UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Maxxon, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1526138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8908 South Yale Avenue, Suite 409
Tulsa, OK 74137
(Address of principal executive offices, including zip code)
(918) 492-4125
(Registrant's Telephone Number, Including Area Code)
(918) 492-2560
(Registrant's Facsimile Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
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Information Required in Registration Statement
Certain Forward-Looking Information
Certain statements included in this report which are not historical facts
are forward-looking statements, including the information provided with respect
to future business opportunities, expected financing sources and related
matters. These forward-looking statements are based on current expectations,
estimates, assumptions and beliefs of management. Words such as "expects,"
"anticipates," "intends," believes," "estimates" and similar expressions are
intended to identify such forward-looking statements. Since this information is
based on current expectations that involve risks and uncertainties, actual
results could differ materially from those expressed in the forward-looking
statements.
Part I
Item 1. Description of Business
(a) Business Development
1. Form and Year of Organization
Maxxon, Inc., a Nevada corporation ("Maxxon" or the "Company"), is a
development stage corporation that was organized on August 16, 1996 under the
name Cerro Mining Corporation. Its current purpose is to develop and
commercialize a proprietary disposable safety syringe that retracts the needle
into the barrel of the syringe after use.
2. Bankruptcy or Receivership
Maxxon has never been in bankruptcy or receivership.
3. Mergers, Reclassifications and Purchases of Assets
On May 9, 1997, Maxxon, Inc., an Oklahoma corporation, entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with Cerro Mining
Corporation ("Cerro"), a copy of which is attached as Exhibit 6.6 and
incorporated herein by reference. Pursuant to the Merger Agreement, Cerro issued
7,578,000 shares of common stock for 100% of the issued and outstanding common
stock of Maxxon-Oklahoma. Maxxon-Oklahoma ceased to exist by reason of the
merger, and Cerro changed its name to Maxxon, Inc.
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On April 30, 1997, prior to the Merger with Cerro, Maxxon-Oklahoma entered
into an Exclusive Patent License Agreement with Mr. Harry Kaufhold ("Kaufhold
License"), a copy of which is attached as Exhibit 6.5 and incorporated herein by
reference. Pursuant to the Kaufhold License, Mr. Kaufhold granted
Maxxon-Oklahoma an exclusive worldwide license to perfect, produce and market a
disposable syringe with needle retraction ("Safety Syringe") and practice the
U.S. Patent No. 5,125,898 ("Patent") which is owned by Mr. Kaufhold. The safety
syringe design is a single-handed, vacuum-operated syringe that retracts the
needle into the barrel of the syringe after use. The vacuum is created at the
time of manufacture. In exchange for the Kaufhold License, Maxxon agreed to pay
Mr. Kaufhold $100,000, $10,000 of which was paid upon execution of the Kaufhold
License, and $90,000 of which was paid pursuant to a promissory note, bearing
interest at 18% annually. The promissory note and accrued interest were paid in
full by Maxxon on March 1, 1998.
Additionally, Maxxon agreed to pay Mr. Kaufhold a royalty equal to 3% of
the gross receipts (excluding taxes, transportation, insurance, shipping and
handling, packaging, returns, replacements for defective or damaged goods, all
discounts, and all funds received from sales which are contested or subject to
claims) from the sale of the safety syringe, including any foreign sales, based
on the Patent and any additions, extensions and improvements thereto. The term
of the royalty is coincident with the term of the Patent. By reason of the
Merger, the License Agreement became an asset of the Company.
To facilitate the development of the safety syringe based on the Kaufhold
License, Maxxon entered into a Development Agreement on June 9, 1998 with Texas
Applied Biological Sciences ("TABS") and Hartzell Manufacturing, Inc.
("Hartzell") to refine and produce a prototype safety syringe based on the
Kaufhold design. The Development Agreement required the completion of the
prototype by September 1998. On October 19, 1999, Maxxon received 2 prototypes
which TABS asserted are working prototypes that meet required technical
specifications for the safety syringe and which were produced from molds that
meet such specifications. TABS has advised Maxxon that this delivery completes
its obligations under the Development Agreement, even though TABS has advised
Maxxon that additional optimization of the molds is required before production
molds could be made. In November, 1999, after more than 2 years of efforts to
produce a viable, usable, working prototype of the safety syringe acquired from
Mr. Kaufhold, Maxxon's Board of Directors determined to discontinue this effort.
While Maxxon's consultants were able to produce a syringe that worked on
occasion, it was determined that the Kaufhold design would not result in a
safety syringe that would be commercially competitive and sufficiently reliable
to warrant further expenditures.
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In June, 1997, Maxxon entered into an Agreement and Plan of Exchange with
Ives Health Company, Inc. ("Ives"), an Oklahoma corporation, a copy of which is
attached as Exhibit 6.7 and incorporated herein by reference. Pursuant to that
agreement, Maxxon issued 621,600 shares of its common stock, par value $.001 per
share, in exchange for all the issued and outstanding common stock of Ives. As a
result of the Agreement and Plan of Exchange, Ives became a wholly-owned
subsidiary of Maxxon. Additionally, The Health Company, Inc.("THC"),
wholly-owned personally by Keith Ives, President of Ives, became a wholly-owned
subsidiary of Maxxon.
On December 31, 1997, Maxxon entered into an agreement to rescind the
aforementioned stock exchange with Ives. Under the rescission agreement, which
is attached as Exhibit 6.8 and incorporated herein by reference, Maxxon
organized a new corporation under Oklahoma law with an authorized capitalization
of 50,000,000 shares of common stock, par value $0.001 per share, whose name is
Ives Health Company, Inc.("New Ives"). The recission agreement provided that
Maxxon receive 1,700,000 shares of common stock in New Ives, that Keith Ives
resign as a director, officer, employee, agent and representative of Maxxon and
THC, and that Keith Ives surrender 275,360 shares of Maxxon common stock owned
by him, so that thereafter he personally owned of record 80,000 shares of Maxxon
common stock.
On November 18, 1999, Maxxon entered into an Exclusive License Agreement
with Wayland J. Rippstein, Jr. and others (the "Rippstein License"), attached
hereto as Exhibit 6.9, pursuant to which Maxxon acquired the exclusive worldwide
license to manufacture and market a new proprietary safety syringe invented and
being developed by Mr. Rippstein (the "Ripp Syringe"). This new syringe is a
single-handed, vacuum-operated safety syringe that retracts the needle into the
barrel of the syringe after use. The vacuum is created at the time of use, not
at the time of manufacture. Pursuant to the Rippstein License, the Company
agreed to pay $10,000 in reimbursable patent costs and $200,000 upon the
occurrence of (1) the issuance of a U.S. Patent covering the syringe, (2) the
completion of a fully functional and working prototype of the syringe and (3)
FDA approval to sell the syringe in the U.S. The Rippstein License also provides
for Maxxon to pay royalties of 4% of gross sales of syringes and minimum annual
royalties ranging from $10,000 to $20,000 beginning on the 4th anniversary after
both a working protype syringe is developed and a U.S. Patent is issued. See
Patents, Trademarks, Licenses, Royalty Agreements and Labor Contracts. Such
royalties continue for the life of the last to expire patent, if issued. The
Rippstein License also also required Maxxon to grant to Mr. Rippstein and others
options to purchase a total of 1,600,000 shares of common stock of Maxxon at
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$0.50 per share, which was the closing price of Maxxon's common stock on the day
the Rippstein License was signed. The options expire October 31, 2009 and are
subject to certain vesting conditions. See Item 4. Certain Beneficial Owners and
Management.
On November 18, 1999, Maxxon entered into a Technical Consulting Agreement
with Wayland J. Rippstein, Jr., attached hereto as Exhibit 6.10, whereby Maxxon
engaged Mr. Rippstein on a non-exclusive basis to provide technical assistance
and consulting services to achieve startup of production of the RIPP Syringe.
Maxxon paid Mr. Rippstein $12,500 upon execution of the Agreement, and agreed to
pay the balance of $37,500 upon the occurrence of various milestones in the
development of the syringe.
Maxxon has had no revenues from the sale of safety syringes to date and has
funded its activities through the sale of its common stock and through loans by
shareholders. Maxxon does not anticipate any revenues from the sale of safety
syringes until such time as the product is developed and approval from the FDA
is obtained. Such approval is not expected until late 2001.
(b) Business of Issuer
1. Principal Products and Services of Maxxon and Their Markets
Maxxon has no products or services for sale at this time. It is anticipated
that the safety syringe will be marketed when development is completed and FDA
approval is secured, either directly by Maxxon or by a corporate marketing
partner, to laboratories, research institutions, hospitals, clinics, doctors and
other medical professionals throughout the world. The safety syringe is the only
product Maxxon has in development.
The safety syringe is a disposable retractable syringe that uses a
proprietary, patented technology whereby a vacuum causes the needle to retract
into the barrel of the syringe after an injection is administered. The safety
syringe is intended to be a cost-effective alternative to traditional disposable
syringes and is intended to avoid the danger of accidental needle puncture
associated with traditional disposable syringes. With a traditional disposable
syringe, a needle contaminated with a patient's blood remains a danger to health
care professionals handling the needle until it is permanently disposed of in a
proper biohazard containment unit. The safety syringe does not present a "needle
stick" hazard to health professionals after use, because the contaminated needle
is retracted into the barrel of the safety syringe after use.
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The world-wide market for disposable syringes is estimated to be in excess
of 15 billion units annually. According to the Centers for Disease Control and
Prevention in Atlanta, the use of disposable syringes results in over 2,400
needle sticks per day in the United States alone of which approximately 76% of
such needle sticks could be prevented by using an effective safety syringe,
according to the Centers for Disease Control and Prevention in Atlanta. Every
clinic, hospital, doctor's office, laboratory, public health department, medical
research facility, medical school and retail purchaser of syringes for diabetes
and other home uses is a potential customer for the Maxxon Safety Syringe, if
and when developed, approved by the FDA and available commercially.
2. Distribution Method of Products and Services
Maxxon has not yet determined how its safety syringe will be distributed.
Maxxon does not presently have any manufacturing or distribution capacity.
Maxxon has not determined the commercial arrangements under which it would be
willing to engage such a corporate marketing partner.
3. Status of Publicly Announced Products or Services
The safety syringe is still in development. If and when a prototype is
developed and if Maxxon determines that the safety syringe will be commercially
viable, Maxxon will commence collecting the data required for FDA approval.
In November, 1999, after more than 2 years of efforts to produce a viable,
usable, working prototype of the safety syringe acquired from Mr. Kaufhold,
Maxxon's Board of Directors determined to discontinue this effort. While
Maxxon's consultants were able to produce a syringe that worked on occasion, it
was determined that the Kaufhold design would not result in a safety syringe
that would be commercially competitive and sufficiently reliable to warrant
further expenditures.
On November 18, 1999, Maxxon entered into an Exclusive License Agreement
with Wayland J. Rippstein, Jr. and others (the "Rippstein License"), attached
hereto as Exhibit 6.9, pursuant to which Maxxon acquired the exclusive worldwide
license to manufacture and market a new proprietary safety syringe invented and
being developed by Mr. Rippstein (the "Ripp Syringe"). This new syringe is a
single-handed, vacuum-operated safety syringe that retracts the needle into the
barrel of the syringe after use. 4. Competitive Business Conditions, Competitive
Position and Methods of Competition
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Competition in the medical products and services industry is intense.
The number of potential competitors in the marketplace makes competitive
pressures severe. In particular, the medical device industry has attracted large
and sophisticated potential competitors with established brand names which have
greater financial, technical, manufacturing, marketing, regulatory and
distribution resources than Maxxon.
Although there are other safety syringes commercially available, however,
the cost of these alternative safety syringes makes them impractical as
alternatives to traditional disposable syringes. Unless Maxxon's safety syringe
can be manufactured and sold at a price competitive with current disposable
syringes, Maxxon's safety syringe will not be able to compete effectively in the
marketplace. There can be no assurance that Maxxon will be able to successfully
complete the production of its safety syringe, that its safety syringe will
achieve required regulatory approval or that its safety syringe, if so developed
and approved, can be manufactured and distributed at a price competitive with
other safety syringes on the market.
Maxxon's primary potential competitors are the manufacturers and
distributors of existing syringes currently available in the marketplace. In
particular, Maxxon estimates that Becton-Dickinson, controls much of the
distribution of the disposable syringe market. If Becton-Dickinson or any of the
other established competitors of Maxxon were to develop or acquire a safety
syringe technology that could produce a safety syringe at a price competitive
with disposable syringes, Maxxon's ability to compete would be materially
adversely affected.
5. Sources of Raw Materials and the Names of Principal Suppliers
Maxxon does not presently manufacture any products, so it has no raw
materials requirements. The materials used in manufacturing the Maxxon Safety
Syringe are commercially available from a number of suppliers. The manufacturing
process is highly technical and demanding with very low fault tolerances. There
can be no assurance that Maxxon will be able to engage a company capable of
manufacturing the Safety Syringe in a cost-effective manner.
6. Dependence on One or Few Major Customers
Maxxon does not yet have a product to sell, so its has no customers.
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7. Patents, Trademarks, Licenses, Royalty Agreements or Labor Contracts
Mr. Harry Kaufhold, Jr. owns the U.S. Patent on the Safety Syringe
published on June 30, 1992. On April 30, 1997, Mr. Kaufhold entered into an
exclusive license agreement ("Kaufhold License") whereby Mr. Kaufhold granted
Maxxon-Oklahoma an exclusive worldwide license to perfect, produce and market
the safety syringe. Further development of the safety syringe is being conducted
by TABS and Hartzell. Maxxon has no information that has lead it to believe that
the Patent infringes the intellectual property rights of another, but Maxxon
gives no assurance to that effect.
The Kaufhold License obligates Maxxon to pay Mr. Kaufhold a royalty while
the Patent remains in effect equal to 3% of the gross receipts (excluding taxes,
transportation, insurance, shipping and handling, packaging, returns,
replacements for defective or damaged goods, all discounts, and all funds
received from sales which are contested or subject to claims) from the sale of
the Safety Syringe, including any foreign sales, using the Patent or any
additions, extensions and improvements thereto. If by April 30, 2000, the
cumulative sales of syringes using the Patent have not exceeded $100,000, or if
in any subsequent year the annual sales do not exceed $100,000, the Kaufhold
License, along with any royalty obligation, will terminate. In November, 1999,
Maxxon ceased to pursue development of the Kaufhold designed syringe because it
was determined not to be commercially viable.
On November 18, 1999, Maxxon entered into an Exclusive License Agreement
with Wayland J. Rippstein, Jr. and others (the "Rippstein License"), attached
hereto as Exhibit 6.9, pursuant to which Maxxon acquired the exclusive worldwide
license to manufacture and market a new proprietary safety syringe invented and
being developed by Mr. Rippstein (the "Ripp Syringe"). This new syringe is a
single-handed, vacuum-operated safety syringe that retracts the needle into the
barrel of the syringe after use. The vacuum is created at the time of use, not
at the time of manufacture. Mr. Rippstein intends to apply for a U.S. Patent as
soon as possible and intends to apply for international patent protection after
the U.S. Patent has been filed. There is no assurance that a U.S. Patent will
issue or that international patent protection will be obtained.
Pursuant to the Rippstein License, the Company agreed to pay a royalty of
4% of gross sales of licensed products for the life of the last to expire patent
covering the Ripp Syringe. All earned but unpaid royalties shall accrued
interest at the rate of 8% per year, compounded annually, from and after the due
date until paid in full. Maxxon also agreed to pay $100,000 to Mr. Rippstein and
$100,000 to his two associates provided that the following events occur on or
before September 30, 2001: (1) the issuance of a U.S. Patent covering the Ripp
Syringe, (2) the completion of a fully functional and working safety syringe,
and (3) FDA approval to sell the Ripp Syringe in the U.S.; provided that Maxxon
agrees to pay the obligations if the Ripp Syringe is sold in jurisdictions not
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requiring FDA approval prior to September 30, 2001. If such events have not
occurred by September 30, 2001, then the obligation of Maxxon to pay the
$200,000 shall be terminated. Maxxon also agreed to grant Mr. Rippstein and his
two associates options to purchase a total of 1,600,000 shares of common stock
of Maxxon at $0.50 per share, which was the closing price of the common stock on
the day the Rippstein License was signed. The options expire October 31, 2009
are subject to certain vesting conditions as follows: (1) 20% of the options
shall become vested and exercisable immediately upon execution of the Rippstein
License, (2) 20% of the options shall become vested and exercisable when a fully
working safety syringe has been produced and demonstrated to be safe and
reliable and meeting the specifications, (3) 20% of the options shall become
vested and exercisable upon issuance of a U.S. Patent covering the Ripp Syringe,
(4) 20% of the options shall become vested and exercisable upon the production
of (5) 20% of the options shall become vested and exercisable upon FDA approval
of the Ripp Syringe. The Ripp Syringe is currently in development. No assurance
is given that it will be successfully developed or commercially viable.
8. Need for Governmental Approval
Pursuant to the Federal Food, Drug and Cosmetic Act, the FDA regulates the
research, design, testing, manufacture, safety, labeling, storage,
record-keeping, advertising and promotion, distribution, and production of
medical devices in the United States. Maxxon's Safety Syringe is considered a
medical device, is subject to FDA regulation, and must receive FDA approval
prior to sale in the United States.
Medical devices are classified into one of three classes, depending on the
controls deemed by FDA to be necessary to reasonably ensure their safety and
effectiveness. Class I devices are subject to general controls (e.g. labeling,
pre-market notification and adherence to Quality System regulations, which have
replaced Good Manufacturing Practice regulations.) These devices are subject to
the lowest level of regulatory control. Class II devices are subject to general
controls and to special controls (e.g. performance standards, post-market
surveillance, patient registries, and FDA guidelines). Generally, Class III
devices are those which must receive pre-market approval by the FDA to ensure
their safety and effectiveness, and require clinical testing and FDA approval
prior to marketing and distribution. Class III devices are the most rigorously
regulated.
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Generally, before a new device can be introduced into the market in the
United States, the manufacturer must obtain FDA clearance through a 510(k)
pre-market notification or approval of a premarket approval ("PMA") application.
If a medical device manufacturer can establish that a device is "substantially
equivalent" to a legally marketed Class I, Class II device, or a Class III
device for which FDA has not called for PMAs, the manufacturer may seek
clearance from FDA to market the device by filing a 510(k) pre-market
notification. The 510(k) pre-market notification will need to be supported by
appropriate data establishing the claim of substantial equivalence to the
satisfaction of the FDA.
If Maxxon cannot establish that its safety syringe is substantially
equivalent to a legally marketed predicate device, Maxxon must seek pre-market
approval of the proposed device through submission of a PMA application. A PMA
application must be supported by valid scientific evidence, including
pre-clinical and clinical trial data, as well as extensive literature to
demonstrate a reasonable assurance of the safety and effectiveness of the
device. The PMA represents the most rigorous form of FDA regulatory approval.
Management believes that it will be able to establish that the Safety Syringe is
substantially equivalent to FDA approved syringes.
The Maxxon Safety Syringe is a single-handed, vacuum operated safety
syringe. FDA currently regulates piston syringes as Class II devices, subject to
special controls embodied in published standards relating to syringes and
require 510(k) clearance.
If the Maxxon Safety Syringe is packaged with needles, the syringe and the
needles each require FDA clearance. Like piston syringes, hypodermic single
lumen needles are regulated as Class II devices, are subject to special controls
embodied in published standards, and require 510(k) clearance. Since Maxxon does
not manufacture needles, it is likely that Maxxon will license them from a third
party manufacturer and gain the right to reference the manufacturer's Device
Master File. This requires obtaining written consent to reference information
relate to that party's product, facility, and manufacturing procedures. The
party, while willing to allow FDA's confidential review of that information, may
not want the Company to have direct access to it, so reference to the party's
Device Master File for the needles may be unavailable.
If the safety syringe is not packaged with needles, the Company will have
to submit performance test data for all needle sizes and gauges intended to be
used with the product.
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Maxxon's safety syringe meets the definition of a medical device and is
subject to FDA 510(k) pre-market notification clearance before it can be
commercialized in the United States. No such approval is required in foreign
jurisdiction, through such foreign jurisdiction may have its own requesting
equipment which must to met before the safety syringe can be sold there. Maxxon
cannot begin to gather the data necessary for submission of the application
until an effective working prototype syringe is produced in sufficient
quantities to gather such data. Management expects that the working prototype
could be completed in late 2000 and that FDA approval that could be obtained in
late 2001, though no assurance is given to that effect. The schedule will depend
in large part upon the range and scope of the clinical tests required, which
management can not estimate at this time, and the results of such tests.
9. Effect of Existing or Probable Governmental Regulation
The safety syringe field is relatively new, and it is quite possible that
new regulations could be proposed and adopted which could restrict marketing of
its safety syringe. Maxxon is not aware of any such pending or proposed
regulations, however, there is no assurance that they will not be imposed.
In October, 1998, California enacted legislation that made itself the first
state in the nation to require the use of safety needles to protect healthcare
workers from accidental needlesticks. The law requires that healthcare employers
in California use safe needle devices beginning January 15, 1999. Other states
are expected to enact similar legislation.
10. Estimate of the Amount Spent on Research and Development
Through December 15, 1999, Maxxon has paid approximately $290,000 for
research and development of the Kaufhold safety syringe, and $10,000 for the
Rippstein syringe and has committed to fund an additional $200,000 upon the
occurrence of various development and FDA approval milestones related to the
Rippstein syringe. See Item 1. Subparagraph 7. Patents, Trademarks and Licenses
for details about the milestones. No customer, current or future, has or is
expected to bear any direct research and development expense.
11. Costs and effects of environmental compliance
Maxxon has incurred no costs associated with environmental compliance and
does not expect to be required to spend any sums on environmental compliance in
the future.
12. Number of total employees and number of full time employees
Maxxon has no full time employees. Maxxon's sole officer and director and
its five employees provide services to Maxxon on a part-time basis and are each
engaged in other business activities. There are no written employment
agreements.
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13. Year 2000 Disclosure
The computer hardware and software used by the Company are made or licensed
by various name-brand companies and are less than one year old. The computer
hardware consists of a network server and six personal computers and the
computer software consists of an operating system and word processing,
spreadsheet and accounting applications. The Company has been advised by each
vendor, either directly in writing or indirectly through information obtained at
their web site, that their hardware and/or software is Year 2000 compliant. On
September 30, 1999, the Company tested these assertions by setting the date on
the network server and on each computer to January 1, 2000. Each software
application on each computer was used, and no problems were encountered. The
Company does no use any proprietary computer software. To date, the costs to the
Company to address Year 2000 issues have been immaterial.
The Company is dependent upon its outside technical consultants for
development of the safety syringe. The Company is also dependent on
third-parties for banking, telephone, internet and utility services. Because the
Company's product is still in development, the Company does not yet have
customers or suppliers and does not anticipate having customers or suppliers in
the near future.
The Company believes that the most likely worst case scenario related to
Year 2000 is a significant delay in the development of the safety syringe. Such
an interruption could occur due to a breakdown in the computer systems of its
outside technical consultants or third parties. The Company currently does not
have a contingency plan in the event a particular system or vendor is not Year
2000 ready. There can be no assurance that unexpected Year 2000 readiness
problems of the Company or its vendors and service providers will not materially
adversely affect the Company's business, operating results or financial
condition. The foregoing assessment represents management's best estimates at
the present time, which could change significantly in the future.
Item 2. Management Discussion and Analysis
(a) Plan of Operation
1. Plan of Operation for the Next Twelve Months
Maxxon anticipates spending the next twelve months developing a functional
prototype of the safety syringe and gathering the data necessary to support its
application for FDA approval.
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Maxxon is seeking to consummate a business combination by way of tax-free
merger, exchange of stock, sale of assets or other business combination with a
medical device company with existing manufacturing, quality control, marketing,
distribution and regulatory compliance capabilities in place. Alternatively but
simultaneously, Maxxon is seeking strategic alliances with medical
professionals, pharmaceutical and other companies willing to provide Maxxon with
manufacturing, marketing and distribution capabilities. Maxxon has no such
agreements at this time. There is no assurance that Maxxon will be successful in
making acceptable arrangements for a business combination or strategic
alliances.
(i) Cash Requirements
Management believes that Maxxon can satisfy its cash needs out of available
cash for the next three months. Maxxon intends to engage in an offering of its
common stock to fund the development costs and costs associated with collecting
data and filing the required applications for FDA approval, and to identify and
consummate strategic business alliances. There is no assurance that any
additional capital needed will be available to Maxxon on acceptable terms when
needed, if at all. Any additional capital may involve substantial dilution to
the interests of Maxxon's then existing stockholders.
(ii) Product Development and Research Plan for the Next Twelve Months
Maxxon anticipates spending the balance of the next twelve months
developing a functional prototype of the safety syringe and gathering the data
necessary to support its application for FDA approval. There is no assurance
that the Company will be successful in developing a functional prototype of the
safety syringe or in gaining FDA approval for the safety syringe.
(iii) Expected Purchase or Sale of Plant and Significant Equipment.
None.
(iv) Expected Significant Changes in the Number of Employees
Maxxon plans to hire a Chief Executive Officer during 2000 to chart the
direction and future of the Company and to implement the Company's strategic
plans. There is no assurance that the Company will be able to attract and retain
a qualified CEO or that such CEO, if hired, will be successful in implementing
the Company's strategic plans.
Item 3. Description of Property
(a) Location and Description of Property
The Company's principal executive office is located at 8908 South Yale,
Suite 409, Tulsa, Oklahoma 74137-3545. Maxxon leases its executive offices,
which are currently shared with other companies controlled by its officer and
director. Maxxon's portion of the lease payment is approximately $2,200 per
month.
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Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table shows the ownership of Maxxon common stock by officers
and directors, and by persons known to the Company to be the beneficial owner of
more than 5% of the Company's common stock. The number of shares owned includes
the shares which the listed beneficial owner has the right to acquire within
sixty days from options to purchase common stock. The percentage of outstanding
shares was calculated based on the 12,317,348 shares issued and outstanding at
December 15, 1999 plus the shares which the listed beneficial owner has the
right to acquire within 60 days:
Percent of
Relationship Common Shares Outstanding
Name and Address to Company Owned Shares
---------------- ------------ ------------- -----------
Gifford M. Mabie Sole Officer 368,750 (1) 2.92%
8908 S. Yale Ave. and Director
Tulsa, OK 74137
Rhonda R. Vincent Beneficial Owner 1,142,750 (2) 9.01%
8908 S. Yale Ave.
Tulsa, OK 74137
Sole Officer and
Director and
Beneficial Owner
as a group
(2 persons) 1,511,500 11.70%
(1) Includes 26,000 shares owned directly, 55,000 shares owned indirectly
through Investor Relations Corporation, a company owned 50% by Mr. Mabie, and
300,000 options exercisable at $0.50 per share.
(2) Includes 878,800 shares owned directly, 50,000 shares owned indirectly
through Investor Relations Corporation, a company owned 50% by Ms. Vincent, and
300,000 options exercisable at $0.50 per share.
Common Stock Options
At December 15, 1999, Maxxon had outstanding a total of 2,800,000 options
to purchase shares of its common stock at $0.50 per share, 1,520,000 of which
were exercisable. Of the 2,800,000 options outstanding, 1,200,000 are employee
stock options granted by the Board in January, 1998 and 1,600,000 are consultant
options granted by the Board in November, 1999. The exercise price was equal to
the market price of the Company's common stock as quoted on the OTC Bulletin
Board on the date of grant. The options expire ten years from the date of the
grant if not sooner exercised:
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Options
Exercisable
Relationship Options at
Name and Address to Company Outstanding 12/15/99
- ---------------- ------------ ----------- -----------
Gifford M. Mabie........... Sole Officer 300,000 300,000
and Director
Rhonda R. Vincent.......... Key Employee 300,000 300,000
Dr. Thomas Coughlin........ Key Employee 200,000 200,000
Frederick Slicker.......... Key Employee 200,000 200,000
Vicki Pippin............... Key Employee 200,000 200,000
----------- -----------
Total Employee Options 1,200,000 1,200,000
Wayland Rippstein
and Associates
(3 persons)................ Consultant 1,600,000 320,000
----------- -----------
Total Options Outstanding and Exercisable...... 2,800,000 1,520,000
=========== ===========
The options to Wayland Rippstein and associates were granted to Wayland
Rippstein (800,000 options), Ken Keltner (400,000 options) and Lynn Carter
(400,000 options)in connection with the execution of the Rippstein License . The
options expire October 31, 2009 and are subject to certain vesting conditions as
follows: (1) 20% of the options shall become vested and exercisable immediately
upon execution of the Rippstein License, (2) 20% of the options shall become
vested and exercisable when a fully working safety syringe has been produced and
demonstrated to be safe and reliable and meeting the specifications, (3) 20% of
the options shall become vested and exercisable upon issuance of a U.S. Patent
covering the Ripp Syringe, (4) 20% of the options shall become vested and
exercisable upon the production of (5) 20% of the options shall become vested
and exercisable upon FDA approval of the Ripp Syringe. As of December 15, 1999,
20% of the options granted were exercisable.
Changes in Control
There are presently no arrangements which may result in a change in control
of the Company.
Item 5. Directors, Officers and Significant Employees and Consultants
(a) Identify Directors and Executive Officers
(1)-(4) Names, Ages, Positions, Offices and Business Experience
Gifford M. Mabie, age 59, is Chariman, CEO and a Director of Maxxon. From
1982 to 1994, Mr. Mabie was Senior Vice President of CIS Technologies, Inc.
(NASD: CISI), a leading health care information company that was purchased by
National Data Corporation (NYSE: NDC) in 1996. Mr. Mabie was instrumental in
raising over $40 million in capital that funded acquisitions and new product
development. As a result, that company's revenues grew from $105,000 in 1987 to
over $40 million in 1995. Prior to CIS, Mr. Mabie was with Honeywell Information
Systems, Inc., where he ranked as one of its top five salesmen worldwide. Prior
to joining Honeywell, he was corporate controller with W.B. Dunavant and
Company, one of the world's largest cotton brokers. He holds degrees in
accounting and economics from Memphis State University and served for eight
years in the United States Navy.
15
<PAGE>
(5) Other Directorships
Gifford Mabie is also an officer and a director of:
Lexon, Inc., (OTCBB: LXXN), which is developing cancer screening test kits
for colon cancer and certain types of ovarian and testicular cancers and for
lung cancer.
Centrex, Inc., which is developing a prototype for almost instantaneous
detection of e.coli and crytosporidium.
Nubar, Inc., which is developing a laminated carbon fiber reinforcing bar
for concrete structures.
Image Analysis, Inc., which is developing a color magnetic resonance
imaging software
(b) Other Significant Employees and Technical Consultants
The following persons are significant part-time employees to Maxxon, but
none of them is an officer or director:
Thomas R. Coughlin, M.D., age 50, is Medical Director for the Company. He
is also an officer and director of Lexon, Image Analysis, Centrex and Nubar.
Prior to joining the Company, Dr. Coughlin was a cardiovascular surgeon for more
than 25 years. From 1995 to January 1999, he practiced cardiovascular surgery in
Tulsa, Oklahoma and was assistant clinical professor at the University of
Oklahoma Medical School from 1995 to 1998. From 1992 to 1995, he was Medical
Director of Cardiovascular Surgical Services at Alexandria Hospital in
Alexandria, Virginia; and from 1991 to 1995, he was Assistant Clinical
Professor, Thoracic and Cardiovascular Surgery, at George Washington University
Medical Center in Washington, D.C. He has received numerous professional honors
and has published 25 research papers. He is a graduate of the University of
Rochester School of Medicine and Dentistry, Rochester, New York (M.D.) and Seton
Hall University (B.S.).
16
<PAGE>
Rhonda R. Vincent, age 35, is Director of Finance of Maxxon. She is also
the Director of Finance for Lexon, and Vice President and a Director of Image
Analysis, Centrex and Nubar. From 1994 to 1997, Ms. Vincent was Vice President,
Secretary, Treasurer and Director of Corporate Vision, Inc. (OTCBB: CVIA), a
multimedia software development company. For five years prior to founding
Corporate Vision, Ms. Vincent held various accounting, finance and investor
relations positions with CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information processing company that was purchased by National Data
Corporation (NYSE: NDC) in 1996. She began her career as an audit associate with
the public accounting firm of Coopers & Lybrand. Ms. Vincent is a Certified
Public Accountant and holds a Bachelor of Science degree in accounting from Oral
Roberts University. She resigned as a officer and director of Image Analysis on
July 15, 1999. She is Director of Finance of Maxxon, Lexon, Centrex and Nubar.
Frederick K. Slicker, age 56, is General Counsel for Maxxon. He is also
General Counsel for Lexon, Image Analysis, Centrex, and Nubar. He has practiced
law for more than 30 years, primarily in the areas of mergers and acquisitions,
securities law compliance and general business. He holds a Master of Laws degree
from Harvard Law School and a Juris Doctor Degree with highest distinction and a
Bachelor of Arts in Mathematics from the University of Kansas. He served in the
United States Army for seven years. In addition to his duties at Image Analysis,
he continues to practice law for third-party clients. He is a frequent speaker
to professional groups on legal and other subjects.
Vicki L. Pippin, age 40, is Director of Administration for Maxxon. She has
had more than 20 years in senior executive administration for various public
companies in the aerospace and healthcare software industries, including
McDonnell Douglas, Burteck Industries and CIS Technologies. She also works as
Director of Administration for Image Analysis, Lexon, Centrex and Nubar.
Wayland J. Rippstein is a technical consultant to Maxxon. He retired in
1983 from NASA as the Head of the Toxicology Laboratory where he worked
extensively with syringes, vacuums and other issues on the leading edge of
technology for more than 20 years. Since his retirement, Mr. Rippstein has been
a consultant to various businesses. He has testified extensively as an expert
witness in litigation involving the toxicological chemical effects of fires,
explosions and other catastrophic events. Mr. Rippstein also owned and operated
a chemical manufacturing firm for more than 7 years, selling primarily
agricultural chemicals. He holds a patent for an agricultural chemistry product.
He is a graduate from the University of Texas with a Bachelors and Masters
Degree in Chemistry.
17
<PAGE>
(c) Family Relationships
None.
(d) Involvement in Legal Proceedings of Officers, Directors, and Control Persons
None.
Item 6. Compensation of Sole Officer and Director and Other Significant
Employees
Mr. Mabie, the sole officer and director, has received no salary since
inception. The Company accrues the fair value of Mr. Mabie's services as a
contribution to paid-in capital. During 1998, the Board granted Mr. Mabie an
option to purchase 300,000 shares of common stock at $0.50 per share. The
exercise price was equal to the closing price of the Company's common stock on
the date of grant. The options expire ten years from the date of grant.
During 1997, 1998, and through December 15, 1999, Mr. Slicker, the
Company's legal counsel, was paid fees of $41,000, $53,000, and $61,000,
respectively. His fees are for legal services rendered to the Company at his
standard hourly rate. During 1998, the Board granted Mr. Slicker an option to
purchase 300,000 shares of common stock at $0.50 per share. The exercise price
was equal to the closing price of the Company's common stock on the date of
grant. The options expire ten years from the date of grant. During 1999, Mr.
Slicker exercised an option to purchase 100,000 shares of the Company's common
stock at $0.50 per share which resulted in the Company receiving $50,000.
Dr. Coughlin, Medical Director for the Company, has received no salary for
his services. The Company accrues the fair value of Dr. Coughlin's services as a
contribution to paid-in capital. During 1998, the Board granted Mr. Mabie an
option to purchase 300,000 shares of common stock at $0.50 per share. The
exercise price was equal to the closing price of the Company's common stock on
the date of grant. The options expire ten years from the date of grant. During
1999, Dr. Coughlin exercised an option to purchase 100,000 shares of the
Company's common stock at $0.50 per share which resulted in the Company
receiving $50,000.
18
<PAGE>
Ms. Vincent, Finance Director for the Company, received no salary for her
services during 1999 and 1997. The Company accrued the fair value of Ms.
Vincent's services as a contribution to paid-in capital. During 1998, Ms.
Vincent received a salary of $30,000. During 1998, the Board granted Ms. Vincent
an option to purchase 300,000 shares of common stock at $0.50 per share. The
exercise price was equal to the closing price of the Company's common stock on
the date of grant. The options expire ten years from the date of grant.
Ms. Pippin, Administrative Director for the Company, received no salary for
her services no 1999. The Company accrued the fair value of Ms. Pippin's
services as a contribution to paid-in capital. During 1998 and 1997, Ms. Pippin
received a salary of $47,000 and $27,417, respectively. During 1998, the Board
granted Ms. Pippin an option to purchase 300,000 shares of common stock at $0.50
per share. The exercise price was equal to the closing price of the Company's
common stock on the date of grant. The options expire ten years from the date of
grant.During 1999, Ms. Pippin exercised an option to purchase 100,000 shares of
the Company's common stock at $0.50 per share which resulted in the Company
receiving $50,000.
Item 7. Certain Relationships and Related Transactions
(a) Describe Related Party Transactions
During 1997 and 1998, the Company loaned Mr. Mabie $33,500 and $17,500,
respectively, at an interest rate of 8% per year. The loans and accrued interest
were canceled during 1998 and accounted for as G&A expense.
During 1997 and 1998, the Company loaned Ms. Vincent $29,000 and $7,500,
respectively, at an interest rate of 8% per year. The loans and accrued interest
were canceled during 1998 and accounted for as G&A expense.
During 1997, the Company issued 108,000 shares of stock through conversion
of common stock warrants by Bryant Investments, a founder of Cerro Mining. Of
the 108,000 shares issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000 promissory note. During
1998, the Company canceled the promissory note and accrued interest of $4,677
pursuant to a settlement agreement with Bryant Investments. The settlement was
accounted for as G&A expense.
During 1997 and 1998, the Company advanced approximately $64,000 to William
Robinson, a former officer of the Company. During 1997, the Company also issued
52,757 shares of common stock in exchange for $69,800 in subscriptions
receivable from a company related to Mr. Robinson. During 1998, the Company
canceled $64,000 in indebtedness plus accrued interest of $1,507 from William
Robinson and canceled the $69,800 receivable from a company related to Mr.
Robinson, pursuant to his resignation and settlement agreement. The settlement
was accounted for as G&A expense.
During 1997, the Company advanced approximately $35,000 to Sean Stanton, a
founder of Cerro Mining. During 1998, the Company canceled the $35,000
indebtedness plus accrued interest of $1,023 and issued Mr. Stanton 350,000
shares of common stock pursuant to a settlement agreement. The settlement was
accounted for as G&A expense.
19
<PAGE>
Item 8. Description of Securities
Maxxon is authorized to issue 25,000,000 Shares of Common Stock, par value
$0.001 per share, of which 12,317,348 shares were outstanding as of December 15,
1999.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
Maxxon has not paid cash dividends on its Common Stock. Holders of Common Stock
are entitled to receive such dividends as may be declared and paid from time to
time by the Board of Directors out of funds legally available therefor. Maxxon
intends to retain any earnings for the operation and expansion of its future.
Any future determination as to the payment of cash dividends will depend upon
future earnings, results of operations, capital requirements, Maxxon's financial
condition and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Maxxon, holders of shares of Common Stock are entitled to receive pro rata all
of the assets of Maxxon available for distribution to shareholders.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Maxxon.
20
<PAGE>
Part II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
(a) Market Information
Maxxon's Common Stock is actively traded on the NASD's Over-the-Counter
Bulletin Board. The high and low prices for Maxxon's Common Stock during the
calendar quarters ended were:
Quarter ended High Low
------------- --------- ---------
March 31, 1998 $2.63 $0.47
June 30, 1998 $2.94 $1.16
September 30, 1998 $1.91 $0.97
December 31, 1998 $1.56 $0.78
March 31, 1999 $1.75 $0.75
June 30, 1999 $1.34 $0.75
September 30, 1999 $1.13 $0.38
Quotations on the OTC Bulletin Board reflect bid and ask quotations, may
reflect inter-dealer prices, without retail markup, mark-down or commission, and
may not represent actual transactions.
