U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
INNOVATIVE TRACKING SOLUTIONS CORPORATION
(Name of Small Business Issuer in its charter)
Delaware 33-0728140
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(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
23232 Peralta Drive, Suite 115
Laguna Hills, California
92653-1438
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(Address of principal executive offices)
(Zip Code)
Issuer's telephone number, including area code 949-454-1278
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each
exchange on which to
be so registered
each class is to be registered
None N/A
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Securities to be registered pursuant to Section 12(g) of the
Act:
Common Stock, $.001 par value
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(Title of class)
<PAGE>
Item 1. Description of Business
Business Development
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Innovative Tracking Solutions Corporation, also known as
InTracks Corporation ("the Company") was incorporated under the
laws of the state of Delaware on September 4, 1996. Its
principal and executive offices are located at 23232 Peralta Drive, Suite
115, Laguna Hills, California 92653-1438, telephone (949) 454-
1278.
The Company is in the business of developing, manufacturing and
marketing a broad range of simple and creative products that
solve typical problems associated with the fast-paced nature of modern
individuals and businesses. The Company chooses to launch
products that are expected to generate continual profits for years to
come based on the products having a "niche" in the market and, in
most cases, having "proprietary" or "exclusive" market rights. The
Company holds the exclusive rights to several patents as well as
additional pending patents for products which have broad ranges
of applications from consumer to healthcare devices. The Company
launched its first product into small test markets in November
of 1997.
The Company's initial operations included the further
development and manufacture of the Smart Kitchen(tm) patented
food storage tracking system invented by the Company founders and
licensed exclusively to the Company. Based on the then current
financial condition of the Company and the cost to launch this
product into the consumer marketplace, the Company decided to
postpone the launch in favor of the development and launch of an
additional product, the Private Practice(tm) Vibration Reminder
Disk, which the Company felt held greater market potential and lower
manufacturing and marketing costs. The Company secured
exclusive marketing rights to the product and launched it into test
markets in November of 1997.
The Company Research & Development Division's continuing goal
is to develop proprietary product concepts within its healthcare
and consumer divisions and strategically market these products
both domestically and internationally. The Company believes that by
diversifying its holdings into multiple product lines and
applications, it will reduce the risk that can be associated
with one-product companies and increase its profit potential. The
Company also seeks to acquire exclusive marketing rights to
products developed outside the Company.
From July 15, 1997 to January 1998, the Company conducted a
private placement of 125,000 Units (the "Units") of its $.001
par value common stock ("Common Stock") pursuant to Regulation D,
Rule 504 under the Securities Act of 1933 ("1933 Act") at $2.00 per
Unit. Each Unit consisted of one (1) share of Common Stock and
three (3) Stock Purchase Warrants which expire December 31,
1998.
The Company sold 93,612 units directly to investors, and
collected cash proceeds totaling $185,826. Proceeds from the sale of the
shares were applied towards the continuing development and
marketing of the Company's first product and working capital.
In May of 1997, the Company reserved 500,000 shares of
restricted Common Stock subscribed by a private accredited
investor at $1.00 per share pursuant to Section 4(2) of the Securities
Act of 1933. On December 3, 1997, the subscriber assigned his
subscription rights back to the Company. The Company then
offered the reassigned 500,000 shares in a separate private placement
pursuant to Section 4(2) of the Securities Act of 1933. As of
September 30, 1998, the Company had sold 363,166 of these shares
for the gross proceeds of $340,027. Proceeds from the sale of
the shares were applied towards the continuing development and
<page
marketing of the Company's products and working capital.
In September of 1998, the Company commenced a private
placement of its $.001 par value common stock ("Common Stock")
offering 800,000 shares pursuant to Regulation D, Rule 505 under
the Securities Act of 1933 ("1933 Act") at $1.25 per Share. The
Company has received a commitment for the subscription of all
800,000 shares from a third party and expects to complete the
full offering by December 31, 1998.
In March 1998, the Company filed a 15(c)211 disclosure with
the NASD and was cleared to trade on the NASDAQ OTC Bulletin
Board (Symbol: IVTX) on April 21, 1998.
Business of the Issuer
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General
The Company develops, manufacturers and markets unique and
proprietary products that have broad applications in several
markets. The Company has three main divisions: Healthcare
Products, Consumer Products, and Research & Development (New
Products). The Company's first product in the Healthcare
division was launched into test markets in November of 1997 and into the
healthcare industry in June of 1998. Within its Consumer Product
division, the Company intends to launch its first product in
1999.
Within its Research & Development division, the Company intends
to begin the development of additional proprietary product concepts
and also evaluate additional product concepts developed outside
the Company.
Products
The Private Practice(tm) Vibration Reminder Disk
The first product launched within the Company's Healthcare
division is the patented Private Practice(tm) Vibration Reminder
Disk System. The product has countless applications in the healthcare
field in prompting patients to perform their prescribed
therapies which usually consist of rehabilitation exercises or taking
medications. The product also has applications in "ergonomics"
in helping to prevent "Repetitive Motion Injury" by prompting
workers to take several 30-second "Microbreaks" throughout the day to
perform specific conditioning exercises. It also has
applications in consumer fitness and health by prompting mini sessions of
isometric exercises frequently throughout the day along with an
eating pace mode that helps to slow one's eating speed.
The Company holds the exclusive rights to an existing patent
on the product with exclusive rights to an additional patent
approved on April 28, 1998 by the United States Patent and
Trademark Office and exclusive rights to a third patent
currently pending on the product and to any and all extensions or
improvements on the product that become patented. (See Exhibit
10.3 for details of Licensing Agreement.)
Worn on the body, the Private Practice(tm) Vibration Reminder
Disk automatically, consistently and silently vibrates at
specific intervals throughout the day to remind the wearer to stop and
perform a specific task from taking medications to performing
rehabilitation exercises frequently throughout the day at home,
work or wherever they may be. With patient compliance to
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treatment plans being one of the biggest problems facing the
healthcare professional today, there is a tremendous need for
practical and affordable solutions to improving patient
outcomes.
The Company's low-cost vibration disk that can be worn
conveniently anywhere on the body provides a "private" and "physical"
reminder that can be more effective than the few audible or visual
reminders currently available for use.
The Private Practice(tm) Vibration Reminder Disk was designed to
be easy to use and has a simple one-button operation. It is
small (approx. 1 3/4 in diameter) and thin (3/4 inch thick) and can be
worn practically anywhere on the body undetectable in several
ways: inside a specially designed skin Pouch-Patch(tm), clipped under
the clothing, simply placed in a pocket or worn on the wrist with
the specially designed wrist strap (all included with the product).
It also has a "postpone feature" which acts like a "snooze button"
on an alarm clock for those times when the patient may not be near
their medication when the vibration reminder occurs.
