights in respect to any change, conversion, or
exchange of shares. The record date so fixed shall be not more than sixty
(60) days nor less than five (5) days prior to the date of any meeting, nor
more than sixty (60) days prior to any other event for the purpose of which
it is fixed. When a record date is so fixed, only shareholders of record at
the close of business on that date are entitled to notice of and to vote at
any such meeting, to give consent without a meeting, to receive a report, to
receive a dividend, distribution, or allotment of rights, or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation after the record date, except as otherwise provided
in the Articles of Incorporation, Bylaws or the Minnesota Business
Corporations Act.
If no record date is fixed:
(i) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the date notice
is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held;
(ii) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, when
no prior action by the Board
<PAGE>
of Directors is necessary, shall be at the close of business on the
business day next preceding the day on which the first written consent
is given; and
(iii) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the
sixtieth day prior to the date of such other action, whichever is
later.
A resolution approved by the affirmative vote of a majority of the
directors present may establish procedures whereby a shareholder may certify
in writing to the Corporation that all or a portion of the shares registered
in the name of the shareholders are held for the account of one or more
beneficial owners. Upon receipt by the Corporation of the writing, the
persons specified as beneficial owners, rather than the actual shareholder,
are deemed the shareholders for the purposes specified in writing.
A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting.
SECTION 2. CERTIFICATE FOR SHARES. Every holder of shares in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the President and Chief Executive Officer and the Secretary,
if any, or if not signed, have a facsimile signature of such person placed
upon the certificate, certifying the number of shares and the class or series
of shares owned by the shareholder. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
Except as provided by law or in this Section 2, no new certificates
for shares shall be issued to replace an old certificate unless the latter is
surrendered to the Corporation and cancelled at the same time. Except as
prohibited by law, including the Minnesota Business Corporation Act, Section
302A.419, the Secretary may, in case any share certificate or certificate for
any other security is lost, stolen or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Secretary may
require, including provisions for indemnification of the Corporation secured
by a bond or other adequate security sufficient to protect the Corporation
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
ARTICLE VII
CORPORATE RECORDS
SECTION 1. BOOKS AND RECORDS. The Corporation shall keep at its
principal executive office, or at another place or places within the United
States determined by the Board of
<PAGE>
Directors, a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of shares held
by each shareholder. The Corporation shall also keep, at its principal
executive office, or at another place or places within the United States
determined by the Board, a record of the dates on which certificates or
transaction statements representing shares were issued.
The Corporation shall keep at its principal executive office, or, if
its principal executive office is outside of the State of Minnesota, shall
make available at its registered office within ten days after receipt by the
Secretary of the Corporation of a written demand for them made by a person
described in Section 2 of this Article VII, originals or copies of:
(a) Records of all proceedings for the last three years;
(b) Records of all proceedings of the Board of Directors for the last
three years;
(c) The current Articles of Incorporation, as amended;
(d) The current Bylaws, as amended;
(e) Financial statements required by Section 4 of this Article and
the financial statement for the most recent interim period prepared in the
course of the operation of the Corporation for distribution to the
shareholders or to a governmental agency as a matter of public record;
(f) Reports made to shareholders generally within the last three years;
(g) A statement of the names and usual business addresses of its
directors and principal officers; and
(h) Certain voting trust agreements and shareholder control
agreements as required by law.
The records maintained by the Corporation, including its share
register, financial records and minute books, may utilize any information
storage technique (including punched holes, printed or magnetized spots, or
micro-images) even though that makes them illegible visually, if the records
can be converted accurately and within a reasonable time, into a form that is
legible visually and whose contents are assembled by related subject matter
to permit convenient use by people in the normal course of business. The
Corporation will convert any of the records referred to in this paragraph
upon the request of a person entitled to inspect them, and the expense of the
conversion shall be borne by the person entitled to inspect and requesting
the records. A copy of the conversion shall be accepted for all purposes to
the same extent as the existing or original records would be if they were
legible visually.
<PAGE>
SECTION 2. INSPECTION OF CORPORATE RECORDS. If the Corporation is
not publicly held, a shareholder, beneficial owner, or a holder of a voting
trust certificate, has an absolute right, upon written demand, to examine and
copy, in person or by a legal representative, at any reasonable time, the
Corporation's share register and records listed in Section 1, subdivisions
(a) through (h) of this Article VII. If the Corporation is not publicly
held, a shareholder, beneficial owner, or a holder of a voting trust
certificate has the right, upon written demand, to examine and copy, in
person or by a legal representative, other corporate records at any
reasonable time only if the shareholder, beneficial owner, or holder of a
voting trust certificate demonstrates a proper purpose for the examination.
If the Corporation is publicly held, a shareholder, beneficial
owner, or a holder of a voting trust certificate has, upon written demand
stating the purpose an acknowledged or verified in the manner provided in
Chapter 358 of the Minnesota Statutes, the right at any reasonable time to
examine and copy the Corporation's share register and other corporate records
upon demonstrating the stated purpose to be a proper purpose. The
acknowledged or verified demand must be directed to the Corporation at its
registered office in the State of Minnesota or at its principal place of
business.
A shareholder, beneficial owner, or holder of a voting trust
certificate who has gained access under this Section to any corporate record
including the share register may not use or furnish to another for use the
corporate record or a portion of the contents for any purpose other than a
proper purpose.
For purposes of this Section, a "proper purpose" is one reasonably
related to the person's interest as a shareholder, beneficial owner, or
holder of a voting trust certificate of the Corporation. Copies of the share
register and all documents referred to in Section 1, subparagraphs (a)
through (h), if required to be furnished under this Section, shall be
furnished at the expense of the Corporation. In all other cases, the
Corporation may charge the requesting party a reasonable fee to cover the
expenses of providing the copy.
Every Director shall have the absolute right at any reasonable time
to inspect all books, records and documents of every kind and to inspect the
physical properties of the Corporation. Such inspection by a Director may be
made in person or by agent or attorney and the right of inspection includes
the right to copy, photograph and make extracts.
SECTION 3. FINANCIAL STATEMENTS. The Corporation shall keep
appropriate and complete financial records. The Corporation shall, upon
written request by a shareholder, furnish annual financial statements,
including at least a balance sheet as of the end of each fiscal year and a
statement of income for the fiscal year, which shall be prepared on the basis
of accounting methods reasonable in the circumstances and may be consolidated
statements of the Corporation and one or more of its subsidiaries, if any.
In the case of statements audited by a public accountant, each copy shall be
accompanied by a statement of the Chief Financial Officer or other person in
charge of the Corporation's financial records stating the reasonable belief
of the person that the financial statements
<PAGE>
were prepared in accordance with accounting methods reasonable in the
circumstances, describing the basis of presentation, and describing any
respects in which the financial statements were not prepared on a basis
consistent with those prepared for the previous year.
ARTICLE VIII
AMENDMENTS
SECTION 1. POWER OF BOARD OF DIRECTORS. Unless otherwise provided
by the Articles of Incorporation, new Bylaws may be adopted or these Bylaws
may be amended or repealed only by the affirmative vote of a majority of the
directors; PROVIDED, HOWEVER, that the director's power to adopt, amend or
repeal Bylaws is subject to the power of the shareholders, exercisable in a
manner provided in Section 2 of this Article VIII, to adopt, amend or repeal
bylaws adopted, amended or repeated by the directors.
SECTION 2. POWER OF SHAREHOLDERS. If a shareholder or shareholders
holding three percent or more of the voting power of the shares entitled to
vote propose a resolution for action by the shareholders to adopt, amend or
repeat bylaws adopted, amended, or repealed by the directors and the
resolution sets forth the provision or provisions proposed for adoption,
amendment or repeal, the limitations and procedures for submitting,
considering and adopting the resolution are the same as provided in Section
302A.135, subdivisions 2 to 4 of the Minnesota Business Corporation Act, for
amendment of the articles. The provisions of this subdivision regarding
shareholder-proposed amendments shall not apply to the Corporation if it is
registered or reporting under the federal securities laws to the extent that
those provisions are in a conflict with the federal securities laws or rules
promulgated thereunder, in which case the federal securities laws or rules
promulgated thereunder shall govern.
ARTICLE IX
MISCELLANEOUS
SECTION 1. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payments or money, notes or other evidences of indebtedness, issued in
the name of or payable to the Corporation, shall be signed or endorsed by
such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
SECTION 2. CONTRACTS, ETC., HOW EXECUTED. The Board of Directors,
except as otherwise provided in these Bylaws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized by the Board of Directors, no officer, agent or employee shall
have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
to any amount.
<PAGE>
SECTION 3. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
Chairman of the Board, the President and Chief Executive Officer, the Chief
Financial Officer, or any other person authorized by resolution of the Board
of Directors is authorized to vote on behalf of the Corporation any and all
shares of any other corporation or corporations, foreign or domestic,
standing in the name of the Corporation. The authority granted to these
officers to vote or represent on behalf of the Corporation any and all shares
held by the Corporation in any other corporation or corporations may be
exercised by any of these officers in person or proxy duly executed by these
officers.
SECTION 4. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the Minnesota Business Corporations Act shall govern
the construction of these Bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the
singular number includes the plural and the plural number includes the
singular, and the term "person" includes a corporation as well as a natural
person.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(i) That I am the duly elected and acting Secretary of TMI,
Inc., a Minnesota corporation; and
(ii) That the foregoing Bylaws, comprising sixteen (16) pages,
constitute the Bylaws of said corporation as duly approved and
adopted by the Board of Directors on August 5, 1992.
By:
------------------------------------
George N. Berger, Secretary
Date: August 5, 1992
<PAGE>
EXHIBIT 4
Portion of Articles of Incorporation, as amended,
defining the rights of stockholders<PAGE>
<PAGE>
ARTICLE IV
NO PREEMPTIVE RIGHTS
No holder of any class of stock in the corporation shall have a
preemptive right as defined in the Minnesota Statutes, Section 302A.413, to
acquire any rights to purchase securities of the Corporation or a certain
fraction of the unissued securities before the Corporation may offer them to
other person(s), other than such rights (if any) as the Board of Directors, in
its discretion, may determine from time to time.
ARTICLE V
NO CUMULATIVE VOTING
No shareholder shall have the right to cumulative voting in the
election of directors or in any and all other matter(s) to come to a vote before
the shareholders.
ARTICLE VI
LIMITATION OF LIABILITY
No direction of the corporation shall be personally liable to the
corporation or any of its shareholders for monetary damages for breach of
fiduciary duty as a director; provided, that such limitation upon a director's
liability shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or itss
shareholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under Section
302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from
which the director derived an improper personal benefit; or (v) for any act or
omission occurring prior to the date this provision becomes effective.
<PAGE>
EXHIBIT 10.1
Asset Purchase Agreement, dated March 31, 1996, between
Home Builders International, Inc. and the Company
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 31st day of March, 1996, by and between HOME BUILDERS INTERNATIONAL,
INC., a Minnesota corporation ("Seller"), to INTERNATIONAL BUILDING CONCEPTS,
LTD., a Minnesota corporation ("Buyer").
RECITALS:
WHEREAS, Seller has been engaged in the business of producing, marketing
and selling monolithic housing structures (the "Business"); and
WHEREAS, Seller desires to sell, assign and transfer to Buyer, and Buyer
desires to purchase and acquire from Seller, certain assets of Seller used in
connection with the Business, and Buyer has agreed to assume the Assumed
Liabilities (as defined herein), for the consideration and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements herein set forth, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions set
forth in this Agreement, Seller will sell, assign and transfer to Buyer, and
Buyer will purchase and acquire from Seller, at the Closing (as defined in
Section 2.1), all of Seller's right, title and interest in and to certain assets
of the Business as the same exist on the Closing Date, including all inventory,
accounts receivable, customer contracts, and records and documents related to
the operation of the Business, as well as the personal property set forth on
SCHEDULE 1.1 attached to this Agreement and hereby made a part hereof (the
"Assets").
1.2 EXCLUDED ASSETS. In addition to any tax loss carry forward of Seller,
none of which Buyer shall obtain, Seller shall retain, and Buyer shall not
purchase from Seller, the following assets (collectively, the "Excluded
Assets"):
1.2.1 UNIHOME TRADE NAME. The trade name "UniHome," which relates
to the technology and invention set forth in United States Patent No. 5,351,453
held by Robert H. Leslie.
1.2.2 ENVIROBOARD TRADE NAME AND TECHNOLOGY. The trade name
"Enviroboard" and all right, title and interest in and to the Enviroboard
process and technology.
<PAGE>
1.2.3 CUSTOMER LEADS. All customer leads directly resulting from
the article in PARADE MAGAZINE, dated April 10, 1994, describing the UniHome
technology.
1.2.4 MONTE ALTO PROJECT. All right, title and interest in and to
all real and personal property constituting the 32-unit rental housing project
built by Seller in Monte Alto, Texas.
1.3 CONSIDERATION; ASSUMPTION OF LIABILITIES. In consideration for the
transfer of the Assets pursuant to this Agreement, and subject to the terms and
conditions set forth in this Agreement, at the Closing Buyer shall assume all
the obligations and liabilities of Seller amounting to $516,863.38 as set forth
in SCHEDULE 1.3 attached to this Agreement (the "Assumed Liabilities"), which
Buyer has paid, satisfied, honored and discharged as of the date hereof, or
hereby agrees to pay, satisfy, honor and discharge when due.
1.4 LIABILITIES NOT ASSUMED. The Buyer does not and shall not assume, pay,
perform, or discharge any liabilities or obligations of the Seller, other than
the Assumed Liabilities, and without limiting the foregoing, it is expressly
agreed that the Buyer shall not assume any liabilities or obligations of the
Seller except those expressly assumed under Section 1.3.
1.5 CERTAIN TAXES, FEES, ETC. All taxes and fees payable in connection
with the sale, transfer and delivery of the Assets, including, without
limitation, sales, use and transfer taxes, and recording taxes and fees, shall
be paid and borne by Buyer.
ARTICLE II
CLOSING
2.1 PLACE AND DATE. The closing of the sale and purchase of the Assets
(the "Closing") shall take place at such time and place as the parties hereto
may mutually determine. The date so fixed for the Closing is herein called the
"Closing Date." The Closing shall be effective as of the Closing Date.
2.2 DELIVERIES BY THE PARTIES.
2.2.1 DELIVERIES BY SELLER. At the Closing, Seller shall deliver
or shall cause to be delivered to Buyer the following:
(a) a duly executed bill of sale, assignment and general
conveyance, substantially in a form satisfactory to Buyer;
(b) possession of the Assets; and
(c) a copy of resolutions of Seller's Board of Directors, duly
certified by Seller's corporate Secretary, authorizing the
transactions contemplated herein.
<PAGE>
2.2.2 DELIVERIES BY BUYER. At the Closing, Buyer shall
deliver to Seller a copy of resolutions of Buyer's Board of Directors, duly
certified by Buyer's corporate Secretary, authorizing the transactions
contemplated herein.
2.2.3 DELIVERIES BY SELLER AND BUYER. At the Closing, Seller
and Buyer shall execute and deliver or shall cause to be executed and delivered
all other documents reasonably required by either party hereto pertaining to
this Agreement and the transactions contemplated hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION, STANDING, ETC. Seller is a corporation duly organized
and validly existing under the laws of the State of Minnesota. Seller has all
requisite power and authority to carry on the Business as now conducted by it,
to own and operate the Assets it owns and, in the places where the Assets are
now owned or operated, to sell and transfer the Assets it owns and perform its
other obligations hereunder. Seller has the requisite power and authority to
execute and deliver this Agreement, and to perform its obligations hereunder.
3.2 AUTHORITY; BINDING EFFECT. The execution and delivery of this
Agreement and the other agreements, documents, certificates and instruments
required to be delivered by Seller pursuant to this Agreement, and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Seller. This Agreement and the other
agreements, documents, certificates and instruments required to be delivered by
Seller pursuant to this Agreement have been duly executed and delivered by
Seller and constitute the valid, legal and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, moratorium, insolvency
or other similar laws affecting the rights of creditors generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
3.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the other agreements, documents, certificates and instruments
required to be delivered by Seller pursuant to this Agreement will not result in
(a) any conflict with Seller's Articles of Incorporation and/or Bylaws as
amended to date, (b) any material breach or violation of or default under any
statute, law, rule, regulation, judgment, decree or order, or any material
mortgage, deed of trust, indenture or agreement relating to borrowed money, to
which Seller is a party or by which any of the Assets is bound, or (c) the
creation or imposition of any material lien, charge, pledge or encumbrance on
any Asset.
3.4 OWNERSHIP OF ASSETS. Seller has legal and beneficial ownership of all
tangible personal property owned by it and included in the Assets, and valid
leasehold interests in all real
<PAGE>
property and tangible personal property held under lease and included in the
Assets, in each case subject to no lien or other encumbrance.
3.5 CONDITION OF ASSETS. None of the Assets has been disposed of as of
the Closing Date, except for obsolete or surplus equipment sold or disposed of
in the ordinary course of Seller's business. All such Assets are in good
operating condition and repair, subject only to normal wear and tear and are, as
of the Closing Date, usable in the ordinary course of business consistent with
Seller's past practices.
3.6 DISCLOSURES. Neither this Agreement, any schedule or exhibit to this
Agreement, nor any other agreement, documents or written statement made by
Seller or furnished by the Seller to the Buyer in connection with the
transactions contemplated hereby, contains any untrue statement of material fact
or omits to state any material fact necessary to make the statements contained
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller as follows:
4.1 ORGANIZATION, STANDING, ETC. Buyer is a corporation duly organized
and validly existing under the laws of the State of Minnesota. Buyer has all
requisite power and authority to execute and deliver this Agreement and the
other agreements, documents certificates and instruments required to be
delivered by Buyer pursuant to this Agreement and to perform its obligations
hereunder and thereunder.