(b) Holders
As of December 15, 1999 there were approximately 250 holders of record of
Maxxon's common stock.
(c) Dividends
Maxxon has not declared any dividends in the past, and there is no
intention to declare dividends in the future.
Item 2. Legal Proceedings
There is no litigation pending against Maxxon. There are certain claims
outstanding arising under the Development Agreement among TABS, Hartzell and
Maxxon. Maxxon asserts that a material breach has occurred by reason of the
failure of TABS and Hartzell to produce a working prototype of the Safety
Syringe on or before September 30, 1998 as required by the Development
Agreement. On September 24, 1999, TABS first submitted its invoice for services
rendered from January 1, 1999 through September 22, 1999 of approximately
$41,000. In addition, TABS then informed Maxxon that it has received invoices
from Hartzell for approximately $7,200 which TABS has not paid, because Hartzell
has failed to produce parts to TABS that meet approved specifications and which
when assembled do not result in a working prototype. Maxxon funded an escrow
account in the amount of $125,000 pursuant to the Development Agreement, and
approximately $50,000 remains undisturbed. The Company is working to resolve the
dispute, but there is no assurance that it can be resolved to the satisfaction
of all parties without litigation.
21
<PAGE>
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities
(a) Date, Title and Amount of Securities Sold
From inception through December 15, 1999, the Company sold 2,256,000 shares
of its common stock in private offerings to third party investors.
The Company issued 7,578,000 shares of its common stock pursuant to the
Merger with Maxxon-Oklahoma. Following the Merger, the Company issued 621,600
shares of its common stock pursuant to the Agreement and Plan of Exchange with
Ives Health Company, Inc.
The Company has issued 300,000 shares upon the exercise of options granted
to key consultants.
In May 1997, the Merger of Maxxon-Oklahoma into Cerro Mining was completed.
Pursuant to the merger the shareholders of Cerro retained 531,000 shares of
common stock and the shareholders of Maxxon received 7,578,000 shares of common
stock.
During 1997, the Company sold 175,069 shares of common stock to third-party
investors for $266,720 in cash, issued 90,499 shares in exchange for services
from third-parties valued at $173,427, and issued 102,673 shares upon conversion
of $75,000 in debentures which were purchased during 1997 by a third-party
investor for cash.
During 1997, the Company issued 108,000 shares of stock through conversion
of common stock warrants by Bryant Investments, a founder of Cerro Mining. Of
the 108,000 shares issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000 promissory note. During
1997, the Company issued 52,757 shares in exchange for $69,800 in subscriptions
receivable from a party related to a former officer. During 1998, the Company
canceled the promissory note and the subscription receivable pursuant to a
settlement agreements with Bryant Investments and with the former officer.
In August 1997, the Company completed the merger with Ives Health Company
and The Health Club and issued 621,600 shares of its common stock to the
shareholders of the two companies. Additionally, the Company issued 18,513
shares of its common stock, as payment for $27,000 in Ives debts. In December
1997, 275,360 shares of stock previously issued for the acquisition of Ives
Health Company were surrendered to the Company (see Note 3).
During 1998, the Company sold 50,000 shares of common stock to a
third-party investor for $91,000 in cash, issued 44,827 shares of common stock
as payment for $55,000 in Ives debts, and issued 548,574 shares of common stock
upon conversion of debentures purchased by a third party investor during 1997
for $25,000 and during 1998 for $250,000.
In January 1998, the Company entered into an agreement with Stockbroker
Relations, Inc., a third-party investor relations firm, to provide services to
the Company in exchange for 835,042 shares of common stock valued at $448,140.
In January 1998, the Company issued 77,691 to Texas Applied Biotechnology
Services, Inc. (TABS) as payment for $35,660 in services related to the
development of the safety syringe. During 1998, the Company also issued 75,274
shares valued at $90,748 as payment for services rendered by Maxxon's Medical
Advisory Board and Com-Med Strategic Alliances, which coordinated the Board's
activities. During 1998, the Company canceled 91,572 shares issued during 1997
pending performance of services by other third-party vendors. The services were
valued at $40,265 during 1997. The services were not performed and the Company
canceled the shares during 1998.
22
<PAGE>
In January 1998, the Board granted 1,750,000 options to purchase common
stock at exercise prices ranging from $0.50 to $.2.00 per share to Stockbroker
Relations, Inc. ("SRI"). During 1998, SRI exercised 500,000 options at prices
ranging from $0.50 and $0.75 per share which resulted in the Company receiving
$307,400 in cash and $18,100 in services. In September 1998, the Board granted
70,000 options to purchase common stock at $0.75 per share to Morgan-Phillips,
Inc., a third-party investor relations firm. Morgan-Phillips exercised all
70,000 options during 1998, which resulted in the Company receiving $52,500 in
cash.
In June 1998, the Company issued 350,000 shares to Sean Stanton, a founder
of Cerro Mining, as a result of a settlement agreement.
During 1999, the Company sold 390,693 shares of its common stock to
third-party investors for $342,425 in cash, issued 14,069 shares of its common
stock to a non-affiliate as a consulting fee in connection with the sale of
common stock, issued 300,000 shares of its common stock to employees in
connection with the exercise of stock options which resulted in the Company
receiving $150,000 in cash, and issued 150,000 shares of its common stock to
Morgan-Phillips, Inc. in exchange for services valued at $150,000.
(b) Names of Principal Underwriters
There was no public offering of the Maxxon shares. The shares outstanding
were issued in various transactions exempt from registation under Sections 4(1),
4(2), 4(6), and 7 of the Securities Act of 1933.
(c) Consideration
In connection with the sale of 140,693 shares of common stock to
third-party investors during 1999, the Company issued 14,069 shares of its
common stock a non-affiliate as a consulting fee.
23
<PAGE>
(d) Section under which Exemption from Registration was Claimed
The issuance of the securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(1), 4(2),
4(6) and 7 of the Securities Act of 1933. Each recipient in each such
transaction represented his or her intention to acquire the securities for
investment only and not with a view to any distribution thereof and, where
applicable, appropriate legends were affixed to the share certificates issued in
such transactions.
Item 5. Indemnification of Officers and Directors
Maxxon's Articles of Incorporation provide for indemnification to the full
extent permitted by Nevada law of all persons it has the power to indemnify
under Nevada law. In addition, Maxxon's Bylaws provide for indemnification to
the full extent permitted by Nevada law of all persons it has the power to
indemnify under Nevada law. Such indemnification is not deemed to be exclusive
of any other rights to which those indemnified may be entitled, under any bylaw,
agreement, vote of stockholders or otherwise. The provisions of Maxxon's
Articles of Incorporation and Bylaws which provide indemnification may reduce
the likelihood of derivative litigation against Maxxon's directors and officers
for breach of their fiduciary duties, even though such action, if successful,
might otherwise benefit Maxxon and its stockholders.
In addition, Maxxon has entered into indemnification agreements with
Messers. Mabie, Slicker, and Coughlin and Ms. Vincent and Ms. Pippin, a form of
which is attached hereto as Exhibit 6.3. These agreements provide that Maxxon
will indemnify each person for acts committed in his or her official capacities
and for virtually all other claims for which a contractual indemnity might be
enforceable.
24
<PAGE>
Part F/S
TABLE OF CONTENTS
(a) Annual Financial Statements
Independent Auditor's Report................................................F-2
Balance Sheets at December 31, 1998 and 1997................................F-3
Statements of Operations from Inception (December 16, 1996)
to December 31, 1998 and for the years ended
December 31, 1998 and 1997...............................................F-4
Statements of Cash Flows from Inception (December 16, 1996)
to December 31, 1998 and for the years ended
December 31, 1998 and 1997...............................................F-5
Statements of Changes in Stockholders' Equity
from Inception (December 16, 1996) to December 31, 1998 .................F-6
Notes to Financial Statements December 31, 1998.............................F-7
(b) Interim Financial Statements
Balance Sheets at September 30, 1999 (Unaudited) and
December 31, 1998 .......................................................F-19
Statements of Operations from Inception (December 16, 1996)
to September 30, 1999 and for the nine months ended
September 30, 1999 and 1998..............................................F-20
Statements of Cash Flows from Inception (December 16, 1996)
to September 30, 1999 and for the nine months ended
September 30, 1999 and 1998..............................................F-21
Notes to Financial Statements September 30, 1999............................F-22
F-1
<PAGE>
Independent Auditor's Report
To the Shareholders of
Maxxon, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheet of Maxxon, Inc. (a
development stage company) for the years ended December 31, 1998 and 1997, and
the related statements of operations, shareholders' equity, and cash flows for
the years ended December 31, 1998 and 1997 and for the period from December 16,
1996 (inception) to December 31, 1998. 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 audit.
We conducted our audit 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 principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Maxxon, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997 and for the period from December
16, 1996 (inception) to December 31, 1998 in conformity with generally accepted
accounting principles.
Henderson Sutton & Co., P. C.
Certified Public Accountants
March 29, 1999
F-2
<PAGE>
Maxxon, Inc.
Balance Sheets
December 31, 1998 and 1997
December 31, December 31,
1998 1997
------------ ------------
ASSETS
Current assets
Cash ............................................... -- 2,665
Receivables from related parties (Note 3 and 15) ... 12,000 280,577
Interest receivable- related parties (Note 15) ..... -- 8,771
Prepaid consulting expenses ........................ -- 3,000
------------ ------------
Total current assets ............................ 12,000 295,013
------------ ------------
Property and Equipment, net of depreciation ........ 22,210 16,132
------------ ------------
Other assets
Investment in Ives Health Company (Note 4) ......... 640,418 639,348
Investment in The Health Club (Note 4) ............. 45,000 45,000
License Agreement and Other Intangible Assets,
net of amortization (Note 2 and 5)............... 99,741 103,200
------------ ------------
Total other assets ........................... 785,159 787,548
------------ ------------
TOTAL ASSETS ....................................... 819,369 1,098,693
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities ........... 7,629 101,227
Notes payable (Note 6) ............................. -- 26,656
Convertible debenture payable (Note 14) ............ -- 25,000
------------ ------------
Total current liabilities ....................... 7,629 152,883
Long-term debt
Note payable to related party (Note 15) ............ 69,538 --
Convertible debenture payable (Note 14) ............ -- 55,000
------------ ------------
Total long-term debt ............................ 69,538 55,000
------------ ------------
Total liabilities .................................. 77,167 207,883
------------ ------------
Shareholders' equity
Preferred stock, $0.001 par value, 5,000,000 shares
authorized; no shares issued and outstanding
at December 31, 1998 and 1997, respectively...... -- --
Common stock, $0.001 par value,
45,000,000 shares authorized; 11,462,587 shares
and 9,002,751 shares issued and outstanding at
December 31, 1998 and 1997, respectively......... 11,463 9,003
Paid in capital .................................... 4,110,497 1,746,982
Stock subscriptions receivable- related party ...... -- (69,800)
Retained earnings .................................. (3,379,758) (795,375)
------------ ------------
Total shareholders' equity ...................... 742,202 890,810
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... 819,369 1,098,693
============ ============
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
Maxxon, Inc.
Statements of Operations
From inception (December 16, 1996) through December 31, 1998 and
for the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
From inception
(December 16,
1997) through
December 31, December 31, December 31,
1998 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
Revenue ..................................... $ -- $ -- $ --
Expenses
Research and development .................... 281,353 195,818 85,535
General and administrative .................. 3,088,550 2,385,377 703,173
------------ ----------- ------------
Total operating expenses ................. 3,369,903 2,581,195 788,708
------------ ----------- ------------
Operating loss .............................. (3,369,903) (2,581,195) (788,708)
Interest income ............................. 15,554 6,784 8,770
Interest expense ............................ 10,686 981 9,705
Depreciation and amortization ............... 14,723 8,991 5,732
------------ ----------- ------------
Net loss from operations .................... $ (3,379,758) $ (2,584,383) $ (795,375)
------------ ----------- ------------
Weighted average shares outstanding (Note 10) 10,003,051 10,003,051 7,487,750
------------ ----------- ------------
Net loss per share (Note 1) ................. $ (0.34) $ (0.26) $ (0.11)
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
Maxxon, Inc.
Statements of Cash Flows
From inception (December 16, 1996) through December 31, 1998 and
for the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
From inception
(December 16,
1997) through
December 31, December 31, December 31,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Operating activities
Net loss (3,379,758) (2,584,383) (795,375)
Plus non-cash charges to earnings:
Depreciation and amortization 14,723 8,991 5,732
Common stock issued for services 689,915 516,488 173,427
Expenses paid by third parties 49,634 49,634 -
Contribution of services by officer and employees 114,154 114,154 -
Services by officer and employees paid for with non-cash consideration 87,500 87,500 -
Consulting Services paid for with non-cash consideration 287,877 287,877 -
Compensation cost for stock options granted to non-employees 918,187 918,187 -
Change in working capital accounts:
(Increase) decrease in other receivables (12,000) (12,000) -
(Increase) decrease in prepaid expenses - 3,000 (3,000)
(Increase) decrease in receivables from related parties (176,577) (25,000) (151,577)
(Increase) decrease in interest receivable - 8,771 (8,771)
Increase (decrease) in accounts payable and accrued liabilities 43,289 (57,938) 101,227
----------- ------------ ------------
Total operating activities ` (1,363,056) (684,719) (678,337)
----------- ------------ ------------
Investing activities
Purchase of equipment (28,948) (11,024) (17,924)
Investment in Ives Health Company (251,997) (1,070) (250,927)
Investment in The Health Club (10,000) - (10,000)
----------- ------------ ------------
Total investing activities (290,945) (12,094) (278,851)
----------- ------------ ------------
Financing activities
Loans from Shareholders 19,904 19,904 -
Sale of common stock for cash:
To third-party investors (prior to Merger) 574,477 - 574,477
To third-party investors 444,720 91,000 353,720
From exercise of stock options by third-parties 359,900 359,900 -
Convertible Debentures issued for cash 355,000 250,000 105,000
Payment of exclusive license note payable (100,000) (26,656) (73,344)
----------- ------------ ------------
Total financing activities 1,654,001 694,148 959,853
----------- ------------ ------------
Change in cash - (2,665) 2,665
Cash at beginning of period - 2,665 -
----------- ------------ ------------
Cash at end of period $ - $ - $ 2,665
=========== ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest and taxes during the period 10,687 982 9,705
=========== ============ ============
Non-cash financing and investing activities:
Common stock issued to founders 7,000 - 7,000
Common stock issued in connection with Merger
with Cerro Mining Corporation 300 - 300
Common stock issued in Ives Merger 346,262 - 346,262
Common stock subscriptions 69,800 - 69,800
Common stock issued in exchange for promissory note 129,000 - 129,000
Common stock issued for convertible debentures 190,660 115,660 75,000
Common stock issued for services 174,013 586 173,427
Common stock issued to pay Ives debt 27,000 - 27,000
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
Maxxon Inc.
Statements of Stockholders' Equity
From inception (December 16, 1996) thorugh December 31, 1998 and
for the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
during the
Note Price Common Stock Paid-In Development Subscription
Reference per Share Shares Amount Capital Stage Receivable Total
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception (December 16, 1996) --- - - - - -
Cerro Mining/Maxxon-OK Merger:
Cerro Mining $0.001 531,000 531 (231) 300
Maxxon-OK:
Shares issued to founders 9 $0.001 7,000,000 7,000 7,000
Shares sold for cash to third-party 9 $0.90 - $1.00 578,000 578 573,899 574,477
investors
Ives Transactions:
Investment in Ives Health Company 4 $1.57 311,240 311 310,951 311,261
Investment in The Health Club 4 1.57 35,000 35 34,965 35,000
Conversion of Ives Debt 4 1.46 18,513 19 26,981 27,000
Issuance of Common Stock for:
Cash from third-party investors 12 $1.62 218,569 219 353,501 353,720
Cash from related party 12,15
Promissory Notes 3,12 $2.00 64,500 65 128,935 129,000
Subscriptions Receivable 12,15 $1.22-$1.49 52,757 53 69,747 (69,800) -
Services Rendered 12 $1.38-$3.42 90,499 90 173,337 173,427
Debentures Converted 14 $0.73 102,673 103 74,897 75,000
Net Income (Loss) at December 31, 1997 (795,375) (795,375)
----------------------------------------------------------------------
Balance at December 31, 1997 9,002,751 9,003 1,746,982 (795,375) (69,800) 890,809
Issuance of Common Stock for:
Conversion of Ives Debt 4 $1.22-$1.28 44,827 45 54,955 55,000
Cash from third-party investor 12 1.82 50,000 50 90,950 91,000
Options exercised by third-parties 12,13 $0.50-$0.75 545,867 546 359,354 359,900
for cash
Options exercised by third-parties 12,13 $0.75 24,133 24 18,076 18,100
for services
Services Rendered by third-parties 12 $0.46 - $1.43 988,007 988 573,560 574,549
Debentures Converted by third parties 14 $0.50 548,574 549 274,451 275,000
Settlement with related party 15 350,000 350 350
Certificates canceled: 12 (91,572) (92) (40,173) (40,265)
Value of Services Contributed by Officer
and Employees 1 114,154 114,154
Compensation Cost for Stock Options
Granted to Non-Employees 13 918,187 918,187
Cancellation of Subscriptions Receivable
from related party 12,15 69,800 69,800
Net Income (Loss) at December 31, 1998 (2,584,383) (2,584,383)
----------------------------------------------------------------------
Balance at December 31, 1998 11,462,587 11,463 4,110,497 (3,379,758) 0 742,202
----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statments.
F-6
<PAGE>
Maxxon, Inc.
(Formerly Cerro Mining)
A Development Stage Company
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Organization and Nature of Operations
Maxxon, Inc. ("Maxxon" or "the Company") is a
development stage company organized to develop and market
selected healthcare products. These products provide unique
advantages or improvements to products that are currently in
use. The Company has acquired an exclusive license to develop,
manufacture and market a patented disposable safety syringe
that automatically retracts the needle into the plunger after
an injection has been given.
On May 31, 1997, Cerro Mining Corporation ("Cerro
Mining"), a publicly traded Nevada corporation, acquired all
of the outstanding common stock of Maxxon, Inc., a privately
held Oklahoma corporation that was incorporated on December
16, 1996 ("Maxxon-Oklahoma"). For the period from December 16,
1996 to December 31, 1996, there was no activity in
Maxxon-Oklahoma. Subsequent to the merger, Maxxon-Oklahoma
ceased to exist and Cerro Mining changed its name to Maxxon,
Inc. For accounting purposes, the merger was treated as a
"Reverse Acquisition" whereby the financial statements of the
acquired entity, Maxxon-Oklahoma, became those of the Company
(See Note 9, "Reorganization"). The combination is a
recapitalization and not a business combination (as defined in
APB Opinion No. 16); therefore, pro forma financial
information is not presented.
Cash and Cash Equivalents
The Company considers highly liquid investments (that
are readily convertible to cash) purchased with original
maturity dates of three months or less to be cash equivalents.
Compensation of Officers and Employees
Currently, the Company's officers and other employees
serve without pay or other non-equity compensation. The fair
value of these services is estimated by management and is
recognized as a capital contribution. For the year ended
December 31, 1998 and for the period from inception to
December 31, 1998, the Company recorded $114,154 as a capital
contribution of services by the officers and other employees.
Stock-based Compensation
The Company accounts for stock-based compensation
arrangements in accordance with Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and complies with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation".
Under APB No. 25, compensation expense is based on the
difference, if any, on the date of grant, between the fair
F-7
<PAGE>
value of the Company's stock and the exercise price. The
Company accounts for stock issued to non-employees in
accordance with the provisions of SFAS No. 123 and the
Emerging Issues Task Force Consensus in Issue No. 96-18.
Income Taxes
The Company uses the liability method of accounting
for income taxes as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Under the liability method, deferred taxes are determined
based on the differences between the financial statement and
tax bases of assets and liabilities at enacted tax rates in
effect in the years in which the differences are expected to
reverse.
Segment Information
Effective January 1, 1998, the Company adopted the
provisions of SFAS No. 131, "Disclosures about Segments of and
Enterprise and Related Information". The Company identifies
its operating segments based on business activities,
management responsibility and geographical location. During
the years ended December 31, 1998 and 1997, the Company
operated in a single business segment engaged in developing
and marketing selected healthcare products.
Earnings (Loss) per Share
The Company computes net income per share in
accordance with SFAS No. 128, "Earnings per Share" and SEC
Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provision of SFAS NO. 128 and SAB 98 basic net income (loss)
per share is calculated by dividing net income (loss)
available to common stockholders for the period by the
weighted average shares of common stock of the Company
outstanding during the period (see Note 9). Diluted net income
per share is computed by dividing the net income for the
period by the weighted average number of common and common
equivalent shares outstanding during the period. The
calculation of fully diluted income (loss) per share of common
stock assumes the dilutive effect of the Company's Series A
Senior Subordinated Convertible Redeemable Debentures due on
various dates in 1998 and 1999 and that has a conversion into
common stock at the later of the beginning of the fiscal year
or issue date. During a loss period, the assumed exercise of
outstanding convertible debentures has an anti-dilutive
effect. Therefore, these shares are not included in the
December 31, 1998 and 1997 weighted average shares of
10,003,051 and 7,487,750 used respectively in the calculations
of loss per share.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements
and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
F-8
<PAGE>
Reclassifications
Certain reclassifications have been made to the prior
year financial statements to conform to the current period
presentation.
Research and Development ("R&D") Costs
The company is amortizing the $100,000 paid pursuant
to the exclusive license agreement for a patented disposable
safety syringe that automatically retracts the needle into the
plunger after an injection has been given. The amortization is
for a period of 40 years. All costs for developing the
patented safety syringe are expensed as incurred.
New Accounting Standards
The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" during
1998. The Company has no comprehensive income items during
1998. Therefore, net loss equals comprehensive income. The
Company operates in only on business segment. The Company will
adopt SFAS No. 133, "Accounting for Derivative Investments and
Hedging Activities" during 1999. Currently, the Company does
not engage in hedging activities or transactions involving
derivatives.
Note 2 - Exclusive License
On April 30, 1997, the Company signed a license
agreement to pay $100,000 to Harry J. Kaufhold for the
exclusive worldwide license to perfect, produce and market a
patented safety syringe. The exclusive license is being
amortized over 40 years using the straight-line method. At
December 31, 1998 and 1997, the amount of accumulated
amortization related to the Exclusive License was $5,000 and
$2,500, respectively.
Note 3 - Receivables from Related Parties
Receivables from Related Parties at December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
An unsecured note with Bryant Investments,
bearing interest of 8% per annum and
maturing March 15, 1998 $ -- $ 129,000
An unsecured note with William Robinson,
bearing interest of 8% per annum and
maturing June 10, 1999 $ -- $ 54,446
An unsecured note with Sean Stanton,
Bearing interest at 8% per annum and
maturing March 15, 1998 $ -- $ 34,631
F-9
<PAGE>
An unsecured note with Gifford Mabie,
bearing interest of 8% per annum and
maturing May 19, 1999 $ -- $ 33,500
An unsecured note with Rhonda Vincent,
bearing interest of 8% per annum and
maturing June 17, 1999 $ -- $ 29,000
Rent receivable from related companies $ 12,000 $ 0
------ -------
Total receivable from related parties $ 12,000 $ 280,577
====== ========
</TABLE>
During 1998, the Company canceled the notes from officers in
lieu of compensation for services. During 1998, the Company
canceled the note from William Robinson, Bryant Investments and
Sean Stanton pursuant to a settlement agreement. See Note 15.
Related Party Transactions.
The $12,000 related party receivable balance at
December 31, 1998 resulted from the office space that is
shared with other companies controlled by the sole officer and
director of the Company. The rent expense is allocated among
the companies based on their level of activity and recorded as
related party receivable on Maxxon's financial statements.
Note 4 - Investment in Ives Health Company and The Health Club
On August 15, 1997, the Company completed a stock
exchange with Ives Health Company, ("Ives") and The Health
Club, Inc. (" THC"), whereby Maxxon issued 621,600 shares of
its common stock in exchange for all of the outstanding shares
of both companies. Pursuant to this agreement, both Ives and
THC became wholly owned subsidiaries of Maxxon, Inc. During
1997 and 1998, the Company issued 18,513 shares and 44,827
shares, respectively, as payment of Ives liabilities amounting
to $27,000 and $55,000, respectively.
On December 31, 1997, the Company entered into an
agreement to rescind the portion of the August stock exchange
agreement pertaining to Ives Health Co. Under the new
agreement, a new corporation was formed, which retained the
name Ives Health Company, Inc. Keith Ives resigned as an
officer and director of Maxxon and surrendered 275,360 shares
of common stock of Maxxon. As further directed in the
agreement, Maxxon received 1,700,000 shares of the newly
formed Ives Health Company, Inc., par value, $0.001, which
represented 19.5% of the outstanding shares of Ives as of
December 31, 1997. The Company's investment in Ives is
accounted for under the cost method. The Company retained 100%
ownership of The Health Club. As of December 31, 1998, there
had been no financial activity for The Health Club.
F-10
<PAGE>
The Investment in Ives Health Company and Investment
in The Health Club at December 31, 1998 and 1997 represent the
total amount of cash advanced, plus the value of Maxxon stock
issued as payment of Ives debts and issued in connection with
the Merger and break-up.
Note 5 - Exclusive License and Other Intangible Assets
Exclusive License and Other Intangible Assets
consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
<S> <C> <C>
Exclusive license - safety syringe. $ 100,000 $ 100,000
Less: Accumulated amortization (5,000) (2,500)
-------------------- --------------------
$ 95,000 $ 97,500
-------------------- --------------------
Other intangible assets 7,726 7,140
Less: Accumulated amortization ( 2,985) ( 1,440)
-------------------- --------------------
Intangible assets, net $ 4,741 $ 5,700
-------------------- --------------------
Total Exclusive License and Other Intangible
Assets, Net of Amortization $99,741 $103,200
-------------------- --------------------
</TABLE>
The exclusive license is being amortized over 40
years and the other intangible assets, which are primarily
organization costs, are being amortized over 5 years, using
the straight-line method.
Note 6 - Note Payable
On April 30, 1997, the Company executed a $90,000
note payable to the licensor of the patented syringe. The
note, which is an unsecured obligation of the Company,
requires monthly installment payments of $10,000, bearing
interest at 18% per year, and matures February 28, 1998. At
December 31, 1997, $26,656 remained payable on this note. This
balance was paid in full during February 1998.
Note 7 - Income Taxes
The deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net operating loss carry-forward $ 1,013,927 $ 238,613
Less: Valuation allowance 1,013,927 238,613
------------ ------------
Net Deferred Tax Benefit $ - - $ - -
============ =============
</TABLE>
F-11
<PAGE>
As of December 31, 1998 and 1997, the Company net
operating loss carry-forwards of approximately $3,300,000.
Approximately $800,000 will expire in 2012 and the remaining
$2,500,000 will expire in 2013. Deferred taxes reflect a
combined federal and state tax rate of approximately 30%.
Note 8 - Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement,
the Company agreed to pay to the licensor a royalty equal to
three percent (3%) of gross receipts (excluding taxes,
transportation, insurance, shipping and handling, packaging,
returns, replacements for defective or damaged goods, all
discounts, and all funds received from sales which are
contested or subject to claims) from the sale of products
based on the patent or any additions, extensions and
improvements thereto. The term of the royalty is coincident
with the life of the patent and shall survive any acquisition,
change of control or any other event where the Company is not
directly managing the production and sale of the products
using the patent. If by April 30, 2000, the cumulative sales
from products using the patent have not exceeded $100,000 or
if any subsequent year the annual sales do not exceed
$100,000, the exclusive license agreement, along with the
royalty obligation, will terminate.
Foreign Patent Protection
The U.S. patent covering the Maxxon safety syringe
does not extend to foreign countries and the Company does not
presently have any foreign patent protection for its product.
Leases
On March 24, 1997, Maxxon, Inc. executed a five-year
lease for office space. The minimum annual lease payments
under the lease are scheduled as follows:
For the Periods Ended
December 31 Amount
----------- ------
1999 $23,186
2000 $23,702
2001 $24,217
2002 $20,610
This office space is shared with other companies
controlled by the officers and directors of the Company. The
rent expense is allocated among the companies based on their
level of activity and recorded as a related party receivable
on Maxxon's financial statements.
Note 9 - Reorganization
On January 1, 1997, Maxxon-Oklahoma changed the par
value for its common stock from $0.01 per share to $0.001 per
share and issued 7,000,000 shares of common stock to its
founders. Subsequently, Maxxon-Oklahoma issued 578,000 shares
of its common stock to third-party investors for $574,477 in
F-12
<PAGE>
cash. On May 31, 1997, Cerro Mining and Maxxon-Oklahoma
completed a merger of the companies, whereby Cerro Mining
issued 7,578,000 shares of common stock for 100% of the issued
and outstanding common stock of Maxxon-Oklahoma. In connection
with the merger, Cerro Mining assigned all mining assets,
agreements and assignments to R.F.C. International ("RFC"),
former majority shareholder of Cerro Mining, in return for
1,725,000 shares of common stock of Cerro Mining owned by RFC.
After the merger, the shareholders of Cerro Mining owned
531,000 shares of common stock. In connection with the Merger,
Cerro Mining changed its name to Maxxon, Inc.
For accounting purposes, the merger of Cerro Mining
and Maxxon-Oklahoma was treated as a reverse acquisition and
the Company elected a quasi-reorganization in which the Cerro
Mining deficit of $462,000 was eliminated into paid-in
capital. After the assignment of mining assets, but prior to
the issuance of 7,578,000 shares of its common stock for 100%
of the common stock of Maxxon-Oklahoma, Cerro Mining had $300
in total assets and 531,000 shares of common stock issued and
outstanding.
Note 10 - Earnings (Loss) Per Share
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Common Shares Outstanding 11,462,587 9,002,751
Effect of using weighted average
common and common
equivalent shares outstanding.
(1,459,536) (1,515,001)
----------- -----------
Weighted average common shares
outstanding.
10,003,051 7,487,750
=========== =========
</TABLE>
Note 11 - Development Stage Operations
The Company was incorporated on December 16, 1996.
Since inception, its primary focus has been raising capital
and developing the safety syringe. The Company had no
financial activity prior to January 1, 1997.
Note 12 - Common Stock and Paid-In Capital
In May 1997, the Merger of Maxxon-Oklahoma into Cerro
Mining was completed. Pursuant to the merger the shareholders
of Cerro retained 531,000 shares of common stock and the
shareholders of Maxxon received 7,578,000 shares of common
stock. See Note 9- Reorganizaton.
From May 1997 to December 1997, the Company sold
175,069 shares of common stock to third-party investors for
$266,720 in cash, issued 90,499 shares in exchange for
services from third-parties valued at $173,427, and issued
102,673 shares upon conversion of $75,000 in debentures which
were purchased during 1997 by a third-party investor for cash.
F-13
<PAGE>
During 1997, the Company issued 108,000 shares of
stock through conversion of common stock warrants by Bryant
Investments, a founder of Cerro Mining. Of the 108,000 shares
issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000
promissory note. During 1997, the Company issued 52,757 shares
in exchange for $69,800 in subscriptions receivable from a
party related to a former officer. During 1998, the Company
canceled the promissory note and the subscription receivable
pursuant to a settlement agreements with Bryant Investments
and with the former officer.
In August 1997, the Company completed the merger with
Ives Health Company and The Health Club and issued 621,600
shares of its common stock to the shareholders of the two
companies. Additionally, the Company issued 18,513 shares of
its common stock, as payment for $27,000 in Ives debts. In
December 1997, 275,360 shares of stock previously issued for
the acquisition of Ives Health Company were surrendered to the
Company (see Note 3).
During 1998, the Company sold 50,000 shares of common
stock to a third-party investor for $91,000 in cash, issued
44,827 shares of common stock as payment for $55,000 in Ives
debts, and issued 548,574 shares of common stock upon
conversion of debentures purchased by a third party investor
during 1997 for $25,000 and during 1998 for $250,000.
In January 1998, the Company entered into an
agreement with Stockbroker Relations, Inc., a third-party
investor relations firm, to provide services to the Company in
exchange for 835,042 shares of common stock valued at
$448,140. In January 1998, the Company issued 77,691 to Texas
Applied Biotechnology Services, Inc. (TABS) as payment for
$35,660 in services related to the development of the safety
syringe. During 1998, the Company also issued 75,274 shares
valued at $90,748 as payment for services rendered by Maxxon's
Medical Advisory Board and Com-Med Strategic Alliances, which
coordinated the Board's activities. During 1998, the Company
canceled 91,572 shares issued during 1997 pending performance
of services by other third-party vendors. The services were
valued at $40,265 during 1997. The services were not performed
and the Company canceled the shares during 1998.
In January 1998, the Board granted 1,750,000 options
to purchase common stock at exercise prices ranging from $0.50
to $.2.00 per share to Stockbroker Relations, Inc. ("SRI").
During 1998, SRI exercised 500,000 options at prices ranging
from $0.50 and $0.75 per share which resulted in the Company
receiving $307,400 in cash and $18,100 in services. In
September 1998, the Board granted 70,000 options to purchase
common stock at $0.75 per share to Morgan-Phillips, Inc., a
third-party investor relations firm. Morgan-Phillips exercised
all 70,000 options during 1998, which resulted in the Company
receiving $52,500 in cash.
In June 1998, the Company issued 350,000 shares to
Oasis Capital, a founder of Cerro Mining, as a result of a
settlement agreement.
F-14
<PAGE>
Maxxon is authorized to issue up to 20,000,000 shares
of common stock, $0.001 par value. At December 31, 1998,
11,462,587 shares of common stock were issued and outstanding.
Voting Rights. Holders of shares of Common Stock are
entitled to one vote per share on all matters submitted to a
vote of the shareholders. Shares of Common Stock do not have
cumulative voting rights, which means that the holders of a
majority of the shareholders votes eligible to vote and voting
for the election of the Board of Directors can elect all
members of the Board of Directors. Holders of a majority of
the issued and outstanding shares of Common Stock may take
action by written consent without a meeting.
Dividend Rights. Holders of record of shares of
Common Stock are entitled to receive dividends when and if
declared by the Board of Directors. To date, Maxxon has not
paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be
declared and paid from time to time by the Board of Directors
out of funds legally available therefore. Maxxon intends to
retain any earnings for the operation and expansion of its
business and does not anticipate paying cash dividends in the
foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of
operations, capital requirements, Maxxon's financial condition
and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution
or winding up of Maxxon, holders of shares of Common Stock are
entitled to receive pro rata all of the assets of Maxxon
available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Maxxon's
Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have
any preemptive rights to subscribe for or to purchase any
stock, obligations or other securities of Maxxon.
Note 13 - Stock Options
On January 20, 1998, the Board granted 1,500,000
options to purchase common stock at an exercise price of $0.50
per share to the sole officer and employees of the Company.
The exercise price was equal to the price of the Company's
common stock on the date of grant. No compensation cost was
recorded.
On January 20, 1998, the Board granted 1,750,000
options to Stockbroker Relations, Inc. ("SRI"), an investor
relations firm, at exercise prices ranging from $0.50 to $2.00
per share as part of an agreement to provide investor
relations services to the Company during 1998. Compensation
cost was calculated using the Black-Scholes option pricing
model with the following assumptions: exercise prices ranging
from $0.50 to $2.00 per share; stock price of $0.50 per share,
which was the price of the Company's stock as quoted on the
OTC Bulletin Board on the date of grant.; risk-free interest
rate of 6.0%; expected dividend yield of 0.0; expected life of
ten years; and estimated volatility of 149%. The Company
F-15
<PAGE>
recorded $855,255 as compensation cost related to the SRI
option grant.
During 1998, SRI exercised 500,000 options with
exercise prices ranging from $0.50 to $0.75 per share which
resulted in the Company receiving $307,400 in cash and $18,100
in services. During 1998, SRI forfeited 1,250,000 options at
exercise prices ranging from $1.00 to $2.00 per share,
pursuant to a settlement agreement.
On September 24, 1998, the Board granted 70,000
options to purchase common stock at an exercise price of $0.75
per share to Morgan-Phillips, Inc. ("Morgan-Phillips"), an
investor relations firm, for their services during 1998.
Compensation cost was calculated using the Black-Scholes
option pricing model with the following assumptions: exercise
price of $0.75 per share; stock price of $1.50 per share,
which was the price of the Company's stock as quoted on the
OTC Bulletin Board on the date of grant; risk-free interest
rate of 6.0%; expected dividend yield of 0.0; expected life of
ten years; and estimated volatility of 102%. The Company
recorded $62,937 as compensation cost related to the
Morgan-Phillips option grant.
During 1998, Morgan-Phillips exercised all 70,000
options with resulted in the Company receiving $52,500 in
cash.
SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") provides an alternative method of
determining compensation cost for employee stock options,
which alternative method may be adopted at the option of the
Company. Had compensation cost for the 1,500,000 options
granted to employees during 1998 been determined consistent
with SFAS 123, the Company's net loss and EPS would have been
reduced to the following pro forma amounts:
Net loss:
As reported $(2,584,384)
Pro forma $(3,042,037)
Basic and diluted EPS:
As reported $ (0.26)
Pro forma $ (0.30)
A summary of the status of the Company's stock
options at December 31, 1999, and changes during the period
then ended is presented below:
F-16
<PAGE>
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Employees:
Outstanding, beginning of period -- --
Granted 1,500,000 $ 0.50
Exercised -- --
Canceled -- --
---------------
Outstanding, December 31, 1998 1,500,000 $ 0.50
Exercisable, December 31, 1998 1,500,000 $ 0.50
Weighted average fair value of options granted -- $0.49
Weighted
Average
Shares Exercise Price
------ --------------
Non-Employees:
Outstanding, beginning of period -- --
Granted 1,820,000 $ 1.23
Exercised 570,000 $ 0.64
Canceled (1,250,000) $ 1.50
---------------
Outstanding, December 31, 1998 -- --
Exercisable, December 31, 1998 -- --
Weighted average fair value of options granted -- $0.50
</TABLE>
The following table summarizes information about
fixed stock options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ -------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range Outstanding Contractual Exercise Exercisable Exercise
of Exercise Prices at 12/31/98 Life Price at 12/31/98 Price
------------------ ----------- ------------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Employees:
$0.50 1,500,000 9.13 Years $0.50 1,500,000 $0.50
Non-Employees:
-- -- -- -- -- --
</TABLE>
Note 14 - Convertible Debentures
In October 1997, the Company offered a maximum of
$1,000,000 of its 12% Series A Subordinated Convertible
Redeemable Debentures. At December 31, 1997, outstanding
F-17
<PAGE>
debentures totaled $55,000, all with due dates in November
1999. The debentures were converted to 44,827 shares of common
stock during 1998.
In November 1997, the Company entered into an
agreement with an individual to issue 8% Series A Senior
Subordinated Convertible Redeemable Debentures in an aggregate
principal face not to exceed $250,000, and due November 1998.
At December 31, 1998 and 1997, debentures outstanding were
$-0- and $25,000, respectively. During 1998, the $25,000
debenture outstanding at December 31, 1997 was converted into
59,701 shares of common stock. During 1998, the Company sold
debentures totaling $250,000 for cash. During 1998, the
debentures were converted into 488,873 shares of common stock.
Note 15 - Related Party Transactions
During 1997, the Company issued 108,000 shares of
stock through conversion of common stock warrants by Bryant
Investments, a founder of Cerro Mining. Of the 108,000 shares
issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000
promissory note. During 1998, the Company canceled the
promissory note and accrued interest of $4,677 pursuant to a
settlement agreement with Bryant Investments.
During 1997 and 1998, the Company loaned $33,500 and
$17,500, respectively, to Gifford Mabie, sole officer and
director. During 1998, the Company canceled the notes plus
accrued interest of $3,911 and accounted for the cancellation
as compensation expense.
During 1997 and 1998, the Company loaned $29,000 and
$7,500, respectively, to Rhonda Vincent, an employee. During
1998, the Company canceled the notes plus accrued interest of
$2,872 and accounted for the cancellation as compensation
expense.