The product is proprietary and unique and currently has over
50 applications or uses in the healthcare field from prompting
Kegel therapy exercises throughout the day to help reduce
incontinence problems to prompting bedridden or wheelchair-
mobile patients to reposition and "unweight" frequently to help prevent
pressure ulcers (sores). Since launching the Private
Practice(tm) Vibration Reminder Disk into the healthcare industry, the
Company has developed seven versions of the product to address the
specific reminder interval needs of several health problems; (1) Physical
Therapy/General Rehab Version, (2) Medications Reminder Version,
(3)Pressure Ulcer Prevention Version (4)Casting/Bracing/Immobilization
Version, (5) Kegel Therapy/Incontinence Version (6) Ergonomic/Injury
Prevention Version and (7) Fitness Version. Each version comes pre-set
with five relative and specific reminder intervals and vibration
sequences and includes specific information and recommendations
relative to the needs of the particular application.
The Company extends the product into several healthcare
settings through specific protocols developed by industry
experts hired by the Company. These well-known experts in the fields of
incontinence, wound care (pressure ulcer prevention) and work
injury prevention are currently developing specific protocols
for the vibration disk for these health issues. The protocols
include patient educational brochures and videos along with specific
guidelines for the healthcare staff in implementing the Private
Practice(tm) system.
Patient non-compliance to therapy or treatment regimens can
result in health complications and/or the need for extended
treatments. According to national studies, non-compliance to
medications costs the U.S. population over $100 billion per year
and results in as many as 125,000 deaths. The Company's goal is
improve patient compliance and consequently patient outcomes
with the Private Practice(tm) Vibration Reminder Disk. The Company
is offering a simple and low-cost solution that has a multitude of
applications for a magnitude of healthcare problems.
With the recent "cut-backs" in Medicare and the Prospective
Payment System, "patient outcomes" and "preventative healthcare"
are among the most significant issues for third party payors
(insurance companies). A new Medicare prospective payment
system, created by the Balanced Budget Act of 1997, will have a profound
effect upon the nation's healthcare institutions. Health care
institutions and providers are assuming more financial risk for
appropriate product utilization, patient compliance and outcomes
management. The low cost Private Practice? Vibration Reminder
Disk is designed to follow patients from
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the hospital setting, to the skilled nursing facility setting,
or on to the home care setting, stepping down the cost of care
while maintaining patient compliance to prescribed treatments.
Improved patient outcomes in lower cost health care settings is what
healthcare payors are demanding.
There are over 7,000 hospitals, 15,000 skilled nursing
facilities and 15,000 home health agencies in the United States
facing reimbursement cut-backs. Furthermore, there are over
15,000 Home Medical Equipment (HME) dealers throughout the United
States searching for retail business to augment their dependence on
Medicare and MediCaid billing. The Healthcare Product division
of the Company is determined to capture a large share of this
market, by providing a low cost solution for healthcare delivery. Based
on successful case studies already submitted to the Company from
clinicians using the Private Practice(tm) Vibration Reminder
Disk with their patients, the Company feels their low-cost and easy-to-use
Private Practice(tm) Vibration Reminder Disk will have
substantial impact in the healthcare industry in improving patient outcomes
and assisting preventive healthcare.
The Company's focus is on high-application markets such as
physical therapy and rehabilitation, incontinence treatments,
pharmacy services, AIDS treatment centers, diabetes centers,
respiratory therapy departments, wound care prevention, for
every healthcare setting; and wherever a patient or caregiver needs a
reminder to take or provide a medication or to perform a
therapy.
The Company has identified insurance reimbursement for the
Private Practice(tm) Vibration Reminder Disk through certain
existing Medicare and CPT (Current Procedure Technology) codes.
The Company has received recent notification from a practitioner
who prescribed the product for a patient that it was
successfully reimbursed by the patient's insurance carrier 21
days after submission. Reimbursement from a patient's insurance
company to the doctor, therapist or to the patient is approved
on a case by case basis and dependent upon several factors.
Reimbursement using these codes can sometimes take a longer time
for completion and can be disapproved in some patient cases.
The ideal reimbursement situation is for the product to have
it's own Medicare (HCPCS) code. The Company is working to
establish the product's own code which would allow its cost to
be reimbursed more often and more quickly. If successful in
acquiring this code, the proliferation of this product could be
enhanced in this industry. The product can be assigned its own
code by virtue of it being billed often and frequently by the
medical practitioners under the existing codes. The product can
also be assigned it's own code through the submission of
clinical trials and substantiation through regional DMERCS
offices. The Company has already completed the design of a
study protocol for the casting/bracing/immobilization
application of the product and is currently submitting the study
to select hospitals for approval.
The Company has also identified opportunities for clinicians
to enhance their practice with the use of the Private
Practice(tm) Vibration Reminder Disk when the product is reimbursed by
insurance or sold to the patient. The additional time the clinician
spends training the patient with the product (or diagnosing the need
for the product) is billable under the adjunct therapy treatment
(CPT) codes. This additional reimbursement generates new revenue as a
result of prescribing the product.
If the product is not reimbursed by medical insurance, it
remains affordable for the patient or the professional providing
the care. The suggested retail price of the Private
Practice(tm) Vibration Reminder Disk at the home health dealer is $29.95 with
a clinician or professional price of $24.95. The product is made
of high quality materials and to be extremely reliable having an
expected battery life of approximately one year. The Company is
currently working on a lower-cost and more temporary or
disposable version of the device that would be more feasible for the
pharmaceutical manufacturer to include free with each and every
prescription. The device would serve to increase compliance to a
patient's medication schedule, therefore benefiting the
patient's health and outcome.
<page
According to medical studies that measure compliance to
prescription medications, approximately only 33% of patients
take their medications properly and timely. Even patients facing
serious health problems such as heart problems or cancer have difficulty
complying with the prescription regimen with only 22% and 27%
respectively complying to their medications schedule. For
pharmaceutical manufacturers, missed doses result in delayed
refills of the prescribed medication and consequently lost
revenue amounting to billions of dollars. Therefore, improved compliance
would result in more on-time refills and consequently increased
revenue for pharmaceutical manufacturers.
The Private Practice(tm) Vibration Reminder Disk also has
applications in "injury prevention" and "ergonomics" in helping
to prevent "Repetitive Motion Injury" and other potential
injuries in the work environment. According to industry sources,
Repetitive Motion Injury (RMI) cases have increased 13-fold in the past
decade and now account for nearly $20 billion in workers' compensation
costs annually and an estimated $100 billion in lost
productivity and turnover. The average treatment and disability costs for one
injured worker are approximately $45,000. Pending regulations
from OSHA (Occupational Health and Safety Administration) and state
legislature will mean more businesses, even small ones, will
have to take steps to evaluate work sites, provide training and
"control exposures" believed to cause RMI. The Company has
recently begun marketing an "ergonomic" version of the disk that
silently prompts workers to take several 30-second "Microbreaks"
throughout the day to perform specific conditioning exercises
with respect to proper body mechanics, or to perform safety checks.