4.2 AUTHORITY; BINDING EFFECT. The execution and delivery of this
Agreement and the other agreements, documents, certificates and instruments
required to be delivered by Buyer pursuant to this Agreement, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement and the other agreements, documents, certificates and instruments
required to be delivered by Buyer pursuant to this Agreement, have been duly
executed and delivered by Buyer and constitute valid, legal and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting the rights of creditors
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
ARTICLE V
COVENANTS
5.1 OBLIGATIONS OF THE PARTIES; BEST EFFORTS. The parties shall apply for
and diligently prosecute all applications for, and shall use their best efforts
promptly to obtain, such consents, authorizations and approvals from such
governmental authorities, lessors and other third parties as
<PAGE>
shall be necessary to permit the consummation of the transactions
contemplated by this Agreement, and shall use their best efforts to effect
the consummation of the transactions contemplated by this Agreement.
5.2 CONSENTS. Anything in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign any agreement,
contract, license, lease, commitment, claim or right or any benefit arising
thereunder or resulting therefrom if any attempted assignment thereof, without
the consent of a third party thereto, would constitute a breach thereof or in
any way affect the respective rights of Buyer or Seller thereunder. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Buyer would not
receive all such rights, Seller will cooperate with Buyer in any reasonable
arrangement to provide Buyer the benefits thereunder, and any transfer or
assignment to Buyer of any agreement or contract which shall require the consent
or approval of any third party shall be made subject to such consent or approval
being obtained.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Seller.
6.1.1 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
representations and warranties in Article IV shall be true and correct when made
and at and as of the Closing Date with the same effect as though made at and as
of such time, except to the extent that another date shall be specified therein.
Buyer shall have duly performed and complied in all material respects with all
agreements contained herein required to be performed or complied with by it at
or before the Closing.
6.1.2 ASSUMPTION OF LIABILITIES; DELIVER OF AGREEMENTS. Buyer
shall have taken all actions necessary to assume the Assumed Liabilities, and
shall have executed and delivered to the Seller the other documents required to
be delivered by Buyer hereunder.
6.1.3 CONSENTS. Any required consents or waivers in connection
with the execution, delivery and performance of this Agreement and the other
documents and agreements required hereunder shall have been obtained.
6.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Buyer.
<PAGE>
6.2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
representations and warranties in Article III shall be true and correct when
made and at and as of the Closing Date with the same effect as though made at
and as of such time, except to the extent that another date shall be specified
therein. The Seller shall have duly performed and complied in all material
respects with all agreements contained herein required to be performed or
complied with by it at or before the Closing.
6.2.2 DELIVERIES BY SELLER. The Seller shall have executed and
delivered to the Buyer each of the documents and agreements to be delivered by
Seller under this Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.1 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto (which are hereby incorporated by reference and made a part
hereof), supersedes all other prior agreements, understandings, representations
and warranties, oral or written, between the parties hereto in respect of the
subject matter hereof.
7.1 MODIFICATION; WAIVER. This Agreement may be modified only by a
written instrument executed by the parties hereto. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or prior to
the Closing Date by the party entitled to the benefits thereof.
7.3 EXPENSES. Whether or not the transactions contemplated herein shall
be consummated, except as expressly provided in this Agreement, each party shall
pay all fees and expenses incurred by it in connection with this Agreement and
the consummation of the transactions contemplated hereby.
7.4 FURTHER ASSURANCES. Each party shall execute and deliver such further
instruments of transfer and assignment and other documents and take such other
actions as may reasonably be requested by the other party in order to transfer
to Buyer title to the Assets in accordance herewith and to consummate or
implement the transactions contemplated hereby.
7.6 NOTICES. The parties hereto shall keep each other apprised of their
addresses until all of the obligations arising under this Agreement have been
discharged. All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed, by registered mail, first-class postage paid, return receipt requested,
or any other delivery service with proof of delivery.
7.7 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but shall not be assignable, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
<PAGE>
7.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
7.9 CAPTIONS. The section headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provision hereof.
7.10 GOVERNING LAW. This Agreement and the respective rights and
obligations of the parties hereto shall be governed by and construed, performed
and enforced in accordance with the laws of the State of Minnesota.
[CONTINUED ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
BUYER: SELLER:
INTERNATIONAL BUILDING CONCEPTS LTD. HOME BUILDERS INTERNATIONAL, INC.
By: By:
-------------------------------- ------------------------------
Name: Name:
---------------------------- --------------------------
Title: Title:
--------------------------- -------------------------
Attest: Attest:
---------------------------- --------------------------
Name: Name:
---------------------------- --------------------------
Title: Title:
--------------------------- -------------------------
<PAGE>
SCHEDULE 1.1
PERSONAL PROPERTY
Model Home Mahogany Desks
Forklift Oak Desks
Dust Collector Conference Room Tables
Compressor Conference Room Chairs
Cement Mixer Loveseat
Belt Sander Wing-Back Chairs
Drills Book Shelves
Staple Guns Compaq 386
Bank Saw Citizen Printer
Drillpress NEC Monitor
Circular Saw IBP PSI
Sawbuck PSI 5VGA Monitor
Miter Saw HP Deskjet Printer
Chop Saw Headline Computer
Hand Saws Leading Edge Monitor
Routers HP Laserjet III
Grinders Panasonic Printer
Panel Saw HP Deskjet 550 Printer
Shop Vacuum White Board
<PAGE>
Scale Filing Cabinets
SCHEDULE 1.3
ASSUMED LIABILITIES
Note Payable S. Loken 7,000
Note Payable The William C. Norris Institute 11,500
Note Payable S. Nicoletti 9,000
Note Payable International Building Systems, Inc. 10,000
Note Payable G. Orloff 5,000
Convertible Debt International Building Systems, Inc. 360,000
Accounts Payable Trade 31,961
Accrued Payroll 27,799
Accrued Rent 10,000
Payroll Tax Liability Federal 36,184
Payroll Tax Liability State 8,419
-------
516,863
-------
-------
<PAGE>
BILL OF SALE, ASSIGNMENT
AND
GENERAL CONVEYANCE
THIS BILL OF SALE is made, executed and delivered as of the 10th day of
June, 1996, by HOME BUILDERS INTERNATIONAL, INC., a Minnesota corporation (the
"Seller"), to INTERNATIONAL BUILDING CONCEPTS LTD., a Minnesota corporation (the
"Buyer").
FOR THE GOOD AND VALUABLE CONSIDERATION given to the Seller under the Asset
Purchase Agreement, dated the date hereof, between the Buyer and the Seller (the
"Asset Purchase Agreement"), the receipt and sufficiency of which the Seller
hereby acknowledges, the Seller, by these presents, does hereby grant, sell,
convey, transfer, assign, set over, release and confirm unto the Buyer, and its
successors and assigns, all of the Seller's rights, title and interest in and to
the Assets (as defined in the Asset Purchase Agreement), all as the same shall
exist on the date hereof, TO HAVE AND TO HOLD the same unto the Buyer, its
successors and assigns forever.
The Seller does, for itself and its successors and assigns, hereby
reconfirm the representations and warranties set forth in the Asset Purchase
Agreement with respect to the Assets and does further represent and warrant (i)
that it alone has exclusive legal and beneficial ownership of all the Assets,
(ii) that the same in each case is subject to no lien, claim, charge, security
interest or other encumbrance of any kind or nature, and is sold, transferred
and conveyed free and clear of any such encumbrance of any kind or nature, and
(iii) that it has all requisite power and authority to sell and transfer the
Assets.
The Seller, for itself and its successors and assigns, by this Bill of
Sale, covenants and agrees that the Seller and its successors and assigns shall
do or cause to be done all such further acts and shall execute, acknowledge and
deliver, or shall cause to be executed, acknowledged, and delivered any and all
such further bills of sale, deeds, instruments, assignments, transfers,
conveyances, powers of attorney, consents, assurances and other documents and
instruments as the Buyer may reasonably request to vest in the Buyer and its
successors and assigns, the assets intended to be transferred, conveyed and
assigned to the Buyer hereby.
This Bill of Sale shall be governed by and construed and enforced in
accordance with the laws of the State of Minnesota applicable to agreements made
and performed entirely within such state.
IN WITNESS WHEREOF, the Sellers has executed this Bill of Sale on the day
and year first written above.
SELLER:
HOME BUILDERS INTERNATIONAL, INC.
By:
-----------------------------------------------
Robert H. Leslie, President
<PAGE>
EXHIBIT 10.2
Employment Agreement, dated June 10, 1996, between
Robert H. Leslie and the Company<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 10th day of June, 1996, by and between
INTERNATIONAL BUILDING CONCEPTS, LTD., a Minnesota corporation (the
"Corporation"), and ROBERT H. LESLIE, an adult resident of Minnesota (the
"Employee").
RECITAL:
WHEREAS, the Corporation desires to employ the Employee and to set forth
the principal terms and conditions of the Employee's employment, and the
Employee desires to be employed by the Corporation, on the terms and conditions
set forth below.
NOW, THEREFORE, in consideration of the recital and the mutual promises and
agreements contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Corporation hereby employs the Employee and the
Employee hereby accepts employment with the Corporation on the terms and
conditions set forth in this Agreement.
2. TERM AND RENEWAL. The Employee's employment by the Corporation shall
commence on the date of this Agreement and shall continue for a period of two
(2) years, unless such employment is terminated earlier as provided herein. The
term of this Agreement shall renew automatically for successive one (1) year
terms unless a party gives notice to the other not less than thirty (30) days
prior to the end of the term that this Agreement is not to be renewed.
3. DUTIES. The Employee shall be engaged as President of the Corporation.
The Employee will faithfully and to the best of his ability perform the duties
as reasonably assigned from time to time by the Corporation's Board of
Directors. The Employee agrees to devote his entire business time, energy and
skills to properly discharge the duties of such employment and to participate in
the active management of the Corporation while so employed hereunder.
4. COMPENSATION.
(a) The Employee's compensation for the services performed under this
Agreement and for Employee's covenants and agreements hereinafter set forth
shall be a salary of Ninety-Six Thousand Dollars ($96,000) per year. The
Employee's salary may be increased at the sole discretion of the Corporation's
Board of Directors.
(b) As additional compensation, the Employee shall be entitled to the
fringe benefits described in Paragraph 5 below and may, in the sole discretion
of the Corporation's Board of Directors, receive such additional compensation,
salary, bonus or other benefits as the Corporation's Board of Directors shall
determine.
<PAGE>
5. FRINGE BENEFITS. The Employee shall have the right to participate in
the insurance and other fringe benefit plans generally provided by the
Corporation to its officers, subject, however, to the Employee's qualification
for participation in such benefit plans pursuant to the terms and conditions
under which such benefit plans are offered.
6. VACATION. The Employee shall be entitled to four (4) weeks of paid
vacation during each calendar year during which this Agreement remains in
effect. Any vacation time not used during any such calendar year may not be
carried forward to any succeeding calendar year and shall be forfeited. No
vacation may be taken in advance. The Employee shall not be entitled to receive
any payment in cash for vacation time remaining unused at the end of any year or
upon termination of this Agreement.
7. NONCOMPETITION. The parties also acknowledge and agree that the
Corporation's customer contacts and relations are established and maintained at
great expense and that the Employee, by virtue of employment under this
Agreement, will have unique and extensive exposure to and personal contact with
the Company's customers and that the Employee will be able to establish a unique
relationship with those individuals that will enable him, both during and after
employment, to unfairly compete with the Corporation. In consideration of the
employment by the Corporation of the Employee, and in consideration of the
compensation provided to the Employee by the Corporation under this Agreement,
the Employee agrees that he shall not, at any time during the term of this
Agreement, nor for a period of two (2) years after the Employee ceases to be
employed by the Corporation, (a) directly or indirectly, engage in or become
interested in any other business or other entity other than the Corporation
(whether as owner, partner, trustee, beneficiary, stockholder, officer,
director, employee, independent contractor, agent, servant, consultant, lessor,
lessee or otherwise; provided, however, that ownership of less than ten percent
(10%) interest in a corporation whose shares of stock are traded in a recognized
stock exchange or traded in the over-the-counter market shall not be deemed a
violation of this paragraph) that manufactures, assembles, distributes, sells or
markets products (including replacement parts) identical or similar to any
products currently or previously offered in connection with the Corporation's
business which competes with the Corporation's business, and/or (b) in any
manner induce, attempt to induce or assist others to induce any customer,
client, employee, or any other person or entity having a business or employment
relationship with the Corporation to terminate such relationship, or do anything
to interfere with the relationship of the Corporation with such person or
entity.
8. CONFIDENTIAL INFORMATION. The parties agree that the Corporation's
customers, business connections, agreements, customer lists, procedures,
operations, business software and computer programs and printouts, techniques,
financial information and other aspects of the business are established at great
expense and protected as confidential information and provide the Corporation
with a substantial competitive advantage in conducting its business. The
parties further agree that by virtue of the Employee's employment with the
Corporation, the Employee will have access to, and be entrusted with, secret,
confidential and proprietary information, and that the Corporation would suffer
great loss and injury if the Employee would disclose this
<PAGE>
information or use it to compete with the Corporation. Therefore, in
consideration of the compensation and other benefits to be provided to the
Employee under this Agreement, the Employee agrees that during the term of
his employment, and for a period of two (2) years after the termination of
the Employee's employment with the Corporation, the Employee shall not,
directly or indirectly, either individually or as an employee, agent,
partner, shareholder, consultant or in any other capacity, use or disclose,
or cause to be used or disclosed, any secret, confidential or proprietary
information acquired by the Employee during his employment with the
Corporation, whether owned by the Corporation prior to or discovered and
developed by the Corporation subsequent to the Employee's employment, and
regardless of the fact that the Employee may have participated in the
discovery or development of such information.
9. RELIEF FOR VIOLATIONS. The Employee covenants and agrees that if
Employee shall violate any of the covenants and agreements under Paragraph 7
and/or Paragraph 8 or both, the Corporation shall be entitled to an accounting
and repayment of all profits, compensation, commissions, remuneration or
benefits which the Employee directly or indirectly has realized and/or may
realize as the result of, arising out of or in connection with any such
violation. The Employee acknowledges that an irreparable injury may result to
the Corporation and its business in the event of a breach of the Employee's
covenants contained in Paragraph 7 and/or Paragraph 8 of this Agreement. The
Employee also acknowledges and agrees that the damages or injuries which the
Corporation may sustain as a result of the Employee's breach of Paragraphs 7
and/or Paragraph 8 of this Agreement are difficult to ascertain and money
damages alone may not be an adequate remedy to the Corporation. The Employee,
therefore, agrees that if a controversy arises concerning the rights or
obligations of a party under this Agreement, such rights or obligations shall be
enforceable in a court of equity by a decree of specific performance and the
Corporation shall also be entitled to any injunctive relief necessary to prevent
or restrain any violation by the Employee or any persons directly or indirectly
acting for or with the Employee of the provisions of Paragraphs 7 and/or
Paragraph 8 of this Agreement. Such remedies, however, shall be cumulative and
non-exclusive and shall be in addition to any other remedy to which the parties
may be entitled.
10. REASONABLE RESTRICTIONS. The Employee agrees that terms and
conditions of Paragraphs 7, 8 and 9 of this Agreement are reasonable and
necessary for the protection of the Corporation's business, trade secrets and
confidential information and to prevent damage or loss to the Corporation as the
result of action taken by the Employee. The Employee acknowledges that the
consideration provided for herein is sufficient to fully and adequately
compensate the Employee for agreeing to the restrictions set forth in Paragraphs
7, 8 and 9 of this Agreement. The Employee acknowledges that he could continue
to actively pursue his career and earn sufficient compensation in business
without breaching any of the restrictions contained in this Agreement.
<PAGE>
11. TERMINATION.
(a) Except as otherwise set forth herein, if either party desires to
terminate the Employee's employment with the Corporation, such party shall give
written notice of termination to the other party not less than thirty (30) days
prior to the effective date of termination. Notwithstanding the preceding
sentence, the Corporation shall have the right to terminate the employment of
the Employee immediately without notice upon the happening of any of the
following events:
(i) The death of the Employee;
(ii) The Employee becomes disabled, which, for purposes of this
Agreement, shall mean that the Employee is unable to perform substantially
all of his duties for a period of six (6) consecutive months or for a total
of one hundred eighty (180) days in any one year period. If there is any
dispute as to whether the termination of the Employee's employment was due
to the Employee's physical or mental illness or incapacity, such question
shall be submitted to a licensed physician for the purpose of making such
determination. An examination of the Employee shall be made within thirty
(30) days after written notice by the Corporation or the Employee to the
other by a licensed physician agreeable to the Employee and the
Corporation. The Employee shall submit to such examination and provide such
information that such physician may request and the determination of such
physician as to the question of the Employees physical or mental condition
shall be binding and conclusive on all parties concerned for purposes of
this Agreement.;
(iii) The Employee ceases to be a shareholder of the Corporation;
(iv) The breach by the Employee of any provisions of Paragraph 7 or
Paragraph 8 of this Agreement;
(v) The commission by the Employee of any act of dishonesty or
fraud with respect to the Corporation or its business;
(vi) The continued failure of the Employee to substantially perform
his duties for the Corporation (other than by reason of death or illness)
after a review of performance is made with the Employee that identifies the
manner in which the Corporation believes that the Employee has failed to
perform his duties and the Employee fails to resume substantial performance
of those duties after participating in such review;
(vii) The use of alcohol and/or drugs by the Employee in such a
manner as to interfere with the performance of the Employee's duties for
the Corporation;
<PAGE>
(viii) Conviction of the Employee of a felony or misdemeanor which,
in the reasonable judgment of the Corporation's Board of Directors, is
likely to have a material adverse effect upon the business or reputation of
the Employee or the Corporation or which substantially impairs the
Employee's ability to perform his duties for the Corporation; or
(ix) Conduct by the Employee which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise.
(b) Upon notice of termination of employment or at any time thereafter as
directed by the Corporation, the Employee shall return to the Corporation any
and all property of the Corporation in the Employee's possession or control.
The agreements of the Employee pursuant to Paragraphs 7, 8, 9 and 10 shall
survive the termination of employment under this Agreement.