During 1997 and 1998, the Company advanced $54,446
and $10,000, respectively, to William Robinson, a former
officer of the Company, and during 1997 issued 52,757 shares
in exchange for $69,800 in subscriptions receivable from a
company related to Mr. Robinson. During 1998, the Company
canceled the indebtedness plus accrued interest of $1,507 and
canceled the subscription receivable pursuant to a settlement
agreement with Mr. Robinson, which included his resignation.
During 1997, the Company advanced $34,631 to Sean
Stanton, a founder of Cerro Mining. During 1998, the Company
canceled the indebtedness plus accrued interest of $1,023 and
issued 350,000 shares to Mr. Stanton pursuant to a settlement
agreement.
During 1998, the Company received $19,904 in loans
from a non-affiliated shareholder. During 1998, the
non-affiliated shareholder paid for expenses on behalf of the
Company. The Company recorded the $49,634 as an expense and a
payable to the non-affiliated shareholder.
F-18
(b) Interim Financial Statements (Unaudited)
Maxxon, Inc.
Balance Sheets
September 30, 1999 (Unaudited) and December 31, 1998
September 30, December 31,
1999 1998
------------ ------------
ASSETS
Current assets
Cash ............................................... 173,312 --
Receivables from related parties (Note 3 and 15) ... 51,951 12,000
Prepaid consulting expenses ........................ 25,705 --
------------ ------------
Total current assets ............................ 250,968 12,000
------------ ------------
Property and Equipment, net of depreciation ........ 22,867 22,210
------------ ------------
Other assets
Investment in Ives Health Company (Note 4) ......... 640,418 640,418
Investment in The Health Club (Note 4) ............. 45,000 45,000
License Agreement and Other Intangible Assets,
net of amortization (Note 2 and 5)............... 96,707 99,741
------------ ------------
Total other assets ........................... 782,125 785,159
------------ ------------
TOTAL ASSETS ....................................... 1,055,960 819,369
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities ........... 1,777 7,629
------------ ------------
Total current liabilities ....................... 1,777 7,629
Long-term debt
Note payable to related party (Note 15) ............ 69,678 69,538
------------ ------------
Total long-term debt ............................ 69,678 69,538
------------ ------------
Total liabilities .................................. 71,455 77,167
------------ ------------
Shareholders' equity
Preferred stock, $0.001 par value, 5,000,000 shares
authorized; no shares issued and outstanding
at December 31, 1998 and 1997, respectively...... -- --
Common stock, $0.001 par value,
45,000,000 shares authorized; 11,462,587 shares
and 9,002,751 shares issued and outstanding at
December 31, 1998 and 1997, respectively......... 12,317 11,463
Paid in capital .................................... 4,962,067 4,110,497
Retained earnings .................................. (3,989,879) (3,379,758)
------------ ------------
Total shareholders' equity ...................... 984,505 742,202
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... 1,055,960 819,369
============ ============
The accompanying notes are an integral part of the financial statements
F-19
<PAGE>
Maxxon, Inc.
Statements of Operations
From inception (December 16, 1996) through September 30, 1999 and
for the Nine Months ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
From Inception
(December 16, Nine Months Nine Months
1996) through Ended Ended
September 30, September 30, September 30,
1999 1999 1998
(Unaudited) (Unaudited) (Unaudited)
------------- ----------- ------------
<S> <C> <C> <C>
Revenue ..................................... $ -- $ -- $ --
Expenses
Research and development .................... 281,353 -- 195,818
General and administrative .................. 3,690,523 601,973 2,261,387
------------ ----------- ------------
Total operating expenses ................. 3,971,876 601,973 2,457,205
------------ ----------- ------------
Operating loss .............................. (3,971,876) (601,973) (2,457,205)
Interest income ............................. 15,554 -- 6,784
Interest expense ............................ 10,686 -- 982
Depreciation and amortization ............... 22,871 8,148 6,655
------------ ----------- ------------
Net loss from operations .................... $ (3,989,879) $ (610,121) $ (2,458,058)
------------ ----------- ------------
Weighted average shares outstanding (Note 10) 12,028,721 12,028,721 11,115,449
------------ ----------- ------------
Net loss per share (Note 1) ................. $ (0.33) $ (0.05) $ (0.22)
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-20
<PAGE>
Maxxon, Inc.
Statements of Cash Flows
From inception (December 16, 1996) through September 30, 1999 and
for the Nine Months ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
From inception
(December 16, Nine Months Nine Months
1997) through Ended Ended
September 30, September 30, September 30,
1999 1999 1998
(Unaudited) (Unaudited) (Unaudited)
------------- ------------ ------------
<S> <C> <C> <C>
Operating activities
Net loss (3,989,879) (610,121) (2,458,058)
Plus non-cash charges to earnings:
Depreciation and amortization 22,871 8,148 6,655
Common stock issued for services 856,657 166,742 536,427
Expenses paid by third parties 49,634 - 49,633
Contribution of services by officer and employees 324,154 210,000 48,900
Services by officer and employees paid for with non-cash consideration 87,500 - 87,500
Consulting Services paid for with non-cash consideration 287,877 - 297,877
Compensation cost for stock options granted to non-employees 918,187 - 918,187
Change in working capital accounts:
(Increase) decrease in other receivables (12,000) - (7,200)
(Increase) decrease in prepaid expenses (25,705) (25,705) -
(Increase) decrease in receivables from related parties (216,528) (39,951) (35,000)
(Increase) decrease in interest receivable - - 8,771
Increase (decrease) in accounts payable and accrued liabilities 37,437 (5,852) (55,488)
----------- ------------ ------------
Total operating activities ` (1,659,795) (296,739) (601,796)
----------- ------------ ------------
Investing activities
Purchase of equipment (34,719) (5,771) (11,024)
Investment in Ives Health Company (251,997) - (1,070)
Investment in The Health Club (10,000) - -
----------- ------------ ------------
Total investing activities (296,716) (5,771) (12,094)
----------- ------------ ------------
Financing activities
Loans from Shareholders 20,044 140 19,845
Sale of common stock for cash:
To third-party investors (prior to Merger) 574,477 - -
To third-party investors 787,145 342,425 91,000
Less: Issue Costs (16,743) (16,743) -
From exercise of stock options by third-parties 509,900 150,000 318,000
Convertible Debentures issued for cash 355,000 - 250,000
Payment of exclusive license note payable (100,000) - (26,656)
----------- ------------ ------------
Total financing activities 2,129,823 475,822 652,189
----------- ------------ ------------
Change in cash 173,312 173,312 38,299
Cash at beginning of period - - 2,665
----------- ------------ ------------
Cash at end of period $173,312 $173,312 $40,964
=========== ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest and taxes during the period 10,687 - 982
=========== ============ ============
Non-cash financing and investing activities:
Common stock issued to founders 7,000 - -
Common stock issued in connection with Merger
with Cerro Mining Corporation 300 - -
Common stock issued in Ives Merger 346,262 - -
Common stock subscriptions 69,800 - -
Common stock issued in exchange for promissory note 129,000 - -
Common stock issued for convertible debentures 190,660 - 115,660
Common stock issued for services 174,013 - 586
Common stock issued to pay Ives debt 27,000 - -
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-21
<PAGE>
Maxxon, Inc.
A Development Stage Company
Notes to Financial Statements
September 30, 1999
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial statements and do not include
all information and footnotes required by generally accepted
accounting principles for complete financial statements.
However, the information furnished reflects all necessary
adjustments, consisting only of normal recurring adjustments
which are, in the opinion of management, necessary in order to
make the financial statements not misleading.
Organization and Nature of Operations
Maxxon, Inc. ("Maxxon" or "the Company") is a
development stage company organized to develop and market
selected healthcare products. These products provide unique
advantages or improvements to products that are currently in
use. The Company has acquired an exclusive license to develop,
manufacture and market a patented disposable safety syringe
that automatically retracts the needle into the plunger after
an injection has been given.
On May 31, 1997, Cerro Mining Corporation ("Cerro
Mining"), a publicly traded Nevada corporation, acquired all
of the outstanding common stock of Maxxon, Inc., a privately
held Oklahoma corporation that was incorporated on December
16, 1996 ("Maxxon-Oklahoma"). For the period from December 16,
1996 to December 31, 1996, there was no activity in
Maxxon-Oklahoma. Subsequent to the merger, Maxxon-Oklahoma
ceased to exist and Cerro Mining changed its name to Maxxon,
Inc. For accounting purposes, the merger was treated as a
"Reverse Acquisition" whereby the financial statements of the
acquired entity, Maxxon-Oklahoma, became those of the Company
(See Note 9, "Reorganization"). The combination is a
recapitalization and not a business combination (as defined in
APB Opinion No. 16); therefore, pro forma financial
information is not presented.
Cash and Cash Equivalents
The Company considers highly liquid investments
(those readily convertible to cash) purchased with original
maturity dates of three months or less to be cash equivalents.
Compensation of Officers and Employees
Currently, the Company's officers and other employees
serve without pay or other non-equity compensation. The fair
value of these services I,,s estimated by management and is
recognized as a capital contribution. A $210,000 and $48,900
capital contribution by the officers and other employees was
recognized for the periods ended September 30, 1999 and 1998,
respectively.
F-22
<PAGE>
Stock-based Compensation
The Company accounts for stock-based compensation
arrangements in accordance with Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and complies with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation". Under
APB No. 25, compensation expense is based on the difference,
if any, on the date of grant, between the fair value of the
Company's stock and the exercise price. The Company accounts
for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and the Emerging Issues Task Force
Consensus in Issue No.
96-18.
Income Taxes
The Company uses the liability method of accounting
for income taxes as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Under the liability method, deferred taxes are determined
based on the differences between the financial statement and
tax bases of assets and liabilities at enacted tax rates in
effect in the years in which the differences are expected to
reverse.
Segment Information
Effective January 1, 1998, the Company adopted the
provisions of SFAS No. 131, "Disclosures about Segments of and
Enterprise and Related Information". The Company identifies
its operating segments based on business activities,
management responsibility and geographical location. During
the periods ended September 30, 1999 and 1998, the Company
operated in a single business segment engaged in developing
and marketing selected healthcare products.
Earnings (Loss) per Share
The Company computes net income per share in
accordance with SFAS No. 128, "Earnings per Share" and SEC
Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provision of SFAS NO. 128 and SAB 98 basic net income (loss)
per share is calculated by dividing net income (loss)
available to common stockholders for the period by the
weighted average shares of common stock of the Company
outstanding during the period (see Note 9). Diluted net income
per share is computed by dividing the net income for the
period by the weighted average number of common and common
equivalent shares outstanding during the period. The
calculation of fully diluted income (loss) per share of common
stock assumes the dilutive effect of the Company's Series A
Senior Subordinated Convertible Redeemable Debentures due on
various dates in 1998 and 1999 and that has a conversion into
common stock at the later of the beginning of the fiscal year
or issue date.
F-23
<PAGE>
Note 1 - Summary of Significant Accounting Policies (continued)
Earnings (Loss) per Share (continued)
During a loss period, the assumed exercise of
outstanding convertible debentures has an anti-dilutive
effect. Therefore, these shares are not included in the
September 30, 1999 and 1998 weighted average shares of
12,028,721 and 11,115,449 used respectively in the
calculations of loss per share.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements
and the reported revenues and expenses during the reporting
period.
Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
Reclassifications
Certain reclassifications have been made to the prior
year financial statements to conform to the current period
presentation.
Research and Development ("R&D") Costs
The company is amortizing the $100,000 paid pursuant
to the exclusive license agreement for a patented disposable
safety syringe that automatically retracts the needle into the
plunger after an injection has been given. The amortization is
for a period of 40 years. All costs for developing the
patented safety syringe are expensed as incurred.
New Accounting Standards
The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" during
1998. The Company has no comprehensive income items during
1998. Therefore, net loss equals comprehensive income. The
Company operates in only on business segment. The Company
adopted SFAS No. 133, "Accounting for Derivative Investments
and Hedging Activities" during 1999. As of September 30,
1999 the Company does not engage in hedging activities or
transactions involving derivatives.
Note 2 - Exclusive License
On April 30, 1997, the Company signed a license
agreement to pay $100,000 to Harry J. Kaufhold for the
exclusive worldwide license to perfect, produce and market a
patented safety syringe. The exclusive license is being
amortized over 40 years using the straight-line method. At
September 30, 1999 and December 31, 1998, the amount of
accumulated amortization related to the Exclusive License was
$6,875 and $5,000, respectively.
F-24
<PAGE>
Note 3 - Receivables from Related Parties
The $51,951 and $12,000 related party receivable
balance at September 30, 1999 and December 31, 1998,
respectively, resulted primarily from the office space that is
shared with other companies controlled by the sole officer and
director of the Company. The rent expense is allocated among
the companies based on their level of activity and recorded as
related party receivable on Maxxon's financial statements.
Note 4 - Investment in Ives Health Company and The Health Club
On August 15, 1997, the Company completed a stock
exchange with Ives Health Company, ("Ives") and The Health
Club, Inc. (" THC"), whereby Maxxon issued 621,600 shares of
its common stock in exchange for all of the outstanding shares
of both companies. Pursuant to this agreement, both Ives and
THC became wholly owned subsidiaries of Maxxon, Inc. During
1997 and 1998, the Company issued 18,513 shares and 44,827
shares, respectively, as payment of Ives liabilities amounting
to $27,000 and $55,000, respectively.
On December 31, 1997, the Company entered into an
agreement to rescind the portion of the August stock exchange
agreement pertaining to Ives Health Co. Under the new
agreement, a new corporation was formed, which will retain the
name Ives Health Company, Inc. The director of Ives resigned
as an officer of Maxxon and surrendered 275,360 shares of the
Company's stock. As further directed in the agreement, Maxxon
received 1,700,000 shares of the newly formed Ives Health
Company, Inc., par value, $0.001, which represented 19.5% of
the outstanding shares of Ives as of December 31, 1997. The
Company's investment in Ives is accounted for under the cost
method. The Company retained 100% ownership of The Health
Club. As of September 30, 1999, there had been no financial
activity for The Health Club.
The Investment in Ives Health Company and Investment
in The Health Club at September 30, 1999 and 1998 represent
the total amount of cash advanced, plus the value of Maxxon
stock issued as payment of Ives debts and issued in connection
with the Merger and break-up.
F-25
<PAGE>
Note 5 - Exclusive License and Other Intangible Assets
Exclusive License and Other Intangible Assets consist
of the following at September 30, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Exclusive license - safety syringe. $ 100,000 $ 100,000
Less: Accumulated amortization (6,875) (5,000)
-------------------- --------------------
$ 93,125 $ 95,000
-------------------- --------------------
Other intangible assets 7,726 7,726
Less: Accumulated amortization ( 4,144) ( 2,985)
-------------------- --------------------
Intangible assets, net $ 3,582 $ 4,741
-------------------- --------------------
Total Exclusive License and Other Intangible
Assets, Net of Amortization $ 96,707 $ 99,741
-------------------- --------------------
</TABLE>
The exclusive license is being amortized over 40
years and the other intangible assets, which are primarily
organization costs, are being amortized over 5 years, using
the straight-line method.
Note 6 - Related Party Payable
During 1998, the Company received $19,904 in loans
from a non-affiliated shareholder. During 1998, the
non-affiliated shareholder paid for expenses on behalf of the
Company. The Company recorded the $49,634 as an expense and a
payable to the non-affiliated shareholder. See Related Party
Transactions.
Note 7 - Income Taxes
The deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net operating loss carry-forward $ 1,196,964 $ 976,030
Less: Valuation allowance 1,196,964 976,030
------------ ------------
Net Deferred Tax Benefit $ - - $ - -
============ =============
</TABLE>
As of September 30, 1999, the Company had a net
operating loss carry-forward of approximately $4,000,000.
Approximately $800,000 will expire in 2012 and the remaining
$3,200,000 will expire in 2013. Deferred taxes reflect a
combined federal and state tax rate of approximately 30%.
Note 8 - Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement,
the Company agreed to pay to the licensor a royalty equal to
three percent (3%) of gross receipts (excluding taxes,
transportation, insurance, shipping and handling, packaging,
F-26
<PAGE>
returns, replacements for defective or damaged goods, all
discounts, and all funds received from sales which are
contested or subject to claims) from the sale of products
based on the patent or any additions, extensions and
improvements thereto. The term of the royalty is coincident
with the life of the patent and shall survive any acquisition,
change of control or any other event where the Company is not
directly managing the production and sale of the products
using the patent. If by April 30, 2000, the cumulative sales
from products using the patent have not exceeded $100,000 or
if any subsequent year the annual sales do not exceed
$100,000, the exclusive license agreement, along with the
royalty obligation, will terminate.
Foreign Patent Protection
The U.S. patent covering the Maxxon safety syringe
does not extend to foreign countries and the Company does not
presently have any foreign patent protection for its product.
Note 8 - Commitments and Contingencies (continued)
Leases
On March 24, 1997, Maxxon, Inc. executed a five-year
lease for office space. The minimum annual lease payments
under the lease are scheduled as follows:
For the Periods Ended
December 31 Amount
----------- ------
1999 $23,186
2000 $23,702
2001 $24,217
2002 $20,610
This office space is shared with other companies
controlled by the officers and directors of the Company. The
value of the minimum lease payments is allocated among the
companies based on their level of activity and recorded as an
accrued liability to Maxxon on a quarterly basis.
Note 9 - Reorganization
On January 1, 1997, Maxxon-Oklahoma changed the par
value for its common stock from $0.01 per share to $0.001 per
share and issued 7,000,000 shares of common stock to its
founders. Subsequently, Maxxon-Oklahoma issued 578,000 shares
of its common stock to third-party investors for $574,477 in
cash. On May 31, 1997, Cerro Mining and Maxxon-Oklahoma
completed a merger of the companies, whereby Cerro Mining
issued 7,578,000 shares of common stock for 100% of the issued
and outstanding common stock of Maxxon-Oklahoma. In connection
with the merger, Cerro Mining assigned all mining assets,
agreements and assignments to R.F.C. International ("RFC"),
former majority shareholder of Cerro Mining, in return for
1,725,000 shares of common stock of Cerro Mining owned by RFC.
After the merger, the shareholders of Cerro Mining owned
531,000 shares of common stock. In connection with the Merger,
Cerro Mining changed its name to Maxxon, Inc.
F-27
<PAGE>
For accounting purposes, the merger of Cerro Mining
and Maxxon-Oklahoma was treated as a reverse acquisition and
the Company elected a quasi-reorganization in which the Cerro
Mining deficit of $462,000 was eliminated into paid-in
capital. After the assignment of mining assets, but prior to
the issuance of 7,578,000 shares of its common stock for 100%
of the common stock of Maxxon-Oklahoma, Cerro Mining had $300
in total assets and 531,000 shares of common stock issued and
outstanding.
Note 10 - Earnings (Loss) Per Share
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
------------- -------------
Common Shares Outstanding 12,317,349 11,390,570
Effect of using weighted average
common and common
equivalent shares outstanding.
( 288,628) ( 275,121)
---------- ----------
Weighted average common shares
outstanding.
12,028,721 11,115,449
=========== ==========
Note 11 - Development Stage Operations
The Company was incorporated on December 16, 1996.
Since inception, their primary focus has been raising capital
and developing the safety syringe. The Company had no
financial activity prior to January 1, 1997.
Note 12 - Common Stock and Paid-In Capital
In May 1997, the Merger of Maxxon-Oklahoma into Cerro
Mining was completed. Pursuant to the merger the shareholders
of Cerro retained 531,000 shares of common stock and the
shareholders of Maxxon received 7,578,000 shares of common
stock. See Note 9- Reorganizaton.
From May 1997 to December 1997, the Company sold
175,069 shares of common stock to third-party investors for
$266,720 in cash, issued 90,499 shares in exchange for
services from third-parties valued at $173,427, and issued
102,673 shares upon conversion of $75,000 in debentures which
were purchased during 1997 by a third-party investor for cash.
During 1997, the Company issued 108,000 shares of
stock through conversion of common stock warrants by Bryant
Investments, a founder of Cerro Mining. Of the 108,000 shares
issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000
promissory note. During 1997, the Company issued 52,757 shares
in exchange for $69,800 in subscriptions receivable from a
F-28
<PAGE>
party related to a former officer. During 1998, the Company
canceled the promissory note and the subscription receivable
pursuant to a settlement agreements with Bryant Investments
and with the former officer.
In August 1997, the Company completed the merger with
Ives Health Company and The Health Club and issued 621,600
shares of its common stock to the shareholders of the two
companies. Additionally, the Company issued 18,513 shares of
its common stock, as payment for $27,000 in Ives debts. In
December 1997, 275,360 shares of stock previously issued for
the acquisition of Ives Health Company were surrendered to the
Company (see Note 3).
During 1998, the Company sold 50,000 shares of common
stock to a third-party investor for $91,000 in cash, issued
44,827 shares of common stock as payment for $55,000 in Ives
debts, and issued 548,574 shares of common stock upon
conversion of debentures purchased by a third party investor
during 1997 for $25,000 and during 1998 for $250,000.
In January 1998, the Company entered into an
agreement with Stockbroker Relations, Inc., a third-party
investor relations firm, to provide services to the Company in
exchange for 835,042 shares of common stock valued at
$448,140. In January 1998, the Company issued 77,691 to Texas
Applied Biotechnology Services, Inc. (TABS) as payment for
$35,660 in services related to the development of the safety
syringe. During 1998, the Company also issued 75,274 shares
valued at $90,748 as payment for services rendered by Maxxon's
Medical Advisory Board and Com-Med Strategic Alliances, which
coordinated the Board's activities. During 1998, the Company
canceled 91,572 shares issued during 1997 pending performance
of services by other third-party vendors. The services were
valued at $40,265 during 1997. The services were not performed
and the Company canceled the shares during 1998.
In January 1998, the Board granted 1,750,000 options
to purchase common stock at exercise prices ranging from $0.50
to $.2.00 per share to Stockbroker Relations, Inc. ("SRI").
During 1998, SRI exercised 500,000 options at prices ranging
from $0.50 and $0.75 per share which resulted in the Company
receiving $307,400 in cash and $18,100 in services. In
September 1998, the Board granted 70,000 options to purchase
common stock at $0.75 per share to Morgan-Phillips, Inc., a
third-party investor relations firm. Morgan-Phillips exercised
all 70,000 options during 1998, which resulted in the Company
receiving $52,500 in cash.
In June 1998, the Company issued 350,000 shares to
Oasis Capital, a founder of Cerro Mining, as a result of a
settlement agreement.
During 1999, the Company sold 390,693 shares of its
common stock to third-party investors for $342,425 in cash,
issued 14,069 shares of its common stock to a non-affiliate as
a consulting fee in connection with the sale of common stock,
issued 300,000 shares of its common stock to employees in
connection with the exercise of stock options which resulted
in the Company receiving $150,000 in cash, and issued 150,000
F-29
<PAGE>
shares of its common stock to Morgan-Phillips, Inc. in
exchange for services valued at $150,000.
Maxxon is authorized to issue up to 20,000,000 shares
of common stock, $0.001 par value. At September 30, 1999,
12,317,330 shares of common stock were issued and outstanding.
Voting Rights. Holders of shares of Common Stock are
entitled to one vote per share on all matters submitted to a
vote of the shareholders. Shares of Common Stock do not have
cumulative voting rights, which means that the holders of a
majority of the shareholders votes eligible to vote and voting
for the election of the Board of Directors can elect all
members of the Board of Directors. Holders of a majority of
the issued and outstanding shares of Common Stock may take
action by written consent without a meeting.
Dividend Rights. Holders of record of shares of
Common Stock are entitled to receive dividends when and if
declared by the Board of Directors. To date, Maxxon has not
paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be
declared and paid from time to time by the Board of Directors
out of funds legally available therefore. Maxxon intends to
retain any earnings for the operation and expansion of its
business and does not anticipate paying cash dividends in the
foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of
operations, capital requirements, Maxxon's financial condition
and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution
or winding up of Maxxon, holders of shares of Common Stock are
entitled to receive pro rata all of the assets of Maxxon
available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Maxxon's
Preferred Stock.
Preemptive Rights. Holders of Common Stock do not
have any preemptive rights to subscribe for or to purchase any
stock, obligations or other securities of Maxxon.
Note 13 - Stock Options
On January 20, 1998, the Board granted
1,500,000 options to purchase common stock at an exercise
price of $0.50 per share to the sole officer and employees of
the Company. The exercise price was equal to the price of the
Company's common stock on the date of grant. No compensation
cost was recorded.
On January 20, 1998, the Board granted 1,750,000
options to Stockbroker Relations, Inc. ("SRI"), an investor
relations firm, at exercise prices ranging from $0.50 to $2.00
per share as part of an agreement to provide investor
relations services to the Company during 1998. Compensation
cost was calculated using the Black-Scholes option pricing
model with the following assumptions: exercise prices ranging
from $0.50 to $2.00 per share; stock price of $0.50 per share,
which was the price of the Company's stock as quoted on the
F-30
<PAGE>
OTC Bulletin Board on the date of grant; risk-free interest
rate of 6.0%; expected dividend yield of 0.0; expected life of
ten years; and estimated volatility of 149%. The Company
recorded $855,255 as compensation cost related to the SRI
option grant.
During 1998, SRI exercised 500,000 options with
exercise prices ranging from $0.50 to $0.75 per share which
resulted in the Company receiving $307,400 in cash and $18,100
in services. During 1998, SRI forfeited 1,250,000 options at
exercise prices ranging from $1.00 to $2.00 per share,
pursuant to a settlement agreement.
On September 24, 1998, the Board granted 70,000
options to purchase common stock at an exercise price of $0.75
per share to Morgan-Phillips, Inc. ("Morgan-Phillips"), an
investor relations firm, for their services during 1998.
Compensation cost was calculated using the Black-Scholes
option pricing model with the following assumptions: exercise
price of $0.75 per share; stock price of $1.50 per share,
which was the price of the Company's stock as quoted on the
OTC Bulletin Board on the date of grant; risk-free interest
rate of 6.0%; expected dividend yield of 0.0; expected life of
ten years; and estimated volatility of 102%. The Company
recorded $62,937 as compensation cost related to the
Morgan-Phillips option grant.
During 1998, Morgan-Phillips exercised all 70,000
options with resulted in the Company receiving $52,500 in
cash.
SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") provides an alternative method of
determining compensation cost for employee stock options,
which may be adopted at the option of the Company. Had
compensation cost for the 1,500,000 options granted to
employees during 1998 been determined consistent with SFAS
123, the Company's net loss and EPS would have been reduced to
the following pro forma amounts:
Net loss: 1999 1998
-------------------- --------------
As reported $ (610,121) $(2,458,058)
Pro forma $(1,067,774) $(2,915,711)
Basic and diluted EPS:
As reported $ (0.05) $ (0.22)
Pro forma $ (0.09) $ (0.26)
F-31
<PAGE>
A summary of the status of the Company's stock options
at September 30, 1999, and changes during the period then
ended is presented below:
<TABLE>
<CAPTION>
Weighted
Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding, December 31, 1998 1,500,000 $ 0.50
Granted -- --
Exercised (300,000) $ 0.50
Forfeited -- --
Outstanding, September 30, 1999 1,200,000 $ 0.50
Exercisable, September 30, 1999 1,200,000 $ 0.50
Weighted average fair value of
options granted -- $0.4921
</TABLE>
The following table summarizes information about
fixed stock options outstanding at September 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ -------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range Outstanding Contractual Exercise Exercisable Exercise
of Exercise Prices at 09/30/99 Life Price at 09/30/99 Price
------------------ ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Employees:
$0.50 1,200,000 8.38 Years $0.50 1,200,000 $0.50
</TABLE>
Subsequent Event
On November 18, 1999, the Board granted 1,600,000
options at an exercise price of $0.50 per share in connection
with the execution of the Rippstein License (See Note 16.
Subsequent Events.) to Wayland Rippstein (800,000 options),
Ken Keltner (400,000 options) and Lynn Carter (400,000
options). The exercise price was equal to the price of the
Company's common stock as quoted on the OTC Bulletin Board on
the date of grant. The options expire October 31, 2009 and are
subject to certain vesting conditions as follows: (1) 20% of
the options shall become vested and exercisable immediately
upon execution of the Rippstein License, (2) 20% of the
options shall become vested and exercisable when a fully
working safety syringe has been produced and demonstrated to
be safe and reliable and meeting the specifications, (3) 20%
of the options shall become vested and exercisable upon
issuance of a U.S. Patent covering the Ripp Syringe, (4) 20%
of the options shall become vested and exercisable upon the
production of (5) 20% of the options shall become vested and
exercisable upon FDA approval of the Ripp Syringe. As of
December 15, 1999, 20% of the options granted, or 320,000
options, were exercisable.
F-32
<PAGE>
Note 14 - Convertible Debentures
In October 1997, the Company offered a maximum of
$1,000,000 of its 12% Series A Subordinated Convertible
Redeemable Debentures. At December 31, 1997, outstanding
debentures totaled $55,000, all with due dates in November
1999. The debentures were converted to 44,827 shares of common
stock during 1998.
In November 1997, the Company entered into an
agreement with an individual to issue 8% Series A Senior
Subordinated Convertible Redeemable Debentures in an aggregate
principal face not to exceed $250,000, and due November 1998.
At December 31, 1998 and 1997, debentures outstanding were
$-0- and $25,000, respectively. During 1998, the $25,000
debenture outstanding at December 31, 1997 was converted into
59,701 shares of common stock. During 1998, the Company sold
debentures totaling $250,000 for cash. During 1998, the
debentures were converted into 488,873 shares of common stock.
Note 15 - Related Party Transactions
During 1997, the Company issued 108,000 shares of
stock through conversion of common stock warrants by Bryant
Investments, a founder of Cerro Mining. Of the 108,000 shares
issued, 43,500 shares were issued in exchange for $87,000 in
cash and 64,500 were issued in exchange for a $129,000
promissory note. During 1998, the Company canceled the
promissory note and accrued interest of $4,677 pursuant to a
settlement agreement with Bryant Investments.
During 1997 and 1998, the Company loaned $33,500 and
$17,500, respectively, to Gifford Mabie, sole officer and
director. During 1998, the Company canceled the notes plus
accrued interest of $3,911 and accounted for the cancellation
as compensation expense.
During 1997 and 1998, the Company loaned $29,000 and
$7,500, respectively, to Rhonda Vincent, an employee. During
1998, the Company canceled the notes plus accrued interest of
$2,872 and accounted for the cancellation as compensation
expense.
During 1997 and 1998, the Company advanced $54,446
and $10,000, respectively, to William Robinson, a former
officer of the Company, and during 1997 issued 52,757 shares
in exchange for $69,800 in subscriptions receivable from a
company related to Mr. Robinson. During 1998, the Company
canceled the indebtedness plus accrued interest of $1,507 and
canceled the subscription receivable pursuant to a settlement
agreement with Mr. Robinson, which included his resignation.
During 1997, the Company advanced $34,631 to Sean
Stanton, a founder of Cerro Mining. During 1998, the Company
canceled the indebtedness plus accrued interest of $1,023 and
issued 350,000 shares to Mr. Stanton pursuant to a settlement
agreement.
F-33
<PAGE>
During 1998, the Company received $19,904 in loans
from a non-affiliated shareholder. During 1998, the
non-affiliated shareholder paid for expenses on behalf of the
Company. The Company recorded the $49,634 as an expense and a
payable to the non-affiliated shareholder.
Note 16 - Subsequent Events
On November 18, 1999, Maxxon entered into an
Exclusive License Agreement with Wayland J. Rippstein, Jr. and
others (the "Rippstein License"), attached hereto as Exhibit
6.9, pursuant to which Maxxon acquired the exclusive worldwide
license to manufacture and market a new proprietary safety
syringe invented and being developed by Mr. Rippstein (the
"Ripp Syringe"). This new syringe is a single-handed,
vacuum-operated safety syringe that retracts the needle into
the barrel of the syringe after use. The vacuum is created at
the time of use, not at the time of manufacture. Pursuant to
the Rippstein License, the Company agreed to pay $10,000 in
reimbursable patent costs and $200,000 upon the occurrence of
(1) the issuance of a U.S. Patent covering the syringe, (2)
the completion of a fully functional and working prototype of
the syringe and (3) FDA approval to sell the syringe in the
U.S. The Rippstein License also provides for Maxxon to pay
royalties of 4% of gross sales of syringes and minimum annual
royalties ranging from $10,000 to $20,000 beginning on the 4th
anniversary after both a working prototype syringe is
developed and a U.S. Patent is issued. See Patents,
Trademarks, Licenses, Royalty Agreements and Labor Contracts.
Such royalties continue for the life of the last to expire
patent, if issued. The Rippstein License also required Maxxon
to grant to Mr. Rippstein and others options to purchase a
total of 1,600,000 shares of common stock of Maxxon at $0.50
per share, which was the closing price of Maxxon's common
stock on the day the Rippstein License was signed. The options
expire October 31, 2009 and are subject to certain vesting
conditions. See Item 4. Certain Beneficial Owners and
Management.
On November 18, 1999, Maxxon entered into a Technical
Consulting Agreement with Wayland J. Rippstein, Jr., attached
hereto as Exhibit 6.10, whereby Maxxon engaged Mr. Rippstein
on a non-exclusive basis to provide technical assistance and
consulting services to achieve startup of production of the
RIPP Syringe. Maxxon paid Mr. Rippstein $12,500 upon execution
of the Agreement, and agreed to pay the balance of $37,500
upon the occurrence of various milestones in the development
of the syringe.
F-34
Part III
Index to and Description of Exhibits
Exhibit
Number Description of Exhibit
- ------- --------------------------------------------------------------------
2.1 Amended Articles of Incorporation
2.2 Bylaws
3.1 Form of Common Stock Certificate
6.1 1998 Incentive Stock Option Plan
6.2 Form of Incentive Stock Option Agreement
6.3 Form of Officer/Director Indemnification Agreement
6.4 Development Agreement among Maxxon, TABS/Hartzell
6.5 Exclusive License Agreement (Kaufhold)
6.6 Agreement and Plan of Merger between Cerro Mining Corporation and
Maxxon-Oklahoma, Oklahoma Certificate of
Merger, and Nevada Certificate of Merger attached
6.7 Agreement and Plan of Exchange with Ives Health Company, Inc.,
dated June 18, 1997.
6.8 Agreement dated December 31, 1997 among Keith Ives, Ives Health
Company, Inc., Gifford Mabie and Maxxon.
6.9 Exclusive License Agreement with Wayland J. Rippstein
6.10 Technical Consulting Agreements with Wayland J. Rippstein
6.11 Form of Stock Option Agreement for Rippstein, Keltner and Carter
25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this regiatration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAXXON, INC.
/s/ GIFFORD M. MABIE
---------------------
December 15, 1999 President
26
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXXON, INC.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned, Maxxon, Inc. ("Corporation"), an Oklahoma corporation,
for the purpose of adopting this Amended and Restated Certificate of
Incorporation pursuant to Section 1080 of the Oklahoma General Corporation Act
(the "Act"), hereby certifies:
1. The name of the Corporation is Maxxon, Inc.
2. The name under which the Corporation was originally incorporated is
Maxxon, Inc.
3. The original Certificate of Incorporation of the Corporation was
filed with the Oklahoma Secretary of State on December 16, 1996 and amended on
May 2, 1997.
4. The amendments effected by this Amended and Restated Certificate of
Incorporation are:
(a) To delete Article, Three, Article Six, Article Seven,
Article Eight, Article Nine, Article Ten and Article
Eleven;
(b) To add a new Article V denying cumulative voting, a new
Article VI denying preemptive rights, a new Article VII
relating to the Board of Directors, a new Article VIII
relating to amendment of the bylaws, a new Article IX
relating to Possible Conflicts of Interest, a new
Article X relating to Indemnification, a new Article XI
relating to Director Liability in Certain Case, and a
new Article XII relating to certain creditor
compromises; and
(c) To renumber, edit, alter, modify and change the
language of the remaining provisions in the Certificate
of Incorporation for consistency and clarity.
5. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the Act, and restates, integrates and amends the
Certificate of Incorporation.
6. The Amended and Restated Certificate of Incorporation of Maxxon,
Inc., as amended hereby, is restated in its entirety as follows:
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXXON, INC.
ARTICLE I
NAME
The name of the Corporation is Maxxon, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Oklahoma, is
located at 8908 South Yale, Suite 409, Tulsa, Oklahoma 74137. The Corporation's
registered agent at that office is Gifford M. Mabie..
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Oklahoma General
Corporation Act.
ARTICLE IV
CAPITALIZATION
The total number of shares which this Corporation is authorized to
issue is 25,000,000 shares of Common Stock, par value $0.001 per share.
The Board of Directors shall have the power and authority to issue
without shareholder approval debentures or other securities convertible into, or
warrants or options to subscribe for or purchase, authorized shares of Common
Stock or Preferred Stock of the Corporation upon such terms and conditions as
shall be determined by action of the Board of Directors.
ARTICLE V
NO CUMULATIVE VOTING
The holders of record of the Common Stock or Preferred Stock shall have one
vote for each share held of record. Cumulative voting for the election of
directors or otherwise is not permitted.
<PAGE>
ARTICLE VI
NO PREEMPTIVE RIGHTS
No holder of record of Common Stock or Preferred Stock shall have a
preemptive right or be entitled as a matter of right to subscribe for or
purchase any: (i) shares of capital stock of the Corporation of any class
whatsoever; (ii) warrants, options or rights of the Corporation; or (iii)
securities convertible into, or carrying warrants, options or rights to
subscribe for or purchase, capital stock of the Corporation of any class
whatsoever, whether now or hereafter authorized.
ARTICLE VII
BOARD OF DIRECTORS
The Board of Directors shall consist of from one (1) to five (5)
directors who shall serve as directors until the next annual meeting of
shareholders or until their respective successor is duly elected and qualified.
The number of directors may be changed from time to time in accordance with the
bylaws of the Corporation then in effect. Election of directors at a meeting of
shareholders need not be by written ballot.
ARTICLE VIII
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter, amend or repeal the bylaws of the Corporation and to
adopt new bylaws.
ARTICLE IX
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other
corporation, partnership, proprietorship, trust, association or other entity in
which the Corporation owns an interest or in which a director or officer of the
Corporation has a financial interest shall be void or voidable solely for this
reason or solely because any such director or officer is present at or
participates in the approval of such agreement or transaction.
ARTICLE X
INDEMNIFICATION
To the full extent not prohibited by the law as in effect from time to
time, the Corporation shall indemnify any person (and the heirs, executors and
representatives of such person) who is or was a director, officer, employee or
agent of the Corporation, or who, at the request of this Corporation, is or was
a director, officer, employee, agent, partner, or trustee, as the case may be,
of any other corporation, partnership, proprietorship, trust, association or
other entity in which this Corporation
2
<PAGE>
owns an interest, against any and all liabilities and reasonable expenses
incurred by such person in connection with or resulting from any claim, action,
suit or proceeding, whether brought by or in the right of the Corporation or
otherwise and whether civil, criminal, administrative or investigative in
nature, and in connection with an appeal relating thereto, in which such person
is a party or is threatened to be made a party by reason of serving or having
served in any such capacity.
ARTICLE XI
NO DIRECTOR LIABILITY IN CERTAIN CASES
To the maximum extent permitted by law as in effect from time to time, no
director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of any fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director for: (i) any breach of the director's duty of loyalty to
the Corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
unlawful payment of dividends or stock redemptions; or (iv) any transaction from
which the director derived an improper personal benefit.
ARTICLE XII
CERTAIN COMPROMISES
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 1106 of Title 18 of the Oklahoma Statutes as in effect
from time to time or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 1100 of Title 18 of the Oklahoma Statutes as in effect from time to
time, may order a meeting of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
to be summoned in such manner as the court directs. If a majority in number
representing three-fourths (3/4ths) in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, and/or on all the shareholders or class of
shareholders, of this Corporation, as the case may be, and also on this
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporated to be signed by its Chairman and President
and attested by its Corporate Secretary this ____ of May, 1997.
ATTEST:
- -------------------------- ------------------------------
Rhonda R. Vincent, Secretary Gifford M. Mabie, Chairman and President
3
<PAGE>
STATE OF OKLAHOMA )
) SS.