These exercises help reduce risks to repetitive motion injury
and help to energize the body, relieve stress, and increase
productivity.
The Private Practice(tm) Vibration Reminder Disk also has
applications in consumer health and fitness and is used as a
prompt to perform mini sessions of isometric exercise throughout the
day or to promote one's health by being prompted to drink water
consistently, among other applications.
Competition
With respect to vibration "reminder" devices in general, the
Company is aware of only one other device on the market that is
somewhat similar to the Private Practice(tm) Vibration Reminder
Disk.
It is called the Motivator(tm) and it is worn on the belt
similar to a pager. It does not come pre-programmed with pre-set intervals
for a specific purpose or task and cannot be worn anywhere on the
body. It retails for approximately $90 making it much more expensive
than the Private Practice(tm) Vibration Reminder Disk.
With respect to compliance to medication schedules, there are
currently other types of reminder aids available; most are
audible. Most of these devices are ineffective, complicated or
expensive. Many are in the form of pill cases that have to be set to
specific times and that beep when it is time to take a medication.
Although these are fairly inexpensive, there are several disadvantages to
these types of devices that make them ineffective in improving
compliance. First, if the patient is not within "ear shot" of
the beeping case, the reminder is lost. Furthermore, most people
are bombarded with audible and visual stimuli all day long and as a
result, tend to not notice the beeping type reminder, tune it
out or simply ignore it, usually unintentionally. Lastly, the
devices can tend to be too complicated for the elderly patient to set.
There are also watches that beep or vibrate that can be used to
provide a reminder. However, most cannot be set for specific
and separate intervals within a given
<page
day (other than once per hour) and usually have to be set again
every day. They too, can be quite complicated for an elderly
patient to operate. There are also paging services that will
page a patient several times throughout the day to let them know it
is time to take a medication. Not only does the patient have to
purchase and wear a bulky pager, but they also have to pay for
the ongoing paging service. The Private Practice(tm) Vibration
Reminder Disk is simple, affordable and can be worn undetectable anywhere
on the body. It provides a "private" and "physical" reminder to
help assure that patients remember to take their medications on time.
With respect to "ergonomics" or "injury prevention", the
Company is aware of only one other type of reminder system for
prompting exercises at the workstation; software programs.
There are several software programs designed to "pop up" on the screen
at predetermined times to prompt the worker to stop and
exercise. However, these programs have inherent problems that make them
less practical for businesses; many programs that lock up the
keyboard interrupt the work flow and frustrate the worker and many
programs will "freeze up" other computers attached to a network and cause
other network problems. Furthermore, these programs provide
only a visual or audible reminder that can be easily "tuned-out" by
the worker.
Marketing
The Company is currently marketing the Private Practice(tm)
Vibration Reminder Disk through industry trade magazines,
conventions and trade shows and through its recently formed
independent manufacturer's representative network. The Company
has contracted exclusive territories in the U.S. to certain
experienced members of the Health Industry Representative Association for
sale of the product to clinicians and home health dealers across the
country. These representatives provide an existing infrastructure
which allows the product to gain immediate and broad exposure.
The Company has also achieved distribution through several national
medical and healthcare specialty catalogs with the product being
featured in fourth quarter, 1998 issues. As the Company expands
it distribution network, it is also currently considering requests
for exclusive distribution in Japan and Taiwan from certain well-
known international distributors as well as private labeling of the
product with certain national healthcare product manufacturers
in the U.S.
The Company is currently marketing the ergonomic application
of the product to key ergonomic consultants, distributors,
independent sales reps and potential strategic alliance firms to
more quickly tap the market for the product by using the
existing marketing infrastructures in the ergonomic industry. The
Company is also investigating and pursuing the potential of insurance
companies offering discounted workers' compensation insurance
rates to companies that have instituted the Private Practice(tm) 30-
second Microbreak(tm) in the workplace (similar to how consumers
receive a discount on their homeowner's insurance if they have a fire
extinguisher in their home). The potential of the product in
preventing RMI could mean that insurance companies could benefit
from a reduced number of actual injury claims relative to RMI.
If such a discount were offered, the proliferation of this product
could be enhanced in this market.
The Smart Kitchen(tm) Food Tracking System.
The Company's Consumer Product division intends to launch the
Company's second innovative new product called the Smart
Kitchen(tm) Food Tracking System in 1999. Smart Kitchen(tm) is a patented
electronic food inventory and timing device that attaches
magnetically to the front of a consumer's refrigerator and helps
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them keep track of their leftover and perishable foods. The
device contains a databank of the most commonly stored food items
stored in the kitchen along with their estimated storage lifetimes. The
consumer simply enters the names of their perishable and
leftover food items as they store them and the device provides a warning
before each food item can potentially spoil. This product was
originally named the Leftover Lifeguard(r), but was changed,
based on focus-group research and the expansion of the device to track
perishables stored in the freezer and pantry, to the Smart
Kitchen(tm) Food Tracking System. The product will retail for approximately
$50.
The Company holds the exclusive rights to three patents on the
product with exclusive rights to any and all extensions or
improvements on the product that become patented. (See Exhibit
10.5 for details of Licensing Agreement.)
The USDA announced on July 1, 1997 that Americans waste over
96 billion pounds of edible food per year and that the vast
majority of the waste came from consumers who threw away uneaten
produce, forgot foods in the back of their refrigerators or
discarded foods possibly too soon because they had trouble
interpreting package-dating information. According to research
from the University of Arizona, the average American wastes
approximately 15% of the food they buy, throwing away enough
leftovers and perishables every year to feed all of Canada.
This figure translates to approximately $750 per year for the average
household being wasted on forgotten and spoiled food. A 1987
study by the University of Oregon, which examined the reasons that
households discard food, suggests that consumer education may
play an important role in reducing consumer food loss. The Smart
Kitchen? automatically helps to educate consumers by the nature
of its functions. It helps consumers organize their kitchen, saves
them time and money, helps them determine food safety, warns
them before food might spoil and helps them build their weekly
shopping list, too.
The Company has completed all research and development and in-
home usage testing of the product. The Company has also
developed an accompanying handbook that teaches the consumer many
important facts and offers helpful hints relative to food storage and
safety.
The Company retained a leading expert in food storage to author
the handbook. The Company has built 500 units using an existing
off-the-shelf plastic housing for the product's initial launch.
The Company intends to mold a new housing for the product for
subsequent inventory and sale.