12. REIMBURSEMENT OF BUSINESS EXPENSES. The Corporation shall reimburse
the Employee for the amount of expenses reasonably and necessarily incurred by
the Employee in connection with the Corporation's business; provided, however,
that no single expenditure in excess of $100 shall be made without the
Corporation's prior approval. The Employee shall submit an itemized accounting
for all expenses for which reimbursement is sought at such time and in such
detail as the Corporation shall reasonably require. The Corporation shall not be
obligated to pay or reimburse expenses for which adequate documentation is not
furnished in the manner directed by the Corporation.
13. WAIVER. The failure of either party to insist, in any one or more
instances, upon performance of the terms or conditions of this Agreement shall
not be construed as a waiver or a relinquishment of any right granted hereunder
or of the future performance of any such term, covenant or condition.
14. SEVERABILITY. In the event any provision of this Agreement is held to
be invalid or unenforceable for any reason whatsoever, such invalidity or
unenforceability shall not affect any other provision of this Agreement and the
remaining covenants, restrictions and provisions hereof shall remain in full
force and effect and any court of competent jurisdiction may so modify the
objectionable provision as to make it valid, reasonable and enforceable.
FURTHERMORE, THE PARTIES SPECIFICALLY ACKNOWLEDGE THE ABOVE COVENANT NOT TO
COMPETE AND COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION ARE SEPARATE AND
INDEPENDENT AGREEMENTS.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
16. BENEFIT. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against the Corporation, its
successors and assigns, and the Employee, his heirs, beneficiaries and legal
representatives. The Employee's rights and obligations under this Agreement may
not be delegated or assigned except as specifically set forth herein.
<PAGE>
17. NOTICES. Any notice to be given hereunder shall be deemed sufficient
if addressed in writing, and delivered by registered or certified mail or
delivered personally, in the case of the Corporation to its principal business
office, and in the case of the Employee, to his address appearing on the
Corporation's records, or to such other address as he may designate in writing
to the Corporation.
18. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement and understanding between the parties hereto in reference to all of
the matters herein agreed upon, and no representations, promises, agreements or
understandings, whether written or oral, not herein contained shall be of any
force or effect. This Agreement may only be amended by an agreement in writing
signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day, month and year first above written.
EMPLOYEE: CORPORATION:
International Building Concepts, Ltd.,
_________________________ a Minnesota corporation
Robert H. Leslie
By:____________________________________
Title:______________________________
Attest:________________________________
Title:__________________________
<PAGE>
EXHIBIT 10.3
Assignment of Invention and Patent, dated June 12, 1996, executed by
Robert H. Leslie in favor of the Company<PAGE>
<PAGE>
ASSIGNMENT
OF
INVENTION AND PATENT
WHEREAS, ROBERT H. LESLIE, a resident alien of the United States of
America residing in Edina, Minnesota, is the inventor of that certain
invention disclosed and claimed in the application for United States Letters
Patent, filed on February 7, 1996, under Application Number 60/011,265 and
entitled "MONOLITHIC SHELTER" (the "Invention");
WHEREAS, ROBERT H. LESLIE owns the entire right, title and interest in
and to the Invention and in and to any existing and future Letters Patent
granted therefor in the United States and in any and all foreign countries;
WHEREAS, INTERNATIONAL BUILDING CONCEPTS LTD., a Minnesota corporation
having its principal place of business at 3040 4th Avenue South, Minneapolis,
Minnesota 55408, desires to acquire, and ROBERT H. LESLIE desires to assign and
transfer, the entire right, title and interest in and to the Invention and in
and to any existing and future Letters Patent granted therefor in the United
States and in any and all foreign countries.
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) conveyed
to me by INTERNATIONAL BUILDING CONCEPTS LTD. and for other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, I, ROBERT H. LESLIE, have assigned and transferred, and by these
presents do hereby assign and transfer unto said INTERNATIONAL BUILDING CONCEPTS
LTD., the full and exclusive right to the Invention in the United States and its
territorial possessions and in all foreign countries, and the entire right,
title and interest in and to any and all existing and future Letters Patent
granted therefor in the United States and its territorial possessions and in any
and all foreign countries and in and to any and all divisions, reissues,
continuations and extensions thereof.
I hereby authorize and request the Patent Office officials in the United
States and any and all foreign countries to reissue any and all of said existing
Letters Patent, and to issue any and all of said future Letters Patent when
granted, to said INTERNATIONAL BUILDING CONCEPTS LTD., as assignee of my entire
right, title and interest in and to the same, for the sole use and benefit of
said INTERNATIONAL BUILDING CONCEPTS LTD., its successors and assigns.
Further, I agree that I will communicate to said INTERNATIONAL BUILDING
CONCEPTS LTD. or its representatives any facts known to me regarding the
Invention, and testify in any legal proceeding, sign all lawful papers, execute
all divisional, continuation, substitution, issuance, reissuance and renewal
applications, execute all necessary assignment papers to cause any and all of
said existing and future Letters Patent to be reissued or issued, as the case
may be, to said INTERNATIONAL BUILDING CONCEPTS LTD., make all
<PAGE>
rightful oaths and generally do everything reasonably necessary to aid said
INTERNATIONAL BUILDING CONCEPTS LTD., its successors and assigns, to obtain
and enforce proper protection for the Invention in the United States and in
any and all foreign countries.
IN TESTIMONY WHEREOF, the undersigned has executed this Assignment of
Invention and Patent this ____ day of __________________________, 1996.
________________________________________
Robert H. Leslie
STATE OF MINNESOTA )
) SS
HENNEPIN COUNTY )
On this ___ day of _________________, 1996, before me, a Notary Public
for and within the County aforesaid, personally appeared ROBERT H. LESLIE, to
me known to be the person described in the foregoing Assignment of Invention
and Patent, and he acknowledged to me that he executed the same as his free
act and deed.
_______________________________________
* ______________________________________
Notary Public, State of Minnesota
My commission:__________________________
<PAGE>
EXHIBIT 10.4
Agreement regarding Assignment of Invention and Patent, dated June 12, 1996,
between Robert H. Leslie and the Company
<PAGE>
AGREEMENT
THIS AGREEMENT (the "Agreement") is executed this 12th day of June, 1996,
by and between ROBERT H. LESLIE, an adult resident of Minnesota ("Leslie"), and
INTERNATIONAL BUILDING CONCEPTS, LTD., a Minnesota corporation (the "Company").
R E C I T A L S:
A. Pursuant to an Assignment of Invention and Patent, a copy of which is
attached hereto as EXHIBIT A, Leslie has agreed to assign to the Company all of
his right, title and interest in and to that certain invention disclosed and
claimed in the application for United States Letters Patent, filed on February
7, 1996, under Application Number 60/011,265 and entitled "MONOLITHIC SHELTER"
(the "Patent").
B. The parties desire to confirm Leslie's assignment of the Patent, as
well as the Company's acceptance thereof and consideration therefor, including a
license of the Patent to Leslie.
NOW, THEREFORE, in consideration of the recitals and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. CONFIRMATION OF ASSIGNMENT. By execution hereof, Leslie confirms
that he has assigned to the Company, and hereby does assign to the Company,
all of his right, title and interest in and to the Patent, subject to the
terms and conditions hereof.
2. CONFIRMATION OF ACCEPTANCE. By execution hereof, the Company
confirms that it has accepted, and hereby does accept, Leslie's assignment of
all of his right, title and interest in and to the Patent, subject to the
terms and conditions hereof.
3. CONSIDERATION FOR ASSIGNMENT. In consideration for Leslie's
assignment of all of his right, title and interest in and to the Patent, the
sufficiency of which consideration Leslie hereby acknowledges, the Company
hereby agrees (i) to enter into that certain Employment Agreement with
Leslie, dated the date hereof, and (ii) to grant Leslie the license to the
Patent set forth in Section 4 below.
4. NONEXCLUSIVE, ROYALTY-FREE LICENSE OF THE PATENT. In connection
with Leslie's assignment of the Patent, the Company agrees to grant Leslie a
perpetual, nonexclusive, royalty-free, worldwide license to manufacture, use,
sell and otherwise exploit the invention and technology described in the
Patent for its remaining term, including any extension or renewal thereof
(the "License"), subject to the following limitations:
<PAGE>
a. COMMENCEMENT OF THE LICENSE. The License shall take effect only
upon the occurrence of any of the following events:
i. the dissolution of the Company;
ii. the bankruptcy or insolvency of the Company;
iii. the filing by the Company of a petition for bankruptcy or
insolvency;
iv. the filing of any other petition based upon the alleged bankruptcy
or insolvency of the Company which is not dismissed within ninety (90)
days after filing;
v. an assignment by the Company for the benefit of creditors; or
vi. the appointment of a receiver for the Company over any of its
assets.
b. LIMITATION ON TERRITORY. The License shall not apply to, and
shall have no force or effect in, any territories for which the Company has
granted or heretofore grants another person or entity an exclusive license to
manufacture, use, sell and otherwise exploit the invention and technology
described in the Patent for the term stated in such other license. The
Company shall keep Leslie apprised at all times of any and all such other
licenses.
5. FURTHER ASSURANCES. The parties each agree to complete, execute and
deliver any additional instruments and to take any further action reasonably
required or appropriate to consummate the transactions contemplated in this
Agreement.
6. INVALIDITY. If for any reason any term or provision of this
Agreement shall be declared void and unenforceable by any court of law or
equity, or shall not be able to be performed by reason of any state or
federal regulation, law or ordinance, it shall only affect such particular
term or provision of this Agreement and the balance of this Agreement shall
remain in full force and effect and shall be binding upon the parties hereto.
7. NOTICES. The parties hereto shall keep each other apprised of their
addresses until all of the obligations arising under this Agreement have been
discharged. All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed, by registered mail, first-class postage paid, return receipt requested,
or any other delivery service with proof of delivery.
8. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but shall not be assignable, by operation of law or
otherwise, by either party hereto without the prior written consent of the
other party.
<PAGE>
9. COMPLETE AGREEMENT. This Agreement is the complete and exclusive
statement of the agreement between the parties and supersedes and merges all
prior understandings and agreements, oral or written, relating to the subject
matter of this Agreement.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
_____________________________________
Robert H. Leslie
INTERNATIONAL BUILDING CONCEPTS, LTD.
By:__________________________________
Title:____________________________
<PAGE>
EXHIBIT 10.5
Shareholder Control Agreement, dated June 13, 1996,
between the William C. Norris Institute and the Company
regarding control of their joint venture entity, Innovative Homes, Inc.
<PAGE>
INNOVATIVE HOMES, INC.
SHAREHOLDER CONTROL AGREEMENT
THIS AGREEMENT is made effective as of June 13, 1996 by and among the
William C. Norris Institute, a Minnesota nonprofit"corporation ("WCNI") and
International Building Concepts, Ltd., a Minnesota corporation ("IBC"),
(collectively referred to herein as the "Founding Shareholders").
RECITALS
A. The Founding Shareholders own all of the 625,000 issued and
outstanding Class A voting common stock of Innovative Homes, Inc., a
Minnesota corporation (the "Corporation"). WCNI holds 250,000 shares, IBC
holds 375,000 shares.
B. The shareholders intend this Agreement to control certain
aspects of the management of the Corporation's business and of the relations
among the shareholders, all pursuant to and enforceable as a shareholder
control agreement under Minnesota Statutes Sections 302A.457 and 302A.751,
subd. 3(a), and laws supplementary thereto and amendatory thereof.
C. The term "shareholders" in this Agreement means an of the
original parties to this Agreement collectively and any other persons who may
subsequently become owners of stock while this Agreement is in effect.
1.1 GENERALLY. The Corporation was formed for the purpose of
providing readily available, affordable, and high-quality housing, and shall
be bound by all state and federal laws, rules, and orders applicable to this
business. The Articles of Incorporation and Bylaws of the Corporation shall
govern and regulate the affairs of the Corporation except as specifically
provided in this Agreement.
1.2 ISSUANCE OF SHARES. The Corporation shall not issue any
shares, nor any options or rights to purchase shares, except pursuant to
commitments of the Corporation in effect as of the date of this Agreement,
without the prior approval of shareholders holding at least two-thirds (2/3)
of the shares of the Corporation outstanding at the time of such proposed
issuance.
1.3 TRANSFER OF SHARES. Notwithstanding any provisions in the
Bylaws to the contrary, at any time following the occurrence of any of the
following described events, shareholders shall have the right to purchase the
shares owned by a shareholder involved in any of the described occurrences:
(a) A shareholder makes a voluntary application for relief under
federal bankruptcy law or any other law providing relief for debtors;
<PAGE>
(b) An involuntary bankruptcy proceeding is commenced against a
shareholder and is not dismissed within sixty (60) days of its commencement;
(c) A receiver is appointed for any of the property of a shareholder;
(d) An execution or attachment proceeding is directed at the shares
owned by a shareholder;
(e) An order or decree is issued in connection with any divorce,
marriage dissolution, separation or similar proceedings providing for the
transfer of any of the shares, except to a (former) spouse who is an
existing shareholder; or
(f) The shares owned by a shareholder are subject to any event
which would result in the transfer of the shares by operation of law except
as specifically authorized herein.
The purchase price for such stock shall be computed using book value, which
is defined as the value arrived at by adding all assets and deducting all
liabilities and dividing that sum by the number of shares of common stock
outstanding.
1.4 WARRANTS. The shareholders agree that the following
individuals have rights to a warrant for the purchase of the Corporation's
Class A common stock, as follows:
17,500 shares, Dan Evans, at $1.00 per share;
10,000 shares, Bill Osbom, at $1.00 per share; and
10,000 shares, Jack J. Kamowski, at $1.00 per share.
These warrants are exercisable over five (5) years, 25% exercisable after second
year, 25% after third year, 25% after fourth year and 25% after fifth year.
1.5 ADDITIONAL WARRANTS. The shareholders agree that the following
shares of Class A common stock are to be reserved for future warrants:
12,500 shares, future employees, at market price at time of issue; and
25,000 shares, directors, at market price at time of issue.
1.6 FIRST FINANCING. The goal of the first round of financing is
to issue a total of 125,000 shares at $2.00 per share through a private
placement of common stock. It is contemplated that 50,000 shares will be
issued in northern Minnesota to entities and individuals acceptable to the
Board of Directors and an additional 75,000 shares will be issued to other
individuals and entities acceptable to the Board of Directors.
1.7 FAILURE OF FIRST FINANCING. If the Board of Directors finds
that it cannot complete the financing pursuant to section 1.06 of this
Agreement, WCNI shall have the right to
<PAGE>
purchase all, but not less than all, of 125,000 shares at $1.00 each. If
WCNI does not exercise this right, WCNI and IBC shall have the right to
purchase 50,000 and 75,000 shares respectively, at; $1.00 each, representing
a continuation of their pro-rata ownership. If the parties cannot agree to
complete the purchase of shares on these terms, or if no other agreement can
be reached to raise capital from the Founding Shareholders, IBC may purchase
all of WCNI shares for $125,000. This purchase price may be paid from the
proceeds of the sale of the model home, together with IBC convertible
debentures, the terms of which must be agreed upon by WCNI and IBC.
1.8 SUBSEQUENT FINANCING. It is anticipated that additional
capital, if needed, will come from outside investors. However, if after the
shareholders approve an offering of shares under Section 1.02 above, the
Board of Directors finds it desirable to delay outside financing or that
outside finance cannot be obtained on acceptable terms, each current
shareholder will be given the right to purchase shares in accordance with the
shareholder's pro rata portion of the offering. If a shareholder declines
the right to purchase such pro rata share of stock, the remaining
shareholders may, but are not required to, purchase the additional shares.
1.9 DIRECTORS AND OFFICERS. The shareholders agree to vote their
shares to elect Robert H. Leslie, Wayne E. Densmore, Jack J. Karnowski,
Howard G. Norberg, Dan Evans, and two nominees to be agreed upon by the
Founding Shareholders. In the case of resignation or removal of any director
elected by one of the Founding Shareholders, such Founding Shareholder shall
have the right to name a successor. Each Founding Shareholder is deemed to
have elected the following directors: Rob Leslie and Wayne Densmore, elected
by IBC; Jack J. Kamowski, Howard G. Norberg, elected by WCNI. All other
director vacancies will be filled in accordance with the Bylaws. The
unanimous approval of the Board of Directors is required for dividends or
cash contributions.
Officers shall be elected from time to time by the Board of Directors
and shall include Chairman of the Board, President and Chief Executive Officer,
Secretary, Treasurer and Chief Financial Officer.
1.10 CONTRIBUTIONS OF FOUNDING SHAREHOLDERS. In addition to the
cash consideration for the initial stock by WCNI, the shareholders agree that
the Founding Shareholders' contributions are as follows:
(a) WCNI
1. Continued expert assistance and guidance;
2. Corporate, academic and government contacts;
3. Expert assistance through the Job Creation Collaborative,
or Robert H. Leslie.
<PAGE>
(b) IBC
1. Both a non-exclusive and exclusive license for the 12 foot
oriented strand board housing technology invention claimed in U.S.
Provisional Patent Application, Serial No. 60/011,265 for Monolithic
Shelter (the "Invention"), or such successor housing technology as may be
developed by IBC or any successor to the Invention, including all future
Letters Patent issued therefor (collectively, "Housing"), including rights
to manufacturing, marketing and sales, in accordance with the License
Agreement of even date herewith (the "License Agreement");
2. Right to market and manufacture the Housing within the
territory described in Section 1.11 of this Agreement. Upon approval of the
Board of Directors, the Corporation shall have the right to sublicense
technology within the exclusive territory;
3. Provide Housing shells to the Corporation at MANUFACTURING
cost (as defined in Section 1.12) plus 10%;
4. Provide field assembly support of housing shell in field to
first three orders of all developers and dealers in 1996 and 1997 and
product support expertise on an ongoing basis; as IBC introduces major new
technology, such as the two story house, IBC will provide field assembly for
three houses in the first year and three houses in the second year;
5. Provide training on an ongoing basis;
6. Provide access to all internal documents, including
financial information, and support and assistance from personnel reasonably
necessary to develop a business plan for the Corporation;
7. Provide building code approval on the following schedule:
Minnesota, approval received,
Iowa, approval received,
North Dakota, no later than 30 days after receipt of order,
or IBC will initiate a request for code approval if
necessary to obtain orders for Housing in the state,
South Dakota, no later than 30 days after receipt of order,
or IBC will initiate a request for code approval if
necessary to obtain orders for Housing in the state,
Manitoba, no later than 7/l/96, or earlier if necessary to
obtain orders for Housing in the province
<PAGE>
Nebraska, no later than 9/30/96, or earlier if necessary to
obtain orders for Housing in the state
Other states and Indian tribes, as need is determined by the
Corporation.