COUNTY OF TULSA )
I, a Notary Public, hereby certify that on the 2nd day of May, 1997,
personally appeared before me, Gifford M. Mabie, who after having been duly
sworn, declared that he is chairman and President of Maxxon, Inc., that he
signed the foregoing Amended and Restated Certificate of Incorporation as his
free and voluntary act and deed for and on behalf of that Corporation for the
use and purposes therein stated and that the facts therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day
of May, 1997.
--------------------------------
Notary Public
My Commission expires:
- ----------------
[seal]
4
<PAGE>
Articles of Incorporation
(PURSUANT TO NRS 78)
STATE OF NEVADA
Secretary of State
No. C1748296
(Office Use) s/s Dean Heller
- --------------------------------------------------------------------------------
DEAN HELLER, SECRETARY OF STATE
- --------------------------------------------------------------------------------
IMPORTANT: Read instructions on reverse side before completing this form.
TYPE OR PRINT (BLACK INK ONLY)
NAME OF CORPORATION: Cerro Mining Corporation
RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in Nevada
where process may be served)
Name of Resident Agent: The Corporation Trust Company of Nevada
Street Address: One East First Street, Reno, Nevada 89501
SHARES: (number of shares the corporation is authorized to issue)
Number of shares with par value: 25,000,000; Par Value: $0.001; Number of shares
without par value: 0
GOVERNING BOARD: shall be styled as (check one): X Directors __ Trustees
FIRST BOARD OF DIRECTORS shall consist of 1 members and the names and addresses
are as follows (attach additional pages if necessary):
Carolyn Burns 9675 Kilby Drive, Richmond BC, Canada V6X3N1
- ------------- --------------------------------------------
OTHER MATTERS: This form includes the minimal statutory requirements to
incorporate under NRS 78. You may attach additional information pursuant to S.S.
78.037 or any other information you deem appropriate. If any of the additional
information is contradictory to this form it cannot be filed and will be
returned to you for correction. Number of pages attached NIL.
NATURES OF INCORPORATORS: The names and addresses of each of the incorporators
signing the articles: (Signatures must be notarized.) Use additional pages if
there are more than two incorporators.
Name: Robert Ross Dion
Address: XXXX Bayview Drive, Delta, BC, Canada V4M2R4
Signature: s/s Robert Ross Dion
State of Nevada County of Carson:
This instrument was acknowledged before me on:
August 16, 1996
Name of Person: Robert Ross Dion
Incorporator: Cerro Mining Corporation
Name of party on behalf of whom instrument was executed: Sheila R. Hollaway
Notary Public Signature: s/s Sheila R. Hollaway
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
Secretary of State hereby accepts appointment as Resident Agent for the above
named corporation.
- ------------------------
- ------------------------ -----------------------------
AMENDED AND RESTATED
BYLAWS
OF
MAXXON, INC.
ADOPTED EFFECTIVE
May 1, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
TO AMENDED AND RESTATED
BYLAWS
OF
MAXXON, INC.
<S> <S> <S> <C>
ARTICLE I - OFFICES.......................................................................................................1
SECTION 1.01. Registered Office and Registered Agent......................................................1
SECTION 1.02. Other Offices...............................................................................1
ARTICLE II - SHAREHOLDERS..................................................................................................1
SECTION 2.01. Place of Meeting............................................................................1
SECTION 2.02. Annual Meeting..............................................................................1
SECTION 2.03. Special Meetings............................................................................1
SECTION 2.04. Notice of Meetings..........................................................................2
SECTION 2.05. Quorum and Adjourned Meetings...............................................................2
SECTION 2.06. Conduct of Meetings.........................................................................3
SECTION 2.07. Voting .....................................................................................3
SECTION 2.08. Consent of Shareholders in Lieu of a Meeting................................................3
SECTION 2.09. Voting Lists................................................................................3
ARTICLE III - BOARD OF DIRECTORS............................................................................................4
SECTION 3.01. Powers .....................................................................................4
SECTION 3.02. Number, Qualifications and Term of Office...................................................4
SECTION 3.03. Vacancies...................................................................................4
SECTION 3.04. Resignations................................................................................4
SECTION 3.05. Organization................................................................................5
SECTION 3.06. Place of Meetings...........................................................................5
SECTION 3.07. Organizational Meeting......................................................................5
SECTION 3.08. Regular Meetings............................................................................5
SECTION 3.09. Special Meetings............................................................................5
SECTION 3.10 Quorum and Adjourned Meetings...............................................................5
SECTION 3.11. Unanimous Consent of Directors in Lieu of Meeting...........................................5
SECTION 3.12. Executive and Other Committees..............................................................6
SECTION 3.13. Compensation of Directors...................................................................6
ARTICLE IV - NOTICE OF MEETINGS............................................................................................6
SECTION 4.01. Notice .....................................................................................6
SECTION 4.02. Waiver of Notice............................................................................7
<PAGE>
SECTION 4.03. Teleconference Meetings.....................................................................7
ARTICLE V - OFFICERS......................................................................................................7
SECTION 5.01 Number, Qualifications and Designation......................................................7
SECTION 5.02 Election, Term of Office and Resignation....................................................7
SECTION 5.03 Removal of Officers.........................................................................7
SECTION 5.04 Chairman of the Board.......................................................................8
SECTION 5.05 President...................................................................................8
SECTION 5.06 Vice Presidents.............................................................................8
SECTION 5.07 Secretary...................................................................................8
SECTION 5.08 Treasurer...................................................................................9
SECTION 5.09 Controller..................................................................................9
SECTION 5.10 Assistant Officers..........................................................................9
SECTION 5.11 Bonds ......................................................................................9
SECTION 5.12 Compensation of Officers....................................................................9
ARTICLE VI - CERTIFICATES OF STOCK........................................................................................10
SECTION 6.01 Issuance ..................................................................................10
SECTION 6.02 Transfer ..................................................................................10
SECTION 6.03 Stock Certificates.........................................................................10
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated Certificates..........................................10
SECTION 6.05. Record Holder of Shares....................................................................10
SECTION 6.06. Determination of Record Date...............................................................11
ARTICLE VII - INDEMNIFICATION OF DIRECTORS, OFFICERS ANDOTHER AUTHORIZED REPRESENTATIVES...................................11
SECTION 7.01. Indemnification of Authorized Representatives in
Third Party Proceedings.................................................................11
SECTION 7.02. Indemnification of Authorized Representatives in
Corporate Proceedings...................................................................12
SECTION 7.03. Mandatory Indemnification of Authorized Representatives....................................12
SECTION 7.04. Determination of Entitlement to Indemnification............................................12
SECTION 7.05. Advancing Expenses.........................................................................13
SECTION 7.06. Employee Benefit Plans.....................................................................13
SECTION 7.07. Scope .....................................................................................13
SECTION 7.08. Reliance ..................................................................................13
SECTION 7.09. Insurance..................................................................................14
ARTICLE VIII - GENERAL PROVISIONS...........................................................................................14
SECTION 8.01. Dividends..................................................................................14
<PAGE>
SECTION 8.02. Annual Statements..........................................................................14
SECTION 8.03. Contracts..................................................................................14
SECTION 8.04. Checks ....................................................................................14
SECTION 8.05. Corporate Seal.............................................................................14
SECTION 8.06. Deposits ..................................................................................15
SECTION 8.07. Amendment of Bylaws........................................................................15
SECTION 8.08. Fiscal Year................................................................................15
SECTION 8.09. Interested Directors.......................................................................15
SECTION 8.10. Form of Records............................................................................15
</TABLE>
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AMENDED AND RESTATED
B Y L A W S
OF
MAXXON, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office and Registered Agent. The registered office
and registered agent shall be designated in duly adopted actions of the Board of
Directors. Each registered office and registered agent may be changed from time
to time by a duly adopted action of the Board of Directors, and the Corporation
shall file an appropriate statement of change of registered office or registered
agent promptly after the taking of such action in accordance with applicable
law.
SECTION 1.02. Other Offices. The Corporation may also have offices at such
other places within or without the state of incorporation of the Corporation as
the Board of Directors may from time to time determine or the business of the
Corporation requires.
ARTICLE II
SHAREHOLDERS
SECTION 2.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the principal executive office of the Corporation
unless otherwise determined by the Board of Directors and specified in the
notice of meeting, in which event the meeting shall be held at the place within
or without the state of incorporation as shall be designated in the notice of
such meeting.
SECTION 2.02. Annual Meeting. The Board of Directors may fix the date and
time of the annual meeting of the shareholders, but if no such date and time is
fixed by the Board, the annual meeting shall be held on a third Tuesday in May,
if not a legal holiday, and if a legal holiday, then on the next succeeding
business day, at 10:00 a.m. local time. Failure to hold an annual meeting shall
not invalidate, alter or otherwise affect the validity of subsequent actions. At
the annual meeting, the shareholders then entitled to vote shall elect Directors
and shall transact such other business as may properly be brought before the
meeting.
SECTION 2.03. Special Meetings. Special meetings of the shareholders of the
Corporation as a whole, and meetings of a particular class or series of
shareholders of the
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Corporation may be called for any purpose or purposes for which meetings may
lawfully be called at any time by the Chief Executive Officer of the Corporation
or by a majority of the Board of Directors, and shall be called after the
Corporation's receipt of the request in writing from shareholders owning of
record one-fourth of the amount of each class or series of stock of the
Corporation issued and outstanding and entitled to vote. Every request for a
special meeting shall state the specific purposes of the meeting. The date of
the meeting shall be held at such date and time as the Chief Executive Officer
of the Corporation shall fix, not less than 10 days nor more than 60 days after
the receipt of the request, and the Secretary shall give due notice thereof. If
the Chief Executive Officer of the Corporation shall neglect or refuse to fix
the time and date of such meeting or shall fail to cause the Secretary to give
notice thereof, the person or persons calling the meeting may do so.
SECTION 2.04. Notice of Meetings. Written notice of the place, date and hour
of every meeting of the shareholders, whether annual or special, shall be given
to each shareholder of record entitled to vote at the meeting not less than 10
nor more than 60 days before the date of the meeting. Every notice of a special
meeting shall state the purposes thereof.
SECTION 2.05. Quorum and Adjourned Meetings. The record holders in the
aggregate of a majority of stock issued and outstanding (excluding treasury
stock) and entitled to vote at a shareholders meeting and who are present in
person or represented by proxy shall constitute a quorum for the transaction of
business, except as otherwise provided by law, by the Corporation's Certificate
of Incorporation or by these Bylaws. If the matter presented for action at any
meeting of shareholders is one which requires voting by class or series of
stock, then holders of a majority of each class or series effected who are
present in person or by proxy shall constitute a quorum for such class or
series. If a quorum of one or more classes or series of stock is present, in
person or by proxy, shareholders holding that class or series of stock may act
for that class or series, even if a quorum is not present for other classes or
series. If such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat who are present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting until a quorum
shall be present or represented. At any such adjourned meeting at which a quorum
shall be present in person or by proxy, any business may be transacted which
might have been transacted at the meeting as originally called. When a quorum is
present at any meeting, the vote of the record owners holding a majority of the
stock having voting power, present in person or represented by proxy, shall
decide all questions brought before such meeting, unless the question is one
upon which, by expressed provision of applicable law, the Corporation's
Certificate of Incorporation or these Bylaws, a different vote is required, in
which case such expressed provision shall govern and control the decision of
such question. The affirmative vote or consent of the holders of a majority of a
class or series of stock, voting as a class, shall constitute action by that
class or series, unless applicable law, the Corporation's Certificate of
Incorporation or these Bylaws expressly provides a different vote, in which case
such expressed provision shall control. Once a meeting is duly organized and a
quorum is present, the shareholders who are present in
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person or represented by proxy may continue to conduct business until
adjournment, even after withdrawal of enough shareholders to leave less than a
quorum present.
SECTION 2.06. Conduct of Meetings. All annual and special meetings of
shareholders shall be conducted in accordance with such rules and procedures as
the Board of Directors may determine, subject to the requirements of applicable
law, and as to matters not governed by such rules and procedures, the chairman
of the meeting shall determine in good faith the procedures to be followed. The
chairman of any annual or special meeting of shareholders shall be the Chief
Executive Officer of the Corporation, unless the Board of Directors or
shareholders entitled to vote thereat select a different person to be chairman
of the meeting. The Secretary or other person designated by the chairman of the
meeting, shall act as secretary of the meeting.
SECTION 2.07. Voting. Unless the Certificate of Incorporation provides
otherwise, each shareholder of record shall be entitled to one vote in person or
by proxy for each share of stock having voting power and held of record by such
shareholder. No cumulative voting for the election of Directors shall be
permitted unless expressly permitted by the Certificate of Incorporation. No
proxy shall be voted more than three years after its date, unless the proxy
specifically provides for a longer period and the law permits.
SECTION 2.08. Consent of Shareholders in Lieu of a Meeting. Any action
required or permitted to be taken at a meeting of shareholders of the
Corporation may be taken without a meeting, without prior notice and without a
vote, if a consent in writing setting forth the action so taken shall be signed
by the holders of record of stock (by class or series of stock where voting by
class or series of stock is required) having not less than the minimum number of
votes that would be necessary to authorize the taking of such action. Prompt
notice of the taking of action by the shareholders without a meeting by less
than unanimous written consent shall be given to those shareholders entitled to
vote on the action who did not consent in writing to such action.
SECTION 2.09. Voting Lists. At least ten (10) days before every meeting of
shareholders, the Secretary shall cause the Corporation to prepare a complete
list of the shareholders of record entitled to vote at the meeting. The list
shall be arranged in alphabetical order showing the address of each shareholder,
the number of shares registered in the name of each shareholder and the class or
series of stock held. Such list shall be open to the examination of any
shareholder of record for any lawful purpose during ordinary business hours for
a period of at least ten (10) days prior to the meeting either at the principal
executive office of the Corporation or at the place where the meeting is to be
held. The list shall also be available and open for inspection during the whole
time of the meeting and may be inspected by any shareholder of record or
authorized representative who is present.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Powers. The Board of Directors shall have full power to manage
the business and affairs of the Corporation. All powers of the Corporation,
except those specifically reserved to the shareholders by law, the Certificate
of Incorporation or these Bylaws, are hereby granted to and vested in the Board
of Directors.
SECTION 3.02. Number, Qualifications and Term of Office. The Board of
Directors shall consist of such number of directors as may be determined from
time to time by resolution of the Board of Directors. No director need be an
officer or shareholder of the Corporation, but each Director shall be a natural
person 21 years of age or older. Each Director shall serve until the next annual
meeting of the shareholders or until the Director's successor shall have been
duly elected and qualified, except in the event of the Director's death,
resignation or removal.
SECTION 3.03. Vacancies. Except as provided by law or the Certificate of
Incorporation of the Corporation, any Director may be removed, either for or
without cause, at any meeting of shareholders by the affirmative vote of a
majority in number of shares of the shareholders present in person or by proxy
at such meeting and entitled to vote for the election of such director; provided
notice of the intention to act upon such matter shall have been given in the
notice calling such meeting and further provided, if a Director is elected by a
class or series of shareholders, the Director may not be removed without the
action of a majority of the shareholders of that class or series, except as
provided by law, except as provided by law or the Certificate of Incorporation
of the corporation. Vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and any Director so chosen shall hold office until the next annual
election or until his successor is duly elected and qualified. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law. If, at the time of filling any vacancy or any newly created
directorship, the Directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), a
court of competent jurisdiction may, upon application of shareholders holding of
record at least 10 percent of the total number of the shares at the time
outstanding having the right to vote for such Directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the Directors chosen by the Directors then in office.
SECTION 3.04. Resignations. Any Director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the Chief Executive
Officer or the Secretary of the Corporation. Such resignation shall take effect
upon receipt by the Corporation of such notice or at any later time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 3.05. Organization. At every meeting of the Board of Directors, the
Chairman of the Board, if there be one, or, in the case of a vacancy or
incapacity in the office or absence of the Chairman of the Board, the Director
chosen by a majority of the Directors present, shall be the chairman of the
meeting and shall preside, and the person appointed by the chairman of the
meeting shall act as secretary of the meeting.
SECTION 3.06. Place of Meetings. The Board of Directors may hold its
meetings, both regular and special, at such place or places within or without
the state of incorporation as the Board of Directors may from time to time
select, as designated in the notice calling the meeting.
SECTION 3.07. Organizational Meeting. The first meeting of each newly
elected Board of Directors shall be held without notice immediately following
the annual meeting of Common shareholders, unless the shareholders shall
determine otherwise.
SECTION 3.08. Regular Meetings. Regular meetings of the Board of Directors
may be held without further notice after the regular schedule of meetings has
been determined and approved at such time and place as shall be designated from
time to time by a duly adopted action of the Board of Directors.
SECTION 3.09. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board or by two or more of
the Directors. Notice of each special meeting shall be given to each director by
telephone, telegram, telecopy, in writing or in person at least 24 hours (in the
case of notice by telephone, in person or actual notice however received) or 48
hours (in the case of notice by telegram, or telecopy or similar wire
communication) or five (5) days (in the case of notice by mail or otherwise)
before the time at which the meeting is to be held. Each such notice shall state
the date, time and place of the meeting to be so held.
SECTION 3.10 Quorum and Adjourned Meetings. At all meetings of the Board, a
majority of the Directors shall constitute a quorum for the transaction of
business; and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the Certificate of
Incorporation. Proxies of Directors shall not be counted to determine a quorum
for meetings of the Board of Directors, or for any other purpose, and a Director
may not vote by proxy at a meeting of the Board of Directors. If a quorum is not
be present at any meeting of the Board of Directors, a majority of the Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
SECTION 3.11. Unanimous Consent of Directors in Lieu of a Meeting. Unless
otherwise restricted by law, the Certificate of Incorporation or these Bylaws,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any Committee thereof may be taken without a meeting, without
prior notice and without a vote if all members of the Board or such Committee,
as the case may be, consent thereto in writing either before or after the
5
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taking of action with respect thereto. The written consent shall be filed with
the minutes of proceedings of the Board or that Committee.
SECTION 3.12. Executive and Other Committees. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate an Executive
Committee and one or more other committees. Each Committee shall consist of one
or more Directors. Only to the extent expressly provided in the resolution
establishing any Committee and only to the extent such Committee is not
otherwise restricted or limited by applicable law or the Certificate of
Incorporation or these Bylaws, any Committee of the Board shall have and may
exercise all the power and authority of the Board of Directors in the management
of the business and affairs of the Corporation, including the power or authority
to declare a dividend, to authorize the issuance of stock, to adopt a
certificate of ownership and merger and to authorize the seal of the Corporation
to be affixed to all papers which may require it; but no such Committee shall
have the power or authority to (1) amend the Certificate of Incorporation
(except that a Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of the stock adopted by the
Board of Directors, as permitted by applicable law, fix any of the preferences
or rights of such shares relating to voting, dividends, redemption, dissolution,
any distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation not
issued and outstanding), (2) adopt an agreement of merger or consolidation, (3)
recommend to the shareholders the sale, lease or exchange, of all or
substantially all of the Corporation's property and assets, (4) recommend to the
shareholders the dissolution of the Corporation or a revocation of a
dissolution, or (5) amend the Bylaws of the Corporation. Each Committee shall
have such name as may be determined from time to time by resolution adopted by
the Board of Directors. Each Committee shall keep regular minutes of its
meetings and file the same with the minutes of the Board of Directors.
SECTION 3.13. Compensation of Directors. Unless otherwise restricted by law,
the Certificate of Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of Directors. The Directors shall be
reimbursed their actual reasonable expenses, if any, of attendance at any
meeting of the Board of Directors and any Committee thereof and may be paid a
fixed sum for attendance at each such meeting or a fixed salary as determined by
the Board of Directors. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICE OF MEETINGS
SECTION 4.01. Notice. Whenever notice is required to be given to any
Director or shareholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such Director or
shareholder, at the person's address as it appears
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on the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to shareholders may also be given in accordance with
Section 2.04 of Article II hereof, and notice to Directors may also be given in
accordance with Section 3.09 of Article III hereof.
SECTION 4.02. Waiver of Notice. Whenever any notice is required to be
given, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Presence in person at any meeting of
the shareholders, the Board of Directors or any Committee of the Board shall
constitute a waiver of notice of that meeting, unless the person in attendance
expressly states at the outset of the meeting that the person's presence is for
the purpose of objecting to notice. Except in the case of a special meeting of
shareholders and as otherwise required by law, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, Directors, or Committee of Directors need be specified in any
written waiver of notice of such meeting.
SECTION 4.03. Teleconference Meetings. One or more shareholders, Directors
or members of a Committee of Directors may participate in a meeting of the
shareholders, the Board, or of a Committee of the Board, by means of conference
communications or similar communications equipment; provided that all persons
participating in the meeting can hear each other and participate in discussions
thereof. Participation by conference communication equipment at a meeting shall
have the same effect as being present in person at such meeting.
ARTICLE V
OFFICERS
SECTION 5.01 Number, Qualifications and Designation. The officers of the
Corporation shall be chosen by the Board of Directors and shall be a President,
one or more Vice Presidents, a Secretary, a Treasurer, and such other officers
as may be elected in accordance with the provisions of Section 5.02 of this
Article. Any person may hold more than one office. Officers may be, but need not
be, Directors or shareholders of the Corporation. The Board of Directors may
from time to time elect such other officers as it deems necessary or
appropriate, who shall exercise such powers and perform such duties as are
provided in these Bylaws and as the Board of Directors may from time to time
determine.
SECTION 5.02 Election, Term of Office and Resignation. The officers of the
Corporation shall be elected annually by the Board of Directors, and each such
officer shall hold office until a successor shall have been elected and
qualified, or until the officer's death, resignation, or removal. Any officer
may resign at any time upon written notice to the Corporation. Such resignation
shall take effect upon receipt by the Corporation of such notice, or such other
date as specified in such notice.
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SECTION 5.03 Removal of Officers. Any officer or agent elected or appointed
by the Board of Directors may be removed at any time, with or without cause, by
the affirmative vote of a majority of the whole Board of Directors. If any
office becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
SECTION 5.04 Chairman of the Board. If the Board of Directors elects a
Chairman of the Board, the Chairman of the Board shall be the Chief Executive
Officer of the Corporation. The Chairman of the Board shall preside at all
meetings of the shareholders (unless the shareholders entitled to vote thereat
select a different person to so act) and the Board of Directors and shall assist
the Board of Directors in the formulation of policies to be pursued by the
executive management of the Corporation. It shall be the responsibility of the
Chairman of the Board to see that the policies established by the Board of
Directors are carried into effect. The Chairman of the Board may sign and
deliver on behalf of the Corporation any deeds, mortgages, bonds, contracts,
powers of attorney, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation; and the Chairman of
the Board shall perform all duties incident to the office of Chief Executive
Officer of the Corporation and such other duties as may be prescribed by the
Board of Directors from time to time.
SECTION 5.05 President. The President shall be the Chief Operating Officer
of the Corporation, shall report to the Chairman of the Board, if one is
elected, and shall have general supervisory responsibility over all operations
of the Corporation, subject to the control of the Board of Directors. If a
Chairman of the Board is not elected and in the absence or incapacity of the
Chairman of the Board, the President shall perform all the duties of the
Chairman of the Board, including all duties as Chief Executive Officer of the
Corporation. The President shall execute and deliver, in the name of the
Corporation, deeds, mortgages, bonds, contracts or other instruments, authorized
by the Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the Corporation; and, in general,
subject to supervision by the Chairman of the Board, if one is elected, the
President shall perform all duties incident to the office of Chief Operating
Officer of the Corporation, and such other duties as from time to time may be
assigned to him by the Chairman of the Board or the Board of Directors.
SECTION 5.06 Vice Presidents. The Vice Presidents, in the order of the
designation by the Board of Directors, shall perform the duties of the President
in the President's absence or incapacity and such other duties as may from time
to time be assigned to them by the Board of Directors, the Chairman of the Board
or by the President.
SECTION 5.07 Secretary. Unless the chairman of the meeting provides
otherwise, the Secretary shall attend all meetings of the shareholders, the
Board of Directors and Committees thereof, shall record the minutes of the
proceedings thereat and shall keep a current and complete record thereof. The
Secretary shall publish, keep and maintain records and reports of the
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Corporation as required by law; shall be the custodian of the seal of the
Corporation and see that it is affixed to all documents to be executed on behalf
of the Corporation under its seal; and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may from time to
time be assigned to the Secretary by the Board of Directors, the Chairman of the
Board or the President. Each Assistant Secretary shall have such powers and
perform such duties as the Board of Directors, the Chairman of the Board, or the
President may from time to time delegate to that Assistant Secretary.
SECTION 5.08 Treasurer. The Treasurer shall be the Chief Financial Officer
of the Corporation; shall have responsibility for the proper care and custody of
all corporate funds and securities; shall keep full, accurate and complete
records, receipts and disbursements of the Corporation; and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements; shall
render a report to the Board of Directors, whenever requested, of the financial
condition of the Corporation; and shall perform such other duties as the Board
of Directors may prescribe. In the absence or incapacity of a Corporate
Controller, the Treasurer shall also be responsible for the performance of all
the duties of the Controller. Each Assistant Treasurer shall have such powers
and perform such duties as the Board of Directors, the Chairman of the Board or
the President may from time to time delegate to that Assistant Treasurer.
SECTION 5.09 Controller. The Controller, if one is elected, shall be the
Chief Accounting Officer of the Corporation and shall cause to be kept full and
accurate books and accounts of all assets, liabilities and transactions of the
Corporation. The Controller shall establish and administer an adequate plan for
the control of operations, including systems and procedures required to properly
maintain internal controls on all financial transactions of the Corporation. The
Controller shall cause to be prepared statements of the financial condition of
the Corporation and proper profit and loss statements covering the operations of
the Corporation and such other and additional financial statements, if any, as
the Chairman of the Board, the President, the Treasurer or the Board of
Directors from time to time shall require. The Controller shall work under the
direct supervision of the Treasurer and also shall perform such other duties as
may be assigned to the Controller by the Board of Directors, the Chairman of the
Board or the President.
SECTION 5.10 Assistant Officers. The Board of Directors may appoint one or
more assistant officers. Each assistant officer shall, at the request of or in
the absence or incapacity of the officer to whom the person is an assistant,
perform the duties of such officer and shall have such other authority and
perform such other duties as the Board of Directors may prescribe.
SECTION 5.11 Bonds. If required by the Board of Directors, any officer shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board, for the faithful performance of
the duties of the officer's office and for
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the restoration to the Corporation, in case of the officer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in their possession or under their control
belonging to the Corporation.
SECTION 5.12 Compensation of Officers. The compensation of the officers of
the Corporation shall be determined from time to time by the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.01 Issuance. Each shareholder shall be entitled to a certificate
or certificates representing shares of stock of the Corporation owned of record.
The stock certificates of the Corporation shall be numbered and registered in
the stock ledger and transfer books of the Corporation as issued. Certificates
shall be signed by the Chairman, President or a Vice President and by the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, and
shall bear the corporate seal. Any or all of the signatures and the corporate
seal upon such certificate may be a facsimile, engraved or printed. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer, transfer agent or registrar, the certificate shall be valid and of
the same force and effect as if the person continued to be such officer,
transfer agent or registrar.
SECTION 6.02 Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, and subject to compliance with applicable law, it shall be the duty of
the Corporation to issue a new certificate of like form to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
No transfer shall be made which would be inconsistent with applicable law.
SECTION 6.03 Stock Certificates. Stock certificates for each class and
series of stock of the Corporation shall be in such form as provided by statute
and approved by the Board of Directors. The stock transfer books for each class
and series of stock and the blank stock certificates shall be kept by the
Secretary or by any officer or agency designated by the Board of Directors for
that purpose.
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen, destroyed or mutilated upon the receipt by the
Corporation of an affidavit of that fact by the record owner claiming the
certificate of stock to be lost, stolen, destroyed or mutilated. When
authorizing issuance of a replacement certificate, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof, require
the record owner of such lost, stolen,
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destroyed or mutilated certificate, or the person's legal representative to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, destroyed or mutilated.
SECTION 6.05. Record Holder of Shares. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the record
and beneficial owner of shares to receive notices, to receive dividends, to
exercise voting rights and for all other purposes; and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, even if the Corporation shall have notice
thereof.
SECTION 6.06. Determination of Record Date. In order that the Corporation
may determine the shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for any other lawful
action or purpose, the Board of Directors may fix a record date, which shall not
be more than 60 nor less than 10 days before the date of such meeting or any
other action.
If no record date is fixed:
(1) 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 day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; and
(2) The record date for determining shareholders entitled to express
consent to actions in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and
(3) 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.
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; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
SECTION 7.01. Indemnification of Authorized Representatives in Third Party
Proceedings. To the maximum extent not prohibited by law, the Corporation shall
indemnify any person who was or is an authorized representative of the
Corporation (which shall mean for purposes of this Article a Director or officer
of the Corporation or another person serving at the request of the Corporation
as a director, officer, partner or trustee of another corporation, partnership,
joint venture, trust or other business enterprise) and who was or is a party
(which shall include for purposes of this Article the giving of testimony or
similar involvement) or is threatened to be made a party to any third party
proceeding (which shall mean for purposes of this Article, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitration, administrative or investigative other than an action by or in the
right of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (which shall
include for purposes of this Article attorneys' fees and expenses), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such third party proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding (which could or does lead to a criminal third
party proceeding) had no reasonable cause to believe such conduct was unlawful.
The termination of any third party proceeding by judgment, order, settlement,
indictment, conviction or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the authorized representative did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding, had reasonable cause to believe that such
conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in Corporate
Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding (which shall mean for
purposes of this Article any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor or
investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action, if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation, unless and only to the extent that a
court of competent jurisdiction shall determine that, despite the adjudication
of liability but in view of all the circumstances of the case,
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such authorized representative is fairly and reasonably entitled to be
indemnified to the extent such court shall order.
SECTION 7.03. Mandatory Indemnification of Authorized Representatives. To
the extent that an authorized representative of the Corporation has been
successful on the merits or otherwise in defense of any third party proceeding
or corporate proceeding or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses actually and reasonably
incurred by such person in connection therewith.
SECTION 7.04. Determination of Entitlement to Indemnification. Any
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
is proper in the circumstances, because such person has either met the
applicable standards of conduct set forth in Section 7.01 or 7.02 or has been
successful on the merits or otherwise as set forth in Section 7.03 and that the
amount requested has been actually and reasonably incurred. Such determination
shall be made:
(1) By the Board of Directors by a majority of a quorum consisting of
Directors who were not parties to such third party or corporate
proceeding; or
(2) If such a quorum of the Board of Directors is not obtainable, or, even
if obtainable, a majority vote of such a quorum so directs, by
independent legal counsel in a written opinion; or
(3) By the shareholders voting in the aggregate and not by class or
series.
SECTION 7.05. Advancing Expenses. Expenses actually and reasonably incurred
in defending a third party or corporate proceeding shall be paid on behalf of an
authorized representative by the Corporation in advance of the final disposition
of such third party or corporate proceeding as authorized in the manner provided
in Section 7.04 of this Article upon receipt of an undertaking by or on behalf
of the authorized representative to repay such amount unless it shall ultimately
be determined that such person is entitled to be indemnified by the Corporation
as authorized in this Article. The financial ability of such authorized
representative to make such repayment shall not be a prerequisite to the making
of an advance.
SECTION 7.06. Employee Benefit Plans. For purposes of this Article, the
Corporation shall be deemed to have requested an authorized representative to
serve an employee benefit plan where the performance by such person of duties to
the Corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an authorized representative with respect to an employee benefit
plan pursuant to applicable law shall be deemed fines; and action taken or
omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed
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to be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Corporation.
SECTION 7.07. Scope. The indemnification of and advancement of expenses to
authorized representatives, as authorized by this Article, shall (1) not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in an
official capacity and as to action in another capacity, (2) continue as to a
person who has ceased to be an authorized representative, and (3) inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 7.08. Reliance. Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon rights of indemnification provided by this Article.
SECTION 7.09. Insurance. The Corporation may but shall not be obligated to
purchase and maintain insurance at its expense on behalf of any person who is or
was an authorized representative against any liability asserted against such
person in such capacity or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Dividends. Subject to the provisions of the Certificate of
Incorporation, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting only out of
funds or property lawfully available therefor under applicable law. Dividends
may be paid in cash, in property, or in shares of the capital stock or held by
the Corporation, subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Directors from time
to time, in its absolute discretion, determines to be proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
Board of Directors shall determine to be in the interests of the Corporation,
and the Board of Directors may modify or abolish any such reserve in the manner
and at the time the Board of Directors thereof so determines.
SECTION 8.02. Annual Statements. The Board of Directors, through the
officers of the Corporation, shall present at each annual shareholders meeting,
and at any special meeting of the shareholders when called for by vote of the
shareholders, a full and clear statement of the business and condition of the
Corporation.
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SECTION 8.03. Contracts. Except as otherwise provided in these Bylaws, the
Board of Directors may authorize any officer or officers or any agent or agents
to enter into any contract or to execute and deliver any instrument on behalf of
the Corporation, and such authority may be general or confined to specific
instances.
SECTION 8.04. Checks. All checks, notes, bills of exchange or other orders
in writing shall be signed by such person or persons as the Board of Directors
may from time to time designate.
SECTION 8.05. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal", and the state of incorporation of the Corporation. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 8.06. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors may approve or designate; and all
such funds may be withdrawn only upon checks or withdrawal requests signed by
such one or more officers or employees as the Board of Directors shall from time
to time determine.
SECTION 8.07. Amendment of Bylaws. These Bylaws may be altered, amended,
restated or repealed or new bylaws may be adopted by the shareholders or by the
Board of Directors at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal, restatement or
adoption of new bylaws is contained in the notice of such special meeting.
SECTION 8.08. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January and end on the 31st day of December, unless
otherwise provided by resolution of the Board of Directors.
SECTION 8.09. Interested Directors. No contract or transaction between the
Corporation and one or more of its Directors or officers, or between the
Corporation and any other company, partnership, association or other
organization in which one or more of its Directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the Director or officer is present at or participates
in the meeting of the Board of Directors or Committee thereof which authorizes
the contract or transaction, or solely because the Director's or officer's vote
is counted for such purpose, if: (1) the material facts as to the relationship
or interest are disclosed to the Board or the Committee, and the Board or
Committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or (2) the material facts as to
the relationship or interest are disclosed to the shareholders or Directors
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders or Board of Directors; or (3)
the contract or
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transaction is determined to be fair as to the Corporation as of the time it is
authorized, approved, adopted or ratified by the Board of Directors or a
Committee thereof or by the shareholders. Interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a Committee
of the Board which authorizes the contract or transaction.
SECTION 8.10. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of account
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall convert any records so kept upon
the request of any person entitled to inspect the same.
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CERRO MINING CORPORATION
BYLAWS
ARTICLE I
Offices
1.1 Principal Office: The principal offices of the Corporation shall
initially be at 1321 West 8th Avenue, Vancouver, British Columbia, Canada
V6H-3W4, but the Board of Directors, in its discretion may keep and maintain
offices wherever the business of the Corporation may require.
1.2 Registered Office and Agent: The Corporation shall have and
continuously maintain in the State of Nevada a registered office, which may be
the same as its principal office, and a registered agent whose business office
is identical with such registered office. The initial registered office and the
initial registered agent are specified in the Articles of incorporation. The
Corporation may change its registered office or change its registered agent, or
both, upon filing a statement as specified by law in the office of the Secretary
of State of Nevada.
ARTICLE II
Shareholders
2.1 Time and Place: Any meeting of the shareholders may be held at such
time and place, within or outside of the State of Nevada, as may be fixed by the
Board of Directors or as shall be specified in the notice of the meeting or
waiver of notice of the meeting.
2.2 Annual Meeting: The annual meeting of the shareholders shall be held at
the principal offices of the Corporation on the twenty-sixth (26) day of April
each year or at such other place or on such other date as the Board of Directors
may determine.
2.3 Special Meetings: Special meetings of the shareholders, for any purpose
or purposes, may be called by the President, the Board of Directors, or the
holders of not less that 30% of the shareholders entitled to vote at the
meeting.
2.4 Closing of Transfer Books or Fixing of Record Date: For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer boos shall be closed for any stated period not exceeding sixty (60)
days. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any meeting of shareholders, such
date in any case to be not more that sixty (60) days and not less than ten (10)
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer books and the stated period of the closing has expired.
2.5 Voting List: At least ten days before each meeting of shareholders, the
Secretary of the Corporation shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment of such meeting, which list
shall be arranged in alphabetical order and shall contain the address of any
number of shares held by each shareholder. This list shall be kept on file at
the principal office of the Corporation for period of ten days prior to such
meeting, shall be produced and kept open at the meeting, and shall be subject to
inspection by any shareholder for any purpose germane to the meeting during
usual business hours of the Corporation and during the whole time of the
meeting.
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BYLAWS DATED November 14, 1996
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2.6 Notices: Written notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) days nor more than sixty
(60) days before the date of the meeting. Notice shall be given either
personally or by mail, by or at the direction of the President, the Secretary,
or the officer for person calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, addressed
to the shareholder at his or her address as it appears on the stock transfer
books of the Corporation.
2.6.1 If requested by the person or persons lawfully calling such
meeting, the Secretary shall give notice thereof at the corporate expense.
No notice need be sent to any shareholder of record if three successive
letters mailed to the last known address of such shareholder have been
returned as undeliverable until such time as another address for such
shareholder is provided to the Corporation by such shareholder. In order to
be entitled to receive notice of any meeting, a shareholder shall advise
the Corporation in writing of any change in such shareholder's mailing
address as shown on the Corporation's books and records.
2.6.2 When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place of such
meeting are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting.
2.6.3 By attending a meeting, either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meting unless the shareholder, at the beginning of the meeting, objects to
the holding of the meeting or the transacting of business of the meeting.
By attending the meeting, the shareholder also waives any objection to
consideration at the meeting of a matter not within the purpose of purposes
described in the meeting notice unless the shareholder objects to
considering the matter when it is presented.
2.7 Certification Procedure for Beneficial Owners: The Board of Directors
may adopt by resolution a procedure whereby a shareholder of the Corporation may
certify in writing to the Corporation that all or a portion of the shares
registered in the name of such shareholder are held for the account of a
specified person or persons. The resolution shall set forth: (i) the
classification of shareholder who may certify; (ii) the purpose or purposes for
which the certification may be made; (iii) the form of certification and the
information to be contained therein; (iv) if the certification is with respect
to a record date or closing of the stock transfer books, the time within which
the certification must be received by the Corporation; and (v) such other
provisions with respect to the procedure that the board deems necessary or
desirable. Upon receipt by the Corporation of a certificate complying with this
procedure, the person specified in the certification shall be deemed, for the
purpose or purposes set forth in the certification, to be the holders of record
of the number of share specified in place of the shareholder making the
certification.
2.8 Quorum: Except as otherwise provided by law, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of the shareholders. If a quorum shall not be present or
represented, the shareholders present in person or by proxy may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, for a period not to exceed sixty days at any one adjournment, until the
number of shares required for a quorum shall be present. At any such adjourned
meeting at which a quorum is represented, any business may be transacted which
might have been transacted at the meeting originally called. The shareholders
present or represented at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
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BYLAWS DATED November 14, 1996
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2.9 Voting and Proxies: Except as otherwise provided by law, all matters
shall be decided by vote of the majority of the shares represented at the
meeting and entitled to vote on the subject matter. Each outstanding share shall
be entitled to one vote on such matters submitted to a vote of the shareholder
or by his duly authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall by valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. Voting shall be oral, except as otherwise
provided by law, but shall be by written ballot if such written vote is demanded
by any shareholder present in person or by proxy and entitled to vote.
2.10 Voting of shares by Certain Holders: Neither treasury shares, not
shares of its own stock held by the Corporation in a fiduciary capacity, not
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by this
Corporation shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on and after the date on which written notice of redemption has
been mailed to shareholders and a sum sufficient to redeem such shares has been
deposited with a bank or trust company with irrevocable instruction and
authority to pay the redemption price to the holders of the shares upon
surrender or certificates therefor.