Marketing
General Electric is currently reviewing the Smart Kitchen(tm)
product with interest in licensing the exclusive rights to the
patents licensed to the Company on the product. These patents
also protect the right to incorporate the utility of the Smart
Kitchen(tm) device as a built-in feature to a refrigerator. If a licensing
arrangement is secured, all marketing and possibly manufacturing
as well, will be handled by General Electric and the Company will
receive a royalty on sales. If a licensing arrangement is not
achieved, the Company intends to market the Smart Kitchen(tm)
through the existing infrastructure of in-home sales provided by
appliance service technicians and then through the retail market.
Competition
The Company is unaware of any other product on the market that
automatically tracks food storage and lifetimes for multiple
items stored in the kitchen.
<page
Nite Note(r).
The Company's Consumer Product division has recently begun
distributing a product called Nite Note(r) manufactured by Nite
Note of Irvine, California on a non-exclusive basis. Nite Note(r) is
a silent easy way to note night-time thoughts. The hand-held memo
pad conveniently holds a pen and a writing pad. Nite Note(r)
features the pressurized Fisher Spacer pen used by U.S. astronauts because it
writes at any angle, even upside-down. Nite Note(r) "lights up"
when the pen is removed and "lights off" when the pen is
replaced.
The Company has distributed the product through QVC home
shopping channel and is marketing it to other potential retailers.
Employees
As of the date of this registration statement, the Company
employs 3 people on a full-time basis and retains the services of as
many as 10 industry professionals or experts on an Independent
Contractor basis.
Item 2. Management's Discussion and Analysis or Plan of
Operations
Plan of Operations
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The Company is engaged in the business of product development,
manufacturing and marketing of new innovative products in both
the consumer product and healthcare industries.
The Company has financed its activities to date through the
sale of its securities. See Item 10 - "Recent Sales of
Unregistered Securities."
In addition to its working capital on hand as of the date of
this registration statement, the Company believes that it will
require, at least, an additional $1,000,000 of capital over the
next 12 months in order to fund the full scale roll-out of its
products and to finance the continuing operations of the Company
as it endeavors to build revenue and reach profitable operations.
In October 1998, the Company commenced a private placement of
800,000 shares of Common Stock, at a price of $1.25 per share.
The Company has received a commitment from a third party to
subscribe to purchase the total number of offered shares and the Company
expects the sale of these securities to consummate before
December 31, 1998.
Forward Looking Statements
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This registration statement contains forward-looking
statements. The company's expectation of results and other
forward-looking statements contained in this registration
statement, involve a number of risks and uncertainties. Among
the factors that could cause actual results to differ materially
from those expected are the following: business conditions and
general economic conditions; competitive factors, such as pricing and
marketing efforts, timing of product introductions; and the pace
and success of product research and development. These and
other factors may cause expectations to differ.
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Item 3. Description of Property
The Company's executive offices are located in Laguna Hills,
California, and consist of approximately 1,700 square feet which
the Company rents on a month to month basis for monthly rent of
$1,904.
The Company holds the exclusive rights to several patents and
trademarks on the products its developing. The Company's
licensor holds U.S. Utility Patent No.s 5,335,509; 5,487,276 5,711,160;
on Smart Kitchen(tm), formerly known as the Leftover Lifeguard(r).
Smart Kitchen(tm) is pending a U.S. registered trademark, Serial
No.75291283, and the Leftover Lifeguard(r) is a U.S. registered
trademark, Reg. No. 1,947,954. The Company holds the exclusive
manufacturing and marketing rights to an Assignment of U.S.
Utility Patent No. 4,801,921 and to pending application No. 08/907,440
and co-pending application No. 08/907,440 for the Private
Practice(tm) Vibration Reminder Disk, which is pending U.S. trademark
registration, Serial No. 75247416. The Company also holds the
exclusive rights to any and all improvements and extensions of
these products and their patents. See Exhibits 10.3 to 10.6,
Licensing Agreements, Schedule A & B: Patents and Trademarks,
for further information.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information regarding
the beneficial ownership of the shares of Common Stock as of
September 30, 1998 by (i) each person who is known by the
Company to be the beneficial owner of more than five percent (5%) of the
issued and outstanding shares of Common Stock, (ii) each of the
Company's directors and executive officers and (iii) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address Number Percentage
- - ------------------------- of Shares Owned
---------- -----------
<S> <C>
<C>
Dianna Cleveland (1)(3) 1,560,000
46.1%
Lee A. Namisniak (1)(4) 873,500
25.8%
Lou Weiss (1) 191,500
5.7%
Scott Postle (1) 18,000
(2)
Officers and Directors as a group 2,643,000
78.1%
</TABLE>
____________________
(1) Address is 23232 Peralta Drive, Suite 115, Laguna Hills,
California, 92653.
(2) Less than 1%
(3) Does not include options granted to Dianna Cleveland to
purchase 250,000 shares of stock subject to the terms of her
employment agreement. (See Exhibit 10.1.)
(4) Does not include options granted to Lee A. Namisniak to
purchase 200,000 shares of stock subject to the terms of his
employment agreement. (See Exhibit 10.2.)
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Item 5. Directors, Executive Officers, Promoters and Control
Persons.
The Executive Officers and Directors of the Company, and their
agents, are as follows:
Name Age Position
Dianna Cleveland 38 President, Chief Executive Officer and Director
Lee A. Namisniak 43 Executive Vice President, Chief Financial Officer,
Chief Operating Officer and Director
Lou Weiss 50 Director
Scott Postle 49 Vice President
_____________________________________________________________
Dianna Cleveland. Ms. Cleveland, founder of the Company, has served
as President and CEO of the Company since its inception. She is also
the inventor or co-inventor of most all the products being marketed or
to be marketed by the Company. She is an award-winning professional and
has more than 16 years experience in the field of marketing; four years
in product development, five years with advertising agencies, and seven years
in sales. Since 1993, Ms. Cleveland has worked extensively in product
development bringing two product concepts to fruition. From 1986 through
1993,
Ms. Cleveland was a District Sales Manager for Franklin Life
Insurance Company where she was recognized as "Regional Woman of
the Year" and earned several honor club awards. From 1984
through 1986, she served as Account Executive on the Domino's Pizza
account at both their national and regional advertising agencies, Group
243, Inc. and Davidoff & Partners. From 1982 through 1984, she
served as Senior Media Planner on the Xerox account at Needham,
Harper & Steers Advertising Agency in New York (now known as DDB
Needham Worldwide). Ms. Cleveland holds a B.S. in Business
Administration with a concentration in Marketing from Colorado
State University where she graduated in 1982.
Lee A. Namisniak. Mr. Namisniak, co-founder of the
Company, has served as Chief Financial and Operating Officer and
Director of the Company since May, 1997. He is the co-inventor
of several of the products being marketed or to be marketed by the
Company. He is also the spouse of Dianna Cleveland. For the
past 15 years, Mr. Namisniak has specialized in competitive bid
estimating, project management and value engineering (cost
evaluation studies) in commercial contracting for both regional
and national well-known firms. He helped to mainstream bid
estimating functions for the Denver field office of J.S. Alberici (St.