1.11 TERRITORY. The shareholders agree that license for the
technology shall cover the following areas:
(a) EXCLUSIVE TERRITORY
1. Province of Manitoba, Canada
2. All Indian Tribes in the United States and Canada
3. All areas south of the Canadian border from Pembina,
North Dakota to Omaha, Nebraska and extending 50 miles east and 50
miles west of Interstate Highway I-29.
IBC agrees that it will not sell or assist others in selling in the
Exclusive Territory granted to Corporation.
(b) NON-EXCLUSIVE TERRITORY
The Corporation shall use the license on a non-exclusive basis in all
other areas, subject to the terms of the License Agreement.
(c) MARKETING AND DEVELOPMENT
The Corporation will concentrate its marketing efforts in the
Exclusive Territories but will also target the following areas for
development:
1. The "Conac Region" in North Dakota (center of North
American Coalition for Rural Development). This includes six counties
in North Central North Dakota (Benson, Botuneau, McHenry, Pierce,
Rolette, and Towner)
2. The "Lakes Region" in Minnesota an area beginning in
Baudette at the Canadian border, running south to Grand Rapids, to
Aitkin south to Isle, then following 29 west to Wheaton, Minnesota.
The Corporation will build model homes, develop contractor and dealer
relationships and extend a significant marketing effort in these areas. Upon
successful market penetration and sales in any Non-exclusive Territory, the
Corporation may request, and IBC may grant, but is not required to grant, an
exclusive license for that territory. The Corporation shall have a right of
first refusal to acquire other exclusive territories in accordance with Section
l(b) of the License Agreement.
<PAGE>
1.12 MANUFACTURER. The Founding Shareholders agree that IBC shall
manufacture the housing components and sell them to the Corporation at cost
plus 10%. The selling price shall be adjusted quarterly and manufacturing
cost will be determined on a square foot basis, and total cost will be
determined in accordance with the following formula:
(a) COST PER SQUARE FOOT CALCULATION
Direct materials X.XX
Direct labor X.XX
----
Total cost X.XX
10% .XX
----
X.XX
(b) TOTAL COST. = Cost Per Square x Total Square footage of
ordered housing from time to time.
If the Corporation elects to manufacture the components pursuant to the License
Agreement, the Corporation shall seek outside sources of equity and debt
financing. The shareholders agree that the cost of material is based upon cost
for oriented strand board of $10.00 per sheet, which will be reviewed quarterly
and adjusted as necessary. IBC will provide the square foot manufacturing costs
upon execution of this Agreement, and quarterly thereafter.
1.13 SPECIFIC PERFORMANCE. The parties acknowledge that the
damages arising out of any breach of any provision of this Agreement will be
difficult or impossible to determine; accordingly, the parties agree that in
any action commenced with respect to such a breach, the plaintiff(s) shall be
entitled to specific performance or other equitable relief and no party will
assert the defense to such action that the plaintiffs has an "adequate remedy
at law." Exercise of the provisions of this paragraph shall not constitute a
waiver of the right to seek damages or any other legal remedy.
1.14 CERTIFICATE LEGEND. The certificates representing shares
owned by the shareholders shall bear the following legend:
The shares evidenced by this certificate are subject to the
terms of that certain Shareholder Control Agreement dated as
of June 13, 1996, by and among the shareholders of the
Corporation, a copy of which is on file in the office of the
Secretary of the Corporation.
1.15 TERMINATION. This Agreement shall terminate upon the sooner
of any of the following events:
(a) Unanimous written agreement of all the shareholders.
<PAGE>
(b) If either IBC or WCNI seeks protection from creditors under
Chapters 7 or 11 of the Bankruptcy Code, or is dissolved and completely
liquidated.
(c) If one shareholder purchases all of the shares of the other
shareholders pursuant to Section 7.8 of the Bylaws.
(d) The entry of an order for relief under Chapter 7 of the
Bankruptcy Code, or the dissolution or complete liquidation of the
Corporation.
The termination of this Agreement shall not affect obligations or rights accrued
prior to the effective date of termination. Upon the termination of this
Agreement, the shareholders shall surrender to the Corporation their share
certificates and the Corporation shall issue to them in lieu thereof new
certificates for an equal number of shares, without the legend set forth in
Section 1.15 of this Agreement
1.16 SHAREHOLDER CONTROL PROVISIONS. The parties intend that
applicable provisions of this Agreement shall constitute a shareholder
control agreement under Section 302A.457 of the Business Corporations Act and
shall be enforceable and binding in accordance with such Section, and that
all provisions of this Agreement, notwithstanding the application of
Section 302A.457, shall be fully enforceable and binding upon all parties
hereto, to the extent permitted by law. For purposes of compliance with Section
302A.457, the shareholders hereby acknowledge and agree that:
(a) This Agreement has been signed by all persons who are now
shareholders, whether or not all shareholders of the Corporation have voting
rights, and by all subscribers for shares, whether or not voting shares, to
be issued.
(b) A copy of this Agreement shall at all times be kept on file in
the office of the Secretary of the Corporation.
(c) The existence and location of a copy of this Agreement shall
be noted conspicuously on the face or back of each certificate for shares of
the Corporation.
(d) Every shareholder, beneficial owner of shares, and other
person having a permitted security interest in shares shall have the right,
upon written demand, to obtain a copy of this Agreement from the
Corporation, at the expense of the Corporation.
1.17 SHAREHOLDER EXPECTATIONS. The shareholders agree that this
Agreement reflects the parties reasonable expectations concerning matters in
this Agreement pursuant to Section 302A.751, subd. 3a., of Minnesota Statutes
and the parties have had the opportunity to seek the advice of counsel
concerning their rights and obligations hereunder.
<PAGE>
1.18 ADDITIONAL PARTIES TO THIS AGREEMENT. In the event any
additional parties become shareholders in the Corporation, whether as a
result of purchasing shares from the Corporation or from shareholders, or
both, or through a permitted transfer of shares from current or future
shareholders, each new shareholder, as a condition to the purchase of shares,
shall enter into an Addendum to this Agreement in which he or she agrees to
be bound by all provisions hereof. Each new shareholder who executes and
delivers such an Addendum shall be entitled to all rights and benefits
hereunder, and bound by the obligations hereunder, to the same extent as if
he or she had been an original party to this Agreement. Each of the
shareholders agrees to execute and deliver an Addendum to this Agreement with
any new shareholder, so long as the new shareholder is treated consistently
with other parties to this Agreement, based on the number of shares held by
each.
1.19 AMENDMENTS. This Agreement may be amended only by a writing
executed and delivered by all of the parties hereto.
1.20 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
1.21 NOTICES. Notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when delivered in
person or sent by certified or registered mail, postage prepaid, to any
shareholder at its address as reflected by the records of the Corporation, to
the Corporation at the address hereinafter set forth, or, to any of the
parties at any other address that a party may hereafter specify by written
notice to the other party given hereunder:
If to WCNI:
The William C. Norris Institute
2001 Killebrew Drive, Suite 302
Bloomington, MN 55425
Attention: Howard G. Norberg, Vice President
With a copy to:
Jack J. Kamowski
4909 W. 93rd Street
Bloomington, MN 55437
If to IBC:
International Building Concepts, Inc.
3040 4th Avenue South
Minneapolis, MN 55408
Attention: Wayne E. Densmore
<PAGE>
With a copy to:
Kevin L. Crudden, Esq.
Robins, Kaplan, Miller & Ciresi
800 LaSalle Avenue
Minneapolis, MN 55402
1.22 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Minnesota.
1.23 COSTS. If any legal action or other proceeding is brought for
the enforcement of this Agreement, or, because of alleged dispute, breach,
default or misrepresentation, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and all other costs
incurred in that action or proceeding, in addition to any other relief to
which the parties may be entitled.
1.24 WAIVER. No waiver of any provision of this Agreement shall be
effective unless expressed in writing by the party to be charged with such
waiver. No waiver shall be deemed to have continuing effect unless it is
expressly stated to have continuing effect.
1.25 INTERPRETATION AND INVALIDITY. As used in this Agreement,
words denoting gender shall include masculine, feminine, and neuter, and the
singular includes the plural (and vice versa). The provisions of this
Agreement shall be applied and interpreted in a manner consistent with each
other so as to carry out the purposes and intent of the parties, but if for
any reason any provision is unenforceable or invalid, such remaining
provisions shall be carried out with the same force and effect as if the
severed provision had not been a part of this Agreement.
1.26 INTEGRATION. This Agreement constitutes and expresses the
entire agreement and understanding among the parties relative to the subject
matter hereof and supersedes all prior agreements, understandings, and
promises, whether oral or in writing, relating to such subject matter, except
as specifically provided in this Agreement. No amendment or modification of
this Agreement shall be valid unless set forth in a subsequent writing signed
by all parties to this Agreement.
1.27 BINDING EFFECT. This Agreement shall bind and be enforceable
by the parties hereto and their respective heirs, legal representatives,
successors, and permitted assigns, who are obligated to take any action which
may be necessary 6r'proper to carry out the purposes and intent hereof,
notwithstanding any contrary directions contained in any will or other
testamentary instrument.
1.28 SEVERABILITY; CONFLICTS.
(a) To the extent possible, each provision of this Agreement shall
be interpreted in such a manner to be valid and effective under applicable
law, but if any provision of this
<PAGE>
Agreement is held to be invalid, illegal, or unenforceable under any
achievable law or rule in any jurisdiction, such provision shall be
ineffective only to the extent of such invalidity, illegality, or
unenforceability in such jurisdiction, without invalidating the remainder
of this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
(b) To the extent permitted by Minnesota law, any conflict between
the provisions of this Agreement and the Articles of Incorporation or Bylaws
of the Corporation shall be resolved in favor of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
WILLIAM C. NORRIS INSTITUTE
By:____________________________________
Title:_________________________________
INTERNATIONAL BUILDING CONCEPTS,
INC.
By:____________________________________
Title:_________________________________
<PAGE>
EXHIBIT 10.6
License Agreement, dated June 13, 1996, between
the William C. Norris Institute and the Company
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is executed this 13th day
of June, 1996, by and between International Building Concepts, Ltd., a
Minnesota corporation ("Licensor"), and Innovative Homes, Inc., a Minnesota
corporation ("Licensee").
RECITALS
A. WHEREAS, Licensor and The William C. Norris Institute, a
Minnesota nonprofit corporation, ("WCNI") entered into an arrangement which
resulted in the formation of Licensee; and
B. WHEREAS, as part of the agreement between Licensor and WCNI,
licensor agreed to provide Licensee with both an exclusive and a
non-exclusive license for the right to manufacture, market and sell Housing
[as that term is defined in the Shareholder Control Agreement of even date
herewith by and between Licensor and WCNI (the "Shareholder Control Agreement")]
; and
C. WHEREAS, the licensing rights contained in the Shareholder
Control Agreement and this Agreement relate to that certain invention
disclosed and claimed in the Application for United States Letters Patent
filed on February 7, 1996 under Application Number 60/011,265 and entitled A
Monolithic Shelter (the "Licensed Product").
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
1. In consideration of the respective rights and responsibilities of
Licensor and WCNI as provided for in the Shareholder Control Agreement,
Licensor agrees to grant Licensee a perpetual, exclusive and non-exclusive,
royalty-free license to manufacture, use, sell and otherwise exploit the
Licensed Product and technology described in the Application for United
States Letters Patent Number 60/011,265 and, as further expanded by Section
1.10 of the Shareholder Control Agreement, for its remaining term, including
any extension or renewal thereof (the "License'), subject to the following
limitations:
(a) EXCLUSIVE TERRITORY. The exclusive territory of this License
shall be limited to the following areas:
1. The Province of Manitoba, Canada;
2. All Indian tribes in the United States and Canada and the
territory in which the respective tribes or members of the respective
tribes reside; and
<PAGE>
3. All areas south of the Canadian border from Pembina, North
Dakota, to Omaha, Nebraska, and extending 50 miles east and 50 miles
west of Interstate Highway I-29.
Licensor agrees that it will not sell or assist others in selling in
the exclusive territory granted under this License to Licensee.
(b) NON-EXCLUSIVE TERRITORY. Licensor grants Licensee a
non-exclusive license to manufacture, use, sell and otherwise exploit the
Licensed Product. The License shall not apply to and shall have no force
or effect in any territory for which Licensor grants another person or
entity an exclusive license to manufacture, use, sell and otherwise exploit
the Licensed Product. Licensor shall keep Licensee apprised at all times
of any and all other such licenses; provided, however, that prior to
granting another person or entity an exclusive license to manufacture, use,
sell or otherwise exploit the Licensed Product, Licensor shall give
Licensee a right of first refusal to provide the Licensed Product in the
territory to be granted to another person or entity under the same terms
and conditions under which Licensor would grant an exclusive license to
that third party.
2. THE SHAREHOLDER CONTROL AGREEMENT. The terms and provisions of
the Shareholder Control Agreement shall be read to be consistent, explanatory
or complementary to the terms hereof
3. INDEMNIFICATION. If Licensee promptly notifies Licensor in
writing of a third-party claim against Licensee that a Licensed Product
infringes a presently existing United States Patent, a copyright or a trade
secret, Licensor will defend such claims at its expense and will pay any
costs or damages that may be finally awarded against Licensee. Licensee
agrees to cooperate with Licensor in the defense of such claims, provided
Licensor pays Licensee's reasonable costs and expenses, as they are incurred,
including attorneys' fees. Licensor will not indemnify Licensee, however, if
the claim of infringement is solely caused by
(a) Licensee's misuse or modification of the Licensed Product.
(b) Licensee's failure to use corrections or enhancements made
available by Licensor.
(c) Licensee's use of the Licensed Product in combination with
any product or information not owned or developed by Licensor and such
other products give rise to the claim.
(d) Information, direction, specification or materials provided
by Licensee or any third party.
<PAGE>
If the Licensed Product is, or in Licensor's reasonable opinion is likely to
be, held to constitute an infringing product, Licensor shall at its expense
and option either
(a) procure the right for Licensee to continue using it at no
additional costs to Licensee;
(b) replace it with non-infringing equivalent;
(c) modify it to make it non-infringing while retaining functional
equivalence; or
(d) direct Licensee, with respect to the infringing portion of the
Licensed Product, to cease exercise of the license grants provided under
this Agreement, in which case the parties agree to enter into good fifth
negotiations with respect to redefining this Agreement with respect to any
non-infringing portion of the Licensed Product.
The foregoing remedies constitute Licensee's sole and exclusive remedies and
Licensor's entire liability with respect to infringement.
4. WARRANTY. Licensor warrants that the Licensed Product will
conform to the specifications and other documents set forth in the following
schedules:
Schedule 1 - Specifications for Housing
A - Model 864
B - Model 1008
C - Model 1152
Schedule 2 - Product Guarantee
Schedule 3 - Code Compliance Letter
Schedule 4 - National Evaluation Service Reports
Schedule 5 - Structural Diagram.
A - Exterior Sketch
B - Structural Diagrams and Notes
C - Interior, Roof and Foundation Plans
D - Plans for Model 864
E - Plans for Model 1008
F - Plans for Model 1152
G - Electrical, Water and Insulation Plans
Schedule 6 - Patent Applications
A - Application Receipt
<PAGE>
B - Provisional Application
C - Application Drawings
Licensor further warrants that Licensee is entitled through this License
Agreement to future improvements in the patent application, plans and
specifications for the Housing and other trade secrets related thereto. All
future improvements and trade secrets are the property of Licensor.
This warranty is exclusive and is in lieu of all other warranties,
express, implied, statutory or otherwise with respect to the Licensed
Product, (but excluding other warranties in this Agreement regarding the
licensed intellectual property), and all implied warranties, including the
warranties of merchantability or fitness for a particular purpose, are
expressly disclaimed.
5. LIMITATION OF LIABILITY. In no event shall either party be
liable to the other party for any incidental, consequential, indirect,
punitive or economic damages (including, but not limited to, lost profits),
regardless of whether such liability is based on breach of contract, tort,
strict liability, breach of warranties, or failure of essential purpose, and
even if a party is: advised of the possibility of such damages. The parties
expressly agree that these limitations of damages have been specifically
agreed to between the parties and shall survive the determination of any
court of competent jurisdiction that any remedy provided herein fails of its
essential purpose.
6. ARBITRATION. The parties agree that any controversy or claim
arising out of or relating to this Agreement or the breach hereof shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect. The arbitration shall
take place in Minneapolis, Minnesota. Judgment on the award may be entered
in any court in the state of Minnesota or in any other state having
jurisdiction over the party against which the award was made and Licensor and
Licensee hereby consent to the jurisdiction of the federal and state courts
in the state of Minnesota. The award of any arbitration shall be final,
conclusive and binding on the parties hereto. The prevailing party in any
such arbitration shall be entitled to its costs of arbitration and reasonable
attorneys fees incurred therein.
7. CONTRACT PROVISION. The parties agree that it is their intention
to create this Agreement as a contract protected under Section 365(n) of the
United States Bankruptcy Code, and laws supplementary and amendatory thereof.
8. FURTHER ASSURANCES. The parties each agree to complete, execute
and deliver any additional instruments and to take any further action
reasonably required or appropriate to consummate the transactions
contemplated in this Agreement.
9. INVALIDITY. If for any reason any term or provision of this
Agreement shall be declared void and unenforceable by any court of law or
equity, or shall not be able to be performed by reason of any state or
federal regulation, law or ordinance, it shall only affect such particular
term
<PAGE>
or provision of this Agreement, and the balance of this Agreement shall
remain in full force and effect and shall be binding upon the parties hereto.