Shares standing in the name of another corporation may be voted by such
officer, agent, or proxy as the by laws of such corporation may prescribe or, in
the absence of such provision, as the Board of Directors of such corporation may
determine.
Shares entitled to vote and held by a personal representative, custodian,
guardian or conservator may be voted by him, either in person or by proxy,
without a transfer of such shares into him name. Shares standing in the name of
a receiver may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the transfer thereof
into him name if he is authorized to vote the shares in an appropriate order of
the court by which the receiver was appointed. Unless the Secretary of the
Corporation is given written note of alternate voting provisions and is
furnished with a copy of the instrument or order wherein the alternate voting
provisions are stated, if shares or other securities having voting power are
held of record in the name of two or more persons whether fiduciaries, members
of a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, voting with respect to the shares shall have the
following effect: (1) if only one person votes, his vote binds all; (2) if two
or more persons vote, the act of the majority in interest so voting binds all;
or (3) if two or more persons vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately, or any person voting the shares of a beneficiary, if any, may
apply to any court of competent jurisdiction in the State of Nevada to appoint
an additional person to act with the persons so voting the shares. The shares
shall then be voted as determined by a majority of such persons and the person
appointed by the court. If a tenancy is held in unequal interests, a majority
even split for the purpose of this item (3) of this subparagraph shall be a
majority or even split in interest. All other shares may be voted only by the
record holder thereof, except as may be otherwise required by the laws of Nevada
2.11 Waiver: Whenever law or these bylaws require a notice of a meeting to
be given, a written waiver of notice signed by a shareholder entitled to notice,
whether before, at, or after the time stated in the notice, shall be equivalent
to the giving of notice. Attendance of a shareholder in person or by proxy at a
meeting constitutes a waiver of notice of a meeting, except where a shareholder
attends a meeting for the express purpose of objection to the transaction of any
business because the meeting is not lawfully called or convened.
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BYLAWS DATED November 14, 1996
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2.12 Action By Shareholders Without a Meeting: Any action required to or
which may be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to such action.
Such consent may be executed in counterparts and shall be effective as of the
date specified in the consent.
ARTICLE III
Directors
3.1 Authority of Board of Directors: The business and affairs of the
Corporation shall be managed by a Board of Directors which shall exercise all
the powers of the Corporation, except as otherwise provided by Nevada law or the
Articles of Incorporation of the Corporation.
3.2 Number: The number of directors of this Corporation shall, in no case,
be less than one (1), nor more than five (5). Subject to such limitations, the
number of directors shall be fixed by resolution of the board of Directors, and
may be increased or decreased by resolution of the Board of Directors, but no
decrease shall have the effect of shortening the term of any incumbent director.
3.3 Qualification: Directors shall be natural persons at the age of
eighteen years or older, but need not be residents of the State of Nevada or
shareholders of the Corporation. Directors shall be removed in the manner
provided by the Nevada Corporate Code.
3.4 Election: The Board of Directors shall be elected at the annual meeting
of shareholders or at a special meeting called for that purpose.
3.5 Term: Each director shall be elected to hold office until the next
annual meeting of shareholders and until his or her successor shall have been
elected and qualified.
3.6 Removal and Resignation: Any director may be removed at a shareholders
meeting expressly called for that purpose, with or without cause, by a vote of
the holders of the majority of share entitled to vote at an election of
directors. Any director may resign at any time by giving written notice to the
President or to the Secretary, and acceptance of such resignation shall not be
necessary to make it effective unless the notice so provides.
3.7 Vacancies: Any vacancy occurring on the Board of Directors and any
directorship to be filled by reason of an increase in the size of the Board of
Directors shall be filled by the affirmative vote of the remaining majority of
directors. A director elected to fill a vacancy shall hold office during the
unexpired term of his or predecessor in office. A director elected to fill a
position resulting from an increase in the Board of Directors shall hold office
until the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified.
3.8 Meetings: A regular meeting of the Board of Directors shall be held
immediately after, and at the same place as, the annual meeting of shareholders.
Not notice of this meeting of the Board of Directors need be given. The Board of
Directors, or any committee designated by the Board of Directors, may, by
resolution, establish a time and place for additional regular meetings which may
thereafter be held without further notice.
3.9 Special Meetings: Special meetings of the Board of Directors may be
called by or at the request of the President or any two Directors. The persons
or persons authorized to call special meetings of the Board of Directors may fix
any place, either within or outside Nevada, as the place for holding any special
meeting of the Board of directors called by them.
3.10 Notices: Notice of a special meeting stating the date, hour and place
of such meeting shall be given to each member of the Board of Directors, or
committee of the Board of Directors, by the Secretary, the President or the
members of the Board or such committee calling the meeting. The notice
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BYLAWS DATED November 14, 1996
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may be deposited in the United State mail at lease five (5) days before the
meeting addressed to the Director at the last address he or she has furnished to
the Corporation of this purpose, and any notice so mailed shall be deemed to
have been given at the time it is mailed. Notice may also be given at lease
three (3) days before the meeting in person, or by telephone, prepaid telegram,
telex, facsimile, cablegram or radiogram, and such notice shall be deemed to
have been given at the time, when the personal or telephone conversation occurs,
or when the telegram, telex facsimile, cablegram or radiogram is either
personally delivered to the Director or delivered to the last address of the
director furnished to the Corporation by him or her for this purpose.
3.11 Quorum: Except as provided in Section 3.7 of these bylaws, a majority
of the number of directors fixed in accordance with these bylaws shall
constitute a quorum for the transaction of business at all meeting of the Board
of Directors. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors except as
otherwise specifically required by law.
3.12 Waiver: A written waiver of notice signed by a director entitled to
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of notice. Attendance of a director at a meeting
constitutes a waiver of notice of such meeting, except where a Director attends
a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
3.13 Attendance by Telephone: Members of the Board of Directors or any
committee designated by the Board of Directors may participate in a meeting of
the board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
3.14 Action by Directors Without a Meeting: Any action required to or which
may be taken at a meeting of the Board of Directors, executive committee, or
other committee of the directors may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
directors, executive or other committee members entitled to vote with respect to
the proposed action. Such consent may be executed in counterparts and shall be
effective as of the date of the last signature thereon.
3.15 Presumption of Assent: A director of the Corporation who is present at
a meeting of the Board of Directors or committee of the board at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless: (i) he objects at the beginning of the meeting to the holding of
the meeting or the transaction of business at the meeting; (ii) he
contemporaneously requests that his dissent be entered in the minutes of the
meeting; or (iii) he gives written notice of his dissent to the presiding
officer of the meeting before its adjournment or delivers such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. A director may dissent to a specific acting at a
meeting, while assenting to others. The right to dissent to a specific action
taken at a meeting of the Board of Directors or a committee of the board shall
not be available to a director who voted in favor of such action.
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BYLAWS DATED November 14, 1996
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ARTICLE IV
Committees
4.1 Committees: The Board of Directors, by resolution adopted by a majority
of the full Board of Directors, may designate from among its members an
executive committee and one or more other committees each of which, to the
extent provided in the resolution, shall have all of the authority of the Board
of Directors, except that no such committee shall have the authority to: (i)
declare dividends or distributions; (ii) approve or recommend to shareholders
actions or proposals required by the Nevada Business Corporation Act to be
approved by shareholders; (iii) fill vacancies on the Board of Directors or any
committee thereof; (iv) amend the bylaws; (v) approve a plan of merger not
requiring shareholder approval; (vi) reduce earned or capital surplus; (vii)
authorize or approve the reacquisition of shares unless pursuant to a general
formula or method specified by the Board of Directors; or (viii) authorize or
approve the issuance or sale of, or any contract to issue or sell, shares or
designate the terms of a series of a class of shares provided that the Board of
Directors, having acted regarding general authorization for the issuance or sale
of shares or any contract thereof and, in the case of a series, the designation
thereof, may, pursuant to the general formula or method specified by the board
by resolution or by adoption of a stock option or other plan, authorize a
committee to fix the terms of any contract for the sale of the shares and to fix
the terms upon which such shares may be issued or sold, including without
limitation, the price, the dividend rate, provisions for redemption, sinking
fund, conversion, or voting or preferential rights, and provisions for other
features of a class of shares or a series of a class of shares, with full power
in such committee to adopt any final resolution setting forth all terms thereof
and to authorize the statement of the terms of a series for filing with the
Secretary of State under the Nevada Business Corporation Act.
Neither the designation of any such committee, the delegation of authority
to such committee, nor any action by such committee pursuant to its authority
shall alone constitute compliance by any member of the Board of Directors, nor a
member of the committee in question, with his responsibility to conform to the
standard of care set forth in Article V of these Bylaws
ARTICLE V
Standard
5.1 Standard of Care: A director shall perform his duties as a director,
including his duties as a member of any committee of the board upon which he may
serve, in food faith, in a manner he reasonably believes to be in the best
interests of the Corporation and with such care as an ordinarily prudent person
in a like position should use under similar circumstances. In performing his
duties, a director shall be entitled to rely on information, opinions, reports,
or statements, including financial statements and other financial data, in each
case prepared or presented by the persons herein designated; but he shall not be
considered to be acting in good faith if he has knowledge concerning the matter
in question that would cause such reliance to be unwarranted. A person who so
performs his duties shall not have any liability by reason of being or having
been a director of the Corporation. Any provision in these bylaws to the
contrary notwithstanding, to the fullest extent permitted by the Nevada Business
Corporation Act as the same exists or may thereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
The designated persons on whom a director is entitled to rely are: (1) one
or more officers of employees of the Corporation whom the director reasonable
believes to be reliable and competent in the matters presented; (2) counsel,
public accountants, or other persons as to matters which the directo4r
reasonably believes to be within such persons' professional or expert
competence; or (3) a committee of the board upon which the director does not
serve, duly designated in accordance with Article IV of these bylaws, as to
matters within its designated authority, which committee the director reasonably
believes to merit confidence.
ARTICLE VI
CERRO MINING CORPORATION Page 6 of 11
BYLAWS DATED November 14, 1996
<PAGE>
Officers
6.1 Number and Election: The officers of the Corporation shall be a
President, a Secretary and a Treasurer, who shall be elected by the Board of
Directors. In addition, the Board of Directors may elect one or more Vice
Presidents, and the Board of Directors may appoint one or more Assistant
Secretaries or Assistant Treasurers, and such other subordinate officers as they
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors. The Board of Directors may als9o appoint a Chief
Executive Officer, who may also serve in the capacity of President of the
Corporation. Any two or more offices may be held by the same person, except the
offices of President and Secretary. The officers of the Corporation shall be
natural persons of the age of eighteen years or older.
6.2 President: The President shall be the chief executive officer of the
Corporation unless a separate Chief Executive Officer has been appointed by the
Board of Directors in accordance with Section 6.1. He or she shall preside at
all meetings of shareholders and of the Board of Directors. Subject to the
direction and control of the Board of Directors, he or she shall have general
and active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carries into effect. He or
she may execute contracts, deeds and other instruments on behalf of the
Corporation as is necessary and appropriate. He or she shall perform such
additional functions and duties as are appropriate and customary for the office
of President and as the Board of Directors may prescribe from time to time.
6.3 Vice President: The Vice President, or, if there shall be more than
one, the Vice Presidents in the order determined by the Board of Directors,
shall be the officer(s) next in seniority after the President and the Chief
Executive Officer, if one has been appointed by the Board of Directors. Each
Vice President shall also perform such duties and exercise such powers as are
appropriate and as are prescribed by the Board of Directors or President. Upon
the death, absence or disability of the President, the Vice President, or if
there shall be more than one, the Vice Presidents in the order determined by the
Board of Directors, shall perform the duties and exercise the powers of the
President.
6.4 Secretary: The Secretary shall give, or cause to be given, notice of
all meetings of the shareholders and special meetings of the Board of Directors,
keep the minutes of such meetings, have charge of the corporate seal and stock
records, be responsible for the maintenance of all corporate records and files
and the preparation and filing of reports to governmental agencies, other than
tax returns, have authority to affix the corporate seal to any instrument
requiring it (and, when so affixed, it may be attested by his or her signature),
and perform such other functions and duties as are appropriate and customary for
the office of Secretary as the Board of Directors or the President may prescribe
from time to time.
6.5 Assistant Secretary: The Assistant Secretary, or it there shall be more
than one, the Assistant Secretaries in order determined by the Board of
Directors or the President, shall in the death, absence, or disability of the
Secretary or in case such duties are specifically delegated to him by the Board
of Directors, President or Secretary, perform the duties and exercise the powers
of the Secretary and shall, under the supervision of the Secretary, perform such
other duties and have such other powers as may be prescribed from time to time
by the Board of Directors or the President.
6.6 Treasurer: The Treasurer shall have control of the funds and the care
and custody of all stocks, bonds, and other securities owned by the Corporation
and shall be responsible for the preparation and filing of tax returns. He or
she shall receive all moneys paid to the Corporation, and shall have authority
to give receipts and vouchers, to sign and endorse checks and warrants in its
name and on its behalf, and give full discharge for the same. He or she shall
also have charge of disbursement of the funds of the Corporation, shall keep
full and accurate records of the receipts and disbursements, and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as shall be designated by the Board of
Directors. He or she shall perform such other
CERRO MINING CORPORATION Page 7 of 11
BYLAWS DATED November 14, 1996
<PAGE>
duties and have such other powers as are appropriate and customary for the
office of Treasurer as the Board of Directors of President may prescribe from
time to time.
6.7 Assistant Treasurer: The Assistant Treasurer, or, if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors or the President, shall, in the death, absence, or disability of the
Treasurer or in case such duties are specifically delegated to him or her by the
Board of Directors, President or Treasurer, perform the duties and exercise the
powers of the Treasurer, and shall, under the supervision of the Treasurer,
perform such other duties and have such other powers as the Board of Directors
or the President may prescribe from time to time.
6.8 Removal and Resignation: Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any officer may resign at any time by giving written
notice of his or her resignation to the president or to the Secretary, and
acceptance of such resignation shall not be necessary to make it effective,
unless the notice so provides. Any vacancy occurring in any other office of the
Corporation may be filled by the President for the unexpired portion of the
term.
6.9 Compensation: Officers shall receive such compensation for their
services as may be authorized or ratified by the Board of Directors. Election or
appointment of an officer shall not of itself create a contract right to
compensation for services performed as such officer.
ARTICLE VII
Stock
7.1 Certificates: Certificates representing shares of the capital stock of
the Corporation shall be in such form as may be approved by the Board of
Directors and shall be signed by the President or any Vice President and by the
Secretary or any Assistant Secretary. All certificates shall be consecutively
numbered and the names of the owners, the number of the shares and the date of
issue shall be entered on the books of the Corporation. Each certificate
representing shares shall state upon its face: (1) that the Corporation is
organized under the laws of the State of Nevada; (2) the nave of the person to
whom issued; (3) the number of shares which the certificate represents: (4) the
par value, if any, of each share represented by the certificate; and (5) any
restrictions placed upon the transfer of the shares represented by the
certificate.
7.2 Facsimile Signatures: When a certificate is signed (1) by a transfer
agent other than the Corporation or its employee, or (2) by a registrar other
than the Corporation or its employee, any other signature on the certificate may
be facsimile. In case any officer, transfer agent, or registrar who has signed,
or whose facsimile signature or signatures have been place upon, any
certificate, shall cease to be such officer, transfer agent, or registrar,
whether because of death, resignation, or otherwise, before the certificate is
issued by the Corporation, it may nevertheless be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent, or registrar
at the date of issue.
7.3 Consideration for Shares: Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof) as
shall be fixed from time to time by the Board of Directors. Such consideration
may consist in whole or in part of money, other property, tangible or
intangible, other securities of the Corporation, labor or services actually
performed for the Corporation, or contracts for services to be performed for the
Corporation. Neither the promissory note of a subscriber or direct purchaser of
shares from the Corporation not the unsecured or nonnegotiable promissory note
of any other person shall constitute payment or part payment for shares of the
Corporation. Treasury shares shall be disposed of for such consideration
expressed in dollars as may be fixed from time to time by the Board of
Directors.
7.4 Lost Certificates: In case of the alleged loss, destruction or
mutilation of a certificate of stock, the Board of Directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The Board of Directors may in its
discretion
CERRO MINING CORPORATION Page 8 of 11
BYLAWS DATED November 14, 1996
<PAGE>
require a bond in such form and amount and with such surety as it may determine
before issuing a new certificate.
7.5 Transfer of Stock: Transfers of shares shall be made on the books of
the Corporation only upon presentation of the certificate or certificates
representing such shares properly endorsed by the person or persons appearing
upon the face of such certificate, except as may otherwise be expressly provided
by the statutes of the State of Nevada or by order of a court of competent
jurisdiction. The officers or transfer agents of the Corporation may, in their
discretion, require a signature guaranty before making any transfer. The
Corporation shall be entitled to treat the person in whose name any share of
stock is registered on its books as the owner of those shares for all purposes,
and shall not be bound to recognize any equitable or other claim or interest in
the shares on the part of any other person, whether or not the Corporation shall
have notice of such claim or interest.
7.6 Transfer Agent, Registrars, and Paying Agents: The board may at is
discretion appoint one or more transfer agents, registrars and agents for making
payment upon any class of stock, bond, debenture, or other security of the
Corporation. Such agents and registrars may be entitles to such compensation as
may be agreed.
ARTICLE VIII
Indemnification of Certain Persons
8.1 Authority for Indemnification: Any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
and whether formal or informal, by reason of the fact that he is or was a
director, officer, employee, fiduciary or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, or agent of any foreign or domestic corporation or of any partnership,
joint venture, trust, other enterprise or employee benefit plan ("Any Proper
Person"), shall be indemnified by the Corporation against expenses (including
attorneys fees), judgements, penalties, fines, (including an excise tax assessed
with respect to an employee benefit plan) and amounts paid in settlement
reasonable incurred by him in connection with such action, suit or proceeding if
it is determined by the groups set forth in Section 8.4 of this Article that he
conducted himself in good faith and the he: (1) reasonably believed, in the case
of conduct in his official capacity with the Corporation , that his conduct was
in the Corporation's best interests; of (2) in all other cases (except criminal
cases) believed that his conduct was at least not opposed to the Corporation's
best interests; or (3) with respect to criminal proceedings had no reasonable
cause to believe his conduct was unlawful. A person will be deemed to be acting
in his official capacity while acting as a director, officer, employee or agent
of this Corporation and when he is acting on this Corporation's behalf for some
other entity. Not indemnification shall be made under this section to a director
with respect to any claim, issue or matter in connection with a proceeding by or
in the right of a proceeding charging improper personal benefit to the director,
whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Further, indemnification under this Section in connection with the
proceeding brought by or in the right of the Corporation shall be limited to
reasonable expenses, including attorneys' fees, incurred in connection with the
proceeding. These limitations shall apply to directors only and not to officer,
employees, fiduciaries, or agents of the Corporation.
8.2 Right to Indemnification: The Corporation shall indemnify any Proper
Person who has been wholly successful on the merits or otherwise, in defense of
any action, suit, or proceeding referred to in Section 8.1 of this Article
against expenses (including attorneys' fees) reasonably incurred by him in
connection with the proceeding without the necessity of any action by the
Corporation other than the determination in good faith that the defense has been
wholly successful.
CERRO MINING CORPORATION Page 9 of 11
BYLAWS DATED November 14, 1996
<PAGE>
8.3 Effect of Termination of Action: The termination of any action, suit or
proceeding by judgement, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that the
person seeking indemnification did not meet the standards of conduct described
in Section 1 of this Article. Entry of a judgment by consent as part of a
settlement shall not be deemed an adjudication of liability.
8.4 Groups Authorized to Make Indemnification Determination: In all cases
except where there is a right to indemnification set forth in Section 8.2 of
this article or where indemnification is ordered by a court, any indemnification
shall be made by the Corporation only as authorized in the specific case upon a
determination by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has net the applicable standards
of conduct set forth in Section 1 of this Article. This determination shall be
made by the Board of Directors by a majority vote of a quorum, which quorum
shall consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the Board of Directors designated by the board, which committee
shall consist of two or more directors not parties to the proceeding except that
directors who are parties to the proceeding may participate in the designation
of directors for the committee. If a Quorum of the Board of Directors cannot be
obtained or the committee cannot be established, or even if a Quorum can be
obtained or the committee can be established by such Quorum or committee so
directs, the determination shall be made by independent legal counsel selected
by a vote of a quorum of the Board of Directors or a committee in the manner
specified in this Section, or, if a Quorum of the full Board of Directors cannot
be obtained and a committee cannot be established, by independent legal counsel
selected by majority vote of the full board (including directors who are parties
to the action) or by a vote of the shareholders.
8.5 Court Ordered indemnification: Any Proper Person may apply of
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 8.2 of this
Article, including indemnification for reasonably expenses incurred to obtain
court-ordered indemnification. If the court determines that the director is
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section 1 of this Article or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
individual has been adjudged liable, indemnification shall be limited to
reasonable expenses incurred.
8.6 Advance of Expenses: Expenses (including attorneys fees) incurred in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation to any Proper Person in advance of the final disposition of such
action, suit or proceeding upon receipt of: (1) a written affirmation of such
Proper person's good faith belief that he has met the standards of conduct
prescribed by Section 1 of this Article; (2) a written undertaking, executed
personally or on his behalf, to repay such advances if it is ultimately
determined that he did not meet the prescribed standards of conduct (the
undertaking shall be an unlimited general obligation of the Proper Person but
need not be secured and may be accepted without reference to financial ability
to make repayment); and (3) a determination is made by the proper group (as
described in Section 4 of this Article), that the facts as then known to the
group would not preclude indemnification.
8.7 Report to Shareholders: Any indemnification of or advance of expenses
to a director in accordance with this Article, if arising out of a proceeding by
or on behalf of the Corporation, shall be reported in writing to the
shareholders with or before the notice of the next shareholders' meeting.
ARTICLE IX
Provision of Insurance
By action of the Board of Directors, notwithstanding any interest of the
directors in the action, the Corporation may purchase and maintain insurance, in
such scope and amounts as the Board of Directors deem appropriate, on behalf of
any person who is or was a director, officer, employee, fiduciary, or agent of
the
CERRO MINING CORPORATION Page 10 of 11
BYLAWS DATED November 14, 1996
<PAGE>
Corporation, or who, while a director, officer, employee, fiduciary, or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation or of any partnership, joint venture, trust,
other enterprise or employee benefit plan, against any liability asserted
against, or incurred by, him in any such capacity or arising out of his status
as such, whether or not the Corporation would have the power to indemnify him
against such liability under the provision of Article VII or applicable law.
ARTICLE X
Miscellaneous
10.1 Fiscal Year: The Board of Directors may, by resolution, adopt a fiscal
year for this Corporation.
10.2 Amendment of Bylaws: These bylaws may at any time and from time to
time, be amended, supplemented, or repealed by the Board of Directors.
These bylaws were adopted as the bylaws of the Corporation by a resolution
of the Board of Directors dated November 14, 1996.
- --------------------------------
s/s Carolyn Burns, Secretary
CERRO MINING CORPORATION Page 11 of 11
BYLAWS DATED November 14, 1996
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO. 577774 10 2
Number Shares
xxxxxxxxxx xxxxxxxxxxx
MAXXON, INC.
AUTHORIZED COMMON STOCK: 45,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of MAXXON, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
Dated: xxxxxxxxxxxx
MAXXON, INC.
CORPORATE
SEAL
NEVADA
- ------------------------------------ ------------------------------
Secretary President
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
Countersigned Registered:
NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA 89501
By:_________________________
Authorized Signature
MAXXON, INC.
1998 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan. The MAXXON, INC. 1998 Incentive Stock Option Plan
(the "Plan") is intended to advance the interests of MAXXON, INC. ( "Company")
by providing its directors, officers, key employees and key advisors who have
substantial responsibility for the direction and management of the Company with
incentive for them to promote the success of the Company, to establish and
encourage them to increase their proprietary interest in the Company, and to
encourage them to remain in its service. These aims will be achieved through the
granting of incentive stock options to purchase shares of the common stock of
the Company, par value $.001 per share ("Common Stock"). It is intended that
options granted under the Plan and designated by the Committee under Paragraph 2
will qualify as Incentive Stock Options ("Options") under Section 422A of the
Internal Revenue Code of 1954, as amended, (the "Code"), and the terms of the
Plan shall be interpreted in accordance with this intention. Notwithstanding
anything herein to the contrary, all actions taken shall be in accordance with
the Code and with this Plan.
2. Administration of the Plan. The Board of Directors shall appoint a
Committee or the Board of Directors may act as the Committee to administer this
Plan. The Board may from time to time appoint members to the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it shall deem
advisable. All action of the Committee shall be taken by majority vote of its
members. Any action may be taken by a written instrument signed by all the
members of the Committee, and action so taken shall be as effective as if that
action had been taken by a majority vote of the Committee members at a meeting
duly called and held. The Committee may appoint a secretary to keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. The Committee may take any action by
written consent of a majority of the members of the Committee, taken either
before or after such action.
3. Grant of Options. Subject to any applicable limitation in federal tax
laws from time to time, the Committee shall have complete and full authority in
its discretion: (i) to determine and designate persons entitled to participate
from the Company and its subsidiaries who are to receive Options, (ii) to
authorize the granting of Options, (iii) to establish the number of shares to be
covered by such Options including the terms thereof; and (iv) to interpret the
Plan and to prescribe, amend, and rescind rules and regulations relating to it.
All decisions of the Committee shall be final and binding.
4. Stock Subject to the Plan. The aggregate number of shares which may be
issued under Options granted under the Plan shall not exceed 2,000,000 shares of
Common Stock. Such shares may consist of authorized but unissued shares of
Common stock or previously issued shares of Common Stock reacquired by the
Company. Any shares subject to an Option under the Plan which remain unissued
upon the termination of the Option and which are not subject to outstanding
Options at the termination of the Plan, shall cease to be subject to the Plan,
but until termination of the Plan, the Company shall at all times make available
sufficient shares to meet the requirements
<PAGE>
of the Plan. Should any Option hereunder expire or terminate prior to its
exercise in full, the shares theretofore subject to such Option may again be
subject to a new Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustments as provided
in Paragraph 6(j) hereof.
5. Eligibility. The persons eligible to participate in the Plan as
recipients of Options shall include only directors, officers, key employees and
key advisers of the Company and its subsidiaries. The term "key employee" shall
include directors, officers, executives, and supervisory personnel, as well as
other employees and principal advisors of the Company or a subsidiary
corporation of the Company. The term "subsidiary corporation" shall for the
purpose of this Plan be defined in the same manner as such term is defined in
Section 425(f) of the Code. A person who has been granted Options hereunder
shall remain eligible to receive an additional Option or Options, if the
Committee shall so determines. Options granted to different recipients and at
different times need not contain similar provisions.
6. Terms and Conditions. Each Option granted under the Plan shall be
evidenced by a written Incentive Stock Option Agreement ("Option Agreement"), in
a form approved by the Committee, which shall be subject to the following
express terms and conditions and to such other terms and conditions as the
Committee may deem appropriate.
(a) Option Period. Each Option Agreement shall specify the period for
which the Option thereunder is granted (which in no event shall exceed ten
years from the date of grant) and shall provide that the Option shall
expire at the end of such period. However, in the case of an Option granted
to an individual who, at the time of grant, owns more than ten percent of
the total combined voting power of all classes of Common Stock of the
Company ("Ten Percent Stockholder") on the date the Option is granted to
him, the Option period shall not exceed five years from the date of grant.
(b) Option Price. The purchase price under each Option issued shall be
determined by the Committee at the time the Option is granted, but in no
event shall such purchase price be less than 100 percent of the fair market
value of the Company's Common Stock. In the case of an Option granted to a
Ten Percent Stockholder, the Option price shall not be less than 110
percent of the fair market value of the Common Stock subject to the Option,
on the date the Option is granted.
(c) Exercise Period. Each Option Agreement shall provide that the
Option therein granted may be exercised in whole or in part at any time
after the Option grant or vested in such installments as the Committee or
Board of Directors may specify. However, no portion of any Option may be
exercisable prior to the approval of the Plan by the shareholders of the
Company.
(d) Procedure for Exercise. Options shall be exercised by the delivery
of written notice to the Company setting forth the number of shares with
respect to which the Option
-2-
<PAGE>
is to be exercised. Such notice shall be accompanied by cash or certified
check, bank draft, and specifying the address to which the certificates for
such shares are to be mailed. As promptly as practicable after receipt of
such written notification and payment, the Company shall deliver to the
Optionee, certificates for the number of shares with respect to which such
Option has been so exercised, issued in the optionee's name; provided,
however, that such delivery shall be deemed effected for all purposes when
a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the Optionee, at the
address specified pursuant to this paragraph 6(d).
(e) Termination of Employment. If a person to whom an Option has been
granted ceases to be employed by the Company or any one of its subsidiaries
for any reason other than death or disability or ceases to be an advisor to
the Company, the Options theretofore granted to such a person under this
Plan to the extent not theretofore exercised, shall forthwith terminate.
Any Options which are exercisable on the date of such termination of
employment may be exercised during a three month period beginning on such
date; provided, however, if an Optionee's employment is terminated because
of the Optionee's dishonesty, theft, embezzlement from the Company,
disclosing trade secrets of the Company, or willful misconduct while in the
employment of the Company, then any Option or unexercised portion thereof
granted to said Optionee shall expire upon such termination of employment.
(f) Disability or Death of Optionee. In the event of the disability or
death of an Option holder under the Plan while, the Options previously
granted may be exercised (to the extent he would have been entitled to do
so at the date of his disability or death) at any time and from time to
time, within a period of one year after Optionee's disability or death, by
the executor or administrator of Optionee's estate, by the person or
persons to whom Optionee's rights under the Option shall pass by will or
the laws of descent and distribution, but in no event may the Option be
exercised after its stated expiration. An Optionee shall be deemed to be
disabled if, in the opinion of a physician selected by the Committee, the
Optionee is incapable of performing services for the Company or any of its
subsidiaries by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long,
continued and indefinite duration.
(g) Transferability. Any Option granted hereunder may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution and shall be
exercisable, during the Optionee's lifetime, only by him.
(h) Rights as a Stockholder. An Optionee or a transferee of an Option
under the Plan has no rights as a stockholder with respect to shares
covered by an Option until the date he validly exercises the Option in
accordance herewith including full payment for the exercised Option shares;
except as provided in paragraph 6(j), no adjustment for dividends, or
otherwise shall be made if the record date therefor is prior to the date on
which he became or becomes the holder of record thereof.
-3-
<PAGE>
(i) Extraordinary Corporate Transactions. In the event of (i) the
dissolution or liquidation of the Company, or similar occurrence, (ii) any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, where the Company will not be a surviving entity or (iii) a
transfer of substantially all of the assets of the Company or more than 80%
of the outstanding Common Stock, the Option rights granted hereunder shall
terminate and thereupon become null and void; provided, however, that each
Optionee shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition,
separation, reorganization or similar occurrence, to exercise any Option
rights granted hereunder, without regard to an option period or of any
limitations thereunder.
(j) Changes in Company's Capital Structure. The existence of the Plan
and outstanding Options granted hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of bonds, debentures,
preferred or prior preference stock senior to or affecting the Common Stock
or the rights thereof, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise; provided, however, if the outstanding shares of Common Stock of
the Company shall at any time be changed or exchanged by declaration of a
stock dividend, stock split, combination of shares, or recapitalization,
the number and kind of shares subject to the Plan or subject to any Options
theretofore granted, and the Option prices, shall be appropriately and
equitably adjusted so as to maintain the proportionate number of shares
without changing the aggregate Option price.
(k) Investment Representation. Shares of Common Stock shall not be
issued and delivered with respect to an Option granted under the Plan
unless issuance of such shares (i) complies with all relevant provisions of
law including, without limitation the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, or (ii) the Committee has received evidence
satisfactory to it to the effect that an exemption from registration under
the Securities Act and any applicable state securities laws is available
for the sale and issuance contemplated. Each Option Agreement shall contain
an agreement that upon demand by the Committee for such a representation,
the optionee (or any person acting under paragraph 6(f)) shall deliver to
the Committee at the time of any exercise of an Option a written
representation that the shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation
prior to the delivery of any shares issued upon exercise of an Option and
prior to the expiration of the Option period shall be a condition precedent
to the right of the optionee or such other person to purchase any shares.
-4-
<PAGE>
(l) Option Agreement. Each Option Agreement which provides for
the grant of an Option to a key employee shall contain such terms and
provisions as the Committee may determine to be necessary or desirable
in order to qualify such Option under Section 422A of the Code.
7. Amendments or Termination. The Board of Directors may at any time and
from time to time amend, alter or terminate the Plan, but no amendment or
alteration shall be made which would impair the rights of any optionee under any
Option theretofore granted without his consent, or which, without the approval
of the holders of at least a majority of the shares of Common Stock at the time
outstanding, would: (i) except as is provided in paragraph 6(j) of the Plan,
increase the minimum number of shares reserved for the purposes of the Plan or
reduce the Option price provided for in paragraph 6(b) of the Plan, (ii) change
the class of persons eligible to participate in the Plan as provided in
paragraph 4 of the Plan, (iii) extend the Option period provided for in
paragraph 6(a) of the Plan, or (iv) extend the expiration date of this Plan set
forth in paragraph 9 of the Plan.
8. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Company to sell and
deliver shares under such Options shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any governmental or
regulatory agency or national securities exchange as may be required, and shall
be further subject to counsel for the Company with respect to such compliance.
The Company shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of such shares under any federal or state law or any ruling or
regulation of any government body or national securities exchange which the
Company shall, in its sole discretion, determine to be necessary or advisable
and the Company shall have no obligation to effect any such registration or
qualification.
9. Effectiveness and Expiration of Plan. The Plan shall be effective on the
date the Board of Directors of the Company adopts the Plan. If the holders of at
least a majority of the shares of Common Stock at the time outstanding fail to
approve the Plan within twelve months after the date the Board of Directors
approved the Plan, the Plan shall thereupon terminate and all Options previously
granted under the Plan shall immediately become null and void. The Plan shall
expire ten years after the effective date of the Plan and thereafter no Option
shall be granted pursuant to the Plan.
10. Liability of Company. The Company, its parent or any subsidiary which
is in existence or thereafter comes into existence shall not be liable to an
optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale of shares as
to which the Company has been unable to obtain from any regulatory body
having jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares hereunder; and
-5-
<PAGE>
(b) Tax Consequences. Any tax consequence expected, but not realized,
by any Optionee or other person due to the exercise of any Option granted
hereunder.
11. Use of Proceeds. The proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of Options granted under the Plan shall be
added to the general funds and used for general corporate purposes.
12. Governing Law. This Plan shall be interpreted and construed in
accordance with the laws of the State of Oklahoma.
13. Incorporated by Reference. The Plan hereby granted includes all
technical corrections, modifications, alterations and amendments to the Internal
Revenue Code 1986 applicable to incentive stock option plans generally, and all
regulations, administrative pronouncements and interpretations thereof are
hereby incorporated herein automatically effective immediately upon the
effective date thereof. All options granted under the Plan and all Option
Agreements executed pursuant to the terms of the Plan hereby incorporate all
applicable provisions of all amendments, revisions, modifications and
alterations as hereby and as hereafter adopted to the extent permitted by law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing, Maxxon, Inc. has caused these presents to be duly executed in its
name and behalf by its proper officers thereunto duly authorized, and its
corporate seal to be affixed hereto this 1st day of Febreaury, 1998.
MAXXON, INC.
By: _____________________________
Gifford Mabie, President
MAXXON, INC.
INCENTIVE STOCK OPTION AGREEMENT
This agreement ("Agreement"), made as of the 1st day of February, 1998, by
and between MAXXON, INC. ("MAXXON") and Vicki Pippin("Optionee").
1. The Option. In consideration of the sum of $10 and other valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, Maxxon hereby grants to Optionee an option to purchase 300,000
shares of common stock of Maxxon in accordance with the Agreement.
2. Option Exercise Price. The exercise price is $0.50 per share, subject to
adjustment as provided in this Agreement. The parties acknowledge that the fair
market value on the date hereof is $.50 per share.
3. Exercise of the Option. The Option may be exercised at any time, and
from time to time, in whole or in part, on or before February 1, 2008, as
provided in Paragraph 8 below. The Option shall be exercised by Optionee given
Maxxon written notice of exercise ("Notice") in accordance with Paragraph 9
hereof, accompanied by a check in payment of the full exercise price for the
number of shares of common stock specified in the Notice or other form of
payment as may be agreed upon by all parties. In the event that any business
combination or other acquisitive transaction occurs during the term of this
Agreement when any of the Options hereby granted remain unexercised and
outstanding, the occurrence of such a transaction shall automatically result in
the exercise of such unexercised Options, with the exercise price being paid
either by cash or by the reduction in the number of Option shares issuable in an
amount determined by deducting the exercise price from the total consideration
payable to Optionee had all the unexercised Options been exercised immediately
before the consummation of that transaction. It is the purpose of this provision
to insure the Optionee that all of the Options hereby granted are considered
exercised and the shares issuable upon the exercise be deemed to be issued and
outstanding immediately prior to the consummation thereof but with the exercise
price being paid in any form of consideration, including a reduction in the
number of shares attributable to this Option, so that the Optionee enjoys the
full value of the Option shares less the exercise price. Maxxon shall promptly
deliver certificates representing the shares of common stock to Optionee;
provided that if the Optionee is required by any law or regulation to take any
action with respect to such shares before their transfer, then the date of
delivery thereof shall be extended for the period necessary to take such action.
4. Adjustment Provisions. If, prior to the expiration of the Option, there
shall be any change in the stated capital of the shares covered by this Option,
to the extent the Option has not been exercised, the exercise price payable
therefor and the number of shares shall in each instance be adjusted as follows:
(a) If a share dividend is declared on the common stock, there shall
be added to the shares under this Option, the number of shares, which would
have been issuable to Optionee had it been the holder of record of the
number of shares then under Option but not theretofore purchased and issued
hereunder. Such additional shares resulting from such share dividend shall
be delivered proportionately from time to time without additional cost upon
the exercise of this Option. Any distribution to the holders of the common
stock, other than
<PAGE>
a distribution of cash as a dividend out of surplus or net profits or a
distribution by way of the granting of rights to subscribe, shall be
treated as a share dividend.
(b) If an increase has been effected in the number of outstanding
shares of common stock by reason of a subdivision of such shares, the
number of shares which may thereafter be purchased under this Option shall
be the number of shares which would have been received by Optionee on such
subdivision had it been the holder of record of the number of shares then
under Option but not theretofore purchased and issued hereunder. In such
event, the price per share under this Option shall be proportionately
adjusted.
(c) If there is any capital reorganization or reclassification of the
stated capital of Maxxon, or any consolidation or merger of Maxxon with any
other corporation or corporations, or the sale or distribution of all or
substantially all of Maxxon's property and assets, adequate provisions
shall be made by Maxxon, so that there shall remain and be substituted
under this Option the shares, securities or assets which would have been
issuable or payable in respect of or in exchange for the common stock then
remaining under this Option and not theretofore purchased and issued
hereunder, Optionee shall have a right thereto as if Optionee had been the
owner of such shares on the applicable record date. Any shares so
substituted under this Option shall be subject to adjustment as provided in
this Paragraph in the same manner and to the same effect as the common
stock covered by this Option.
5. No Rights in Option Stock. Optionee shall have no rights as a
shareholder in respect of shares as to which the Option shall not have been
exercised and payment shall not have been received by Maxxon as herein provided,
and Optionee shall have no rights with respect to such Shares other than those
rights which are expressly conferred by this Agreement.
6. Shares Reserved. The Optionee shall at all times during the term of this
Agreement reserve and keep available such number of shares of common stock as
will be sufficient to satisfy the requirements of this Agreement and shall pay
all original issue taxes on the exercise of this Option and all other fees and
expenses necessarily incurred in connection therewith.