Louis) and headed up the California field office for DSP Constructors
(Denver). He managed projects for additional commercial
contractors working in markets from hospital to bio-pharmaceutical
manufacturing/processing for projects up to $70 million. He
majored in Civil Engineering with a second major in Economics at
Colorado State University.
Lou Weiss. Mr. Weiss has served as a director of the company
since its inception and is a veteran and highly regarded
marketing consultant, strategist and marketing research specialist. For
over 25 years, Mr. Weiss has been instrumental in highly successful
campaigns for many Fortune 500 companies as well as an exciting
array of smaller aggressive organizations. His marketing
<page
analysis and recommendations have led to many textbook case
marketing breakthroughs, including the introduction of Apple
Computer's Macintosh, the introduction of Mitsubishi into the US
market with cars/trucks and big screen TVs, the introduction of
Howard Murad's cosmetic line, and countless other successes. He
founded American Marketing Services (AMS) which was widely
regarded as the highest quality marketing research and consulting firm in
the West which led to its acquisition by Satchi and Satchi, the
international advertising and marketing organization. Following
the acquisition, Mr. Weiss served as Senior Vice President and
Director of Western Operations.
Scott L. Postle. Mr. Postle, joined the Company in July of
1998 as Vice President of Business Development of the Healthcare
Division and is a 29-year veteran in the medical and healthcare
industry. Having introduced several new innovative technologies
into the healthcare market, his specialty is healthcare delivery
and payment policy. Most recently, Postle established a
national distribution network of wound care suppliers representing a new
therapy system to treat patients with pressure ulcers. Annual
revenues from sales and rentals of this product are in excess of
$40 million within three years, and expected to rapidly increase
under the health industry's new prospective payment system.
Prior to this, he served in various senior management positions at
several successful start-up companies including: Director of
Business Development at Lumex Medical Products in 1993-1995;
designed, developed and manufactured AkroTech 4000 Air Therapy
System in 1990-1996; and was appointed to the Health Industry
Manufacturers Association (HIMA) advisory panel for healthcare
delivery and payment, in Washington D.C. in 1994-1995. Postle
holds a bachelor's degree from California State University at
Los Angeles and several professional licenses and certificates in
healthcare.
Each director holds office until his successor is elected and
qualified or until his earlier resignation in the manner
provided in the Bylaws of the Company.
Item 6. Executive Compensation
The following table sets forth the cash and non-cash
compensation paid by the Company to its Chief Executive Officer
and to all other executive officers for services rendered during the
fiscal years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
__Annual Compensation___
Name and Position Year Salary Bonus Other
Annual
Restricted
Comp. Stock
Awards
<S> <C> <C> <C> <C> <C>
Dianna L. Cleveland (1) 1997 -0- -0- -0- -0-
President/CEO 1996 -0- -0- -0- -0-
Lee A. Namisniak (2) 1997 -0- -0- -0- -0-
Chief Financial/ 1996 -0- -0- -0- -0-
Operating Officer
Lou Weiss (3) 1997 -0- -0- -0- 71,000
Shares
Director 1996 -0- -0- -0- 91,500
Shares
</TABLE>
__________________________________________________________________
<page
(1) Ms. Cleveland began accruing a salary at the rate of
$75,000 per annum on July 15, 1997. Due to the fact that the Company did not
pay any salary to Ms. Cleveland for the first year of her contract
and subject to the terms of her employment agreement (referenced
herein in Exhibit 10.1), on July 15, 1998, Ms. Cleveland was
awarded 260,000 shares of restricted Common Stock in the Company.
On July 15, 1998, one year from the effective date of her employment
agreement with the Company, Ms. Cleveland began accruing a salary at the
rate of $125,000 per annum.
(2) Mr. Namisniak began accruing a salary at the rate of
$60,000 per annum on July 15, 1997. Due to the fact that the Company
did not pay any salary to Mr. Namisniak for the first year of his
contract and subject to the terms of his employment agreement
(referenced herein in Exhibit 10.2), on July 15, 1998, Mr.
Namisniak was awarded 208,000 shares of restricted Common Stock
in the Company. Also on July 15, 1998, Mr. Namisniak was
promoted to and "Executive" level and was awarded 20,000 shares
of restricted Common Stock in the Company. On July 15, 1998,
one year from the effective date of his employment agreement
with the Company, Mr. Namisniak began accruing a salary at the
rate of $100,000 per annum. See Exhibit 10.2.
(3) The Company does not pay Mr. Weiss a salary of any kind.
Mr. Weiss has acted in a consulting capacity prior to and from the
inception of the Company and has been awarded 162,500 shares of
Common Stock in the Company.
Item 7. Certain Relationships and Related Transactions.
Between September, 1996 and June, 1997, Dianna L. Cleveland
and Lee A. Namisniak advanced loans totaling $113,451 (Paid in
Capital) to the Company's operating budget in the form of cash
and in the form of payment of Company's expenses. From June 1997, to
end of the fiscal year 1997, Ms. Cleveland and Mr. Namisniak
have received reimbursements against said Paid-In-Capital in cash or
expenses totaling $52,866.
In March of 1997, Mr. Weiss purchased 25,000 shares of Common
Stock of the Company for $20,000. In October of 1997, Mr. Weiss
advanced a loan of $15,000 to the Company's operating budget for
general working capital. This advance accrued interest at the
rate of eight percent (8%) per annum. On June 3, 1998, the Company
repaid Mr. Weiss the $15,000 principal and Mr. Weiss agreed to
accept 4,000 shares of Common Stock of the Company in lieu of
the interest accrued.
In August, 1998, Mr. Namisniak and Ms. Cleveland were awarded
250,000 shares each of Common Stock of the Company subject to
the terms of their exclusive product licensing agreements with the
Company. Before issuance, Mr. Namisniak assigned his 250,000
shares to Dianna Cleveland. See Exhibit 10.3 and 10.5 for
details of Licensing Agreements.
Item 8. Legal Proceedings.
There are no pending legal proceedings to which the Company is
a party or to which the property interests of the Company are
subject.
<page
Item 9. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters.
The Company's Common Stock has been listed on the OTC Bulletin
Board under the symbol "IVTX" since April, 1998. From inception
of trading through September 30, 1998, the high and low last
sale prices were $2.25 per share and $.875 per share, respectively.
The Company considers its Common stock to be thinly traded and that
any reported bid or sale prices may not be a true market-based
valuation of the Common Stock. As of September 30, 1998, there
were 109 record holders of the Company's Common Stock. The
Company has not paid any cash dividends since its inception and does not
contemplate paying dividends in the foreseeable future. It is
anticipated that earnings, if any, will be retained for the
operation of the Company's business.