10. NOTICES. The parties hereto shall keep each other apprised of
their addresses until all of the obligations arising under this Agreement
have been discharged. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mail, by registered mail, first class, postage paid, return
receipt requested, or any other delivery service with proof of delivery.
11. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but shall not be assignable by operation of
law or otherwise by either party hereto without the prior written consent of
the other party.
12. COMPLETE AGREEMENT. This Agreement is a complete and exclusive
statement of the Agreement between the parties and supersedes and merges all
other prior understandings and agreements, oral or written, relating to the
subject matter of this Agreement, except for that certain Shareholder Control
Agreement of even date herewith.
13. NON-DISCLOSURE. Licensee shall not disclose to others the
terms and conditions of this Agreement except a required by law or
governmental regulations, or as may be authorized in writing by Licensor.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
INTERNATIONAL BUILDING CONCEPTS,
LTD.
By:
------------------------------------
Its:
-----------------------------------
INNOVATIVE HOMES, INC.
By:
------------------------------------
Its:
-----------------------------------
<PAGE>
SCHEDULE 1A
SPECIFICATIONS FOR HOUSING
MODEL 864
<PAGE>
Assembly R and U-Value Forms 1008 sq ft STD PLAN TO MINNESOTA ENERGY CODE
- - -------------------------------------------------------------------------------
Assembly
INSULATED WALL ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 24.76
- - -------------------------------------------------------------------------------
Assembly U-Value .04
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
WALL FRAMING AREA
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
DRYWALL 1/2" 0.45
- - -------------------------------------------------------------------------------
WOOD FRAMING 2 1/2" 3.12
- - -------------------------------------------------------------------------------
SIDING. - 0.61
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient 0.68
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .17
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 4.88
- - -------------------------------------------------------------------------------
Assembly U-Value 0.204
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
INSULATED ROOF ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 45.81
- - -------------------------------------------------------------------------------
Assembly U-Value .021
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
ROOF FRAMING ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
SHINGLES - .44
- - -------------------------------------------------------------------------------
ROOF SKIN 1/2" .62
- - -------------------------------------------------------------------------------
RAFTERS 11 1/2" 14.37
- - -------------------------------------------------------------------------------
SHEET ROCK 1/2" .45
- - -------------------------------------------------------------------------------
Interior Film Coefficient .61
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .61
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 17.10
- - -------------------------------------------------------------------------------
Assembly U-Value .058
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
I HEREBY CERTIFY THAT THIS PLAN, SPECIFICATION OR REPORT WAS PREPARED BY ME OR
UNDER MY DIRECT SUPERVISION, AND THAT I AM A DULY REGISTERED PROFESSIONAL
ENGINEER UNDER THE LAWS OF THE STATE OF MINNESOTA.
X /s/ SEAN K. HALLET
- - ---------------------
DATED 3/5/96 REG. NO. 19164
---------------
<PAGE>
Assembly R and U-Value Forms 864 sq ft STD PLAN TO MINNESOTA ENERGY CODE
- - -------------------------------------------------------------------------------
Assembly
INSULATED WALL ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 24.76
- - -------------------------------------------------------------------------------
Assembly U-Value .04
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
WALL FRAMING AREA
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
DRYWALL 1/2" 0.45
- - -------------------------------------------------------------------------------
WOOD FRAMING 2 1/2" 3.12
- - -------------------------------------------------------------------------------
SIDING. - 0.61
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient 0.68
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .17
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 4.88
- - -------------------------------------------------------------------------------
Assembly U-Value 0.204
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
INSULATED ROOF ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 45.81
- - -------------------------------------------------------------------------------
Assembly U-Value .021
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
ROOF FRAMING ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
SHINGLES - .44
- - -------------------------------------------------------------------------------
ROOF SKIN 1/2" .62
- - -------------------------------------------------------------------------------
RAFTERS 11 1/2" 14.37
- - -------------------------------------------------------------------------------
SHEET ROCK 1/2" .45
- - -------------------------------------------------------------------------------
Interior Film Coefficient .61
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .61
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 17.10
- - -------------------------------------------------------------------------------
Assembly U-Value .058
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
I HEREBY CERTIFY THAT THIS PLAN, SPECIFICATION OR REPORT WAS PREPARED BY ME OR
UNDER MY DIRECT SUPERVISION, AND THAT I AM A DULY REGISTERED PROFESSIONAL
ENGINEER UNDER THE LAWS OF THE STATE OF MINNESOTA.
X /s/ SEAN K. HALLET
- - -------------------------
DATED 3/5/96 REG. NO. 19164
--------------------
<PAGE>
EXTERIOR ENVELOPE THERMAL TRANSMITTANCE WORKSHEET
<TABLE>
<S> <C>
- - --------------------------------------------------------------------------------------------
SITE ADDRESS CITY
- - --------------------------------------------------------------------------------------------
NAME OF PERSON COMPLETING FORM DATE
ROBERT H. LESLIE MARCH 5TH 1996
- - --------------------------------------------------------------------------------------------
CEILING/ROOF
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assembly Area (Sq Ft) U-Value U-Value x Area
- - --------------------------------------------------------------------------------------------
Insulated Area 916 .021 19.23
- - --------------------------------------------------------------------------------------------
Framing Area 28 .058 1.62
- - --------------------------------------------------------------------------------------------
Skylights
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------
Totals A 944 B 20.85
- - --------------------------------------------------------------------------------------------
Average U-Value: B 20.85 DIVIDED BY A 944. C .0220
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) D .0250
- - --------------------------------------------------------------------------------------------
EXPOSED WALL
- - --------------------------------------------------------------------------------------------
Insulated Area 1098 .04 43.92
- - --------------------------------------------------------------------------------------------
Framing Area 12 .204 2.448
- - --------------------------------------------------------------------------------------------
Windows 120 .52 62.4
- - --------------------------------------------------------------------------------------------
Doors 40 .065 2.6
- - --------------------------------------------------------------------------------------------
Rim Joist
- - --------------------------------------------------------------------------------------------
Fireplace Wall
- - --------------------------------------------------------------------------------------------
Foundation Wall (above grade)
- - --------------------------------------------------------------------------------------------
Foundation Windows
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
Totals E 1270 F 111.368
- - --------------------------------------------------------------------------------------------
Average U-Value: F 111.368 DIVIDED BY E 1270 G .087
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) H .110
- - --------------------------------------------------------------------------------------------
TOTAL ENVELOPE METHOD
- - --------------------------------------------------------------------------------------------
If C is greater than D, or G is greater than H, complete the following to determine
the design necessary to meet the envelope criteria of the Energy Code.
- - --------------------------------------------------------------------------------------------
As Designed Total: B + F I
- - --------------------------------------------------------------------------------------------
Ceiling Budget: D x A J
- - --------------------------------------------------------------------------------------------
Wall Budget: H x E K
- - --------------------------------------------------------------------------------------------
Total Envelope Budget: J + K L
- - --------------------------------------------------------------------------------------------
As Designed - Budget: I - L M
- - --------------------------------------------------------------------------------------------
If M is greater than zero, adjust R-Values or areas and recalculate so that I
is less than or equal to L.
- - --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
grade and the area of the floor, then calculate the heat loss.
BELOW GRADE WALL HEAT LOSS:
960 x 4
----------- -----------
(wall area) (heat loss)
= 3840 Btu/hr
----------------
(enter on Line C)
BELOW GRADE FLOOR HEAT LOSS:
864 x 4
----------- -----------
(floor area) (heat loss)
= 3840 Btu/hr
-----------------
(enter on Line C)
Place the results on the appropriate location on the heat loss worksheet.
INFILTRATION HEAT LOSS
This heat loss factor is important, but unfortunately, is the most
difficult to estimate accurately. The method shown here uses an estimate of air
changes per hour for the above grade portion of the building at design
conditions. Some commonly accepted numbers are 0.75 air-changes per hour for
new houses, and 1.5 air-changes per hour for old houses.
These numbers could be smaller or larger if the building is exceptionally
tight or unusually loose.
Calculate the above grade volume of the building in cubic feet. If a floor
is partially below ground, measure its height from the grade line to the floor
of the next level. Multiply interior length by width by height to find the
volume. Then apply the following equation:
INFILTRATION HEAT LOSS:
0.018 x .75 x 8640
------------ ---------
(air-changes (volume)
per hour)
= 116.94 Btu/hr
----------------
(enter on Line Q)
Put the result on the heat loss worksheet.
DESIGN TEMPERATURE DIFFERENCE
Check with your local code official (or call the Energy Information Center)
about the correct design temperature to use in your area. This will vary from
- - -16DEG. F to -29DEG. F, depending on your location in the state. Note that this
is not as cold as it ever gets in the location, but it does not usually get
colder than this for long enough to be a problem. Put the design temperature
number on the blank below and calculate the design temperature difference
(T.D.). Note that since the design temperature in Minnesota is less than 0DEG.
F the design temperature will always be greater than 72.
DESIGN T.D.:
72 - -16 = 88 DEG. F
----------- -------
(design
temperature)
Put the design temperature difference number in 3 places on the heat loss
worksheet.
HEAT LOSS WORKSHEET
HEAT LOSS RATE CALCULATION:
Total UxA for roof/ceiling B 20.85 Btu/hr/DEG. F
-----
Total UxA for exposed wall F 111.368
-------
Below grade wall heat loss O 3840 DIVIDED BY -88 = 43.636
---- --------- -------
(Design T.D.)
Below grade floor heat loss P 3456 DIVIDED BY -88 = 39.27
---- --------- -------
(Design T.D.)
Infiltration heat loss Q 116.64
------
Heat Loss Rate (total of above) 331.764Btu/hr/DEG. F
-------
DESIGN HEAT LOSS:
331.764 x 88
- - ----------------- --------------
(Heat Loss Rate) (Design T.D.)
= 29,195 .23 Btu/hr
--------------
ANNUAL HEATING COST
A very crude estimate of heating cost may be obtained with the following
equations. Actually, it is safest to use these estimates only for estimating
the possible savings due to modifying a given design or house.
You will need a multiplier value (MV) degree day adjustment, the annual
fuel efficiency (AFUE) of the heating system, the heating degree days for the
location, and the cost per unit of the heating fuel ($/Btu).
The heating degree day adjustment multiplier value should be chosen using
the following guidelines:
THERMAL CHARACTERISTICS MULTIPLIER
VALUE (MV)
ABOVE AVERAGE 16.5
(very well insulated, tighter
than average, and above
average solar gain)
AVERAGE 18.4
BELOW AVERAGE 20.4
(poorly insulated, more than
average leakage, and below average solar gain)
QUANTITY OF FUEL PURCHASED:
16.5 x 8000
----- --------
(MV) (heating degree days)
x 331.764 DIVIDED BY 88%
- - ---------------- --------
(heat loss rate) (AFUE)
= 49,764,600 Btu/year
----------
ANNUAL COST:
49,764,600 DIVIDED BY .42695
- - ------------ -------
(Btu/year, ($/Btu)
from above) per 100,000 Btu
= 212.47 $/year
-------
<PAGE>
SCHEDULE 1B
SPECIFICATIONS FOR HOUSING
MODEL 1008
<PAGE>
EXTERIOR ENVELOPE THERMAL TRANSMITTANCE WORKSHEET
<TABLE>
<S> <C>
- - --------------------------------------------------------------------------------------------
SITE ADDRESS CITY
- - --------------------------------------------------------------------------------------------
NAME OF PERSON COMPLETING FORM DATE
ROBERT H. LESLIE MARCH 5TH 1996
- - --------------------------------------------------------------------------------------------
CEILING/ROOF
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assembly Area (Sq Ft) U-Value U-Value x Area
- - --------------------------------------------------------------------------------------------
Insulated Area 1065 .021 22.365
- - --------------------------------------------------------------------------------------------
Framing Area 31 .058 1.798
- - --------------------------------------------------------------------------------------------
Skylights
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------
Totals A 1096 B 24.163
- - --------------------------------------------------------------------------------------------
Average U-Value: B 24.163 DIVIDED BY A 1096 C .0220
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) D .0250
- - --------------------------------------------------------------------------------------------
EXPOSED WALL
- - --------------------------------------------------------------------------------------------
Insulated Area 1207 .04 48.28
- - --------------------------------------------------------------------------------------------
Framing Area 14 .204 2.856
- - --------------------------------------------------------------------------------------------
Windows 114 .52 59.28
- - --------------------------------------------------------------------------------------------
Doors 40 .065 2.6
- - --------------------------------------------------------------------------------------------
Rim Joist
- - --------------------------------------------------------------------------------------------
Fireplace Wall
- - --------------------------------------------------------------------------------------------
Foundation Wall (above grade)
- - --------------------------------------------------------------------------------------------
Foundation Windows
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
Totals E 1375 F 113.016
- - --------------------------------------------------------------------------------------------
Average U-Value: F DIVIDED BY E G .0821
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) H .110
- - --------------------------------------------------------------------------------------------
TOTAL ENVELOPE METHOD
- - --------------------------------------------------------------------------------------------
If C is greater than D, or G is greater than H, complete the following to determine
the design necessary to meet the envelope criteria of the Energy Code.
- - --------------------------------------------------------------------------------------------
As Designed Total: B + F I
- - --------------------------------------------------------------------------------------------
Ceiling Budget: D x A J
- - --------------------------------------------------------------------------------------------
Wall Budget: H x E K
- - --------------------------------------------------------------------------------------------
Total Envelope Budget: J + K L
- - --------------------------------------------------------------------------------------------
As Designed - Budget: I - L M
- - --------------------------------------------------------------------------------------------
If M is greater than zero, adjust R-Values or areas and recalculate so that I
is less than or equal to L.
- - --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
grade and the area of the floor, then calculate the heat loss.
BELOW GRADE WALL HEAT LOSS:
1056 x 4
----------- -----------
(wall area) (heat loss)
= 4224 Btu/hr
----------------
(enter on Line C)
BELOW GRADE FLOOR HEAT LOSS:
1008 x 4
----------- -----------
(floor area) (heat loss)
= 4032 Btu/hr
-----------------
(enter on Line C)
Place the results on the appropriate location on the heat loss worksheet.
INFILTRATION HEAT LOSS
This heat loss factor is important, but unfortunately, is the most
difficult to estimate accurately. The method shown here uses an estimate of air
changes per hour for the above grade portion of the building at design
conditions. Some commonly accepted numbers are 0.75 air-changes per hour for
new houses, and 1.5 air-changes per hour for old houses.
These numbers could be smaller or larger if the building is exceptionally
tight or unusually loose.
Calculate the above grade volume of the building in cubic feet. If a floor
is partially below ground, measure its height from the grade line to the floor
of the next level. Multiply interior length by width by height to find the
volume. Then apply the following equation:
INFILTRATION HEAT LOSS:
0.018 x .75 x 10080
------------ ---------
(air-changes (volume)
per hour)
= 136.08 Btu/hr
----------------
(enter on Line Q)
Put the result on the heat loss worksheet.
DESIGN TEMPERATURE DIFFERENCE
Check with your local code official (or call the Energy Information Center)
about the correct design temperature to use in your area. This will vary from
- - -16DEG. F to -29DEG. F, depending on your location in the state. Note that this
is not as cold as it ever gets in the location, but it does not usually get
colder than this for long enough to be a problem. Put the design temperature
number on the blank below and calculate the design temperature difference
(T.D.). Note that since the design temperature in Minnesota is less than 0DEG.
F the design temperature will always be greater than 72.
DESIGN T.D.:
72 - -16 = 88 DEG. F
----------- -------
(design
temperature)
Put the design temperature difference number in 3 places on the heat loss
worksheet.
HEAT LOSS WORKSHEET
HEAT LOSS RATE CALCULATION:
Total UxA for roof/ceiling B 20.163 Btu/hr/DEG. F
------
Total UxA for exposed wall F 113.016
-------
Below grade wall heat loss O 4224 DIVIDED BY 88 = 48.00
---- --------------------- ------
(Design T.D.)
Below grade floor heat loss P 4032 DIVIDED BY 88 = 45.818
---- --------------------- ------
(Design T.D.)
Infiltration heat loss Q 136.08
------
Heat Loss Rate (total of above) 367.077Btu/hr/DEG. F
-------
DESIGN HEAT LOSS:
367.077 x 88
- - ----------------- --------------
(Heat Loss Rate) (Design T.D.)
= 32302.776 Btu/hr
--------------
ANNUAL HEATING COST
A very crude estimate of heating cost may be obtained with the following
equations. Actually, it is safest to use these estimates only for estimating
the possible savings due to modifying a given design or house.
You will need a multiplier value (MV) degree day adjustment, the annual
fuel efficiency (AFUE) of the heating system, the heating degree days for the
location, and the cost per unit of the heating fuel ($/Btu).