7. Non-Assignability. This Option shall not be encumbered, assigned,
transferred or disposed of in whole or in part.
8. Term. The Option, to the extent not previously exercised, shall expire
at 5:00 PM Eastern Daylight Time on January 31, 2008.
9. Miscellaneous.
9.1 Entire Agreement. This Option is granted pursuant to the Maxxon, Inc.
1998 Incentive Stock Option Plan ("Plan"). All the terms and conditions under
the Plan are incorporated herein by reference. This Agreement and the Plan
constitutes the entire agreement between the parties hereto with
2
<PAGE>
respect to the matters provided for herein and supersedes all prior written
agreements between the parties with respect thereto. This Agreement may not be
altered, amended, canceled or terminated except by a written agreement signed by
Optionee and Maxxon. The Plan may be altered in accordance with its terms, and
every alteration in the Plan not involving the exercise price or the number of
Option shares shall be incorporated herein by reference, but the number of
shares and the exercise price hereof shall not be altered without the consent of
Optionee, except as provided by and in effect under the Plan on the date of
grant of this Option.
9.2 Notices. All notices under or in conjunction with this Agreement shall
be in writing, delivered in person against a receipt therefor or sent by telex,
certified, or registered mail, return receipt requested, with postage prepaid to
the address set forth under the signatures below or to such other address as a
party may designate in a notice given in accordance with the provisions of this
Section. All notices shall be deemed given when received in any written form or
5 days after the notice is mailed.
9.3 Captions and Titles; Counterpart Execution. Captions and titles have
been inserted in this Agreement for the benefit of the parties in referring to
this Agreement but shall not be construed or interpreted as part of this
Agreement. This Agreement may be executed in a number of identical counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute but one and the same agreement.
9.4 Construction. All conflicts between this Option Agreement and the Plan
shall be resolved in accordance with the Plan. This Agreement was negotiated,
executed and delivered in the State of Oklahoma and shall be governed by and
construed in accordance with the internal laws of the State of Oklahoma.
9.5 Waiver. The failure by any part to enforce any of its rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver which has been signed by the waiving party. Waiver of any
one breach shall not be deemed to be a waiver of any other breach of the same or
any other provision hereof.
MAXXON, INC. OPTIONEE:
BY________________________ _______________________
Gifford Mabie, President Vicki Pippin
8908 South Yale, Suite 409 8908 South Yale, Suite 409
Tulsa, Oklahoma 74137 Tulsa, Oklahoma 74137-3545
918-492-2560 fax _______________________Fax
OFFICER/DIRECTOR INDEMNIFICATION AGREEMENT
THIS AGREEMENT ("Agreement") is entered into and effective this 16th day of
December, 1996, by and between Maxxon, Inc., an Oklahoma corporation
("Corporation"), and Gifford M. Mabie, ("Indemnified Party").
WHEREAS, the Board of Directors has determined that it is in the best
interest of the Corporation and its shareholders to agree to indemnify
Indemnified Party (who is a Director and/or Officer of the Corporation) from and
against certain liabilities for actions taken by the Indemnified Party during
the performance of tasks for the Corporation.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification. The Corporation hereby agrees to indemnify and hold
harmless Indemnified Party to the maximum extent possible under all applicable
laws against any and all claims, demands, debts, duties, liabilities, judgments,
fines and amounts paid in settlement and expenses (including attorneys' fees and
expenses) actually and reasonably incurred by Indemnified Party in connection
with the investigation, defense, negotiation and settlement of any such claim or
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Corporation) to which Indemnified Party is or becomes a party, or
is threatened to be made a party, by reason of the fact that Indemnified Party
is an officer or a director of the Corporation or any of its subsidiaries.
2. Limitations on Indemnity. No indemnity pursuant to this Agreement shall
be made by the Corporation:
(a) For the amount of such losses for which the Indemnified Party is
indemnified pursuant to any insurance purchased and maintained
by the Corporation; or
(b) In respect to remuneration paid to Indemnified Party if it shall
be determined by a final judgment or other final adjudication
that such remuneration was in violation of law; or
(c) On account of any suit in which judgment is rendered against
Indemnified Party for an accounting of profits made (i) for an
improper personal profit without full and fair disclosure to the
Corporation of all material conflicts of interest and not
approved thereof by a majority of the disinterested members of
the Board of Directors of the Corporation; or (ii) from the
purchase or sale by Indemnified Party of securities of the
Corporation pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local law; or
(d) On account of Indemnified Party's conduct which is finally
determined to have been knowingly fraudulent, deliberately
dishonest or willfully in violation of applicable law for which
the corporation suffered actual financial damages; or
(e) If a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful.
Officer/Director Indemnification Agreement
Page 1 of 4
<PAGE>
3. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Indemnified Party
is an officer or director of the Corporation or a subsidiary and thereafter so
long as Indemnified Party shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Indemnified Party was an officer or a
director of the Corporation or any subsidiary.
4. Notification and Defense of Claim. Within 30 days after receipt by
Indemnified Party of notice of any claim or any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which Indemnified Party has a right to Indemnification
hereunder, Indemnified Party will notify the Corporation of the commencement
thereof. With respect to any such action, suit or proceeding as to which
Indemnified Party notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense; and
(b) Except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party
will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnified Party. After notice from the
Corporation to Indemnified Party of its election to assume the
defense thereof, the Corporation will not be liable to
Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by Indemnified Party in
connection with the defense thereof other than reasonable costs
of investigation or as otherwise provided below. Indemnified
Party shall have the right to employ counsel in such action,
suit or proceeding, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of Indemnified
Party, unless (i) the employment of counsel by Indemnified Party
has been authorized by the Corporation, (ii) Indemnified Party
shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Indemnified Party in the
conduct of the defense of such action, (iii) the Corporation
shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of
counsel shall be at the expense of the Corporation, or (iv)
unless the Indemnified Party reasonably and in good faith
asserts defenses and theories of defense not asserted by the
Corporation. The Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on
behalf of the Corporation or as to which Indemnified Party shall
have made the conclusion provided for in (ii) or (iv) above.
(c) Either party may settle any matter, without the consent of the
other, but in such event, the indemnification provided for
herein shall be of no force or effect with respect to such
settlement. The Corporation shall not be liable to indemnify
Indemnified Party under this Agreement for any amounts paid in
settlement of any action or claim effected without the
Corporation's written consent. The Corporation shall not settle
any action or claim in any manner which would impose any penalty
or limitation on Indemnified Party without Indemnified Party's
written consent. Neither the Corporation or Indemnified Party
will unreasonably withhold their consent to any proposed
settlement.
Officer/Director Indemnification Agreement
Page 2 of 4
<PAGE>
5. Repayment of Expenses. Indemnified Party agrees that Indemnified Party
will reimburse the Corporation for all reasonable expenses paid by the
Corporation in defending any civil or criminal action, suit or proceeding
against Indemnified Party in the event and only to the extent that Indemnified
Party is finally determined that Indemnified Party is not entitled to be
indemnified by the Corporation for such expenses under the Corporation's charter
or bylaws, this Agreement or under applicable law.
6. Enforcement.
(a) The Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed
on the Corporation hereby in order to induce Indemnified Party
to serve as an officer and/or director of the Corporation or any
subsidiary thereof, and acknowledges that Indemnified Party is
relying upon this Agreement as part of the consideration for so
acting.
(b) In the event Indemnified Party is required to bring any action
to enforce rights or to collect moneys due under this Agreement
and is successful in such action, the Corporation shall
reimburse Indemnified Party for all of Indemnified Party's
reasonable attorneys' and other fees and expenses in bringing
and pursing such action.
7. Severability. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
8. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Oklahoma.
(b) This Agreement shall be binding upon Indemnified Party and upon
the Corporation, its successors and assigns, and shall inure to
the benefit of Indemnified Party, his heirs, personal
representatives and assigns and to the benefit of the
Corporation, its successors and assigns.
(c) No amendment, modification, termination or change of this
Agreement shall be effective unless it is signed by both parties
hereto.
9. Additional Rights. This Agreement is in addition to, and not in lieu of,
any other right to indemnification under the Corporation's corporate charter,
bylaws, insurance contracts or otherwise at law or in equity.
Officer/Director Indemnification Agreement
Page 3 of 4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
MAXXON, INC.
By: ______________________________
Gifford M. Mabie, Chairman and President
Indemnified Party:
----------------------------------
Name: Gifford M. Mabie
Capacity: Chairman, President and Chief
Executive Officer
Officer/Director Indemnification Agreement
Page 4 of 4
DEVELOPMENT AGREEMENT
This Agreement ("Agreement") is entered into the 9th day of June, 1998 by
and among MAXXON, INC. ("Maxxon"), TEXAS APPLIED BIOTECHNOLOGY SERVICES ("TABS")
and HARTZELL MANUFACTURING, INC. ("Hartzell") for the purpose of setting forth
certain preliminary agreements of the parties in connection with the manufacture
of initial tooling for the commercial development of the Maxxon Safety Syringe
TM.
Whereas, Maxxon has the exclusive right to manufacture and market the
Maxxon Safety Syringe; and
Whereas, TABS has been engaged by Maxxon as a consultant in the design and
development of a testing program which requires the building of molds to
manufacture certain parts used in the Maxxon Safety Syringe; and
Whereas, Hartzell has the expertise, knowledge and experience to
manufacture the molds according to Maxxon specification and to produce the
Maxxon Safety Syringe in quantities after the prototypes have been inspected,
evaluated, tested and approved for production; and
Whereas, in order to assure Hartzell that Maxxon has sufficient funding to
complete the initial stages of the production plan, Maxxon will deposit with
TABS a total of $125,000 for disbursement as the parties agree and Maxxon will
pursuant to this Agreement appoint TABS as Maxxon's agent for certain purposes,
including the duty to inspect, test, evaluate, modify if necessary in accordance
with this Agreement and approve the molds and the products produced by the
molds.
Now, Therefore, for good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Maxxon hereby appoints TABS as its agent in fact for the purposes of: (1)
receiving and holding funds of Maxxon on deposit in order to assure
Hartzell of Maxxon's ability to pay for the services of Hartzell; (2)
disbursing the funds of Maxxon to Hartzell in accordance with the accepted
production agreement and schedule attached hereto; (3) insuring that the
design, specification, quality and compliance with specification of all
molds, parts and products made; (4) assembling the working parts of the
Maxxon Safety Syringe with the new parts to be produced from the molds
being manufactured by Hartzell; (5) testing, evaluating, modifying and
retesting if necessary to assure that the final molds from which an
accepted first article for each part is made; (6) disbursing funds to
Hartzell in accordance with the schedule of 50% of the estimated costs
submitted at issue of purchase orders for mold production, 40% due with
sample submission by Hartzell and 10% with sample approval; (7) disbursing
funds in like manner for contracted mold modifications to achieve sample
approval; (8) disbursing funds in accordance with a schedule of 50% of
estimated costs submitted with issue of a purchase order for part
production/assembly and 50% upon
<PAGE>
receipt of assembled parts meeting approved specifications; and (9)
disbursing funds to Hartzell for production of final versions of
engineering drawings and electronic files of each part.
2. TABS agrees to hold the $125,000 in a separate bank account segregated from
its other funds and not commingled therewith for the benefit of the parties
and to disburse funds from this deposit only in accordance with the
agreement of the parties set forth in this Agreement and the exhibits, as
amended by mutual written agreement of the parties from time to time.
3. TABS agrees to test, evaluate, modify if necessary in accordance with this
Agreement and approve the molds to be made by Hartzell in accordance with
the agreement of the parties and in accordance with engineering standards
of performance generally accepted in the industry in order to assure a high
quality product.
4. At the conclusion of mold modification processes, Hartzell agrees to
provide TABS with final versions of the dimensioned drawings and electronic
files for each part produced by their molds, including critical tolerances
of each part.
5. The parties agree that Maxxon and TABS are responsible for mold
specifications, and Hartzell is responsible for making the molds that
conform to the approved specifications of the parties based upon an agreed
data base. Modifications to the molds must be approved by Hartzell in order
for Hartzell to be responsible for producing molds and parts according to
agreed specifications.
6. Hartzell agrees to assemble the manufactured parts in accordance with
manufacturing standards generally accepted in the industry in accordance
with the specifications developed and approved by Maxxon/TABS and accepted
by the parties.
7. The following exhibits are attached hereto and incorporated herein by
reference:
(a) Exhibit 2--Maxxon Safety Syringe Timeline (subject to paragraph 10
below)
(b) Exhibit 3--Maxxon Safety Syringe Cost of Molds and Parts
(c) Hartzell Quotations as follows:
#0003475000-00 Luer Taper
#0003475200-00 Plunger
#0003475400-00 Syringe Barrel
#0003475700-00 Plug/Luer Taper Catch Ring
#0003475100-00 Luer Taper
#0003474501-00 Plunger Spacer
and
#0003502900-00 Assembly of Parts
<PAGE>
7. The exhibits may be changed only by the mutual agreement of the parties.
8. The parties contemplate that there will be executed a mutually agreed
development and production agreement which will provide additional details
regarding the agreements of the parties.
9. All improvements to the design of the syringe will become the property of
Maxxon.
10. The schedule for performance hereunder is subject to force majeure events
beyond the control of a party. Upon the occurrence of an event beyond the
control of a party that is likely to result in a delay in the scheduled
time for performance, the party affected by that event agrees to notify the
other parties promptly and use is best good faith diligent efforts to
remedy the cause for the force majeure event and when remedied proceed with
diligence to perform its obligations promptly thereafter.
11. This Agreement is made and entered into in Texas and governed by Texas law.
IN WITNESS WHEREOF, the parties intending to be legally bound have executed
this Agreement with all requisite authority the 9th day of June, 1998
MAXXON, INC. TEXAS APPLIED BIOTECHNOLOGY SERVICES
BY_____________________________ BY_______________________________________
GIFFORD MABIE, PRESIDENT NAME:______________________TITLE________
HARTZELL MANUFACTURING, INC.
BY______________________________
NAME________________TITLE_____
EXCLUSIVE PATENT LICENSE AGREEMENT BY AND BETWEEN HARRY L. KAUFHOLD,
JR. AND MAXXON, INC.
This Agreement ("Agreement"), is executed effective April 30, 1997 for the
exclusive license of Patent No. 5,125,898 dated June 30, 1992 regarding the
Disposable Syringe with Automatic Needle Retraction by and between Harry L.
Kaufhold, Jr., an individual and co-inventor and sole assignee of the
aforementioned Patent ("Licensor"), and Maxxon, Inc., an Oklahoma corporation
("Licensee").
WHEREAS, Licensor desires to grant to Licensee and Licensee desires to
acquire from Licensor the exclusive world-wide license to perfect, produce and
market the safety syringe referenced in Paragraph One, below.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. License. Licensor grants to Licensee exclusive world-wide license to
perfect, produce and market the safety syringe for the following Patent
("Patent"), copies of which are attached hereto, and Licensee agrees to acquire
the same upon the terms and conditions set forth herein:
United States Patent
Patent Number: 5,125,898
Date of Patent: June 30, 1992
Re: DISPOSABLE SYRINGE WITH AUTOMATIC NEEDLE RETRACTION
2. Price. Licensee shall pay Licensor for the exclusive license rights in
the Patent for the sum of One Hundred Thousand Dollars ($100,000.00), and
according to the terms of a $90,000 Promissory Note attached hereto as Exhibit
A.
3. Royalty. Licensee agrees to pay Licensor a royalty hereunder, equal to
three percent (3%) of gross receipts in legal tender in immediately available
funds actually received by Licensee from the sale of products using the Patent.
Gross receipts excludes taxes, transportation, insurance, shipping and handling,
packaging, returns, replacements for defective or damaged goods, all discounts,
and all funds received from sales which are contested or subject to claims. All
royalty payments shall be made monthly by corporate check dated and mailed on or
before the fifteenth (15th) day of each month after receipt of gross receipt
funds by Licensee.
Licensee shall keep accurate sales documents, records, and reports to
insure proper accounting and payment to Licensor of all royalties which may
become due pursuant to the terms of this Agreement. Licensee shall make a
monthly sales report to Licensor dated and mailed no later than the fifteenth
(15) of the month following receipt by Licensor of such gross receipt funds from
sales of products using the Patent. Licensor shall have the right to inspect
Licensee's records solely related to the calculation of royalty payments due
hereunder no more than once each calendar year to insure proper payment of
royalties. Licensor agrees to keep confidential all information which is
confidential, or proprietary or competitively sensitive certain in records of
Licensee.
<PAGE>
This royalty provision shall survive any acquisition of Licensee, change of
control of Licensee or any other event where Licensee is not directly managing
the production and sale of the products using the Patent.
4. Term of Royalty. The term of the Royalty shall be coincident with the
life of the U.S. Patent and all extensions and additions therein, or if by the
third anniversary of this agreement, the cumulative sales have not been $100,000
or if in any subsequent year the total sales for that year do not exceed
$100,000, this agreement will terminate and become null and void.
5. Representations and Warranties.
(a) Licensor is the owner of all rights to the Patent, with the full right,
power and authority to exclusively license such Patent to the Licensee
hereunder; no other person or persons whatsoever has any claim, right, title,
interest or lien in, to, or on said Patent; and no other person or entity has
the right to use the Patent for any purpose whatsoever.
(b) No litigation, actions or proceedings, legal, equitable,
administrative, through arbitration or otherwise, are pending or threatened
which may affect the Patent, or the consummation of this transaction.
(c) Licensor has all requisite power and authority to enter into this
Agreement and to perform his obligations thereunder.
6. No Operating Assurances. Licensor and Licensee are aware that the Patent
will require additional engineering and development before products can be
manufactured and sold. Licensor makes no warranties or representations
concerning the operating performances to be achieved by Licensee.
7. Costs and Expenses. Licensee shall be responsible for all costs incurred
in connection with the development, patent maintenance fees, alterations or new
patents, marketing and distribution of the products made using or incorporating
the Patent.
8. Improvements. All improvements, amendments, modifications and
alterations in the Patent, or new patents, shall be the sole property of the
Licensor.
9. Indemnification by Licensee. Licensee agrees to indemnify and hold
Licensor and his successors and assigns harmless from any and all claims,
losses, damages, injuries and liabilities, including legal fees and expenses,
arising from or on account of Licensee's breach of its representations,
warranties and covenants thereunder, including without limitation, the failure
to pay royalties payable hereunder.
10. Nature of Relationship. Licensor and Licensee agree that (1) the other
party is not an agent, employee, partner, joint venturer, or other
representative of the other party for any purpose whatsoever; (2) each is
separate from the other; and (3) no such person shall obligate the other party
in any way to perform any duty or to be responsible for any obligation or
liability whatsoever, apart from the obligations arising under this agreement.
Neither party nor its respective officers, directors, employees, salesmen,
agents or other representatives shall claim that it is an agent, employee,
partner or other representative of the other party; nor shall any of them be
subject to the active or implied control of the other party for any reason.
<PAGE>
11. Limitation of Liability. Except as set forth in the paragraph 9, the
parties shall not be liable for any loss, damage, injury or other claim of any
kind, character or description, whether sole, concurrent, active, passive,
comparative, strict, contractual or vicarious, and whether absolute or
contingent, and shall not be liable for any reason for any punitive, special or
other similar damages or alleged damages for lost business, lost goodwill, lost
opportunities or otherwise.
12. Final Agreement. This Agreement constitutes the entire agreement between
the parties and terminates and supersedes all prior understandings or agreements
on the subject matter hereof. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successor and permitted assigns of the parties hereto. Nothing
in this Agreement, expressed or implied, confers any rights or remedies upon any
party other than the parties hereto and their respective heirs, legal
representatives and assigns. This Agreement may be modified only by a further
writing that is duly executed by both parties.
13. Severability. If any term of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, then this Agreement,
including all of the remaining terms, will remain in full force and effect as if
such invalid or unenforceable term had never been included.
14. Headings. Headings used in this Agreement are provided for convenience
only and shall not be used to construe meaning or intent.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Oklahoma.
16. Force Majeure. The obligations of the parties hereto (except for the
obligation to pay money) shall be suspended to the extent and for the period
that performance is prevented by any cause, whether foreseeable or enforceable,
beyond its reasonable control. Any party affected by a force majeure event shall
promptly give notice thereof to the other party and shall exercise its
reasonable good faith efforts and diligence to eliminate or remedy the force
majeure event and to return to normal operations as quickly as possible and
shall give the other party prompt notice when that has been accomplished.
17. Arbitration. In the event a dispute arises with respect to the
interpretation or effect of this Agreement or concerning the rights or
obligations of the parties hereto, the parties agree to negotiate in good faith
with reasonable diligence in an effort to resolve the dispute in a mutually
acceptable manner. Failing to reach a resolution thereof, either party shall
have the right to submit the dispute to be settled by binding arbitration under
the rules and conciliations of the American Arbitration Association. The parties
agree that all arbitrations shall be conducted in Tulsa, Oklahoma, unless the
parties mutually agree to the contrary, and shall be conducted in English. The
costs of arbitration shall be borne by the party against whom the reward is
rendered or, if in the interest of fairness, as allocated in accordance with the
judgment of the arbitrators. All awards in arbitration made in good faith and
not infected with fraud or other misconduct shall be final and binding.
18. Miscellaneous.
(a) Good Faith Cooperation. Each party hereto agrees to keep the other party
informed relating to the rights, duties and obligations of the parties hereunder
and render good faith cooperation to the other party in order to consummate the
transactions contemplated hereby.
Licensor and Licensee agree to execute and deliver all requisite forms of
assignment to enable Licensee to file this assignment with the U.S. Patent
Office.
(b) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(c) Amendments. This Agreement may be amended only by a written document
signed by the parties and stating that the document is intended to amend this
Agreement.
(d) Notices. Any notice required by this Agreement or given in connection
with it, shall be in writing and shall be given to the appropriate party by
personal delivery or by certified mail, postage prepaid, or recognized overnight
delivery services.
If to Licensor:
Harry L. Kaufhold, Jr.
P.O. Drawer 34457
Houston, TX 77234
Phone: (713) 941-2111
Fax: (713) 484-0076
If to Licensee:
Maxxon, Inc.
8908 South Yale Avenue, Suite 409
Tulsa, OK 74137
Phone: (918) 492-1257
Fax: (918) 492-2560
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the 30th day of April, 1997.
Maxxon, Inc.
By:___________________________ __________________________
Harry L. Kaufhold, Jr., an individual Gifford M. Mabie, Chairman
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") by and between Cerro Mining
Corporation ("Cerro") and Maxxon, Inc. ("Maxxon").
WHEREAS, Maxxon was formed to develop, test, improve, market and secure
government approval for a new safety syringe; and
WHEREAS, Cerro owns but plans to sell certain mining properties; and
WHEREAS, the parties desire to provide for the terms and conditions upon
which Maxxon will merge into Cerro in a statutory merger "Merger") under Section
1082 of the Oklahoma General Corporation Act and Section 92A.100 et. seq of the
Nevada Revised Statutes ("Act"); and
WHEREAS, for federal income tax purposes, it is intended that the merger
qualify as a tax-free reorganization within the meaning of Section 368(A)(1)(a)
of the Internal Revenue Code of 1986, as amended ("Code").
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger
(a) Agreement to Merge. Subject to the terms and conditions of this
Agreement, at the Effective Time, as defined below, Maxxon shall be merged with
and into Cerro in accordance with the provisions of the Agreement and the Act,
the separate corporate existence of Maxxon shall cease, and Cerro shall continue
as the surviving corporation ("Surviving Corporation"). The constituent
corporations ("Constituent Corporations") to the Merger are Cerro and Maxxon.
The name of Cerro, as the Surviving Corporation, shall be changed by reason of
the Merger to "Maxxon, Inc."
(b) Effective Time. The Merger shall become effective ("Effective Time") at
the time of filing of the Articles of Merger substantially in the form attached
as Exhibit A ("Articles of Merger") with the Secretary of State of the State of
Nevada in accordance with applicable provisions of the Act.
(c) Effect of the Merger. At the Effective Time, all rights, powers,
privileges, franchises, licenses and permits of the Constituent Corporations and
all property, real, personal and mixed, shall be vested in the Surviving
Corporation; and all debts, duties, liabilities and claims of every kind,
character and description of the Constituent Corporations
<PAGE>
shall be debts, duties, liabilities and claims of the Surviving Corporation and
may be enforced against the Surviving Corporation to the same extent as if such
debts, duties, liabilities and claims had been incurred by it. All rights of
creditors of the Constituent Corporations and all liens upon property of either
Constituent Corporation shall be preserved unimpaired and shall not be altered
in any way by reason of the Merger.
1.02. Conversion of Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof:
(i) Each share of Common Stock of Maxxon which is issued and outstanding
shall be converted automatically into one (1) share of Common Stock of Cerro.
(ii) All issued and outstanding options, warrants or similar rights to
purchase Common Stock of Maxxon at the Effective Time shall by reason of the
Merger and without action on the part of the holders thereof be automatically
converted into options, warrants or similar rights to purchase one (1) share of
Common Stock of Cerro for each share covered by such options, warrants or
similar rights upon the same terms and conditions as if issuable by Maxxon upon
the exercise of such options immediately prior the Effective Time.
(iii) Each share of Common Stock of Cerro issued and outstanding at the
Effective Time shall remain issued and outstanding as one share of capital stock
of Cerro.
1.03. Effect of Merger.
(a) Rights in Maxxon Cease. At and after the Effective Time, the holder of
each certificate of Common Stock of Maxxon shall cease to have any rights as a
stockholder of Maxxon. All dividends or other distributions with respect to
Maxxon common stock prior to the Effective Time shall be payable without
interest upon surrender of certificates representing Maxxon Common Stock.
(b) Closure of Maxxon Stock Records. From and after the Effective Time, the
stock transfer books of Maxxon shall be closed, and there shall be no further
registration or transfers on the stock records of Maxxon.
1.04. Articles of Incorporation of the Surviving Corporation. Automatically
upon the occurrence of the Effective Time, the Articles of Incorporation of
Cerro from and after the Effective Time shall be amended to read as set forth in
paragraph 5 of Exhibit A hereto until thereafter amended in accordance with
applicable law.
2
<PAGE>
1.05. Bylaws of The Surviving Corporation. Automatically upon the
occurrence of the Effective Time, the Bylaws of Cerro from and after the
Effective Time shall be amended as set forth in Exhibit B until amended in
accordance with applicable law.
1.06. Directors of The Surviving Corporation. Automatically upon the
occurrence of the Effective Time, the directors of Cerro immediately prior to
the Effective Time shall resign as the directors of Cerro, and the directors of
Maxxon immediately prior to the Effective Time shall become the directors of the
Surviving Corporation until their respective successors are elected and duly
qualified.
1.07. Officers of the Surviving Corporation. The officers of Cerro
immediately prior to the Effective Time shall resign as the officers of Cerro,
and the officers of Maxxon immediately prior to the Effective Time shall become
of the officers of the Surviving Corporation until their respective successors
are duly elected and qualified.
1.08. Closing. The Closing of the Merger shall take place at the offices of
Maxxon at 8908 South Yale, Suite 409, Tulsa Oklahoma 74137 at 5:00 p.m. local
time on the date on which the last condition set forth herein is fulfilled or
waived or at such time and place as the parties agree ("Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. General Representations and Warranties. Each party represents to the
other that:
(i) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and that it is not
required to be qualified or licensed to do business as a foreign corporation in
any other jurisdiction.
(ii) The execution of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly authorized by its
Board of Directors and Shareholders, and no other corporate action on its part
is necessary in order to execute, deliver, consummate and perform its
obligations hereunder.
3
<PAGE>
(iii) The execution, delivery, performance and consummation of the Merger
and the transactions contemplated hereby do not violate any obligation to which
it is a party and will not create a default thereunder.
(iv) There are no suits, actions or proceedings pending or to its knowledge
threatened which seek to enjoin the Merger or the transactions contemplated by
this Agreement or which, if adversely decided, would have a materially adverse
effect on its business, results of operations, assets or prospects.
(v) No statement made by it herein or in the exhibits hereto or any
document delivered by it or on its behalf pursuant to this Agreement contains an
untrue statement of material fact or omits to state all material facts necessary
to make the statements therein not misleading in any material respect.
(vi) It has incurred no finder=s, broker=s, investment banking, financial,
advisory or other similar fee for which the other shall be liable by reason of
the Merger or otherwise.
(vii) All issued and outstanding shares have been validly issued and are
fully paid and non-assessable and have not been issued in violation of any
preemptive or other rights of any other person or any applicable laws.
(viii) There are no outstanding options, warrants, commitments, calls or
other rights or agreements requiring it to issue any shares of its common stock
or securities convertible into shares of its common stock to anyone for any
reason whatsoever.
2.02 Representations by Cerro. Cerro represents to the parties that its
authorized capital consists of 25,000,000 shares of Common Stock, par value
$.001 per share and at the date hereof, 2,256,000shares of its Common Stock are
issued and outstanding; and no shares were held in its treasury, except that at
the Effective Time of the Merger 1,725,000 shares of Cerro's Common Stock shall
be held in treasury. All issued and outstanding shares have been validly issued
and are fully paid and non-assessable shares and have not been issued in
violation of any preemptive or other rights of any other person or any
applicable laws. There are no outstanding options, warrants, commitments, calls
or other rights or agreements requiring it to issue any shares of its Common
Stock or securities convertible into shares of its Common Stock to anyone for
any reason whatsoever, except that warrants to purchase 250,000 shares of Common
Stock of Cerro at an exercise price of $2.00 per share are outstanding. By
reason of the Merger, the Surviving Corporation shall issue 7,758,000 shares of
its Common Stock to shareholders of Maxxon in exchange for certificates
4
<PAGE>
representing shares of Maxxon Common Stock and such newly issue shares shall be
validly issued, fully paid and non-assessable shares upon such exchange.
2.03. Representations by Maxxon. Maxxon represents to the parties that its
authorized capital consists of 25,000,000 shares of Common Stock, par value $.01
per share; at the date hereof, 7,578,000 shares of its Common Stock are issued
and outstanding to Maxxon; and no shares were held in its treasury. All issued
and outstanding shares have been validly issued and are fully paid and
non-assessable and have not been issued in violation of any preemptive or other
rights of any other person or applicable laws. There are no outstanding options,
warrants, commitments, calls or other rights or agreements requiring it to issue
any shares of its Common Stock or securities convertible into shares of its
Common Stock to any person for any reason whatsoever.
ARTICLE III
TRANSACTIONS PRIOR TO CLOSING
3.01. Corporate Approvals. Prior to Closing, each of the parties shall
submit this Agreement to its Board of Directors and Shareholders and obtain
approval thereof. Copies of corporate actions taken shall be provided to each
party.
3.02. Access to Information. Each party agrees to permit upon reasonable
notice the attorneys, accountants, and other representatives of the other
parties reasonable access during normal business hours to its properties and its
books and records to make reasonable investigations with respect to its affairs,
and to make its officers and employees available to answer questions and provide
additional information as reasonably requested.
3.03. Expenses. Each party agrees to bear its own expenses in connection
with the negotiation and consummation of the Merger and the transactions
contemplated hereby.
3.04. Covenants. Except as permitted in writing, each party agrees that it
will:
(i) Pending completion of the Merger, conduct its business in accordance
with its ordinary, usual and normal course of business, and consistent with its
past practices and use its good faith efforts to preserve intact its business
organization, key employees, good will and business relationships;
(ii) Use its good faith efforts to obtain all requisite licenses, permits,
consents, approvals and authorizations necessary in order to consummate the
Merger;
5
<PAGE>
(iii) Notify the other parties upon the occurrence of any event which would
have a materially adverse effect upon the Merger or the transactions
contemplated hereby or upon the business, assets or results of operations; and
(iv) Not enter into any material agreement not in the ordinary course of
its business and not to modify its corporate structure or otherwise act outside
the ordinary course of its business, except as necessary or advisable in order
to consummate the Merger and the transactions contemplated hereby.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the parties to consummate the Merger and the transactions
contemplated hereby are subject to the following conditions which may be waived
to the extent permitted by law:
(i) Each party must obtain the approval of its Board of Directors and
Shareholders in accordance with applicable law, and such approval shall not have
been rescinded or restricted.
(ii) Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Merger and the
transactions contemplated hereby.
(iii) There shall be no effective injunction, writ or preliminary
restraining order or other order of a similar nature issued by any court or
governmental agency having jurisdiction directing that the Merger or the
transactions contemplated hereby shall not be consummated.
(iv) The representations and warranties of the parties shall be true and
correct in all material respects at the Effective Time.
ARTICLE V
MISCELLANEOUS
6
<PAGE>
Neither party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties hereto. No
permitted assignment shall relieve a party of its obligations under this
Agreement without the separate written consent of the other parties. This
Agreement shall be binding upon and enure to the benefit of the parties and
their respective permitted successors and assigns. Each party agrees that it
will comply with all applicable laws, rules and regulations in the execution and
performance of its obligations under this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Nevada.
This document constitutes a complete and entire agreement among the parties with
reference to the subject matters set forth herein. No statement or agreement,
oral or written, made prior to or at the execution hereof and no prior course of
dealing or practice by either party shall vary or modify the terms set forth
herein without the prior consent of the other parties hereto. This Agreement may
be amended only by a written document signed by the parties. Notices or other
communications required to be made in connection with this Agreement shall be
delivered to the parties at the address set forth below or at such other address
as may be changed from time to time by giving written notice to the other
parties. This Agreement may be executed in multiple counterparts, each of which
shall constitute one and a single Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized representatives the 9th day of May, 1997.
CERRO MINING CORPORATION.
By _______________________________
Thomas Moon, President
MAXXON, INC.
By _______________________________
Gifford Mabie, Chairman and President
7
<PAGE>
PROVINCE OF British Columbia )
) ss
COUNTY OF ___________ )
On the 15th day of May, 1997 before the undersigned personally appeared
Thomas Moon, who acknowledged that he is President of Cerro Mining Corporation,
and Carolyn Burns who acknowledged to me that she is Corporate Secretary of
Cerro Mining Corporation, and the each is authorized to execute the above
instrument in their respective capacities and for the purposes contained herein
and that the above instrument is true and correct for all purposes.
In witness, I set my hand and official seal.
---------------------------
Notary Public in and for The Province
of British Columbia
[seal]
My commission expires:
- ----------------------
STATE OF OKLAHOMA )
) ss
COUNTY OF TULSA )
On the 19th day of May, 1997 before the undersigned personally appeared
Gifford Mabie, who acknowledged to me that he is President of Maxxon, Inc., and
Rhonda Vincent, who acknowledged to me that she is Corporate Secretary of
Maxxon, Inc., and the each is authorized to execute the above instrument in
their respective capacities and for the purposes contained herein and that the
above instrument is true and correct for all purposes.
In witness, I set my hand and official seal.
-----------------------------
Notary Public in and for Tulsa
County, Oklahoma
[seal]
My commission expires:
- ---------------------
8
<PAGE>
ARTICLES OF MERGER
An Agreement and Plan of Reorganization has been adopted in accordance with
Section 92A.190 and 92A.200 of the Nevada Revised Statutes by and between Cerro
Mining Corporation ("Cerro"), a Nevada Corporation, and Maxxon, Inc. ("Maxxon"),
an Oklahoma Corporation.
1. The Constituent Corporations are Cerro Mining Corporation, a Nevada
corporation, and Maxxon, Inc. an Oklahoma corporation. As a result of the
Merger, Maxxon, Inc. will cease to exist.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each Constituent Corporation in accordance with
92A.100 et seq. of Nevada Revised Statutes and Title 18, Oklahoma Statutes, ss.
1082 of the Oklahoma Corporation Act.
3. The Surviving Corporation is Cerro Mining Corporation.
4. (a) The approval of Cerro shareholders is required because its
corporate charter is being amended by reason of the Merger. Cerro
has issued and outstanding 2,256,000 shares of its Common Stock,
of which 2,000,000 shares (88% of shares outstanding) were voted
for the Merger, which is sufficient for approval by the owners of
Common Stock of Cerro. There are no other classes of securities
of Cerro issued, outstanding or entitled to vote on the Merger.
(b) The approval of Maxxon shareholders is required because it is
ceasing to exist by reason of the Merger. Maxxon has issued and
outstanding 7,578,000 shares of its Common Stock, of which
7,000,000 shares (92.37% of shares outstanding) voted for the
Merger, which is sufficient for approval by the owners of Common
Stock of Maxxon. There are no other classes of securities of
Maxxon issued, outstanding or entitled to vote on the Merger.
5. The Articles of Incorporation of the Surviving Corporation will be
amended by reason of the Merger as follows:
1. The name of the Surviving Corporation shall be changed to Maxxon,
Inc.
2. There shall be added the following Other Matters:
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter, amend or repeal the bylaws of the Corporation and
to adopt new bylaws.
<PAGE>
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other
corporation, partnership, proprietorship, trust, association or other entity
in which the Corporation owns an interest or in which a director or officer
of the Corporation has a financial interest shall be void or voidable solely
for this reason or solely because any such director or officer is present at
or participates in the approval of such agreement or transaction.
INDEMNIFICATION
To the full extent not prohibited by the law as in effect from time to
time, the Corporation shall indemnify any person (and the heirs, executors
and representatives of such person) who is or was a director, officer,
employee or agent of the Corporation, or who, at the request of this
Corporation, is or was a director, officer, employee, agent, partner, or
trustee, as the case may be, of any other corporation, partnership,
proprietorship, trust, association or other entity in which this Corporation
owns an interest, against any and all liabilities and reasonable expenses
incurred by such person in connection with or resulting from any claim,
action, suit or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether civil, criminal, administrative or
investigative in nature, and in connection with or resulting from any claim,
action, suit or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether civil, criminal, administrative or
investigative in nature, and in connection with an appeal relating thereto,
in which such person is a party or is threatened to be made a party by
reason of serving or having served in any such capacity.
NO DIRECTOR LIABILITY IN CERTAIN CASES
To the maximum extent permitted by law as in effect from time to time,
no director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of any fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director for: (i) any breach of the director's duty of
loyalty to the Corporation or its shareholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) unlawful payment of dividends or stock redemptions; or (iv)
any transaction from which the director derived an improper personal
benefit.
6. An executed copy of the Agreement and Plan of Merger is on file at the
principal place of business of the Surviving Corporation at 8908 South Yale,
Suite 409, Tulsa, Oklahoma 74137.
7. A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation upon request and without cost to any stockholder of any
Constituent Corporation.
-2-
<PAGE>
8. The Surviving Corporation acknowledges and agrees that (a) it may be
served with process in the State of Oklahoma in any proceeding for enforcement
of any obligation of any Constituent Corporation of Oklahoma, as well as for
enforcement of any obligation of the Surviving Corporation arising from the
Merger, including any suit or other proceeding to enforce the right of any
shareholders as determined in appraisal proceedings pursuant to the provisions
of Section 1092 of Title 18, Oklahoma Statutes, and (b) it irrevocably appoints
the Secretary of State of the State of Oklahoma as its agent to accept service
of process in any such suit or other proceedings and it instructs the Secretary
of State of the State of Oklahoma to address all such service of process to the
Surviving Corporation's principal executive offices at 8908 South Yale, Suite
409, Tulsa, OK 74137, the address to which a copy of such process shall be
mailed by the Secretary of State.
IN WITNESS WHEREOF, these Articles of Merger have been duly executed by
Maxxon, Inc., the Surviving Corporation, by its President and Secretary.
Dated: May 20, 1997
CERRO MINING CORPORATION MAXXON, INC.
By: __________________________ By: _____________________________
Thomas Moon, President Gifford Mabie, Chairman
ATTEST: ATTEST:
- ------------------------------ ---------------------------------
Carolyn Burns, Secretary Rhonda Vincent, Secretary
-3-
<PAGE>
ACKNOWLEDGMENTS
CITY OF Vancouver )
) ss
PROVINCE OF British Columbia )
On the 20th day of May, 1997 before the undersigned personally appeared
Thomas Moon, who acknowledged that he is President of Cerro Mining Corporation,
and Carolyn Burns who acknowledged to me that she is Corporate Secretary of
Cerro Mining Corporation, and the each is authorized to execute the above
instrument in their respective capacities and for the purposes contained herein
and that the above instrument is true and correct for all purposes.