The following table sets forth the range of high and low bid
information for each full quarterly period of the last fiscal
year:
Period Reported Average High Bid Average Low Bid
Quarter ended June 30, 1998 2 1/2 1 1/2
Quarter ended September 30, 1998 2 1/8 1 1/8
__________________________________________________________________
Item 10. Recent Sales of Unregistered Securities.
During the last two years the Company has sold unregistered
shares of its Common Stock in the following transactions:
A. In September 1996, the Company issued 800,000 shares of
Common Stock to the founder of the Company. There was no underwriter
involved in this issuance. The issuance was conducted pursuant
to Section 4(2) under the 1933 Act.
B. In September 1996, the Company issued 645,500 shares of
Common Stock to a co-founder of the Company. There was no underwriter
involved in this issuance. The issuance was conducted pursuant
to Section 4(2) under the 1933 Act
C. In September 1996, through March 1997, the Company issued
162,500 shares of Common Stock to a director in consideration
of services rendered. There was no underwriter involved in the
issuances. The issuances were conducted pursuant to Section 4(2)
of the 1933 Act.
D. In September 1996, through December 1997, the Company
conducted a private placement of 137,000 shares of Common Stock to five
accredited investors at a price of $1.00 per share, for the
gross proceeds of $137,000. There was no underwriter involved
in this issuance. The issuance was conducted pursuant to Section
4(2) of the 1933 Act.
E. In January 1997, the Company issued to four individuals, a
total of 9,000 shares of Common Stock in consideration of support
services rendered. There was no underwriter involved in the
issuances. The issuances were conducted pursuant to Section 4(2)
of the 1933 Act.
F. In January 1997, the Company issued a total of 26,000 shares
of Common Stock to 10 consultants in consideration for services
rendered on behalf of the Company. There was no underwriter
involved in this issuance. The issuance was conducted pursuant
to Section 4(2) of the 1933 Act.
<PAGE>
G. From February 1997 to June 1997, the Company issued a total
of 19,000 shares of Common Stock to two consultants in
consideration for services rendered on behalf of the Company.
There was no underwriter involved in this issuance. The issuance
was conducted pursuant to Section 4(2) of the 1933 Act.
H. In March 1997, the Company issued 25,000 shares of Common
Stock to a director, at a price of $0.80 per share for cash proceeds
of $20,000. There was no underwriter involved in this issuance.
The issuance was conducted pursuant to Section 4(2) under the
1933 Act.
I. In June 1997, the Company issued 25,000 shares of Common
Stock to its corporate counsel in consideration of legal services
rendered. There was no underwriter involved in this issuance.
The issuance was conducted pursuant to Section 4(2) under the
1933 Act.
J. During July 1997, through January 1998, the Company conducted
a private placement of Common Stock. In the private placement,
the Company sold 93,612 units of Common Stock in consideration
of cash proceeds of $161,113 net of $24,713 of offering costs.
Each Unit consists of one (1) share of Common Stock ($.001 par
value) and three (3) Stock Purchase Warrants, except for
California residents who receive per unit one (1) share of
Common Stock and one (1) purchase warrant. Each Warrant
entitles the holder thereof to purchase one (1) share of Common
Stock of the Company. The Warrants are exercisable at $2.00 and
were set to expire on July 21, 1998. The Company extended the
Warrants to expire on December 31, 1998. There was no
underwriter involved in this placement. The placement was
conducted pursuant to Regulation D, Rule 504, propounded by the
U.S. Securities and Exchange Commission. Proceeds from the sale
of the shares were applied towards the continuing development
and marketing of its products and working capital.
K. In July 15, 1997, the Company granted to two founding
officers options to purchase 250,000 and 200,000 shares respectively of
Common Stock in the Company at an exercise price of $.50 per
share. The options expire on December 31, 2002.
L. In August 1997, the Company issued 1,000 shares of Common
Stock to an independent contractor in consideration of services
rendered. There was no underwriter involved in the issuances.
The issuances were conducted pursuant to Section 4(2) of the
1933 Act.
M. In September 1997, the Company issued 15,000 shares of Common
Stock to two consultants in consideration of services rendered
on behalf of the Company. There was no underwriter involved in
this issuance. The issuance was conducted pursuant to Section
4(2) of the 1933 Act.
N. In January 1998, the Company issued to four independent
contractors, a total of 9,000 shares of Common Stock in
consideration of services rendered. There was no underwriter
involved in the issuances. The issuances were conducted pursuant
to Regulation D, Rule 504, propounded by the U.S. Securities and
Exchange Commission.
O. In May 1998, the Company issued a total of 500 Units of
Common Stock to 2 existing shareholders at a price of $2.00 per unit
including 3 stock purchase warrants with an exercise price of
$2.00. There was no underwriter involved in this issuance. The
issuance was conducted pursuant to Regulation D, Rule 504,
propounded by the U.S. Securities and Exchange Commission.
<page
P. In May 1998, the Company conducted a private placement of a
previously subscribed 500,000 shares of Common Stock in the
Company at $1.00 per share pursuant to Section 4(2) of the
Securities Act of 1933. The pending sale was fully disclosed
in the Company's Rule 504 offering circular. The sale was never
consummated and the subscriber assigned his subscription rights
back to the Company for other designations As of September 30,
1998, the Company had sold 363,166 of these shares in
consideration of cash proceeds of $321,641 net of $18,386 of
offering costs. There was no underwriter involved in the
issuances. The issuances were conducted pursuant to Section 4(2)
of the 1933 Act. The Company utilized finders in the private
placement and issued a total of 8,000 shares of Common Stock as
finder's fees. The finder's fee shares were issued pursuant to
Section 4(2) of the 1933 Act. Proceeds from the sale of the
shares were applied towards the continuing development and
marketing of its products and working capital.
Q. In May 1998, the Company issued 1,000 shares of Common Stock
to an independent contractor in consideration of services rendered.
There was no underwriter involved in the issuances. The
issuances were conducted pursuant to Section 4(2) of the 1933
Act.
R. In June 1998, the Company issued 4,000 shares of Common Stock
to a director in consideration for interest payment on
indebtedness. There was no underwriter involved in this
issuance. The issuance was conducted pursuant to Regulation D,
Rule 504, propounded by the U.S. Securities and Exchange
Commission.
S. In June 1998, the Company issued 30,000 shares of Common
Stock on a promissory note to an individual for the purpose of selling
those shares at a price of $2.00 per share. There was no
underwriter involved in this issuance. The issuance was
conducted pursuant to Regulation D, Rule 504, propounded by the
U.S. Securities and Exchange Commission.
T. In June 1998, the Company issued a total of 10,000 shares of
Common Stock to a consultant in consideration for services
rendered on behalf of the Company. There was no underwriter
involved in this issuance. Regulation D, Rule 504, propounded
by the U.S. Securities and Exchange Commission.