The heating degree day adjustment multiplier value should be chosen using
the following guidelines:
THERMAL CHARACTERISTICS MULTIPLIER
VALUE (MV)
ABOVE AVERAGE 16.5
(very well insulated, tighter
than average, and above
average solar gain)
AVERAGE 18.4
BELOW AVERAGE 20.4
(poorly insulated, more than
average leakage, and below average solar gain)
QUANTITY OF FUEL PURCHASED:
16.5 x 8000
------ ------
(MV) (heating degree days)
x 367.077 DIVIDED BY 88%
- - ---------------- --------
(heat loss rate) (AFUE)
= 55,061,550 Btu/year
----------
ANNUAL COST:
55,061,550 DIVIDED BY .42695
- - ------------ -------
(Btu/year, ($/Btu)
from above) per 100,000 Btu
= 235.09 $/year
-------
<PAGE>
SCHEDULE 1C
SPECIFICATIONS FOR HOUSING
MODEL 1152
<PAGE>
Assembly R and U-Value Forms 1152 sq ft STD PLAN TO MINNESOTA ENERGY CODE
- - -------------------------------------------------------------------------------
Assembly
INSULATED WALL ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 24.76
- - -------------------------------------------------------------------------------
Assembly U-Value .04
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
WALL FRAMING AREA
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
DRYWALL 1/2" 0.45
- - -------------------------------------------------------------------------------
WOOD FRAMING 2 1/2" 3.12
- - -------------------------------------------------------------------------------
SIDING. - 0.61
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient 0.68
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .17
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 4.88
- - -------------------------------------------------------------------------------
Assembly U-Value 0.204
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
INSULATED ROOF ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FROM UNIHOME
- - -------------------------------------------------------------------------------
DRAWING-INSULATION
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 45.81
- - -------------------------------------------------------------------------------
Assembly U-Value .021
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
ROOF FRAMING ASSEMBLY
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
SHINGLES - .44
- - -------------------------------------------------------------------------------
ROOF SKIN 1/2" .62
- - -------------------------------------------------------------------------------
RAFTERS 11 1/2" 14.37
- - -------------------------------------------------------------------------------
SHEET ROCK 1/2" .45
- - -------------------------------------------------------------------------------
Interior Film Coefficient .61
- - -------------------------------------------------------------------------------
Exterior Film Coefficient .61
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance 17.10
- - -------------------------------------------------------------------------------
Assembly U-Value .058
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Assembly
- - -------------------------------------------------------------------------------
Material (Describe) Thickness R-Value
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Interior Film Coefficient
- - -------------------------------------------------------------------------------
Exterior Film Coefficient
- - -------------------------------------------------------------------------------
Total Assembly Thermal Resistance
- - -------------------------------------------------------------------------------
Assembly U-Value
- - -------------------------------------------------------------------------------
I HEREBY CERTIFY THAT THIS PLAN, SPECIFICATION OR REPORT WAS PREPARED BY ME OR
UNDER MY DIRECT SUPERVISION, AND THAT I AM A DULY REGISTERED PROFESSIONAL
ENGINEER UNDER THE LAWS OF THE STATE OF MINNESOTA.
X /s/ SEAN K. HALLET
- - ---------------------
DATED 3/5/96 REG. NO. 19164
---------------
<PAGE>
EXTERIOR ENVELOPE THERMAL TRANSMITTANCE WORKSHEET
<TABLE>
<S> <C>
- - --------------------------------------------------------------------------------------------
SITE ADDRESS CITY
- - --------------------------------------------------------------------------------------------
NAME OF PERSON COMPLETING FORM DATE
ROBERT H. LESLIE MARCH 5TH 1996
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assembly Area (Sq Ft) U-Value U-Value x Area
- - --------------------------------------------------------------------------------------------
CEILING/ROOF
- - --------------------------------------------------------------------------------------------
Insulated Area 1213 .021 25.473
- - --------------------------------------------------------------------------------------------
Framing Area 35 .058 2.03
- - --------------------------------------------------------------------------------------------
Skylights
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
Totals A 1248 B 27.503
- - --------------------------------------------------------------------------------------------
Average U-Value: B 27.503 DIVIDED BY A 1248 C .0220
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) D .0250
- - --------------------------------------------------------------------------------------------
EXPOSED WALL
- - --------------------------------------------------------------------------------------------
Insulated Area 1318 .04 52.72
- - --------------------------------------------------------------------------------------------
Framing Area 14 .204 2.856
- - --------------------------------------------------------------------------------------------
Windows 138 .52 71.76
- - --------------------------------------------------------------------------------------------
Doors 40 .065 2.6
- - --------------------------------------------------------------------------------------------
Rim Joist
- - --------------------------------------------------------------------------------------------
Fireplace Wall
- - --------------------------------------------------------------------------------------------
Foundation Wall (above grade)
- - --------------------------------------------------------------------------------------------
Foundation Windows
- - --------------------------------------------------------------------------------------------
Other
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
Totals E 1510 F 129.936
- - --------------------------------------------------------------------------------------------
Average U-Value: F 129.936 DIVIDED BY E 1510 G .0860
- - --------------------------------------------------------------------------------------------
Required U-Value (from Energy Code) H .110
- - --------------------------------------------------------------------------------------------
TOTAL ENVELOPE METHOD
- - --------------------------------------------------------------------------------------------
If C is greater than D, or G is greater than H, complete the following to determine
the design necessary to meet the envelope criteria of the Energy Code.
- - --------------------------------------------------------------------------------------------
As Designed Total: B + F I
- - --------------------------------------------------------------------------------------------
Ceiling Budget: D x A J
- - --------------------------------------------------------------------------------------------
Wall Budget: H x E K
- - --------------------------------------------------------------------------------------------
Total Envelope Budget: J + K L
- - --------------------------------------------------------------------------------------------
As Designed - Budget: I - L M
- - --------------------------------------------------------------------------------------------
If M is greater than zero, adjust R-Values or areas and recalculate so that I
is less than or equal to L.
- - --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
grade and the area of the floor, then calculate the heat loss.
BELOW GRADE WALL HEAT LOSS:
1152 x 4
----------- -----------
(wall area) (heat loss)
= 4608 Btu/hr
----------------
(enter on Line C)
BELOW GRADE FLOOR HEAT LOSS:
1152 x 4
----------- -----------
(floor area) (heat loss)
= 4608 Btu/hr
-----------------
(enter on Line C)
Place the results on the appropriate location on the heat loss worksheet.
INFILTRATION HEAT LOSS
This heat loss factor is important, but unfortunately, is the most
difficult to estimate accurately. The method shown here uses an estimate of air
changes per hour for the above grade portion of the building at design
conditions. Some commonly accepted numbers are 0.75 air-changes per hour for
new houses, and 1.5 air-changes per hour for old houses.
These numbers could be smaller or larger if the building is exceptionally
tight or unusually loose.
Calculate the above grade volume of the building in cubic feet. If a floor
is partially below ground, measure its height from the grade line to the floor
of the next level. Multiply interior length by width by height to find the
volume. Then apply the following equation:
INFILTRATION HEAT LOSS:
0.018 x .75 x 11520
------------ ---------
(air-changes (volume)
per hour)
= 155.52 Btu/hr
----------------
(enter on Line Q)
Put the result on the heat loss worksheet.
DESIGN TEMPERATURE DIFFERENCE
Check with your local code official (or call the Energy Information
Center) about the correct design temperature to use in your area. This will
vary from -16 DEG. F to -29 DEG. F, depending on your location in the state.
Note that this is not as cold as it ever gets in the location, but it does
not usually get colder than this for long enough to be a problem. Put the
design temperature number on the blank below and calculate the design
temperature difference (T.D.). Note that since the design temperature in
Minnesota is less than 0 DEG. F the design temperature will always be greater
than 72.
DESIGN T.D.:
72 - -16 = 88 DEG. F
----------- -------
(design
temperature)
Put the design temperature difference number in 3 places on the heat loss
worksheet.
HEAT LOSS WORKSHEET
HEAT LOSS RATE CALCULATION:
Total UxA for roof/ceiling B 27.503 Btu/hr/DEG. F
------
Total UxA for exposed wall F 129.936
-------
Below grade wall heat loss O 4608 DIVIDED BY 88 = 52.363
---- ------
(Design T.D.)
Below grade floor heat loss P 4608 DIVIDED BY 88 = 52.363
---- ------
(Design T.D.)
Infiltration heat loss Q 155.52
------
Heat Loss Rate (total of above) 417.685Btu/hr/DEG. F
-------
DESIGN HEAT LOSS:
417.685 x 88
- - ----------------- --------------
(Heat Loss Rate) (Design T.D.)
= 36756.28 Btu/hr
--------------
ANNUAL HEATING COST
A very crude estimate of heating cost may be obtained with the following
equations. Actually, it is safest to use these estimates only for estimating
the possible savings due to modifying a given design or house.
You will need a multiplier value (MV) degree day adjustment, the annual
fuel efficiency (AFUE) of the heating system, the heating degree days for the
location, and the cost per unit of the heating fuel ($/Btu).
The heating degree day adjustment multiplier value should be chosen using
the following guidelines:
THERMAL CHARACTERISTICS MULTIPLIER
VALUE (MV)
ABOVE AVERAGE 16.5
(very well insulated, tighter
than average, and above
average solar gain)
AVERAGE 18.4
BELOW AVERAGE 20.4
(poorly insulated, more than
average leakage, and below average solar gain)
QUANTITY OF FUEL PURCHASED:
16.5 x 8000
------------------------------
(MV) (heating degree days)
x 417.685 DIVIDED BY 88%
- - ---------------- --------
(heat loss rate) (AFUE)
= 62,652,750 Btu/year
----------
ANNUAL COST:
62,652,750 DIVIDED BY .42695
- - ------------ -------
(Btu/year, ($/Btu)
from above) per 100,000 Btu
= 267.49 $/year
-------
<PAGE>
SCHEDULE 2
PRODUCT GUARANTEE
<PAGE>
UNIHOME-TM-
PRODUCT GUARANTEE
Home Builders International (HBI) guarantees the specifications, workmanship,
and finishes of its manufactured products against production, dimension, and
material defects. HBI will replace defective components if reported within 7
days of receipt of purchase. The components and documentation must be kept for
inspection by an authorized HBI representative prior to replacement. HBI
reserves the right to supply the replacement of the component from any
manufacturing source it considers appropriate.
HBI guarantees product performance for a period of 10 (ten) years, subject to
construction by an authorized HBI Dealer or representative, however, this
guarantee is valid only on confirming that the UniHome-TM- has been erected to
the precise specifications set forth by Home Builders International.
Service Life Warranties, legislated in some states, are recognized, as written,
by HBI. All other warranties and guarantees provided by suppliers are available
on application.
No other guarantee or warranty is implied or provided.
-------------------------------
ROBERT H. LESLIE, PRESIDENT
<PAGE>
SCHEDULE 3
CODE COMPLIANCE LETTER
<PAGE>
HOME BUILDERS INTERNATIONAL
February 27, 1996
To Whom it may Concern:
UniHome is a component part building system that can be site built to produce
many floor plans and designs within a 12-foot modular concept. UniHome is not a
factory built home.
Letters from the Minnesota Department of Administration Building, Codes and
Standards Division confirm our company's opinion that our system is open
construction and therefore is to be reviewed and inspected by local
jurisdictions.
In a letter dated May 8, 1995, Mr. Duane De Lonais, Building Code Representative
of the Building Codes and Standards Division of the Minnesota Department of
Administration wrote
"The panels as you are proposing to build would be of construction MSBC
1360.0200 sub part 16 and would not constitute a prefabricated building
MSBC 1360.0200 SUBP 15. The inspection and plan review would need to be
done by the local building official."
In a second letter dated October 9, 1995, Mr. Elroy Berdahl, Supervisor of the
Manufactured Structures Division stated:
"The Minnesota Building Codes and Standards Division does not approve
building systems that are of open construction. The H.B.I. house is of
open construction and is therefore to be reviewed and inspected by local
jurisdictions."
Both letters referred to deficiencies by our corporation in terms of meeting
standards in Minnesota. These deficiencies which included such things as number
of GFCI circuits in the house, dimensioning of the plumbing layout and approval
of a specifically Minnesota licensed Engineer, have all been overcome. Mr. Sean
Haller P.E., Minnesota Registered Engineer No. 19164 was contracted to take all
the necessary steps to overcome our deficiencies and was authorized to
recalculate all engineering elements to confirm the opinion of engineers
licensed in other states where UniHome is assembled. Additionally, Mr. Hallet
has redrafted the H.B.I. plans and specifications in a manner that is familiar
to Code Officials in the State of Minnesota.
<PAGE>
Pg. 2 HOME BUILDERS INTERNATIONAL
Please feel free to contact me, Robert Leslie, President of HBI, if you have
further questions regarding our system and its relationship to Minnesota Codes.
My telephone number is 612-824-3762.
Sincerely,
Robert H. Leslie
President
RL:plt
<PAGE>
SCHEDULE 4
NATIONAL EVALUATION SERVICE REPORTS
<PAGE>
Reproduced by APA with permissions of:
- - -------------------------------------------------------------------------------
NATIONAL EVALUATION SERVICE, INC.
PARTICIPATING MEMBERS:
<TABLE>
<S> <C>
SECRETARIAT SBCCI Public Safety
BOCA Evaluation Services, Inc. ICBO Evaluation Service, Inc. Testing and Evaluation Services, Inc.
- - ------------------------------------------------------------------------------------------------------------------
4051 West Flossmoor Road 5360 Workman Mill Road 900 Montclair Road, Suite A
Country Club Hills, Illinois 60478-5795 Whittier, California 90601-2299 Birmingham, Alabama 35212-1206
(708) 799-2305 (310) 699-0543 (205) 591-1853
- - ------------------------------------------------------------------------------------------------------------------
REPORT NO. NER-QA397
REISSUED MARCH 1, 1994
NATIONAL EVALUATION REPORT THIS REPORT IS SUBJECT TO
COPYRIGHT -C- 1994, NATIONAL EVALUATION SERVICES, INC. RE-EXAMINATION IN ONE YEAR
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPLIANCE ASSURANCE FOR PLYWOOD, STRUCTURAL-USE PANELS, SPECIALTY WOOD
PRODUCTS, STRUCTURAL GLUED-LAMINATED TIMBER, PREFABRICATED WOOD I-JOISTS,
PLYWOOD CURVED PANELS, PLYWOOD-LUMBER BEAMS, PLYWOOD STRESSED-SKIN PANELS AND
SANDWICH PANELS
AMERICAN PLYWOOD ASSOCIATION
POST OFFICE BOX 11700
TACOMA, WASHINGTON 98411
Listing:
AMERICAN WOOD SYSTEMS
POST OFFICE BOX 11700
TACOMA, WASHINGTON 98411
1.0 SUBJECT
Compliance assurance for plywood, structural-use panels, specialty wood
products, structural glued-laminated timber, prefabricated wood I-joists,
plywood curved panels, plywood-lumber beams, plywood stressed-skin panels
and sandwich panels.
2.0 PROPERTY FOR WHICH EVALUATION IS SOUGHT
Compliance Assurance and/or Inspection Agency
3.0 DESCRIPTION
Compliance Assurance and/or Inspection Services are provided to verify that
manufactured products are representative of the products described in the
reported test results. The services provided are subject to the limitation
of Section 5.0, CONDITIONS OF USE
Compliance Assurance and/or Inspection Services are provided for the
following wood-based products:
A. Plywood
B. Structural-use Panels
C. Specialty Wood Products
D. Structural Glued-laminated Timber
E. Prefabricated Wood l-joists
F. Plywood Curved Panels
G. Plywood-Lumber Beams
H. Plywood Stressed-Skin Panels
I. Sandwich Panels
4.0 EVIDENCE SUBMITTED
Quality assurance program manual, prepared by American Plywood Association,
dated November, 1989. The manual includes the following:
1. Description of the organization, facilities and personnel.
2. Organiation Chart.
3. Trademark License Agreement
4. Affidavit of agency's third party independence.
5. Facsimiles of grade stamps
6. Adhesive Policy
7. Grading Policy
8. Qualification Policy
9. Product Standards
5.0 CONDITIONS OF USE
The National Evaluation Service Committee finds that the American Plywood
Association (APA) and American Wood Systems (AWS) meet the requirements for
recognition as a Compliance Assurance and/or Inspection Agency for the
products listed in Section 3.0, DESCRIPTION of this report, provided the
products labeled or listed by APA or AWS are specifically evaluated in a
current NES or NES Participating Member's evaluation report.
- - --------------------------------------------------------------------------------
THIS REPORT IS LIMITED TO THE SPECIFIC PRODUCT AND DATA AND TEST REPORTS
SUBMITTED BY THE APPLICANT IN ITS APPLICATION REQUESTING THIS REPORT. NO
INDEPENDENT TESTS WERE PERFORMED BY THE NATIONAL EVALUATION SERVICE, INC. (NES),
AND NES SPECIFICALLY DOES NOT MAKE ANY WARRANTY, EITHER EXPRESSED OR IMPLIED, AS
TO ANY FINDING OR OTHER MATTER IN T HIS REPORT OR AS TO ANY PRODUCT COVERED BY
THIS REPORT. THIS DISCLAIMER INCLUDES, BUT IS NOT LIMITED TO, MERCHANTABILITY.
THIS REPORT IS ALSO SUBJECT TO THE LIMITATION LISTED HEREIN.
- - --------------------------------------------------------------------------------
<PAGE>
Reproduced by APA with permissions of:
- - --------------------------------------------------------------------------------
NATIONAL EVALUATION SERVICE, INC.
PARTICIPATING
MEMBERS:
<TABLE>
<S> <C>
SECRETARIAT SBCCI Public Safety
BOCA Evaluation Services, Inc. ICBO Evaluation Service, Inc. Testing and Evaluation Services, Inc.
- - ------------------------------------------------------------------------------------------------------------------
4051 West Flossmoor Road 5360 Workman Mill Road 900 Montclair Road, Suite A
Country Club Hills, Illinois 60478-5795 Whittier, California 90601-2299 Birmingham, Alabama 35213-1206
(708) 799-2305 (310) 699-0543 (205) 591-1853
- - ------------------------------------------------------------------------------------------------------------------
REPORT NO. NER-QA397
REISSUED MARCH 1, 1994
NATIONAL EVALUATION REPORT THIS REPORT IS SUBJECT TO
COPYRIGHT -C- 1994, NATIONAL EVALUATION SERVICES, INC. RE-EXAMINATION IN ONE YEAR
- - -----------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
STANDARDS FOR STRUCTURAL-USE PANELS
APA - THE ENGINEERED WOOD ASSOCIATION
POST OFFICE BOX 11700
TACOMA, WA 98411-0700
1.0 SUBJECT
Standards for Structural-Use Panels.
2.0 PROPERTY FOR WHICH EVALUATION IS SOUGHT
Product Performance and Installation Requirements For:
2.1 Wall Sheathing
2.2 Floor Sheathing
2.3 Roof Sheathing
2.4 Siding
3.0 DESCRIPTION
3.1 PRODUCT PERFORMANCE STANDARDS
3.1.1 General
APA - The Engineered Wood Association is an agency that promulgates the
following standards as published in the "Performance Standards and Policies
for Structural-Use Panels," PRP-108 (February 1994);
- Sturd-l-Floor Standard
- Sheathing Standard
- Siding Standard
The U.S. Department of Commerce promulgates Voluntary Product Standard PS
2-92 "Performance Standard for Wood-Based Structural-Use Panels."