In witness, I set my hand and official seal.
-----------------------------
Notary Public in and for The Province
of British Colubia
[seal]
My commission expires:
- ----------------------
STATE OF OKLAHOMA )
) ss
COUNTY OF TULSA )
On the 20th day of May, 1997 before the undersigned personally appeared
Gifford Mabie, who acknowledged to me that he is Chairman and Chief Executive
Officer of Maxxon, Inc., and Rhonda Vincent, who acknowledged to me that she is
Corporate Secretary of Maxxon, Inc., and the each is authorized to execute the
above instrument in their respective capacities and for the purposes contained
herein and that the above instrument is true and correct for all purposes.
In witness, I set my hand and official seal.
--------------------------
Notary Public in and for Tulsa County,
Oklahoma
[seal]
My commission expires:
- -----------------------
-4-
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange ("Agreement") is entered into by and
between Ives Health Company, Inc., an Oklahoma corporation ("Ives"),. and
Maxxon, Inc., a Nevada corporation ("Maxxon").
WHEREAS, Maxxon was formed to develop, test, improve, market and secure
government approval for a new safety syringe and other health products and
services; and
WHEREAS, Ives is in the business of manufacturing and distributing
preventive health care products, including homeopathic, holistic, nutritional,
weight loss and other preventive natural medicines; and Mr. Ives is the
principal shareholder, director, officer and employee of Ives; and
WHEREAS, the parties desire to provide for the terms and conditions upon
which Maxxon will issue its Common Stock to acquire all the issued and
outstanding Capital Stock of Ives in a share exchange effected pursuant to
Sections 92A.110, 92A.190 and other applicable provisions of the Nevada Revised
Statutes ("Nevada Act") and 18 Oklahoma Statutes ss.1090.1 and other applicable
provisions of the Oklahoma General Corporation Act ("Oklahoma Act"); and
WHEREAS, for federal income tax purposes, it is intended that the Exchange
qualify as a tax-free reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended ("Code").
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
THE EXCHANGE
1.01. The Exchange
(a) Agreement to Exchange. Subject to the terms and conditions of this
Agreement, at the Effective Time, as defined below, Maxxon shall issue in the
aggregate 318,182 shares of Maxxon Common Stock, par value $.001 per share, in
exchange for all the issued and outstanding Common Stock of Ives ("Ives Common
Stock") and all options, warrants, rights and entitlements outstanding for the
issuance of Ives Capital Stock ("Ives Stock Rights") to the persons and in the
number of shares set forth in Exhibit A. hereto. The constituent corporations
("Constituent Corporations") to the Exchange are Ives and Maxxon.
(b) Effective Time. The Exchange shall become effective ("Effective Time")
at the time of filing of the Articles of Exchange substantially in the form
attached as Exhibit
<PAGE>
B ("Articles of Exchange") with the Secretary of State of the State of Nevada in
accordance with applicable provisions of the Nevada Act.
(c) Effect of the Exchange. At the Effective Time, Ives will become a
wholly-owned subsidiary of Maxxon, and all shares of Ives Common Stock and all
Ives Stock Rights shall be automatically converted into the right to receive
shares of Common Stock of Maxxon in accordance with this Agreement. All rights
of creditors of the Constituent Corporations and all liens upon property of
either Constituent Corporation shall be preserved unimpaired and shall not be
altered in any way by reason of the Exchange.
1.02. Conversion of Stock. At the Effective Time, by virtue of the Exchange
and without any action on the part of the holders thereof:
(i) Each share of Common Stock of Ives which is issued and outstanding
shall be converted automatically into 0.021212 shares of Common Stock of Maxxon
(calculated by dividing 318,182 Maxxon shares by 15,000,000 Ives shares); and
(ii) All issued and outstanding options, warrants or similar rights to
purchase Common Stock of Ives at the Effective Time shall by reason of the
Exchange and without action on the part of the holders thereof be automatically
converted into options, warrants or similar rights to purchase 0.021212 shares
of Common Stock of Maxxon upon the same terms and conditions as if such Ives
Stock Rights had been issuable by Maxxon at the exchange rate set forth herein.
(iii) Each share of Common Stock of Maxxon issued and outstanding at the
Effective Time shall remain issued and outstanding, unaffected and unimpaired by
the Exchange.
1.03. Effect of Exchange
At and after the Effective Time, the holder of each certificate of Common
Stock of Ives outstanding immediately prior to Closing shall cease to have any
rights as a stockholder of Ives. All dividends or other distributions with
respect to Ives Common Stock prior to the Effective Time shall be payable
without interest upon surrender of certificates representing Ives Common Stock.
2
<PAGE>
1.04. Certificate of Incorporation of Ives. Immediately following the
occurrence of the Effective Time, the Certificate of Incorporation of Ives shall
be its current Certificate of Incorporation until thereafter amended in
accordance with applicable law.
1.05. Bylaws of Ives. Immediately after the Effective Time, the Bylaws of
Ives from and after the Effective Time shall be its current Bylaws, until
amended in accordance with applicable law.
1.06. Directors After Closing. Automatically upon the occurrence of the
Effective Time, all the directors of Ives (except for M. Keith Ives) immediately
prior to the Effective Time shall resign as the directors of Ives, and the
directors of Maxxon immediately prior to the Effective Time shall become
directors of Ives, until their respective successors are elected and duly
qualified. In addition, Maxxon shall elect M. Keith Ives as a director of Maxxon
at Closing and shall nominate him as a director of Maxxon during the three years
following Closing so long as he remains an employee of Ives or Maxxon.
1.07. Officers of the Surviving Corporation. The officers of Ives
immediately prior to the Effective Time shall resign as the officers of Ives
(except for M. Keith Ives), and the officers of Maxxon immediately prior to the
Effective Time shall become the officers of Ives (except that M. Keith Ives
shall remain President of Ives) until their respective successors are duly
elected and qualified.
1.08. Closing. The Closing of the Exchange shall take place at the offices
of Maxxon at 8908 South Yale, Suite 409, Tulsa Oklahoma 74137 at 5:00 p.m. local
time on the date on which the last condition set forth herein is fulfilled or
waived or at such time and place as the parties agree ("Closing Date").
1.09 Events Prior to Closing.
Maxxon Loan. Maxxon agrees to loan to Ives $60,000 for the purpose of
discharging certain indebtedness of Ives and to provide Ives certain working
capital. Upon receipt thereof, Ives agrees to issue to Maxxon a convertible
debenture of Ives in the form attached as Exhibit C. The use of proceeds of this
$60,000 is as set forth in Exhibit D.
1.10 Additional Financing for Ives. Maxxon agrees to use its good faith
diligent efforts to arrange $2 million in long term financing to complement the
business plan of Ives.
3
<PAGE>
As a first installment of this additional funding, Maxxon agrees to advance to
Ives not less than $200,000 on or before July 15, l997, subject to the
consummation of the Closing on or before July 15, l997.
1.11 The Health Club. The Health Club is a multi-level market distribution
company which distributes products of Ives and others. The Health Club is owned
by M. Keith Ives personally. Mr. Ives agrees to convey all his interest in The
Health Club to Maxxon or to Ives at the discretion of Maxxon at the Closing in
exchange for $10,000 and 35,000 shares of duly authorized, validly issued, fully
paid shares of Maxxon Common Stock. At Closing, Mr. Ives will deliver to Maxxon
a certicate containing such representations and warranties concerning The Health
Club as Maxxon shall reasonably request. The parties agree that the revenues
from gross sales and the profits from operations from The Health Club shall be
attributable to Ives for calculating whether it has met 80% of the Ives
projections contained in Exhibit F as provided for in Article VI below.
1.12 Guarantee of Keith Ives Personally. Following the Closing, Ives will
be a wholly-owned subsidiary of Maxxon. Consequently, the representations and
warranties of Ives set forth in this Agreement will be of no effect following
Closing. As the principal shareholder, director, officer and employee of Ives,
M. Keith Ives agrees to irrevocably and unconditionally guarantee personally all
the representations, warranties, covenants, and agreements of Ives set forth
herein for a period of 3 years following Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. General Representations and Warranties. Each party represents to the
other that:
(i) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and that it is not
required to be qualified or licensed to do business as a foreign corporation in
any jurisdictions other than Oklahoma; and
(ii) The execution of this Agreement and the consummation of the Exchange
and the other transactions contemplated hereby have been duly authorized by its
Board of Directors and Shareholders, and no other corporate action on its part
is necessary in order to execute, deliver, consummate and perform its
obligations hereunder; and
4
<PAGE>
(iii) The execution, delivery, performance and consummation of the Exchange
and the transactions contemplated hereby do not violate any obligation to which
it is a party and will not create a default thereunder; and
(iv) There are no suits, actions or proceedings pending or to its knowledge
threatened which seek to enjoin the Exchange or the transactions contemplated by
this Agreement or which, if adversely decided, would have a materially adverse
effect on its business, results of operations, assets or prospects; and
(v) No statement made by it herein or in the exhibits hereto or any
document delivered by it or on its behalf pursuant to this Agreement contains an
untrue statement of material fact or omits to state all material facts necessary
to make the statements therein not misleading in any material respect; and
(vi) It has incurred no finder=s, broker=s, investment banking, financial,
advisory or other similar fee by reason of the Exchange or otherwise.
2.02 Additional Representations by Ives. Ives and M. Keith Ives each
represents to Maxxon that its authorized capital consists of 20,000,000 shares
of Common Stock, par value $0.01 per share; that at the date hereof, 15,000,000
shares of its Common Stock are issued and outstanding; and no shares were held
in its treasury. All issued and outstanding shares of Common Stock of Ives have
been duly and validly issued and are fully paid and non-assessable shares and
have not been issued in violation of any preemptive or other rights of any other
person or any applicable laws. There are no outstanding options, warrants,
commitments, calls or other rights or agreements requiring it to issue any
shares of Ives Common Stock or securities convertible into shares of its Common
Stock to anyone for any reason whatsoever.
2.03. Additional Representations by Maxxon. Maxxon represents to the
parties that its authorized capital consists of 25,000,000 shares of Common
Stock, par value $.001 per share; at the date hereof, 8,353,000 shares of its
Common Stock are issued and outstanding to Maxxon; and no shares were held in
its treasury. All issued and outstanding shares have been validly issued and are
fully paid and non-assessable and have not been issued in violation of any
preemptive or other rights of any other person or applicable laws. There are no
outstanding options, warrants, commitments, calls or other rights or agreements
requiring it to issue any shares of Maxxon Common Stock or securities
convertible into shares of its Common Stock to any person for any reason
whatsoever, except for the 244,000 warrants exercisable at $2.00 per share.
5
<PAGE>
ARTICLE III
TRANSACTIONS PRIOR TO CLOSING
3.01. Corporate Approvals. Prior to Closing, each of the parties shall
submit this Agreement to its Board of Directors and Shareholders and obtain
approval thereof. Copies of corporate actions taken shall be provided to each
party.
3.02. Access to Information. Each party agrees to permit upon reasonable
notice the attorneys, accountants, and other representatIves of the other
parties reasonable access during normal business hours to its properties and its
books and records to make reasonable investigations with respect to its affairs,
and to make its officers and employees available to answer questions and provide
additional information as reasonably requested.
3.03. Expenses. Each party agrees to bear its own expenses in connection
with the negotiation and consummation of the Exchange and the transactions
contemplated hereby.
3.04. Covenants. Except as permitted in writing, each party agrees that it
will:
(i) Pending completion of the Exchange, conduct its business in accordance
with its ordinary, usual and normal course of business, and consistent with its
past practices and use its good faith efforts to preserve intact its business
organization, key employees, good will and business relationships; and
(ii) Use its good faith efforts to obtain all requisite licenses, permits,
consents, approvals and authorizations necessary in order to consummate the
Exchange; and
(iii) Notify the other parties upon the occurrence of any event which would
have a materially adverse effect upon the Exchange or the transactions
contemplated hereby or upon the business, assets or results of operations; and
(iv) Not enter into any material agreement not in the ordinary course of
its business and not to modify its corporate structure or otherwise act outside
the ordinary course of its business, except as necessary or advisable in order
to consummate the Exchange and the transactions contemplated hereby.
6
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the parties to consummate the Exchange and the
transactions contemplated hereby are subject to the following conditions which
may be waived to the extent permitted by law:
(i) Each party must obtain the approval of its Board of Directors and
Shareholders in accordance with applicable law, and such approval shall not have
been rescinded or restricted; and
(ii) Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Exchange and the
transactions contemplated hereby; and
(iii) There shall be no effective injunction, writ or preliminary
restraining order or other order of a similar nature issued by any court or
governmental agency having jurisdiction directing that the Exchange or the
transactions contemplated hereby shall not be consummated; and
(iv) The representations and warranties of the parties shall be true and
correct in all material respects at the Effective Time; and
(v) M. Keith Ives will enter into a 3 year Employment Agreement in the form
attached Exhibit E; and
(vi) Key employees of Ives as designed by Maxxon will enter into Employment
Agreements in the form attached as Exhibit E; and
(vii) Each Ives shareholder shall deliver to Maxxon its Ives Common Stock
Certificate and a Maxxon Subscription Agreement satisfactory to Maxxon.
ARTICLE V
MISCELLANEOUS
Neither party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties hereto. No
permitted assignment shall relieve a party of its obligations under this
Agreement without the separate written consent of the other parties. This
Agreement shall be binding upon and enure to the benefit of the parties and
their respective permitted successors and assigns. Each party agrees that it
will comply with all applicable laws, rules and regulations in the execution and
performance of its obligations under this Agreement. This Agreement shall be
governed by and construed
7
<PAGE>
in accordance with the laws of the State of Oklahoma. This document constitutes
a complete and entire agreement among the parties with reference to the subject
matters set forth herein. No statement or agreement, oral or written, made prior
to or at the execution hereof and no prior course of dealing or practice by
either party shall vary or modify the terms set forth herein without the prior
consent of the other parties hereto. This Agreement may be amended only by a
written document signed by the parties. Notices or other communications required
to be made in connection with this Agreement shall be delivered to the parties
at the address set forth below or at such other address as may be changed from
time to time by giving written notice to the other parties. This Agreement may
be executed in multiple counterparts, each of which shall constitute one and a
single Agreement.
ARTICLE VI
AGREEMENT TO RETAIN Ives
Maxxon agrees that it will not, without the prior written consent of M.
Keith Ives, sell, transfer or dispose of its ownership interest in Ives for a
period of 3 years after the date hereof; provided Ives meets or exceeds 80% of
its projections attached hereto as Exhibit F, assuming Maxxon makes available to
Ives the $260,000 in interim financing in accordance with Paragraphs 1.09 and
1.10 above and additional financing of $1,740,000 within 18 months after the
Closing. During the 18 months after Closing, the exact time of the additional
$1,740,000 could effect the performance of Ives. In order for Ives to reasonably
be able to meet its performance projections in Exhibit F, the parties anticipate
that the infusion of the $1,740,000 in anticipated additional funding for Ives
should be approximately as follows: $240,000 on or about September 15, 1997; an
additional $500,000 on or about December 1, 1997; an additional $500,000 on or
about June 1,1998; and $500,000 on or about December 1, 1998.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized representatIves the ____ day of June, 1997.
Ives HEALTH COMPANY, INC.
By _______________________________
M. Keith Ives, President and CEO
Maxxon, INC.
By _______________________________
Gifford Mabie, Chairman, President and CEO
8
<PAGE>
---------------------------------
M. Keith Ives, Individually and as Guarantor
ACKNOWLEDGMENTS
STATE OF OKLAHOMA )
) ss
COUNTY OF TULSA )
On the ____ day of June, 1997 before the undersigned personally appeared M.
Keith Ives, who acknowledged that he is President of Ives Health Company, Inc.,
and is authorized to execute the above instrument in his respective capacity and
for the purposes contained herein and that the above instrument is true and
correct for all purposes.
In Witness Whereof, I set my hand and official seal.
-------------------------------
Notary Public in and for Tulsa
County, Oklahoma
[seal]
My commission expires:
- ---------------------
STATE OF OKLAHOMA )
) ss
COUNTY OF TULSA )
On the ____ day of June, 1997 before the undersigned personally appeared
Gifford Mabie, who acknowledged to me that he is Chairman, President and CEO of
Maxxon, Inc., and is authorized to execute the above instrument in his
respective capacity and for the purposes contained herein and that the above
instrument is true and correct for all purposes.
In witness, I set my hand and official seal.
-------------------------------
Notary Public in and for Tulsa
County, Oklahoma
[seal]
My commission expires:
- ----------------------
9
<PAGE>
- ----------------
10
<PAGE>
LIST OF EXHIBITS
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Exhibit A List of Ives Shareholders
Exhibit B Articles of Exchange
Exhibit C Ives $60,000 Convertible Debenture
Exhibit D Use of $60,000 Proceeds
Exhibit E Ives Employment Agreements
Exhibit F Ives Projected Performance
11
<PAGE>
EXHIBIT A
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
List of Ives Shareholders
<PAGE>
EXHIBIT B
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Articles of Exchange
<PAGE>
EXHIBIT C
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Ives' $60,000 Convertible Debenture
<PAGE>
EXHIBIT E
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Ives Employment Agreements
<PAGE>
EXHIBIT D
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Use of $60,000 Proceeds
<PAGE>
EXHIBIT F
TO
AGREEMENT AND PLAN OF EXCHANGE
BETWEEN
Ives HEALTH COMPANY, INC. AND Maxxon, INC.
Ives' Projected Performance
AMENDMENT NO. 1
TO THAT CERTAIN
AGREEMENT AND PLAN OF EXCHANGE
BY AND BETWEEN
IVES HEALTH COMPANY, INC.
AND
MAXXON, INC.
This Amendment No. 1 ("Amendment") to that certain Agreement and Plan of
Exchange ("Agreement") by and between Ives Health Company, Inc. ("Ives") and
Maxxon, Inc. ("Maxxon") is entered into this 18th day of August, 1997. All
defined terms in the Agreement have the same meaning in this Amendment unless
otherwise set forth herein.
1. Amendment to Agreement. The parties agree that the Agreement is amended
so that the exhibits to the Agreement are deleted and the exhibits attached
hereto are substituted therefor.
2. Ives Performance Criteria. The parties agree that the performance
criteria set forth in the exhibits to the Agreement for Ives begin to apply
January 1, 1998 subject to receipt by Ives of the $240,000 payment, the $145,000
note payment, and the $500,000 payment and the $10,000 payment to Keith Ives
personally; and agree that so long as Ives achieves at least 75% of the stated
criteria, Ives shall remain President of Ives, unless his employment is
terminated for cause under his employment agreement.
3. Number of Shares. The parties agree that every reference to "318,182" in
the Agreement and in all exhibits thereto is changed to "621,600."
4. Gender of Pronouns. All masculine and feminine pronouns used in the
Agreement and in all exhibits thereto are intended to include all genders.
5. Agreement Remains Unchanged Except as Specifically Amended. Except as
specifically amended hereby, the Agreement remains in full force and effect.
In witness whereof, the parties have executed this Agreement with full
authority.
IVES HEALTH COMPANY, INC. MAXXON, INC.
By__________________________ By__________________________________
M. Keith Ives, President Gifford Mabie, Chairman and CEO
AGREEMENT
This Agreement ("Agreement") is entered into and effective this 31st day of
December, 1997 by and among M. Keith Ives ("Keith Ives"), Ives Health Company,
Inc. ("Ives"), Gifford Mabie ("Mabie"), and Maxxon, Inc. ("Maxxon").
Whereas, Ives and Maxxon completed a share exchange in August, 1997
pursuant to which Ives became a wholly owned subsidiary of Maxxon; and
Whereas, the parties have concluded that it is in their mutual best
interests and the interests of their shareholders to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Formation of Newco. Upon execution of this Agreement, Maxxon will
organize a new corporation ("Newco") under Oklahoma law with an authorized
capitalization of 50,000,000 shares of common stock, par value $.001 per share,
whose name shall be Ives Health Company, Inc. Keith Ives shall designate the
directors and officers of Newco. Maxxon will change the name of its current
subsidiary and make the name "Ives Health Company, Inc." available to this new
corporation.
2. Resignation of Keith Ives. Upon execution of this Agreement, Keith Ives
agrees to resign as a director, officer, employee, agent, and representative of
Maxxon in every other capacity and as a director, officer, employee, agent and
representative of The Health Club, Inc. and in every other capacity of The
Health Club, Inc.
3. Initial Business Plan for Newco.
(a) The parties agree to issue at par 7,000,000 shares of common stock to
Keith Ives. The parties agree to issue in a stock for stock tax free
reorganization, 1,700,000 shares of Common Stock of Newco in exchange for all
the issued and outstanding shares of Ives. Simultaneously, and as consideration
for the above stock exchange, Keith Ives agrees to surrender to Maxxon 275,360
shares of Maxxon Common Stock owned by him, so that thereafter he shall
personally own of record 80,000 shares of Maxxon Common Stock.
(b) The parties agree that Newco will immediately commence to conduct a
private offering under SEC Regulation D, Rule 504 to sell up to 1,000,000 shares
of Newco for $1.00 per share for up to $1,000,000 less costs and expenses
thereof ("Offering"). Newco shall bear all the costs and expenses in connection
with the Offering, including all printing, copying, mailing, shipping, filing
fees, and federal and state compliance expenses, and related brokerage and
finder's fees, expenses and commissions.
(c) In connection with the Offering, Maxxon agrees to introduce to Newco at
least 5 persons who might agree to assist Newco in the conduct of this Offering
for a fee upon terms and conditions which shall be agreed to by Keith Ives.
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<PAGE>
(d) Maxxon agrees to assist Newco in drafting a private offering
memorandum, including projections generated from information supplied by Newco,
for use by Newco in the conduct of the Offering and supplying Ives/Newco a
copied disk of the Offering. All the information in the private placement
memorandum shall be provided by Newco and Keith Ives. The parties agree that
Maxxon is rendering its services to Newco in connection with the Offering
memorandum solely as an accommodation to Newco and as an independent contractor
for no fee whatsoever. It is expressly agreed that the content of the private
placement memorandum is solely the product of Newco, for which Newco is solely
responsible; and Maxxon shall have no responsibility or liability in connection
with the Offering for any reason whatsoever, including assisting Newco in
preparing disclosure documents. The failure to disclose any facts and the
omission of disclosures from the private placement memorandum is a matter within
the sole discretion of Newco and Keith Ives and is not the determination of or
within the power or discretion of Maxxon in any respect.
(e) Newco and its officers, directors, agents, employees and
representatives shall be solely responsible for compliance with federal and
state securities laws in connection with the Offering, including the filing of
notice of Form D and all applicable state law requirements in connection
therewith. Maxxon will assist and consult with this and all applicable
compliance and filings.
(f) The parties agree that neither Maxxon nor any of its directors,
officers, employees, agents, or representatives shall have any responsibility or
liability for any matter relating to the Offering; and Newco agrees to indemnify
and hold them harmless therefrom.
(g) As soon as reasonably appropriate and after substantial completion of
the Offering, Maxxon agrees to assist Newco in the preparation of a filing with
the SEC under Section 15c211 of the Securities Exchange Act of 1934; provided
all information contained therein shall be supplied by Newco; and further
provided, neither Maxxon nor any of its directors, officers, employees, agents
or representatives shall have any responsibility or liability for the content
thereof or in connection therewith.
(h) Mabie agrees to consult with Newco and Keith Ives for up to 25 hours
after the execution of this Agreement; provided the times at which such
consulting services shall be rendered shall be at mutually agreed times and
further provided Mabie shall have no liability with respect to any advice given
or information provided during such consulting services.
4. Option to Unwind Maxxon's Acquisition of The Health Club, Inc. Maxxon
hereby grants Keith Ives the right for two years from the date of execution of
this Agreement to unwind Maxxon's acquisition of The Health Club, Inc. by paying
Maxxon the $10,000 paid to Keith Ives and by returning to Maxxon the 35,000
shares of Maxxon Common Stock issued to Keith Ives in connection with Maxxon's
acquisition thereof.
5. Distribution Agreement. Maxxon agrees to propose, execute, deliver and
enter into a distribution agreement with Newco granting Newco a non-exclusive
right to sell the Maxxon Safety Syringe TM for a period of five years after the
date hereof containing standard wholesale prices and upon terms no less
favorable to Newco than to any other distributor purchasing the same volumes,
upon the same terms and subject to other applicable requirements. Newco shall be
granted the ability to verify the terms and/or contracts of other distributors.
A draft non-exclusive distributorship agreement is attached hereto as "Exhibit
A" and will be executed by Keith Ives and Maxxon contemporaneously with the
execution of this agreement.
2
<PAGE>
6. Payment of Outstanding Invoice. The parties agree to pay the outstanding
invoices, invoiced to Ives from Frederick K. Slicker and Cross and Robinson, CPA
to Ives before this agreement can be finalized.
(a) All information, documents, etc., in the possession of Cross &
Robinson, CPA, that was removed from Ives CPA, E. Carolyn Tolmans' office must
be returned to Ives before this agreement can be finalized
(b) Regarding this transaction, Ives is responsible for payment to Russell
Barber, Attorney at Law and Maxxon is responsible for payment to Frederick K.
Slicker, Attorney ar Law and/or any other counsel.
7. No Restrictions upon Ives, Newco or Keith Ives. The parties agree that
upon execution and delivery of this Agreement there shall be imposed by Maxxon
no restrictions of any kind upon Ives, Keith Ives or Newco.
8. Transfer Restrictions of Maxxon Shares. This Agreement shall have no
adverse effect upon any applicable transfer restrictions under SEC Rule 144 or
otherwise to the extent such provisions are available.
9. Release. The parties agree that the execution and delivery of this
Agreement constitute a full and complete general release, settlement, discharge,
accord and satisfaction by Newco, Keith Ives and Ives, on the one hand, and by
Mabie and Maxxon, on the other hand, and their respective directors, officers,
employees, agents, partners, representatives, successors and assigns, from and
against any and all claims, actions, causes of action, rights, obligations,
debts, duties, demands, damages or liabilities of every kind, character and
description whatsoever, whether known or unknown, actual or contingent, from the
beginning of time through the date hereof, except as Keith Ives/Ives may bring
action against Maxxon/Mabie in the event Keith Ives/Newco are sued by third
parties which have as its basis any allegations attributable to or resulting
from the action of Maxxon/Mabie.
10. Full Settlement. Each party hereto represents and acknowledges to the
other that it has read and understands the terms, conditions and legal effect of
this Agreement; that it has been represented by counsel of its own choosing in
connection herewith; that its counsel is competent and has explained the meaning
and legal effect of the terms of this Agreement to its satisfaction; that this
Agreement is made voluntarily without any promise, inducement, threat, coercion
or intimidation of any kind, character and description from anyone; and that the
execution and delivery of this Agreement constitutes a full and final general
release, accord, satisfaction, acquittal, compromise, adjustment, adjudication,
reimbursement, restitution, discharge and settlement of all claims of Keith Ives
and Ives, on the one hand, and Mabie and Maxxon, on the other hand, and vice
versa, which either has or may have against the other. This Agreement does not
constitute an admission of wrongdoing or of liability for any reason whatsoever.
The Agreement may not be used for any purpose whatsoever except to reflect the
settlement of the parties as set forth herein.
11. Covenant not to Disparage. Keith Ives, Newco and Ives, on the one hand,
and Mabie and Maxxon, on the other hand, agree not to make untrue or disparaging
statements with respect to the other.
3
<PAGE>
12. Confidentiality with respect to this Agreement. The parties agree to
keep confidential the terms of this Agreement to the extent permitted by law and
not to disclose the terms hereof to any person without the written consent of
the other parties except as required by law. In the event any lawful process,
action, subpoena or other process is commenced against any party hereto which
seeks in whole or in part the disclosure of all or any portion of the terms and
conditions of this Agreement, the party against whom such disclosure agrees to:
(1) promptly and before any such disclosure is made notify the other parties to
this Agreement of the nature of such request; (2) seek by all appropriate means
a protective or other order preventing such disclosure; (3) cooperate fully with
the other parties in seeking a protective order preventing such disclosure; (4)
respond by stating that the information is covered by a confidentiality
agreement which cannot be disclosed without an order from a court of competent
jurisdiction requiring such disclosure; and (5) decline to make any such
disclosure unless and until ordered to do so by a court of competent
jurisdiction.
13. Binding Effect. This Agreement shall be binding upon, shall inure to
the benefit of, and shall be enforceable by and against, all the parties and
their respective heirs, legal representatives, successors and assigns.
14. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original and all of which shall
constitute one agreement. The parties agree that faxed signed copies of this
Agreement shall have the same force and effect as originals.
15. Representations. Each individual executing this Agreement on behalf of
a corporation or other entity represents and warrants that he has express
authority to bind, enter and deliver this Agreement on behalf of that entity
which he represents and that this Agreement is valid, binding and enforceable in
accordance with its terms.
16. Non Compete Clause. Maxxon/Mabie or its successors may not enter into
any negotiations or attempt to buy products or the actual operation of Cap Tabs
NFM, Inc. 5660 Eastgate Drive, San Diego, Ca 92121 and/or Summa Rx Laboratories,
Inc., 15840 FM Rd. #3028, Mineral Wells, Tx 76067. Additionally, Maxxon/Mabie or
its successors may not use any information attained from Keith Ives/Ives to
start, fund or induce start up of any competitive business, for a period of five
(5) years in any areas where Ives conducts its business, including but not
limited to the United States of America.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives effective the 31st day of December,
1977.
MAXXON, INC. IVES HEALTH COMPANY, INC.
By: __________________________ By: __________________________
Gifford Mabie, President M. Keith Ives, President
______________________________ ______________________________
Gifford Mabie, Individually M. Keith Ives, Individually
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EXCLUSIVE LICENSE AGREEMENT
BETWEEN
MAXXON, INC.
AND
WAYLAND J. RIPPSTEIN, JR., KEN KELTNER AND LYNN CARTER
THIS EXCLUSIVE LICENSE AGREEMENT ("Agreement") is entered into by and among
MAXXON, INC. ("MAXXON"), and WAYLAND J. RIPPSTEIN, JR. ("RIPP"), KEN KELTNER
("KELTNER") and LYNN CARTER ("CARTER") (together RIPP, KELTNER and CARTER are
referred to collectively as the "LICENSORS").
RECITALS
WHEREAS, LICENSORS own all the rights, titles and interests in and to that
certain single-handed, vacuum-operated safety syringe device and technology
("Ripp Syringe") covered to be covered by a US Patent to be filed on or before
December 31, 1999 ("US Patent Application"), together with all improvements,
modifications, and changes therein made therein by LICENSORS while this
Agreement remains in effect and all patents, patent applications, patent rights,
and other intellectual property rights therein ("Invention"); and
WHEREAS, LICENSORS will file and prosecute with their best good faith
diligent efforts the US Patent Application to completion through the US Patent
and Trademark Office and may apply for additional patent protection in the
Invention in jurisdictions other than in the US; and
WHEREAS, additional development of the Invention is required; and
WHEREAS, MAXXON desires to acquire, and LICENSORS desire to grant to
MAXXON, an exclusive worldwide license to use, exploit and practice the
Invention, to design, develop and manufacture products that incorporate the
Invention ("Licensed Products") and to make, market, commercialize, sell,
distribute and use the License Products on a worldwide basis.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, the parties agree as follows:
I. DEFINITIONS
The capitalized terms defined herein have the following meanings:
"Agreement" is defined in the Introduction this Exclusive License
Agreement, together with any exhibits, schedules, amendments, modifications and
changes therein from time to time.
"CARTER" is defined in the Introduction.
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"KELTNER" is defined in the Introduction.
"Invention" is defined in the Recitals.
"License" means the exclusive worldwide license in the Invention granted by
this Agreement.
"Licensed Products" means any product or part, apparatus, method, or
service, which uses or incorporates within it any of the Patent Rights and
which:
(i) Is covered in whole or in part by an issued, unexpired claim or pending
claim contained in the Patent Rights in the country in which any such
product or part thereof is made, used or sold; or
(ii) Is manufactured using a process or employees a practice or process
which is covered in whole or in part by an issued patent or an unexpired
claim contained in the Patent Rights; or
(iii) Includes any process or method which is covered in whole or in part
by an issued patent, or contains an unexpired claim contained in the Patent
Rights.
"LICENSORS" is defined in the Introduction.
"MAXXON" is defined in the Introduction.
"Minimum Royalties" is defined in Paragraph 3.03 below.
"Net Sales" shall mean the gross receipts of moneys or cash equivalents
actually received by MAXXON in consideration for the sale of Licensed Products
transferred by MAXXON or by any sublicensee, distributor or sales representative
of MAXXON from any jurisdiction in which the Patent Rights remain in full force
and effect at the time of such sale, computed on a calendar quarter basis, less
allowances for the following items which are directly related to the sale of
Licensed Products:
(a) Cash, trade, or quantity discounts; and
(b) Taxes, including sales taxes;
(c) Import, export and other customs fees and duties; and
(d) Extension of credits and any bad debts; and
(e) Returned or stopped checks or payment for any reason; and
(f) Returns, rejections and replacements of Licensed Products; and
(g) Cost of insurance in transit; and
(h) Commissions paid to foreign sales or export/import/customs agents
or other similar representatives; and
(i) Special packaging; and
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(j) Transportation and handling charges; and
(k) Other similar charges related directly to the sale of Licensed
Products.
Net Sales shall be deemed to have occurred when Maxxon actually receives payment
there for and such payment has cleared all applicable banking channels and is
not subject to be stopped or canceled.
"Patent Rights" means all intellectual property and other rights at common
law and all rights arising from the US Patent Application and any other
provisional or non-provisional patent applications and all amendments and
modifications therein, together with all re-examinations, extensions, or
continuations covering the Invention, and all patents issued covering any
portion of the Invention, and all other intellectual property rights with
respect to the Invention, together with all modifications, changes and
improvements therein.
"RIPP" is defined in the Introduction.
"Ripp Syringe" is defined in the Recitals.
"US Patent Application" is defined in the Recitals.
II. GRANT OF EXCLUSIVE LICENSE
2.01 EXCLUSIVE LICENSE. LICENSORS hereby grant to MAXXON, and MAXXON hereby
accepts from LICENSORS, upon the terms and conditions herein specified, an
exclusive worldwide License to do the following:
(i) Use, exploit and practice the Patent Rights; and
(ii) Design, develop and improve, and assist LICENSORS to design, develop
and improve the Invention and the Licensed Products; and
(iii)Make, market, commercialize, sell and use Licensed Products;
(iv) Sublicense and contract with others to provide services in connection
with Licensed Products to do any of the foregoing.
2.02 PROHIBITED ACTS BY LICENSORS. LICENSORS agree that they will not:
(i) Grant any licenses in the Invention or the Patent Rights to others; or
(ii) Provide Licensed Products to others for any commercial purpose; or
(iii)Subject to and consistent with Article VII hereof, permit others to
use the Invention or Licensed Products for any commercial use.
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Notwithstanding the provisions contained in Paragraphs 2.01 and 2.02 above,
LICENSORS agree to provide consulting and other assistance in the design,
development and commercialization of Licensed Products, to assist and cooperate
with Maxxon in the design, development and commercialization of Licensed
Products; and to provide consulting services for and cooperation with engineers,
mold manufacturers, and manufacturers of Licensed Products to advance and
further the commercialization of Licensed Products.
2.03 RESERVATION OF RIGHTS. LICENSORS reserve the right to make, use and
further develop the Invention and to practice the Invention or the Patent Rights
for their own educational, research and non-commercial purposes; but they agree
that they will not make or permit others to make commercial sales or use of
Licensed Products except through MAXXON or its authorized representatives.
2.04 DUE DILIGENCE. The parties agree to use their good faith diligent
efforts to bring one or more Licensed Products into the commercial market and to
continue active, diligent marketing efforts for one or more Licensed Products
throughout the life of this Agreement.
2.05 SUBLICENSING BY MAXXON. MAXXON has the right to grant sublicense,
distribution, manufacturing and marketing rights to third parties in its sole
discretion upon terms and conditions it deems appropriate. MAXXON agrees to
consult with LICENSORS before any such transaction and to give sympathetic
consideration to the comments, questions and concerns of LICENSORS with respect
thereto, provided that LICENSORS shall not have the right to veto any such
transaction. Copies of all such agreements shall be provided to LICENSORS. For
purposes of coordination and cooperation contemplated by the Paragraph, the
LICENSORS hereby designate RIPP as their representative, and MAXXON shall be
deemed to have coordinated with LICENSORS hereunder if MAXXON has coordinated
with LICENSOR's designated representative. MAXXON hereby designates Dr. Thomas
Coughlin, Jr. as its representative.
2.06 COMMERCIAL DISTRIBUTION OF LICENSED PRODUCTS. The License rights
granted hereunder entitle MAXXON to make, use, sell, practice, exploit and
distribute Licensed Products and to permit others to do the same, through any of
its or their affiliates, subsidiaries and distributors, and to sell Licensed
Product through any channels of commerce, including manufacturers.
2.07 PERFORMANCE SCHEDULE. MAXXON and the LICENSORS agree to cooperate in
good faith with each other, to communicate and coordinate promptly and use their
best good faith diligent efforts to bring the Ripp Syringe to commercialization
as promptly as reasonably possible under all the circumstance. In that regard,
upon the execution of this Agreement, Dr. Thomas Coughlin, Jr. of MAXXON and
RIPP will promptly meet to arrange the manufacture of soft molds for the making
of a prototype of the Ripp Syringe and coordinate with each other to establish a
schedule for the making of a full working prototype of the Ripp Syringe as soon
as is reasonably possible. Thereafter, MAXXON and the LICENSORS will continue to
bring the Ripp Syringe to market with all deliberate speed. MAXXON and LICENSORS
may designate successor representatives to assist in
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the technical development of the Ripp Syringe from time to time by giving the
other notice of the successor technical representative.
2.08 REQUIREMENT TO USE GOOD FAITH EFFORTS TO COMMERCIALIZE. MAXXON agrees
to use its good faith diligent efforts to commercialize the Ripp Syringe after
Completion of Development of the Ripp Syringe.
III. COMPENSATION
3.01 ROYALTIES. MAXXON agrees to pay LICENSORS royalties at the rate of 4%
per cent of Net Sales of Licensed Products which MAXXON actually receives from
the sale of Licensed Products, paid quarterly on or before the last day of
January, April, July, and October of each year in which Licensed Products are
sold. MAXXON agrees to provide LICENSORS a report of Net Sales in sufficient
detail for the LICENSORS to calculate applicable royalties.
3.02 PAYMENTS UPON THE OCCURRENCE OF CERTAIN CONDITIONS. MAXXON agrees to
pay LICENSORS $200,000 as follows: $100,000 to RIPP; $50,000 to KELTNER; and
$50,000 to CARTER, subject to satisfaction of the following conditions: (1) The
issuance of a US Patent covering the Ripp Syringe and the Invention; (2) The
completion of a fully functional and working safety syringe using the Invention;
and (3) FDA approval to sell Ripp Syringes in the US; provided that the events
set forth in subparagraphs (1), (2), and (3) above shall occur on or before
September 30, 2001; and further provided that MAXXON agrees to pay the
obligations represented by this paragraph on a superior basis to all other
indebtedness out of the first $200,000 of net profits from the sale of Ripp
Syringes, even if those syringes do not have FDA approval and even if those
syringes are sold in jurisdictions not requiring FDA approval. In the event such
events have not occurred by September 30, 2001, then the obligations of MAXXON
to pay the LISENSORS under this paragraph shall be terminated and of no force or
effect. In addition, the unpaid principal balance of the obligations to pay
LICENSORS under this paragraph shall bear interest at the simple rate of 8% per
annum, compounded annually, from and after the due date until paid in full.