U. In August 1998, the Company issued to two of its directors an
aggregate of 468,000 shares of Common Stock subject to the terms
of their Employment Agreements referenced herein in Exhibit 10.1
and 10.2 and 20,000 shares of Common Stock to one of the
directors as a promotion bonus. There was no underwriter
involved in the issuances. The issuances were conducted pursuant
to Section 4(2) of the 1933 Act.
V. In August 1998, the Company issued 10,000 shares of Common
Stock to an officer of the company in consideration for services
rendered. There was no underwriter involved in this issuance.
The issuance was conducted pursuant to Section 4(2) of the 1933
Act.
W. In August 1998, the Company issued 250,000 shares of Common
Stock to an officer as licensor in partial fulfillment of the
terms of a Licensing Agreement referenced herein in Exhibit
10.3. There was no underwriter involved in the issuances. The
issuances were conducted pursuant to Section 4(2) of the 1933
Act.
X. In August 1998, the Company issued 250,000 shares of Common
Stock to an officer as licensor in partial fulfillment of the
terms of a Licensing Agreement referenced herein in Exhibit
10.5. Before issuance, the officer, as licensor, assigned the
total of all 250,000 shares to his co-licensor and officer of
the Company. There was no underwriter involved in the
issuances. The issuances were conducted pursuant to Section 4(2)
of the 1933 Act.
<PAGE>
Item 11. Description of Securities.
Common Stock
The Company is authorized to issue 10,000,000 shares of Common
Stock, $.001 par value, of which, as of September 30, 1998,
3,382,278 shares were issued and outstanding and held of record
by 109 stockholders. Holders of shares of Common Stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders generally. The approval of proposals submitted to
stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting,
except in the case of certain fundamental matters (such as
certain amendments to the Certificate of Incorporation, and certain
mergers and reorganizations), in which cases Delaware law and the
Company's Bylaws require the favorable vote of at least a majority of all
outstanding shares. Stockholders are entitled to receive such
dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefor, and in the
event of liquidation, dissolution or winding up of the Company to
share ratably in all assets remaining after payment of liabilities.
The holders of shares of Common Stock have no preemptive,
conversion, subscription or cumulative voting rights.
Item 12. Indemnification of Directors and Officers.
Delaware Statutes
- - ------------------
Section 145 of the Delaware General Corporation Law, as
amended, provides for the indemnification of the Company's
officers, directors, employees and agents under certain
circumstances as follows:
(a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by
or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contender or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint
<page
venture, trust or other enterprise against expenses (including
attorneys' fees)actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and
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 the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any
claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section(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 director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority
vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are
no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the
board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this
section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
<page
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or
is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators
of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement
of expenses or indemnification brought under this section or under
any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including
attorneys' fees).
Certificate of Incorporation
- - -----------------------------
The Company's Certificate of Incorporation provides that the
directors of the Company shall be protected from personal
liability to the fullest extent permitted by law. The Company's Bylaws
also contain a provision for the indemnification of the Company's
directors (see "Indemnification of Directors and Officers -
Bylaws" in Exhibit 3.3).
Item 13. Financial Statements
Report of Independent Certified Public Accountant
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholder's Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Reports on Form 8-K: Not Applicable
<PAGE>
INNOVATIVE TRACKING SOLUTIONS CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1997 and 1996
REPORT OF INDEPENDENT AUDITOR
To the Shareholders and Board of Directors
Innovative Tracking Solutions Corporation
I have audited the accompanying balance sheets of
Innovative Tracking Solutions Corporation (A Development Stage Company) as
of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for periods
then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I 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. I believe that my audits
provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Innovative Tracking Solutions Corporation( A Development Stage
Company) at December 31, 1997 and 1996, and the results of
operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Roger G. Castro Oxnard, CA
February 5, 1998
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1997 1996 1998
<S> (Audited) (Audited) (Unaudited)
ASSETS
Current Assets: <C> <C> <C>
Cash in Banks $ 52,219 $ 782 $ 29,284
Accounts Receivable 1,780
Subscription Receivable 18,700 60,000
Inventory 72,910 60,307 118,649
Prepaid Expenses 1,525 2,475
Total Current Assets 145,354 61,089 212,176
Fixed Assets:
Furniture & Equipment 9,408 4,828 32,583
Less Accumulate
Depreciation (1,516) (172) (1516)
Total Fixed Assets 7,892 4,656 31,067
Other Assets:
Organization Cost 25,299 - 25,299
Patents, trademarks,
licensing agreements 56,337 47,096 222,709
Less accumulated
amortization (1,000) - (1,000)
Other Assets 32,027
Total Other Assets 80,636 47,096 279,035
TOTAL ASSETS $233,882 $112,841 $522,290
Liabilities & Stockholders' Equity
Current Liabilities:
Accounts payable $ 800 $ 6,271 $ 18,311
Accrued interest payable 250 - -
Accrued Salaries - - 181,875
Accrued Licensing Agreements - - 150,000
Note payable 15,000 - -
Other Current Liabilities - - 13,849
Total Current Liabilities 16,050 6,271 364,035
Stockholders' Equity:
Common stocks , $.001
par value. Authorized
shares - 10,000,000
Issued and outstanding
shares 1,995 1,537 3,352
Inception to 12/31/97
- - -1,995,232 Jan., 1998
- - -Sept. 30, 1998-1,393,530
Common stock subscribed 9 30
Paid in capital 367,668 113,451 772,230
Deficit accumulated during
the development stage (151,840) (8,418) (617,357)
Total Stockholders' Equity 217,832 106,570 158,255
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 233,882 $112,841 $522,290
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Statement of Operations
<TABLE>
<CAPTION>
Sept. 6, 1996 Period From Three Sept. 4,
Dec. 31, <inception> to Months Ended Sept. 30 1996<inception>