Panels evaluated under this report comply with either APA PRP-108 or DOC PS
2-92 requirements, or both. Although the structural performance
requirements of DOC PS 2-92 and APA PRP-108 are the same, the panel
identification stamp shall include the standard(s) to which the panel was
tested.
3.1.2 APA Rated Sturd-l-Floor
APA Rated Sturd-l-Floor standard covers thicknesses from 19/32 through 1
1/8 inches. Face ply (if veneer) and the ply adjacent to the face (if
veneer) shall meet the applicable requirements of DOC PS 1-83 for
underlayment grade. Veneer faces are touch sanded and the backs are
unsanded, touch sanded, or textured.
3.1.3 APA Rated Sheathing
APA Rated Sheathing standard identifies subfloor-span ratings of 16, 20,
24, 32 and 48 inches and roof-span ratings of 16, 20, 24, 32, 40, 48, 54
and 60 inches, or wall-span ratings of 16 or 24 inches. The span rating is
determined on the basis of hte results of performance tests noted in
Sectoin 3.1.5 APA Rated Sheathing/Ceiling Deck has one face textured. APA
Rated wall Bracing has a wall span rating of 16 or 24 inches.
3.1.4 APA Rated Siding
<PAGE>
ARA Rated Siding standr identifies span ratinsg (maximum stud spacings) of
16 and 24 inches. Panels are composed entirely of veneer, of combination
of veneer and reconstituted wood or entirely of reconstituted wood, except
that hardboard siding is not included. The span rating is determined on
the basis of results of performance tests as noted in Section 3.1.5.
3.1.5 Performance Requirements
3.1.5.1 Structural Performance: Structural-use panels meet performance
requirements established by the APA for concentrateed, impact,
and uniform loads for the end-use span on the grade mark. Panels
are tested dry, wetted and redried and, for certain loading
conditions, tested wet. Load test requirements are given in APA
PRP-108. Roof spans and live loads shall not exceed those given
in Table 3 and dead loads shall not exceed 10 psf. The live load
for floor panels shall not exceed 100 psf with a dead load not to
exceed 10 psf, except the Sturd-l-Floor panel, with a span
ratings of 48 inches on center, is limited to a total floor load
of 65 psf.
3.1.5.2 Panel Durability. The performance standard requires evaluation
of the resin bonding system. Exterior-type plywood, in U.S.
Department of Commerce Voluntary Product Standard PS 1-83, is
designed to be permanently exposed in outdoor applications.
Siding panels are identified as Exterior. Other panels are
identified as Exposure 1 or 2 and are not intended for permanent
exposure to weather. Exposure 1 or 2 panels are designed to be
used for roof sheating, subflooring, combination subfloor-
underlayment, or wall sheating and shall be covered with an
approved roof covering or exterior wall covering. Panels
identified as Exposure 1 are designed to be used for roof
sheathing where exposed on the underside, such as on eaves.
3.1.6 Composition
3.1.6.1 Veneer: Veneer used in structural-use panels meets the veneer
requirements of DOC PS 1-83. Veneer not meeting the requirements
of DOC PS 1-83 is permitted to be used, provided the panels meet
the performance requirements for the panel grade. Veneer is used
throughout the all-veneer panels and for face and back plies or
inner layers in composite panels.
3.1.6.2 Reconstituted Wood: Panels composed entirely of reconstituted
wood are waferboard, oriented strand board or other wood-based
panels. The panels are manufactured to meet the performance
requirements given in APA PRP-108.
3.1.7 Panels
3.1.7.1 Size: panels are generally produced in nominal sizes of 4 feet
by 8 feet. Length and width tolerances are +0, -1/8 inch.
3.1.7.2 Tongue and Groove Joints: When panels have tongue-and-groove
joints, the joints are on the 8-foot sides, 4-foot ends, or both.
3.1.7.3 Shiplap Edges: When siding panels have shiplap edges, the edges
occur on the 8, 9 or 10 foot sides. The joint is typically cut
approxmately one-half way through the thickeness and when
installed (after expansion occurs), provides a 3/8-inch lap.
4.0 INSTALLATION
4.1 GENERAL
The Structural-Use Panels shall be installed in accordance with this report
and the applicable code.
All panels used for floors and roofs shall be installed over two or more
spans, with the long dimension perpendicular to supports spaced in
accordance with the span rating. Where the strong panel direction is not
parallel to the long dimension, or where the span rating applies to either
direction, panels shall be so identified and shall be installed
accordingly. A 1/2-inch gap shall be provided between the panel and
concrete or masonry walls. Cutouts for plumbing and electrical shall be
oversized. Firestopping is required in accordance with the applicable
code.
Framing members shall align with the panel surface. Square-edged panels
used for floors shall be covered with one of the following:
- Minimum 1/4-inch-thicke underlayment; or
- Minimum 1 1/2 inches of cellular or lightweight concrete; or
- Three-fourth-inch wood strip finish flooring; or
- The edges shall be supported with blocking.
<PAGE>
Fasteners shall be located a minimum of 3/8 inch from panel edges.
Supported panel joints shall occur approximately along the centerline of
framing with a minimum bearing of 1/2 inch.
4.2 STURD-I-FLOOR
panel-end joints shall be staggered. Ring- or screw-shank nails are used
to attach Sturd-I-Floor panels to supports -- 6d for thicknesses through
3/4 inch and 8d for greater thicknesses. nails are spaced a maximum of 6
inches on center along panel edges and 12 inches on center along
intermediate supports except that for 48-inch spans the maximum spacing
shall be 6 inches along intermediate supports. Sturd-I-Floor panels having
nonveneer faces and intended for use under nontextile resilient flooring
shall be covered with 1/4-inch minimum thickness underlayment.
If panels are field glued with an adhesive meeting APA Specification AFG-01
applied to joists and tongue-and-groove edges, nails shall be spaced a
maximum of 12 inches along all bearings for panels 3/4 inch or less, and 6
inches for thicker panels. Framing shall be free of surface moisture,
dirt, cement, and other foreign materials prior to application of the
adhesive.
Adhesives shall be applied in accordance with the adhesive manufacture's
instructions. The application rate shall be 1/4-inch diameter bead applied
to each joist or blocking member, except two 1/4-inch diameter beads shall
be applied where panels abut on a joist. Tongue-and-groove joints shall
also be glued. Installation of the panels shall be within the time limite
designated by the adhesive manufacturer. Where diaphragm action is
required, the nail size and spacing shall be as set forth in Table 1.
If panels are square edged and resilient floor covering is to be applied
directly, panel edges shall be supported by 2-inchlumber blockign. Wehre
panels are covered with a 1/4-inch minimum thickness underlayment or have
tongue-and-groove edges, blocking is not required except if required by
Table 1.
4.3 SHEATHING
4.3.1 Wall Sheathing and Floor Panels
Panels used for wall sheathing are permitted to be installed with the long
panel dimension either perpendicular or parallel to studs. Panels rated
for wall spans shall be installed over the studs spaced no farther apart
than the span rating. When panels rated for roof spans are used for wall
sheathing, the maximum stud spacing is 16 inches for panels with ratings of
16 aqnd 20 inches, and 24 inches for 24 inches and greater span rating.
Panels used for wall sheathging are alternatives to the plywood sheathing
specified in thecode for wall bracing. The panels are considered water-
rellent panel sheathing as defined in the Standard Building Code and
Uniform Building Code. The panels shall be covered by an exterior wall
covering complying with the appropriate code, as noted in Section 3.1.5.2
Wall and floor panels 1/2 inche and less in thickness are fastened withy
6d common nails; 8d nails are used for thickeer panels. Nails are spaced 6
inches on center at panel edges supported by framing and 12 inches on
center at other supports. A 6 inch on center spacing shall be used when
supports are spaced 48 inches on center.
4.3.2 Draftstopping
When panels are used as draftstopping material, the minimum thickness of
the panel shall be 3/8 inch.
4.3.3 Roof Sheathing
Allowable live loads for panels used for roof sheathing with long panel
dimension across supports are given in Table 3. Panel-edge clips shall be
used at unsupported edges, if required by Table 3.
Allowable live loads for panels for roof sheathing applied with the long
panel dimension parallel to supports are given in Table 4. Roof panels
shall be fastened with 8d common nails spaced 6 inches on center at panel
edges supported by framing and 12 inches on center at other supports.
Fastener schedule applies when Douglas-fir or southern pine roof framing
spaced up to 24 inches on center is used in one or two-story construction,
when the basic wind speed is 70 mph maximum in areas using the 1993 BOCA
National Building Code or 1994 Standard Building Code. Nails shall be
spaced 6 inches on center at allsupports within 4 feet of ridges, eaves and
gable ends and at panel edges supported byframing, and 12 inches on center
at other supporrts, when the basic wind speed is greater than 70 mph and no
greater than 100 mph in areas using hte 1994 Uniform Building Code, or the
basic wind speed is greater than 80 mph, but not greater than 110 mph, in
areas using hte 1993 BOCA National Building Code or the 1994 Standard
Building Code.
Staples used for attaching rated sheathing to framing shall be as approvbed
for plywood of the same thickness.
4.3.4 Diaphagm Construction
<PAGE>
When used in diaphragm construction, structural-use panels are assigned the
values in Table 1. Diaphragm dimension ratios permitted in the code for
plywood applyl to structural-use panels. The unblocked values shown also
apply topanesl having tongue-and-groove joints along the longitudinal
edges, except as noted below.
One-and-one-eighth-inch (1 1/8) AAP structural-use panesl fastened with 8d
ring- or screw-shank nails or 10d common nails are assigend the values for
10d common nails and 19/32-inch minimum nominal panel thickness in Table 1.
Where blocked values are requierd for 1 3/32- or 1 1/8 inch tongue-and-
groove panels, 1 inch by 3/8-inch crown by No. 16 gauge staples shall be
driven through the tongue-and-groove edges 3/8 inch from the joint and
driven so as to penetrate the tongue as illustrated in Figure 1. Staples
shall be spaced at one half the boundary nail spacing for Cases 1 and 2,
Table 1, and at one third the boundary nail spacing for Caseds 3 through 6,
Table 1.
4.3.5 Shear Walls
When used in shear walls, APA Rated Sheathing is assigned the values in
Table 2 except that the allowable shear for APA Rated Wall Bracing panesl
applied directly to studs in accordance with the above nail schedule shall
be 180 plf regardless of panel thickness. Diaphragm dimension ratios
permitted in the code for plywood apply to structural-use panels.
For purposes of determining seismic forces for design, the values of K and
Rw, given in the applicable code for plywood shall apply to structural-use
panels, for buildings not more than three stories in height with stud wall
framing using siding, sheathing or Sturd-I-Floor panels for the shear walls
and diaphragms for the lateral force system.
4.4 SIDING
4.4.1 General
When siding is applied directly to studs, the studs shall be spaced no
further apart than the span rating included in the grade mark on the panel.
All veneer-faced siding panels with a span rating of 16 or 24 inches on
center are permitted to be installed over studs spaced 24 inches on center
when applied with face grain horizontal or over nailable sheathing. Other
siding panels with a span rating of 16 or 24 inches on center are permitted
to be applied over studes spaced 24 inches on center when applied over
nailable sheathing. Nailable sheating shall be norminal 1-inch boards or
structural-use panesl of thickensses permitted in the appicable code
forplywood sheathing to which the siding is directly attached.
Fasteners for attaching siding shall benonstaining box, siding or casing
nails. For panels 1/2 inch thick or less, use 6d nails,and 8d for thicker
panels. For 3/8-inch and thinner lap siding, use 6d nails and 8d for
thicker lap siding.
4.4.2 Panel Siding
Panel siding is designed to be applied whtout building paper either direct
to framing or over sheathing, provided all siding joints occur over framing
and are protected with a continuous wood batt, approved caulking, flashing,
vetical or horizontal shiplaps, or otherwise made waterproof. Where
grooved siding is applied horizontally direct to framing, buidling paper
shallb e installed behind the siding, in accordance with tehapplicable
code. Siding shall be fastened directly to framing in accordance with
plywood provision of the code. When siding 1/2 inch or less in thickness
is installed over foam sheathing up to 1 inch in thickness, the siding
shall be fastened with 8d galvanized box nails. Siding greater than 1/2
inch in thickness applied over foam sheathing shallbe fastened with 10d
galvanized box nails. The foam sheathing shall conform to the code.
Panel siding applied directly to studs, spaced in accordance with the span
rating and fastened with 6d galvanized box nails or equivalent, spaced 6
inches on center at panel edges and 12 inches on center at intermediate
studs, is an alternative to the plywood sheathing construction specified in
the code for wall bracing.
Shear values for all-veneer panel siding shall be as given in Table 2 for
siding applied directly to studes, or over 1/2-or 5/8-inch gypsum
sheathing. Thickness at poit of nailing at panel edges determines
applicable values.
All-veneer panel siding, identified as APA 303, applied over maximum 1-
inch-thick foam sheathing, as described above, on studs spaced 16 or 24
inches on center, with 1/2-inch gypsum wallboard installed on the interior
face, is an alternative to the plywood sheathing construction specified in
the code for wall bracing.
For use as roof sheathing with the underside exposed, the allowable spans
for all-veneer siding identified as "303," shall conform to Table 5.
4.4.3 Lap Siding
<PAGE>
Lap siding is applied either to framing or over nailable sheaething as
defined above. When installed either directly to framing or over boards,
building paper (weather-resistive barrier) is required to be installed over
the framing in accordance with the applicable code. Vertical-end-joints
shall be either caulked or otherwise installed in accordance with
recommendations of the siding manufacturere. Siding joints, if staggered,
are allowed to occur away from studs when nailable sheathing is used. When
lap siding is installed over nailable sheathing, nails shall be spaced 8-
inches on center along the bottom edge. If siding is wider than 12 inches,
also nail siding to intermediate studs with nails spaced 8 inches on
center.
5.0 IDENTIFICATION
The Structural-Use Panesl shall be identified in accordance with the
Nationall Evaluation Service report or individual model code evlauation
service report that specifically evaluates the panels.
6.0 EVIDENCE SUBMITTED
6.1 APA Research Report 135-C, titled "Test Methods and Performance
Requirements for Floor and Roof Sheathings."
6.2 Calculations of plywood section properites and allowable loads.
6.3 APA Specification and Policy for Structural-Use Panel Sheathing.
6.4 Performance Standards and Policies for Structural-Use Panels, APA
PRP-108; February, 1994.
6.5 Tests and calculations for racking-shear values.
6.6 Calculations for rated siding used as roof sheathing.
6.7 Calculations for wind resistance.
6.8 APA Research Report 148--Structural Performance of Wood-Based Siding.
6.9 APA Research Report 149--Dimensional Performance of Wood-Based
Siding.
6.10 APA Lap Siding Installation Guide, dated July, 1987.
6.11 Calculations on the recommended roof snow loads for APA rated
sheathing 54/32 and60/48 and Sturd-L-Floor 48 inches on center and 24
inches on center; sealed by John R. Tissell, P.E.
6.12 APA Technical Note No. N375A titled "Design Capacities of the APA
Performance-Rated Structural-Use Panels," dated September, 1991.
6.13 APA Report No. T88-16, titled "Design Values for Structural Panel
Products," prepared by Michael R. O'Halloran and Edward G. Elias,
dated May, 1988.
6.14 U. S. Department of Commerce Voluntary Product Standard PS 2-92,
dated August, 1992.
6.15 Calculations for fastener spacing on roof sheathing, dated
December 29, 1993 prepared and stamped by William Baker, P.E.
7.0 CONDITIONS OF USE
The National Evaluation Service Committee finds that the Standards for
Structural-Use Panels described in this report are acceptable alternative
materials to those specified in the 1993 BOCA National Building Code, the
1994 Standard Building Code, the 1994 Uniform Building Code, and the 1992
CABO One and Two Family Dwelling Code, subject to the following conditions:
7.1 Structural-Use panel developed in accordance with the procedure
described in this report shall be evaluated in a current National
Evaluation Service report or individual raeport of a participating
member.
7.2 Span ratings and load capacities are based on untreated panels or
plywood panels treated only with preservatives in accordance withAWPA
Standards C9, C22 or C29. Structural performance characteristics of
FRT panels are outside the scope of this report and require
evaluation in accordance with the applicable code.