3.03 MINIMUM ROYALTIES. MAXXON agrees to pay LICENSORS a minimum annual
royalty in order to keep the License in full force and effect from and after
Completion of Development of the Ripp Syringe as follows:
A. BEGINNING ON THE 4TH annual anniversary after Completion of
Development of the Ripp Syringe and for each of the next 3 years,
$10,000 less Royalties paid in the previous year; and
B. BEGINNING ON THE 7TH annual anniversary after Completion of
Development of the Ripp Syringe and for each of the next 3 years,
$15,000 less Royalties paid in the previous year; and
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C. BEGINNING ON THE 10TH annual anniversary after Completion of
Development of the Ripp Syringe and for each year thereafter, $20,000
less Royalties paid in the previous year.
3.04 INITIAL SUBLICENSE FEES. MAXXON agrees to pay to LICENSORS 10% of all
initial sublicense, distribution and other marketing fees actually received by
MAXXON, in addition to the royalty payment set forth in Paragraph 3.01 above.
3.05 REIMBURSEMENT OF PATENT COSTS. MAXXON agrees to escrow $10,000 upon
the execution of this Agreement to be used to pay patent application fees in
connection with the Invention as an advance against royalty payments provided
for in Paragraph 3.01. MAXXON may pay other patent fees and expenses from time
to time as an advance against royalties provided for in Paragraph 3.01 above,
including patent and maintenance fees, reasonable attorneys' fees and expenses
and other costs incurred in connection with filing, prosecuting, securing and
maintaining Patent Rights.
3.06 OPTIONS IN MAXXON COMMON STOCK. MAXXON agrees to grant to LICENSORS
stock options to purchase 1,600,000 shares in the aggregate of Common Stock of
MAXXON in accordance with the Option Agreements attached as exhibits hereto. The
Options and the Option shares issuable upon the exercise of such Options may be
pledged as collateral to secure loans to an INVENTOR, but the foreclosure upon a
default thereof shall be subject to all applicable laws, rules and regulations,
including applicable federal and state securities laws.
3.07 ADDITIONAL COMPENSATION. In the rights of MAXXON hereunder are sold or
MAXXON is a participant in a merger, share exchange, reorganization, or other
form of business acquisition before any Licensed Product is sold, then MAXXON
agrees to deliver to LICENSORS 25% of the compensation received by MAXXON upon
the consummation of any such transaction, after the payment of creditors but
before the distribution of any consideration to the shareholders of MAXXON.
3.08 FORM OF PAYMENTS. All payments to LICENSORS hereunder shall be paid in
the same form of consideration as is received by MAXXON; provided however,
MAXXON in its discretion may make any such payments in US dollars. All payments
in currencies other than U.S. dollars shall be calculated using the appropriate
exchange rate for such transactions quoted by the Citibank NA, New York foreign
exchange desk on the last banking day of each calendar quarter.
IV. TERM AND TERMINATION
4.01 TERM. This Agreement shall become effective as of the first date set
forth above and shall continue in effect for the last Patent Rights to expire in
any country in which a patent may have been issued, extended or renewed. MAXXON
shall not be required to pay royalties by reason of the manufacture, use or sale
of Licensed Products in any jurisdiction after the License has expired or the
Patent Rights have expired in that jurisdiction.
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<PAGE>
4.02 TERMINATION. This Agreement may be terminated by a party:
(d) In the event the other party commits any material breach of its duties
under this Agreement by giving written notice thereof to the other
party stating the nature of the defaults claimed. The breaching party
shall have 60 days to cure the asserted defaults. This Agreement shall
continue in full force and effect as if such notice had not been given
if the breaching party cures the defaults.
(b) This Agreement shall terminate at the election of a party if either
MAXXON or LICENSORS permits any of the following events to occur:
(i) A party suspends or abandons its business; or
(ii) A party files a voluntary petition in bankruptcy or any
creditors' rights proceeding filed against it; or
(iii)A party admits the material allegations in any involuntary
petition in bankruptcy or any creditors' rights proceeding filed
against it; or
(iv) A party makes a general assignment of all or substantially all
its assets for the benefit of creditors; or
(v) A party applies for or consents to the appointment of a receiver
or trustee or similar representative over all or substantially
all its assets.
4.03 EFFECT OF TERMINATION. Upon termination of this Agreement, MAXXON
shall cease all production and sale of Licensed Products, except for the
production and sale of Licensed Products on which production had begun prior to
notice of such termination or orders have been accepted prior to the receipt of
notice of termination. MAXXON may continue to sell such Licensed Products for up
to one year after such notice upon payment of royalties accruing thereon. MAXXON
agrees to provide a report of Net Sales to the LICENSORS of any royalties which
may become due by reason thereof.
V. PROSECUTION AND MAINTENANCE OF PATENT RIGHTS
LICENSORS shall prosecute, pursue and maintain the US Patent
Application and all other patent applications relating to the Invention and to
use their best, good faith, diligent efforts to secure patents in the US and in
such other jurisdictions as the parties mutually agree and to protect all the
Patent Rights and intellectual property rights relating thereto, using patent
counsel of their choice; provided, however, that MAXXON shall have reasonable
opportunities to advise LICENSORS with respect to marketing and other
considerations related to the Licensed Products and related needs for
intellectual property protection, and MAXXON shall cooperate with LICENSORS with
respect to the filing, prosecution and maintenance of such patent applications
and patents. LICENSORS shall
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<PAGE>
cooperate and coordinate with MAXXON on such filings and provide copies of
material documents relevant to any such filings in sufficient time to review and
comment upon such documents before filed. All attorneys' fees and expenses,
filing fees and other costs of preparing, filing and prosecuting such
applications patent issuance shall be the responsibility of LICENSORS. If
LICENSORS elect not to pay the expenses of a patent application or maintain an
issued patent included within the Patent Rights or seek a patent in a
jurisdiction which MAXXON believes is important to protect the rights of the
Invention, MAXXON shall have the right to pursue such patent protection and
charge the costs thereof to LICENSORS; provided, however, MAXXON shall notify
LICENSORS.
VI. CONFIDENTIALITY
MAXXON has entered into a Confidentiality Agreement with LICENSORS prior to
the date hereof. The obligation of confidentiality thereunder shall continue in
accordance therewith; provided, however, the obligation of confidentiality shall
not apply to information which is:
(a) In the public domain or which becomes generally available to the
public through no fault of the receiving party; or
(b) Already known to or in the possession of the receiving party prior to
disclosure by the disclosing party; or
(c) Disclosed on a non-confidential basis from a third party having the
right to make such a disclosure; or
(d) Independently developed by the receiving party (by activity not
associated with the Patent Rights); or
(e) Not in fact confidential, proprietary or competitively sensitive; or
(f) Required to be disclosed by law or governmental order.
VII. INFRINGEMENT
7.01 THIRD PARTY INFRINGEMENT OF PATENT RIGHTS. MAXXON and LICENSORS shall
promptly provide written notice to the other party of any alleged infringement
by a third party of the Patent Rights and provide such other party with any
available evidence of such infringement. In the event there is good reason to
believe infringement of any of the Patent Rights is occurring, the parties will
jointly take prompt action to abate or settle such infringement. Either party
shall have the right to institute an action in its own name in so far as
permitted by law to abate the infringement and may join the other as a party
plaintiff.
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7.02 ENFORCEMENT AND DEFENSE. MAXXON shall have the right to prosecute and
defend, at its own expense and utilizing counsel of its choice, any claim of
infringement of or challenge to the validity of the Patent Rights. MAXXON shall
promptly provide LICENSORS copies of all material documents in such proceedings.
No settlement, consent judgment or other voluntary final disposition of any such
suit may be entered into without the written consent of LICENSORS, which consent
shall not unreasonably be withheld.
7.03 COSTS OF ENFORCEMENT AND DEFENSE. In the event that MAXXON shall
undertake the enforcement or defense of the Patent Rights, MAXXON shall have the
right to withhold and set off royalties payable hereunder to LICENSORS to cover
their equal share of all such costs and expenses. In the event MAXXON recovers
from the infringer MAXXON's legal fees or other expenses of litigation, it shall
promptly reimburse LICENSORS any retained royalties.
7.04 CONTROL. If within six (6) months after receiving notice of any
alleged infringement of the Patent Rights by a third party, MAXXON shall have
been unsuccessful in persuading the alleged infringer to desist or shall not
have brought and shall not be diligently prosecuting an infringement action, or
if MAXXON shall notify LICENSORS at any time prior thereto of its intention not
to bring suit against the alleged infringer, then LICENSORS shall have the
right, but not the obligation, to prosecute, at its own expense, utilizing
counsel of its choice, any infringement of the Patent Rights, and LICENSORS may,
for such purposes, join MAXXON as a party plaintiff. The total cost of any such
infringement action commenced solely by LICENSORS shall be borne by LICENSORS;
and LICENSORS shall keep any recovery or damages for past infringement derived
therefrom.
7.05 COOPERATION. In any suit to enforce or defend the Patent Rights
pursuant to this Agreement, the party not in control of such suit shall, at the
request and expense of the controlling party, cooperate in all respects and, to
the extent reasonably possible, have its employees testify when requested and
make available relevant records, papers, information, samples, specimens, and
the like.
7.06 DAMAGES. In the event MAXXON institutes an action for infringement of
Patent Rights and a settlement is entered into or monetary damages are awarded
in a final non-appealable judgment, the amount paid as a result of such
settlement or the monetary damages awarded shall be applied first to the payment
of MAXXON's unpaid attorney's fees incurred in bringing the action. Any such
recovery shall be included in MAXXON's calculation of Net Sales, applied to the
quarter in which such recovery is obtained.
7.07 INFRINGEMENT CLAIMS. Each party shall promptly notify the other upon
receipt of any information regarding any proceedings commenced or threatened
against either party or any purchaser of a Licensed Product on the ground that
the manufacture, use, sale or possession of the Licensed Product is an
infringement of any third party's intellectual property rights. MAXXON and
LICENSORS shall jointly defend all suits brought against it as a result of the
exercise of the rights granted hereunder, and each agrees to render all
reasonable assistance in any such proceedings. The
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costs of all such actions shall be borne equally by the parties. Payment of any
amounts which may be recovered by such third party by way of judgement, award,
decree, or settlement, that resulted from infringement of third party patent
rights by a Licensed Product, including attorneys' fees and expenses and other
costs related thereto, shall be shared equally by the parties. Each of the
LICENSORS and MAXXON agrees not to settle or compromise any action, suit or
proceeding in a manner that would materially and adversely affect the rights of
the other or the Patent Rights, without the written consent of the other.
VIII. WARRANTIES AND INDEMNITIES
8.01 DISCLAIMERS. Nothing in this Agreement shall be construed as:
(a) A warranty or representation by LICENSORS as to the validity or scope
of the Patent Rights, except that LICENSORS reasonably believe that
the Patent Rights do not infringe the rights of others; or
(b) A warranty or representation by LICENSORS that anything made, used,
sold, or otherwise disposed of through the License granted herein is
or will be free from infringement of patents, copyrights, trademarks,
or other proprietary rights of third parties.
8.02 GENERAL REPRESENTATIONS. Each party represents and warrants to the
other that: (i) it has all requisite authority and power to enter into and
perform its obligations under this Agreement; (ii) the person who has executed
this Agreement for such party has all requisite authority to do so for and on
behalf of that party; and (iii) this Agreement is valid, binding and enforceable
in accordance with its terms.
IX. INDEMNIFICATION
9.01 INDEMNIFICATION. Each party agrees to indemnify, defend and hold
harmless the other party and its directors, officers, employees, agents and
representatives, and their respective successors, heirs and assigns
("Indemnities"), against any liability, damage, loss or expenses (including
reasonable attorneys' fees and expense of litigation) incurred by or imposed
upon any one of them in connection with any claims, suits, actions, demands or
judgments arising out of any theory of law arising by reason of a breach of its
duties hereunder. With respect to infringement by the Invention of third party
intellectual property rights, each party understands and agrees that each is
entering into this Agreement reasonably believing that the Invention does not
infringe the rights of others, but no assurance is given by either party to that
effect. Each party shall give prompt written notice to the other of the
commencement of any action, suit, or proceeding for which indemnification may be
sought and shall cooperate reasonably with the other in the defense and
prosecution thereof. Neither party may settle any such dispute where the
settlement adversely affects the rights of the other without the written consent
of the other.
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9.02 Diclaimer. LICENSORS MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES
OF ANY KIND, EXPRESSED OR IMPLIED, EXCEPT TO THE EXTENT THAT LICENSORS OWN THE
INVENTION AND THE PATENT RIGHTS AND THAT THEY REASONABLY BELIEVE THAT INVENTION
AND PATENT RIGHTS DO NOT INFRINGE ANY RIGHTS OF ANY OTHER PERSON OR ENTITY.
X. PATENT MARKINGS
The parties each agree to comply with all applicable laws, rules and
regulations applicable to its performance hereunder. MAXXON will require any
manufacturers to comply with all applicable laws relating to the marking of
Licensed Products on packaging with patent pending, patent numbers, copyrights,
and other intellectual property notices and legends required to maintain the
intellectual property rights licensed in this Agreement.
XI. MISCELLANEOUS
11.01 MANNER OF PAYMENT. All payments hereunder shall be made by check to
LICENSORS. MAXXON shall not withhold taxes required to be paid to a taxing
authority on account of such income to LICENSORS, except as required by
applicable law. Only where required to do so, MAXXON shall withhold taxes in
accordance with applicable law and inform LICENSORS of all amounts so withheld.
All such tax liabilities are the sole responsibility of LICENSORS.
11.02 PROVISIONS CONTRARY TO LAW. The parties agree to comply with all
laws, rules and regulations applicable to the performance of their obligations
hereunder.
11.03 NOTICES. Any notice may be initially given by facsimile with
confirmation required or permitted to be given by this License by postpaid,
first class, registered or certified mail addressed as set forth below unless
changed by notice so given:
For MAXXON: For LICENSORS:
MAXXON, INC. Ken Keltner
8908 South Yale, Suite 409 c/o Petroxx Resources, Inc.
Tulsa, OK 74137-3545 1918 East 51st-3 West
Attn: Gifford Mabie Tulsa, OK 74105
Phone: (918) 492-1257 Phone: (918) 493-1726
Fax: (918) 492-2560 Fax: (918) 742-6521; and
Wayland J. Rippstein
Route 2 Box 820
Alvin, TX 77511
Phone: (281) 331-1230
Cell: (281) 414-4810
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Such notices properly addressed shall be effective upon receipt by the party to
whom notice is sent.
11.04 DISPUTE RESOLUTION. The parties agree to use good faith reasonable
diligence to seek to resolve all disputes by mutual agreement. All disputes
arising hereunder not resolved by mutual agreement shall be resolved by binding
arbitration conducted in English in Tulsa, Oklahoma in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association. The
parties agree to be fully and finally bound by a decision made in arbitration.
Each party agrees to submit to and not contest personal jurisdiction or venue in
Tulsa County, Oklahoma. The prevailing party in any such proceeding shall be
entitled to be awarded its attorneys' fees and expenses, enforcement costs and
such other relief as the court of competent jurisdiction shall award.
11.05 FORCE MAJEURE. Neither party to this Agreement shall be liable for
delay or failure in the performance of any of its obligations hereunder, except
for the payment of money, if such delay or failure is DUE TO CAUSES BEYOND ITS
REASONABLE CONTROL. THE PARTY AFFECTED BY A FORCE MAJEURE event shall use its
good faith diligent efforts to remedy such event as soon as is reasonably
possible.
11.06 ASSIGNMENTS. This Agreement may not be assigned by either party
without the written prior consent of the other party, which consent shall not be
unreasonably withheld; provided, however, MAXXON may assign this Agreement or
any portion hereof to an affiliate or to a successor of all or substantially all
of its business relating to the Licensed Products without the consent of
LICENSORS and MAXXON shall provide LICENSORS notice of any such assignment.
Assignees of this Agreement may also assign this Agreement in the manner
described above. Assignees are bound by all the obligations of this Agreement.
The parties hereto agree that each is acting as an independent contractor and
not as an agent of the other or as joint venturers.
11.07 WAIVERS AND MODIFICATIONS. The failure of any party to insist on the
performance of any obligation hereunder shall not act as a waiver of such
obligation. No waiver, modification, release, or amendment of any obligation
under this Agreement shall be valid or effective unless in writing and signed by
both parties hereto.
11.08 SUCCESSORS IN INTEREST. This Agreement shall inure to the benefit of
and be binding on the parties' permitted assigns, successors in interest, and
subsidiaries.
11.09 CHOICE OF LAW AND JURISDICTION. This Agreement is subject to and
shall be construed and enforced in accordance with the laws of Oklahoma.
11.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by this Agreement.
11.11 NO EFFECT ON OTHER AGREEMENTS. This Agreement shall not alter or
affect in any way any agreement by or between the parties or their affiliates
with respect to any subject.
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11.12 FAILURE TO OBTAIN A US PATENT. LICENSORS agree to use their best
efforts to cause the US Patent Application to be approved, resulting in the
issuance of valid US patents covering the Invention. In the event that a US
patent is not issued after LICENSORS have used their best efforts in that
effort, these shall not be any liability by LICENSORS to MAXXON by reason of the
failure to secure the issuance of a US patent covering the Invention.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date written below.
MAXXON, INC. LICENSORS:
By ______________________________ ____________________________________
Gifford Mabie, President Wayland J. Rippstein, Jr.
------------------------------------
Lynn Carter
------------------------------------
Ken Keltner
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ADDENDUM
THIS ADDENDUM IS ENTERED INTO THIS 18TH day of November, 1999, between
Maxxon, Inc. and Wayland J. Rippstein, Jr., Ken Keltner, and Lynn Carter
("Licensors"). The parties agree as follows:
1. This Addendum shall supercede and clarify the terms and conditions
contained in the Exclusive License Agreement between the parties. If the terms
and conditions of this Addendum conflict the Exclusive License Agreement, this
Addendum shall control.
2. The Exclusive License Agreement covers only the Ripp Syringe and
improvements and modifications thereto. The Exclusive License Agreement does not
apply in any way to any other invention, idea or patents of Licensors.
3. Maxxon agrees to pay Licensors royalties at the rate of 4% of gross sales
of Licensed Products. There shall be no deductions taken into account in
determining the royalty of 4% of gross sales of Licensed Products. All
deductions listed under the definition of Net Sales shall be deleted, and all
references to Net Sales shall refer to gross sales.
4. The royalty of 4% of gross sales due Licensors shall remain the property of
Licensors and shall be deemed a covenant running with the all rights concerning
the Ripp Syringe. In no manner, either expressed or implied, does Maxxon have
the right to change this gross royalty of 4% due to Licensors.
5. In the event Maxxon files bankruptcy or an involuntary petition in
bankruptcy is successful against Maxxon, at the election of Licensors, this
agreement shall immediately be terminated, and Licensors shall be vested with
all right, title, and interest to the patent or any other right regarding the
Ripp Syringe.
6. Paragraph 7.03 is amended to read as follows:
7.03. Costs of Enforcement and Defense. In the event MAXXON shall undertake
the enforcement or defense of the Patent Rights, MAXXON shall pay the costs
thereof, and MAXXON shall not seek or be entitled to reimbursement from
LICENSORS for any amount thereof.
<PAGE>
7. The parties acknowledge that other than the amendments and clarifications
contained in this Addendum, all other terms and conditions of the Exclusive
License Agreement shall remain in full force and effect.
In Witness Whereof, this Addendum was executed the day and year first
written above.
MAXXON, INC.
By_________________________________ ____________________________________
Gifford M. Mabie, President Wayland J. Rippstein, Jr.
- --_________________________________ ____________________________________
Ken Keltner Lynn Carter
MAXXON, INC.
TECHNICAL CONSULTING AGREEMENT
WITH
WAYLAND J. RIPPSTEIN, JR.
This Agreement ("Agreement") is entered into by and between Maxxon, Inc.
("Maxxon"), and Wayland J. Rippstein, Jr. ("RIPP") effective on the date set
forth above the signatures below.
WHEREAS, Maxxon is a development stage company which owns the exclusive
right to manufacture and market a US patented safety syringe; and
WHEREAS, the parties have determined that there exists a huge market for
safety syringes that can meet strict FDA safety and quality standards, that can
be operated with one hand, and that can be sold at wholesale at or near the
existing wholesale price for non-safety syringes; and
WHEREAS, RIPP is the inventor of a new one-handed vacuum-operated
proprietary safety syringe ("RIPP's Syringe") which is different in design than
the safety syringe in which Maxxon has an exclusive license; and
WHEREAS, Maxxon, RIPP and others have entered into an Exclusive License
Agreement ("License Agreement") covering RIPP's Syringe and related rights; and
WHEREAS, the parties believe that RIPP's Syringe will become the standard
safety syringe in the market if it can be produced efficiently, if it can be
approved by the FDA, if it can meet strict quality and safety standards and if
it can be manufactured and sold at a price of approximately $0.10; per unit; and
WHEREAS, RIPP has agreed to provide Maxxon certain technical assistance and
consulting services in the development of RIPP's Syringe in accordance with this
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, parties agree as follows:
1. ACCEPTANCE OF ENGAGEMENT. Maxxon hereby agrees to engage RIPP on a
non-exclusive basis, and RIPP agrees accepts the non-exclusive
engagement from Maxxon, to use his best good faith diligent efforts to
and provide technical assistance and consulting services to achieve
startup of production of RIPP's Syringe.
2. STANDARD OF PERFORMANCE. RIPP shall perform his duties hereunder in
accordance with generally accepted design and engineering standard in
furtherance of the expeditious commercialization of RIPP's Syringe.
3. SCOPE OF PROJECT. The project ("Project") consists of the expeditious
completion of the design, development and production of working
prototype units of RIPP's
<PAGE>
Syringes made off of molds which will produce several thousand working
prototype syringes for use in field testing and gathering data to
support an FDA application for approval of commercial sale of RIPP's
Syringe in the US.
4. DEFINITION OF STARTUP. The term "Startup" means the completion and
assembly of prototype units of the Ripp Syringe where each part made
from an approved mold meets technical specifications, where all the
production molds meet technical specifications, and where each part
produced off of the molds has been assembled with other parts produced
off of approved molds into a working safety syringe which meets
technical specifications, in each case as reasonably and in good faith
determined by RIPP.
5. RIPP'S DUTIES. RIPP shall perform the following duties:
(a) File, prosecute and secure the issuance of US and agreed foreign
patents and other intellectual property protection; and
(b) Design, engineer, and develop RIPP's Syringe through the startup
phase, including approval of molds for syringe production and the
production of working prototypes ready for commercial production;
and
(c) Assist, consult with and cooperate with Maxxon and with the mold
manufacturers in the design and production of molds for the
manufacture of RIPP's Syringe; and
(d) Assist, consult with and cooperate with Maxxon and with the
syringe manufacturer of RIPP's Syringes in the development and
production of working prototype models of RIPP's Syringes ready
for commercial production; and
(e) Coordinate, cooperate and consult with others in the development
and production of RIPP's Syringe; and
(f) Coordinate and communicate with Maxxon as appropriate but at
least weekly on the status of development and on the existence
and status of proposed solution to any problems with RIPP's
Syringe;
(g) Provide general technical assistance through the startup of this
Project, which includes the development of prototypes and the
modification, adjustment and changes in the prototype syringes to
the point of Startup; and
(h) Spend approximately 50% or more of his reasonable business time,
effort and attention in the performance of his duties hereunder
through Startup; and
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(i) Meet with present and potential investors, funding sources,
strategic and financial acquires, distributors and licensors and
others having a substantial and real interest in completing an
acquisition, funding, investment or commercial transaction with
Maxxon from time to time; and
(j) Provide such other assistance as RIPP deems appropriate in the
development and commercialization of RIPP's Syringe.
6. COMPENSATION. Maxxon agrees to pay RIPP in the aggregate the following
amounts:
(i) $12,500 upon execution of this Agreement; plus
(ii) $12,500 upon the manufacture of the first fully operational
working prototype of RIPP's Syringes; plus
(iii)$25,000 upon Startup; and
(iv) A bonus in the discretion of the Board of Directors of Maxxon if
Startup occurs before March 31, 2000.
In addition, Maxxon agrees to reimburse RIPP is travel costs in
connection with his trips to Tulsa in connection with the negotiations
leading up to this Agreement and the License Agreement.
7. NATURE OF RELATIONSHIP. RIPP and Maxxon are independent contractors
and are not partners, joint venturers, employees, agents, or other
representatives of the other. Neither RIPP nor Maxxon is authorized or
empowered to bind the other in any capacity without the express
written consent of the other. Each of RIPP and Maxxon are solely
responsible for all costs and liabilities incurred by them arising
from taxes of every kind, and/or relating to its own employees and
other representatives, and/or relating to the conduct of its business
as an independent entity; and each agrees to indemnify and hold the
other harmless therefrom. RIPP shall not be entitled to receive any
employee or other compensation or benefits from Maxxon.
8. NO CONFLICTING ACTIVITIES. RIPP agrees not to engage in any activities
that directly compete with the business, products or services of
Maxxon. Maxxon agrees that RIPP may engage in various businesses and
other consulting arrangements that do not directly or indirectly
compete with the rapid commercialization of RIPP's Syringe.
9. OWNERSHIP OF INFORMATION. Maxxon agrees that the developments,
improvements, modifications and changes in RIPP's Syringe discovered
during the performance of
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<PAGE>
this Agreement shall belong to RIPP, provided that Maxxon shall have
the right to use, make, manufacture, distribute, sell and
commercialized products incorporation such developments, improvements,
modifications and changes in accordance with the License Agreement.
10. TERM. This Agreement shall commence upon execution of the License
Agreement and shall end at Startup which shall occur on or before
December 31, 2001. If the Start-up has not occurred by December 31,
2001, this Agreement shall terminate, unless the parties mutually
agree to extend the term hereof.
11. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
occurrence of any of the following events: (a) voluntary notice of
termination given in writing not less than 30 days' prior notice by
either party; (b) a party becomes legally or practically unable to
perform its obligations hereunder; and (c) for cause. "Cause" shall
mean (i) material breach of this Agreement; (ii) misrepresentation of
a material fact; (iii) omission of a material fact; (iv) willful
misconduct; (v) material negligence; and (vi) failure to comply with
an applicable law, rule or regulation.
12. REMEDIES. Each party shall be entitled to exercise all remedies
available to it under a law or in equity in the event the other party
breaches its obligations hereunder.
13. MISCELLANEOUS.
(a) NOTICES. Any notice, request, demand or other communication
required to be made or which may be given to either party hereto
shall be delivered by certified U.S. mail, postage prepaid, to
that party's attention at the address set forth below or at such
other address as shall be changed from time to time by giving
notice hereunder.
(b) ENTIRE AGREEMENT. This document constitutes the complete and
entire employment agreement between the parties hereto with
reference to the subject matters hereof. No statement or
agreement, oral or written, made prior to or at the signing
hereof, and no prior course of dealing or practice by either
party shall vary or modify the written terms hereof.
(c) HEADINGS. The headings and captions contained in this Agreement
are for ease and convenience of reference only and shall not be
deemed for any purpose to affect the substantive meaning of the
rights and duties of the parties hereto in any way.
(d) BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
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<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which has the same text and each of which
shall be deemed an original for all purposes, but together they
constitute one single and the same agreement.
(f) AMENDMENTS. This Agreement may be amended only by a written
document signed by the parties and stating that the document is
intended to amend this Agreement.
(g) APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with Oklahoma law.
(h) DISPUTES. All disputes not resolved by mutual agreement within 60
days, or such longer time as the parties mutually agree, shall be
submitted to binding arbitration pursuant to the Commercial Rules
of Arbitration of the American Arbitration Association. All
arbitration hearings shall be conducted in English and held in
Tulsa, Oklahoma. The prevailing party in any arbitration or suit
brought to interpret or enforce this Agreement shall be entitled
to recover reasonable attorney's fees and expenses in addition to
any other relief which it is entitled.
(i) ADDITIONAL DOCUMENTS. The parties hereto shall enter into and
execute such additional agreements, understandings, documents or
instruments as may be necessary to implement the intent of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed effective this 18th day of November, 1999.
MAXXON, INC.
BY___________________________ ________________________________
GIFFORD M. MABIE, PRESIDENT WAYLAND J. RIPPSTEIN, JR.
8908 South Yale, Suite 409 Route 2, Box 820
Tulsa, OK 74137-3545 Alvin, TX 77511
Phone 918-492-1257
Fax 918-492-2560
<PAGE>
CONSULTING AGREEMENT
This consulting agreement ("Agreement") is entered into by and between MAXXON,
INC. (MAXXON) and UTEK CORPORATION (UTEK) effective THE 15TH day of November
1999.
For good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. SCOPE OF SERVICES. UTEK agrees to provide technology merchant
consulting services to MAXXON to identify, evaluate and recommend
potential technology acquisitions that are synergistic with MAXON's
existing medical technologies. This technology search shall review
technologies form US research institutions and US government
laboratories.
2. COMPENSATION. In consideration for providing the above services,
MAXXON agrees to pay UTEK a total of 500,000 shares. Payable upon
execution of this Agreement.
3. TERM. The term for performance of the services of this Agreement shall
begin November 15, 1999 and ending December 31, 1999.
4. The laws of the State of Oklahoma govern this Agreement.
The parties have executed this Agreement effective November 15, 1999.
MAXXON, INC. UTEK CORPORATION
By:_____________________ By:_______________________
Gifford Mabie, President Dr. Clifford M. Gross, CEO
MAXXON, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT ("AGREEMENT"), MADE AS OF THE 18TH day of November, 1999, by
and between MAXXON, INC. ("MAXXON") and Lynn Carter ("Optionee").
1. THE OPTION. In consideration of the sum of $10 in prior services
rendered and other valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, Maxxon hereby grants to Optionee an option to
purchase 400,000 shares of common stock of Maxxon in accordance with the
Agreement.
2. OPTION EXERCISE PRICE. The exercise price is $0.50 per share, the fair
market value on the date of grant, subject to adjustment as provided in this
Agreement. The parties acknowledge and agree that the fair market value on the
date hereof is $0.50 per share.
3. EXERCISE OF THE OPTION. The Option may be exercised at any time, and
from time to time, in whole or in part, on or before October 31, 2009, as
provided in Paragraph 8 below, subject to the satisfaction of the following
conditions:
A. Options covering 80,000 shares shall be exercisable from and after the
date hereof without regard to the satisfaction of any of the
conditions set forth below; and
B. Options covering 80,000 shares shall become eligible to be exercised
from and after the time when a fully working safety syringe has been
produced and demonstrated to be safe and reliable and meeting the
specifications of the proprietary technology ("Ripp Syringe") covered
by that certain Exclusive License Agreement dated simultaneously with
the grant of this Option ("License Agreement") as certified in good
faith by Wayland J. Rippstein, the inventor; and
C. Options covering 80,000 shares shall become eligible to be exercised
from and after the time when a US patent covering the Ripp Syringe is
published; and
D. Options covering 80,000 shares shall become eligible to be exercised
from and after the time when there is produced a "first article" fully
working safety syringe off of hard production molds where the first
article is certified in good faith by Wayland J. Rippstein, inventor,
to meet all applicable specifications and is ready for full scale
production; and
E. Options covering 80,000 shares shall become eligible to be exercised
from and after the time when the FDA issues approval to sell Ripp
Syringes in the US; or
F. In the alternative to the events covered by Subparagraphs B, C, D and
E above, Options covering 400,000 shares shall become eligible to be
exercised from and after Maxxon completes the sale of the Ripp Syringe
Technology or Maxxon completes a Major Corporate Transaction, as
defined below;
<PAGE>
PROVIDED, HOWEVER, that if the events describe in Subparagraphs B, C, D, E or F
do not occur on or before September 30, 2001, then any unexercised portion of
the Options covered by this Agreement and this Agreement SHALL EXPIRE AND
TERMINATE; AND PROVIDED, FURTHER, once Options first become eligible to be
exercised in accordance with the provisions set forth above, those Options shall
remain exercisable until the expiration of this Option Agreement, unless a court
of competent jurisdiction determines or Maxxon concedes in writing that the Ripp
Syringe infringes upon the intellectual property rights of a third party, in
which event, the unexercised portion of Options covered by this Agreement, if
any, and this Agreement shall thereafter terminate.
The Options hereby granted shall be exercised by Optionee given Maxxon
written notice of exercise ("Notice") in accordance with Paragraph 9 hereof,
accompanied by payment of the full exercise price for the number of shares of
common stock specified to be exercised in the Notice. In the event Optionee
gives Notice of Exercise and does not pay the full exercise price in cash at
that time, Optionee may, in the discretion of Maxxon and to the extent permitted
by law, permit Optionee to defer payment for up to 90 days after the date of
exercise, provided Optionee shall deliver its promissory note to Maxxon in form
and substance as determined in good faith by Maxxon along with a pledge
agreement covering the shares to be so exercised in form and substance as
determined in good faith by Maxxon, which shall provide that if Optionee fails
to made payment of the full exercise price by the due date, the Option shares so
exercised shall be canceled and the note shall be canceled. The Option shares
covered by any such pledge agreement shall be issued and outstanding but such
shares shall not be eligible to be voted while and to the extent the pledge
shall remain in effect. In the event of or other form of payment as may be
agreed upon by all parties. Maxxon shall promptly deliver certificates
representing the shares of common stock to Optionee; provided that if the
Optionee is required by any law or regulation to take any action with respect to
such shares before their transfer, then the date of delivery thereof shall be
extended for the period necessary to take such action.
In the event that any business combination or other acquisitive transaction
("Major Corporate Transaction") occurs during the term of this Agreement when
any of the Options hereby granted and are then exercisable and remain
unexercised and outstanding, the occurrence of such a transaction shall
automatically result in the exercise of such unexercised Options, with the
exercise price being paid either by cash or by the reduction in the number of
Option shares issuable in an amount determined by deducting the exercise price
from the total consideration payable to Optionee had all the unexercised Options
been exercised in cash immediately before the consummation of that transaction.
It is the purpose of this provision to insure the Optionee that all of the
Options hereby granted are considered exercised and the shares issuable upon the
exercise be deemed to be issued and outstanding immediately prior to the
consummation thereof but with the exercise price being paid in any form of
consideration, including a reduction in the number of shares attributable to
this Option, so that the Optionee enjoys the full value of the Option shares
less the exercise price.
4. ANTIDILUTION PROVISIONS.
(a) Except as set forth in subparagraph (b) below, MAXXON agrees that the
total number of shares covered by this Option plus the total number of
shares covered by theretofore exercised shares under this Option shall
not be less than 2.5% of the total number of shares of MAXXON then
issued and outstanding.
2
<PAGE>
(b) Maxxon agrees to make a pro rata adjustment in the number of shares
and the price per share in the Options hereunder by reason of a change
in the capitalization of Maxxon or by reason of any stock split,
reverse stock split, reclassification, reorganization or other similar
adjustment in the capital structure of Maxxon; provided however, there
shall be no adjustment in the number of shares covered by this Option
Agreement or in the exercise price per share for (i) the sale of any
Common Stock of Maxxon for less than $.50 per share or its equivalent;
or (ii) for the sale or exchange of Common Stock of Maxxon pursuant to
any form of business combination at whatever the value of the
consideration exchanged.
(c) Nothing contained herein shall prohibit or restrict MAXXON from
selling its common stock or other securities convertible into common
stock, provided if any such sale is made at a price less than the
exercise price then in effect, the number of shares covered by this
Option shall be adjusted accordingly. No adjustment shall be made by
reason of the exercise of outstanding options on the date hereof.
5. NO RIGHTS IN OPTION STOCK. Optionee shall have no rights as a
shareholder in respect of shares as to which the Option shall not have been
exercised and payment shall not have been received by Maxxon as herein provided,
and Optionee shall have no rights with respect to such Shares other than those
rights which are expressly conferred by this Agreement.
6. SHARES RESERVED. The Optionee shall at all times during the term of this
Agreement reserve and keep available such number of shares of common stock as
will be sufficient to satisfy the requirements of this Agreement and shall pay
all original issue taxes on the exercise of this Option and all other fees and
expenses necessarily incurred in connection therewith.
7. NON-ASSIGNABILITY. This Option shall not be encumbered, assigned,
transferred or disposed of in whole or in part without the prior written consent
of Maxxon.
8. TERM. The Option, to the extent not previously exercised, shall expire
at 5:00 PM Tulsa Time on September 30, 2009.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Option is granted pursuant to the Maxxon, Inc.
1998 Incentive Stock Option Plan ("Plan"), as amended to include the reservation
of authorized but unissued shares of Maxxon sufficient for Maxxon to issued all
the shares authorized by this Option Agreement and the Option Agreements of
similar terms and conditions to Wayland J. Rippstein and Lynn Carter on the date
hereof. All the terms and conditions under the Plan are incorporated herein by
reference. This Agreement and the Plan constitutes the entire agreement between
the parties hereto with respect to the matters provided for herein and
supersedes all prior written agreements between the parties with respect
thereto. This Agreement may not be altered, amended, canceled or terminated
except by a written agreement signed by Optionee and Maxxon. The Plan may be
altered in accordance with its terms, and every alteration in the Plan not
involving the exercise price or the number of Option shares shall be
incorporated herein by reference, but the number of shares and the
3
<PAGE>
exercise price hereof shall not be altered without the consent of Optionee,
except as provided by and in effect under the Plan on the date of grant of this
Option.
9.2 NOTICES. All notices under or in conjunction with this Agreement shall
be in writing, delivered in person against a receipt therefor or sent by telex,
certified, or registered mail, return receipt requested, with postage prepaid to
the address set forth under the signatures below or to such other address as a
party may designate in a notice given in accordance with the provisions of this
Section. All notices shall be deemed given when received in any written form or
5 days after the notice is mailed.
9.3 CAPTIONS AND TITLES; COUNTERPART EXECUTION. Captions and titles have
been inserted in this Agreement for the benefit of the parties in referring to
this Agreement but shall not be construed or interpreted as part of this
Agreement. This Agreement may be executed in a number of identical counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute but one and the same agreement.
9.4 CONSTRUCTION. All conflicts between this Option Agreement and the Plan
shall be resolved in accordance with the Plan. This Agreement was negotiated,
executed and delivered in the State of Oklahoma and shall be governed by and
construed in accordance with the internal laws of the State of Oklahoma.
9.5 WAIVER. The failure by any part to enforce any of its rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver which has been signed by the waiving party. Waiver of any
one breach shall not be deemed to be a waiver of any other breach of the same or
any other provision hereof.
10. SEC REGISTRATION. Maxxon agrees to use its best good faith efforts to
file and keep effective a Form S-8 Registration Statement covering the Options
hereby granted and the Option shares issuable upon the exercise of the Options
hereby granted in accordance with applicable laws, rules and regulations. The
parties understand and agree that Maxxon is not currently eligible to use Form
S-8 and will not be eligible to use such form until the SEC declares effect
Maxxon's Form 10-SB which Maxxon believes will occur on or before January 31,
2000. Maxxon can give no assurance that Form S-8 will continue to be available
to Maxxon or that Maxxon's Form 10-SB will clear the SEC. The provisions of this
paragraph do not constitute an obligation on Maxxon's part to permit Optionee to
demand registration or to piggyback any registration which Maxxon may file in
the future. The parties understand and agree that the Options and the Option
Shares issuable hereunder shall be restricted in accordance with applicable law,
unless the a Form S-8 Registration Statement is filed and declared. Under
current law, when Maxxon becomes a fully reporting 1934 Act company, it will
become eligible to file a Form S-8 Registration Statement which shall be
automatically effective upon filing and the Options hereby granted to Optionee
would be eligible to be so registered under Form S-8. There is no assurance that
the SEC will not change such rules or that applicable laws, rules and
regulations will not change in the future.
4
<PAGE>
In witness whereof, this Option Agreement is executed and delivered with
full corporate authority by persons authorized to so act on the date first
written above.
MAXXON, INC. OPTIONEE:
BY________________________ ____________________________
Gifford Mabie, President Lynn Carter
8908 South Yale, Suite 409 c/o Petroxx Resources, Inc.
TULSA, OKLAHOMA 74137 1918 EAST 51ST, Suite 3-West
Phone: 918-492-1257 Tulsa, OK 74105
Facsimile: 918-492-2560 Phone: 918-743-1726
Facsimile: 918-742-6521