<PAGE>
TABLE 1
ALLOWABLE SHEAR (POUNDS PER FOOT) FOR HORIZONTAL APA STRUCTURAL-USE PANEL
DIAPHRAGMS WITH FRAMING OF DOUGLAS FIR-LARCH OR SOUTHERN PINE(1) FOR WIND OR
SEISMIC LOADING(5)
<TABLE>
<CAPTION>
BLOCKED DIAPHRAGMS UNBLOCKED DIAPHRAGMS
-----------------------------------------------------------------------
Nail Spacing (In.) At Diaphragm Boundaries (All
Cases) at Continuous Panel Edges Parallel to
Lead (Cases 3 and 4) and at all Panel Edges Nails Space 6" Max. At
(Cases 5 and 6)(1) Supported Edges(1)
-----------------------------------------------------------------------
6 4 2-1/2 2 Case 1
------------------------------------------------ (No
Unblocked
MINIMUM MINIMUM MINIMUM Edges or All Other
NAIL NOMINAL NOMINAL Nail Spacing (in.) At Other Panel Edges Continuous Configura-
PENETRATION PANEL WIDTH OF Joints tions
PANEL COMMON IN FRAMING THICKNESS FRAMING ------------------------------------------------ Parallel (Cases 2,3,
GRADE NAIL SIZE (inches) (inch) MEMBER 6 6 4 3 to Lead) 4,5 and 6)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2 185 250 375 420 165 125
APA 6d 1-1/4 5/16 3 210 280 420 475 185 140
STRUCTURAL ----------------------------------------------------------------------------------------------------------------------
RATED 2 270 360 530 600 240 180
SHEATHING, 8d 1- 1/2 3/8 3 300 400 600 675 265 200
EXP 1 OR ----------------------------------------------------------------------------------------------------------------------
EXT 2 320 425 640 730(1) 285 215
10d 1-5/8 15/32 3 360 480 720 820 320 240
- - -----------------------------------------------------------------------------------------------------------------------------------
2 170 225 335 380 150 110
5/16
APA RATED 3 190 250 380 430 170 125
SHEATHING 6d 1-1/4
STURD+FLOOR 2 185 250 375 420 165 125
EXP 1, EXP 3/8 3 210 280 420 475 185 140
2 OR EXT ----------------------------------------------------------------------------------------------------------------------
2 240 320 480 545 215 160
3/8 3 270 360 540 610 240 180
2 255 340 505 575 230 170
8d 1- 1/2 7/16 3 285 380 570 645 255 190
2 270 360 530 600 240 180
15/32 3 300 400 600 675 265 200
----------------------------------------------------------------------------------------------------------------------
2 290 385 575 655(1) 255 190
15/32 3 325 430 650 735 290 215
10d 1-5/8
2 320 425 640 730(1) 285 215
19/32 3 380 480 720 820 320 240
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For framing of other species: (A) Find specific gravity for species of
umber in the APA National Design Specification, (b) find shear value from
table for nail size, and for Structural I panels (regardless of actual
grade), (c) multiple value found in (b) by 0.82 for species with specific
gravity of greater than or equal to 0.42 but less than 0.49, or multiple by
0.65 for species with a specific gravity less than 0.42.
(2) Space nails 12 inches o.c. along intermediate framing members (6-inches
o.c. when supports are spaced 48 inches o.c.)
(3) Framing at panel edges shall be 3-inch nominal or wider and nails shall be
staggered where nails are spaced 2 inches o.c. or 2- 1/2 inches o.c. and
where 10d nails having penetration into framing of more than 1-5/8 inches
are spaced 3 inches o.c.
Exception: Unless otherwise required, 2-inch nominal framing is permitted
to be used where full nailing surface width is available and nails are
staggered.
(4) Use minimum 8d common nails for roof sheathing.
(5) Shear panels shall be not less than 4 feet by 8 feet, except at boundaries
and changes in framing. Wood structural panels less than 12 inches wide
shall be blocked.
[CASE 1 - 6 CHARTS]
NOTE: Framing is permitted to be located in either direction for blocked
diaphragms.
<PAGE>
TABLE 2
ALLOWABLE SHEAR (POUNDS PER FOOT) FOR APA STRUCTURAL-USE PANEL SHEAR WALLS
WITH FRAMING OF DOUGLAS FIR, LARCH OR SOUTHERN PINE FOR WIND OR SEISMIC
LOADING(1,2,5,7)
<TABLE>
<CAPTION>
PANELS APPLIED OVER 1/2" OR 5/8"
PANELS APPLIED DIRECT TO FRAMING GYPSUM SHEATHING
-------------------------------------------------------------------------------------------------
MINIMUM
MINIMUM NAIL
NOMINAL PENETRA- Nail Size Nail Spacing (in.) Nail Size Nail Spacing at Panel
PANEL TION IN (Common or At Other Panel Edges (Common or Edges (In.)
PANEL THICKNESS FRAMING Galvanized ----------------------------------- Galvanized ----------------------------------
GRADE (inch) (inches) Box) 6 4 3 2(1) Box) 6 4 3 2
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APA 5/16 1-1/4 8d 200 30 390 510 8d 200 300 390 510
STRUCTURAL 3/8 230(1) 360(1) 460(1) 610(11) 10D 280 430 550(1) 730
RATED 7/16 1-1/2 8d 255(1) 395(1) 505(1) 670(1)
SHEATHING, 15/32 280 430 550 730
EXP 1 OR EXT 15/32 1-5/8 10d 340 510 655(1) 870 - - - - -
- - ----------------------------------------------------------------------------------------------------------------------------------
APA RATED 5/16 1-1/4 6d 180 270(2) 350 450 8d 180 270 350 450
SHEATHING 3/8 200 300 390 510 200 300 390 510
EXP 1, EXP 2 3/8 220(1) 320(1) 410(1) 530(1)
OR EXT APA 7/16 1-1/2 8d 240(1) 350(1) 450(1) 585 10d 260 380 490(1) 640
RATED 15/32 240 350(1) 450(1) 585(1)
SIDING EXT(4) 15/32 1-5/8 10d 310 480 600(1) 770 - - - - -
19/32 340 510 655(1) 870
- - ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Nail Size Nail Size
(Galvanized (Galvanized
Casing) Casing)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APA RATED 5/16 1-1/4 6d 140 210 275 360 8d 140 210 275 360
SIDING EXT 3/8 1-1/2 8d 160 240 310 410 10d 160 240 310 410
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For framing of other species: (A) Find specific gravity for species of umber in
the APA National Design Specification, (b) find shear value from table for nail
size, and for Structural I panels (regardless of actual grade), (c) multiple
value found in (b) by 0.82 for species with specific gravity of greater than or
equal to 0.42 but less than 0.49, or multiple by 0.65 for species with a
specific gravity less than 0.42.
All panel edges backed with 2-inch nominal or wider framing. Install panels
either horizontally or vertically. Space nails 6 inches o.c. along intermediate
framing members for 3/8-inch and 7/16-inch panels installed on studs spaced 24
inches o.c. For other conditions and panel thicknesses, space nails 12 inches
o.c. on intermediate supports.
Framing at panel edges shall be 3-inch nominal or wider and nails shall be
staggered where nails are spaced 2 inches o.c. or 2- 1/2 inches o.c. and where
10d nails having penetration into framing of more than 1-5/8 inches are spaced 3
inches o.c.
Exception: Unless otherwise required, 2-inch nominal framing is permitted to be
used where full nailing surface width is available and nails are staggered.
Shears are permitted to be increased to values shown for 15/32-inch sheathing
with same nailing, provided (1) studs are spaced a maximum of 16 inches o.c. or
(2) if panels are applied with long dimension across studs.
The values are for short-time loads due to wind or earthquake and must be
reduced by 25 percent for normal loading.
All-veneer panel.
Shear panels shall be not less than 4 feet by 8 feet, except at boundaries and
changes in framing. Wood structural panels less than 12 inches wide shall be
blocked.
<PAGE>
TABLE 3
ALLOWABLE UNIFORM ROOF LIVE LOADS FOR APA RATED SHEATHING AND APA RATED STURD-I-
FLOOR WITH LONG DIMENSION PERPENDICULAR TO SUPPORTS(1,2)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
APA RATED SHEATHING APA RATED SHEATHING/CEILING DECK ROOF FLOOR
- - ----------------------------------------------------------------------------------------------------------------------------------
SPAN
RATING PANEL THICKNESS MAXIMUM SPAN (INCHES) ALLOWABLE LIVE LOADS (PSI)
- - -------------------------------------------------------------------------------------------------------------------------
With Without Spacing of Supports Center-to-Center (inches) MAXIMUM
Roof/Floor Edge Edge -------------------------------------------------------------- SPAN
Span (Inch) Suport(1) Suport(1) 12 16 20 24 32 40 48 54 60 (inches)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/0 5/16 12 12 30 0
16/0 5/16, 3/8 16 16 70 30 0
20/0 5/16, 3/8 20 20 120 50 30 0
24/0 3/8, 7/16, 1/2 24 20 190 100 60 30 20/0
24/16 7/16, 1/2 24 24 190 100 65 40 16
32/16 15/32, 1/2, 5/8 32 28 325 180 120 70 30 16
40/20 9/16, 19/32, 5/8, 3/4, 7/8 40 32 - 305 205 130 60 30 20
48/24 23/32, 3/4, 7/8 48 36 - - 280 175 95 45 35 24
54/32 7/8, 1 54 40 - - - 245 130 75 50 35 32
60/32 7/8, 1 60 40 - - - 305 165 100 70 50 35 32
60/48 7/8, 1, 1-1/18 60 48 - - - 305 165 100 70 50 35 48
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
APA RATED STURD-I-FLOOR ROOF FLOOR
- - ----------------------------------------------------------------------------------------------------------------------------------
MAXIMUM SPAN (inches) ALLOWABLE LIVE LOADS (psi)
--------------------------------------------------------------------------------------
With Without MAXIMUM
SPAN PANEL THICKNESS Edge Edge Spacing of Supports Center-to-Center (inches) SPAN
RATING (inch) Support Support (inches)
12 16 20 24 32 40 48 54 60
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16 o.c. 19/32, 5/8, 21/32 24 24 185 100 65 40 16
20 o.c. 19/32, 5/8, 3/4 32 32 270 150 100 60 30 20
24 o.c. 11/16, 23/32, 3/4 48 36 240 160 100 50 30 25 24
32 o.c. 7/8, 1 48 40 - - 295 185 100 60 40 32
48 o.c. 1-3/32, 1-1/8 60 48 - 290 160 100 65 50 40 48
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The allowable live loads were determined using a dead load of 10 psi. If
the dead load exceeds 10 psi then the live load shall be reduced
accordingly.
(2) Applies to panels 24 inches or wider.
(3) Tong-and-groove edges, panel edge clips (one midway between each support,
except two equally spaced between supports 48 inches on center), lumber
blocking, or other. Only lumber blocking will satisfy blocked diaphragm
requirements of Table No. 1, except as noted in Section 3.2.3.
(4) Twenty-four inches for 1/2-inch panels.
(5) Is permitted to be used over framing of 24 inches on center where 3/4-inch
wood strip flooring is installed at right angles to joist.
(6) Is permitted to be used over framing spaced 24 inches on center for floors
where 1- 1/2 inches of cellular or lightweight concrete is applied over the
panels.
(7) Live load not to exceed 100 psi, dead load not to exceed 10 psi, except as
noted.
(8) Total load not to exceed 6 5psi.
<PAGE>
TABLE 4
ALLOWABLE UNIFORM ROOF LIVE LOADS (PSF) FOR APA RATED SHEATHING WITH LONG
DIMENSION PARALLEL TO SUPPORTS(4)
(NONVENEER, COMPOSITE AND 5-PLY/5-LAYER PLYWOOD PANELS UNLESS OTHERWISE NOTED)
- - --------------------------------------------------------------------------------
LOAD AT MAXIMUM SPAN
Panel Thickness Span Maximum ---------------------
Grade (in.) Rating Span (in.) Live Total
- - --------------------------------------------------------------------------------
APA STRUCTURAL I 7/16 24/8, 24/16 24 20 30
RATED SHEATHING 15/32 32/16 24 35 45
1/2 32/16 24 40 50
19/32, 5/8 40/20 24 70 80
23/32, 3/4 48/24 24 90 100
- - --------------------------------------------------------------------------------
APA RATED 7/16 24/0, 24/16 16 40 50
SHEATHING 15/32 32/16 24 20 25
1/2 24/0, 32/16 24 25 30
19/32 40/20 24 40 50
5/8 32/16, 40/20 24 45 55
21/32, 3/4 40/20, 46/24 24 60 65
- - --------------------------------------------------------------------------------
1For 4-ply plywood marked PS 1, reduce load by 15 psi.
2Composite panels must be 19/32 inch or thicker.
3For composite and 4-ply panels, reduce load by 15 psf.
4Edges shall be blocked with lumber or other approved type of edge support.
TABLE 5
ALLOWABLE SPANS FOR APA RATED 303 PLYWOOD SIDING USED AS ROOF SHEATHING(1)
Minimum Nominal
Thickness (Inches) Species Group No. Maximum Span (inches)
15/32 1 24
15/23 2, 3, 4 16
19/32 1 32
19/32 2, 3, 4 24
23/32 1, 2, 3, 4 32
1-1/8 1, 2, 3, 4 48
(1) Plywood continuous over two or more spans, long dimension across supports.
Uniform load deflection limit is 1/240 of the span under live load. Live
load capacity at maximum span for all listed construction is 30 psi.
[DRAWING]
THIS DRAWING IS FOR ILLUSTRATION PURPOSES ONLY. IT IS NOT INTENDED FOR USE AS A
CONSTRUCTION DOCUMENT FOR THE PURPOSE OF FABRICATION OR ERECTION.
<PAGE>
EXHIBIT 10.7
Order for ten of the Company's packaged homes, dated September 11, 1996,
obtained by Innovative Homes, Inc.
from the Lakota Fund, in the amount of $571,400<PAGE>
<PAGE>
THE LAKOTA P.O. BOX 340, KYLE, S.D. - 605-455-2585
FUND THE LAKOTA FUND
September 11, 1996
Bill Osborn
Innovative Homes
1425 Paul Bunyan Drive NW
Bemidji, MN 56601
Dear Bill,
This letter is to notify you of the intent of the Lakota Fund to use Innovative
Homes for the construction of ten homes in Wanblee, SD for the site known as
Eagle New Homes. Of course the finalization of any commitment to move forward
is contingent upon our receipt and acceptance of a bid for which total
construction, contingency construction, hard construction requirements,
foundations, profit, and overhead which does not exceed $57,180 per unit. This
is also contingent upon guaranteed completion by December 31, 1996. I look
forward to receiving plans including materials lists and costs from you soon.
As we discussed yesterday, I would be interested in having 5 gable and 5 hip
roofs to break up the "look" of the site somewhat, providing costs do not exceed
parameters outlined above. In addition, aside from the plans discussed above,
could I receive a list of possible add-on options (i.e. bay window, combination
windows, exterior trim items, etc.) which might be incorporated into these
designs should we realize cost savings in other areas?
I have yet to further discuss crawl space wood or block option with David and
will be getting back to you shortly on this matter.
If you need further information or have any questions, please feel free to give
me a call.
Sincerely,
Dani Not Help Him
Executive director
<PAGE>
SHEET 1
<TABLE>
<CAPTION>
<S> <C> <C>
INNOVATIVE HOMES, INC. International Building Concepts Client: LAKOTA FUND
1426 PAUL BUNYAN DRIVE NW 3040 4th Ave. S. Address: P.O. Box 340
BEMIDJI, MN 56601 Minneapolis, MN 55408 CONTACT: Dani Not Help Him
(218) 751-1868 612- 824-3762 Phone: 605-455-2500
Fax: 602-455-2685
</TABLE>
SWORN CONSTRUCTION STATEMENT
Date 9/17/96
Model-Crestwood (1152) w/o Patio Door
<TABLE>
<CAPTION>
ITEMS FURNISHED BY COST EACH QUANTITY TOTAL COST
- - ------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Air Conditioning
2. Appliances-Dishwasher
3. Appliances-Disposal
4. Appliances-Hood and Fans
5. Appliances-Oven and Range $ 500.00 10.00 $ 5,000.00
6. Appliances-Refrigerator $ 500.00 10.00 $ 5,000.00
7. Architectural Services
8. Blacktopping
9. Brickwork, Chimney, Fireplace
10.Building Permit
11.Cabinets, casing $ 2,055.00 10.00 $ 20,550.00
12.Carpentry, Labor $ 8,400.00 10.00 $ 84,000.00
13.Carpeting/floor covering $ 2,500.00 10.00 $ 25,000.00
14.Clearing Building Site
15.Closing Costs
16.Concrete-Driveway
17.Concrete-Floors, Steps, Walks
18.Contractor's Fee $ 4,000.00 10.00 $ 40,000.00
19.Counter, Vanity Tops
20.Discount Points
21.Drywall-Plastering
22.Drywall-taping $ 2,000.00 10.00 $ 20,000.00
23.Electric Fixtures
24.Electric Wiring $ 2,300.00 10.00 $ 23,000.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEMS FURNISHED BY COST EACH QUANTITY TOTAL COST
- - ------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
25.Excavating, Filling $ 1,000.00 10.00 $ 10,000.00
26.Floor Finishing
27.Foundation-Blocks
28.Foundation-Concrete
29.Foundation-Waterproofing
30.Garage Door
31.Glass, Mirrors
32.Grading, Backfill $ 1,500.00 10.00 $ 18,000.00
33.Hardware-Finish
34.Hardware-Rough
35.Heating $ 2,700.00 10.00 $ 27,000.00
36.Insulation $ 1,816.00 10.00 $ 18,160.00
37.Laminated Units, Trusses
38.Landscaping
39.Lumber $17,000.00 10.00 $170,000.00
40.Doors & Windows $ 3,229.00 10.00 $ 32,290.00
41.Ornamental Iron
42.Painting-Decorating
43.Painting-Exterior
44.Painting-Interior $ 1,200.00 10.00 $ 12,000.00
45.Plumbing-Materials $ 700.00 10.00 $ 700.00
46.Plumbing-Roughing In $ 700.00 10.00 $ 7,000.00
47.Pre-Stressed Concrete Units
48.Roofing` $ 840.00 10.00 $ 8,400.00
49.Septic System
50.Sheet Metal Gutterwork
51.Sheetrock
52.Sodding, Sod
53.Stonework, Stone
54.Structural Steel
55.Stucco
56.Survey
57.Tile-Ceramic and Plastic
58.Tile-Floor
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEMS FURNISHED BY COST EACH QUANTITY TOTAL COST
- - ------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
59.Tile-Linoleum
60.Water, Gas, Sewer Conn. $ 1,200.00 10.00 $ 12,000.00
61.Well and Pump
62.Window Shades
63.Wood Flooring
64.Lot
65.Realtor Fees
66.Dumpster
67.Interim Financing
68.Vinyl Siding $ 1,300.00 10.00 $ 13,000.00
69.Freight (shipping) $ 500.00 10.00 $ 5,000.00
70.Bathroom Fixtures/Shower/Van $ 1,200.00 10.00 $ 12,000.00
TOTAL $57,140.00 10.00 $571,400.00
</TABLE>
This is a lump sum contract for $571,400 for 10 complete 1152 sq. ft.
Crestwoods on a crawl space.
Lakota Fund ________ Date: ______
International Business Concepts ________ Date: 9/1796
Innovative Homes ________ Date: 9/1796