1997 Dec. 31, 1996 1998 1997 through Sept. 30,
(audited) (audited) (unaudited) 1998 (unaudited)
<S> <C> <C> <C> <C> <C>
Income: $ - $ - $7,57 $ - $8,789
Cost of Goods Sold - - (3,986) - (3,986)
Gross Profit $ - $ - $3,590 $ - $4,803
Operating Expenses:
Advertising &
marketing $34,713 $1,046 $14,573 $ 90 $ 95,564
Auto expense 648 - 1,631 648 4,534
Bank charges 861 241 494 122 3,111
Contributions 319 31 - 319 411
Depreciation &
Amortization Exp. 2,344 172 - - 2,516
Education 393 696 975 - 4,256
Entertainment 331 23 1,562 - 2,445
Free Product
Samples Expense - - 6,000 - 6,000
Insurance 5,362 - 2,146 1,398 16,170
Legal and
professional 1,238 331 4,666 518 17,868
Licenses and
permits 438 178 - 60 616
Misc. Expenses 3,281 532 3,429 2,383 30,718
Offering Expenses - - 6,457 - 30,924
Office expense 11,143 1,997 10,311 5,141 35,807
Outside service 8,571 - 14,212 3,185 42,370
Payroll Expense - - 60,560 28,125 192,146
Rent-facility 15,695 - 3,999 4,971 30,272
Repairs 264 75 348 86 1,620
Taxes Paid - - 3,198 - 5,349
Trade show 1,045 - 10,617 - 18,951
Utilities 9,974 3,096 4,419 3,211 25,912
Total Operating
Expenses $96,620 $8,418 $149,597 $50,257 $563,560
Net loss
from operation $(96,620 $(8,418) $(146,007) $(50,257) $(558,757)
Other Income (Expenses)
Interest income 12 - 277 - 976
Interest expense (250) (3,458) (3,458) - (4,700)
Research and
development (46,564) - - (6,902) (54,876)
Total Other Income
(Expenses) (46,802) - (3,181) (6,902) (58,600)
Net loss $(143,422) $ (8,418) $(149,188) $(57,159) $(617,357)
Earnings(loss)
per share $(0.07) $(0.01) $(0.04) $(0.03) $(0.18)
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Statement of Stockholders' Equity
Deficit
<TABLE> Accumulated
<CAPTION> Number Common Common Additional During the
of Shares Stock at Stock Paid-in- Development
Outstanding Par Value Subscribed Capital Stage Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
September 6, 1996 (inception)
Net loss - September 6, 1996
through December 31, 1996 $(8,418) $(8,418)
Stocks issued
for cash - from
September 6, 1996
(inception)to
December 31, 1996
Restricted shares 1,495,500 $1,496 $113,451 114,947
Stocks issued
for past, present,
and future services
- - - from September 6,
1996 to December
31, 1996 41,500 41 41
Balance at
December 31, 1996 1,537,000 1,537 113,451 (8,418) 106,570
Net loss -
January 1, 1997
Through
December 31, 1997 (143,422) (143,422)
Stocks issued for cash - from
January 1, 1997 to
December 31, 1997
Restricted shares 162,000 162 54,635 54,797
504 Offering 84,232 84 167,164 167,248
Stocks issued for services
in lieu of cash -
January 1, 1997 to
December 31, 1997
Restricted shares 6,500 6 9,729 9,735
504 Offering 2,000 2 3,998 4,000
Stocks issued for past, present,
and future services - from
January 1, 1997 to
December 31, 1997 203,500 204 204
Additional common stock
subscribed(still to be issued
as of December 31, 1997)
504 Offering at
$2 per share 9,350 9 18,691 18,700
Balance at
December 31, 1997 2,004,582 $1,995 $9 367,668 $(151,840) $217,832
Balance at
December 31, 1997 2,004,582 $1,995 $ 9 367,668 $(151,840) $217,832
<page
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Statement of Stockholders' Equity
Continued
Deficit
</TABLE>
<TABLE> Accumulated
<CAPTION> Number Common Common Additional During the
of Shares Stock at Stock Paid-in- Development
Outstanding Par Value Subscribed Capital Stage Total
<S> <C> <C> <C> <C> <C> <C>
Unaudited Information:
Net loss-
January 1, 1998
through
Sept. 30, 1998 (465,517) (465,517)
Stocks issued for cash -
from January 1, 1998 to
September 30, 1998
Restricted shares 363,166 323 317,010 317,333
504 Offering 530 1 999 1,000
Stocks issued for services
in lieu of cash-
January 1, 1998 to
September 30, 1998
504 Offering 17,000 17 25,583 26,600
Stocks issued for past,
present, and future
services - from
January 1, 1998
to
Sept. 30, 1998 967,000 1,007 1,007
Additional common stock
subscribed (still to be
issued as of
September 30,1988)
504 Offering at
$2 per share 30,000 30 59,970 60,000
Balance at
September 30, 1998
(Unaudited) 3,382,278 3,343 39 772,230 (617,357) 158,255
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period From Three Sept. 4,
Dec. 31, Sept. 6 1996 Months Ended <inception)
1997 (inception) to Sept. 30, through
Dec. 31, 1996 1998 1997 Sept. 30, 1998
(audited) (audited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(143,422) $(8,418) $(149,188) $(57,159) $(617,317)
Adjustments To
Reconcile Net Loss
To net cash provided
by operating activities:
Depreciation
& amortization 2,344 172 - - 2,516
Common stocks
subscribed (18,700) - (60,000) - (60,000)
Increase in
accounts receivable (1,780)
Increase
in inventory (12,603) (60,307) (1,230) (5,680) (42,451)
Increase in
prepaid expenses (1,525) - (2,000) (1,525) (950)
Increase (decrease)
in accounts
payable and
accrued interest (5,221) 6,271 7,090 3,231 17,510
Increase (decrease)
in accrued expenses 216,349
Net cash provided (used)
by operating
activities $(179,127) $(62,282) $9,241 $(61,133) $(700,692)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of
fixed assets $(4,580) $(4,828) $(9,384) $(185) $(23,175)
Acquisition of
other assets (34,540) (47,096) (161,264) (18,676) (198,382)
NET CASH PROVIDED
(USED)BY INVESTING
ACTIVITIES $(39,120) $(51,924) $(170,648) $(18,861) $(221,557)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable 15,000 - - - -
Common stocks
issued 458 1,537 1,049 29 3,312
Common stocks
subscribed 9 - 30 - 30
Paid in capital 254,217 113,451 119,695 43,821 772,230
NET CASH PROVIDED
(USED) BY FINANCING
ACTIVITIES $269,684 114,988 $120,774 $43,850 $775,572
INCREASE (DECREASE)
IN CASH 51,437 782 (40,633) (36,144) (146,677)
BEGINNING CASH 782 - 69,917 11,624 52,219
ENDING CASH $52,219 $782 $ 29,284 $(24,520) $(94,458)
See notes to consolidated financial statements
</TABLE>
<page
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Innovative
Tracking Solutions Corporation (a development stage company) is
presented to assist in understanding the Company's financial
statements. The financial statements and notes are
representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Business Activity:
Innovative Tracking Solutions Corporation (a development stage
company) was incorporated in Delaware on September 4, 1996. The
Company is licensed to manufacture and market patented products.
The Company has devoted substantially all of its efforts in
establishing its business and has not generated significant
revenues.
Accounts receivable:
Although the Company employs the full accrual method of
accounting, there were no receivables at the end of the year.
Inventory:
Inventories are stated at cost. Cost is determined by
specific identification of each unit.
Furniture & Equipment:
Furniture and equipment are stated at cost. Depreciation is
computed using the straight-line method for both financial
statements purposes and income tax purposes.
Patents, Copyrights, and Licensing Agreements
Patents, copyrights, and licensing agreements stated at cost.
Amortization is based on straight-line method.
Net Income Per Common Share:
Primary net income per share is based on the average number of
shares of common stock outstanding during the year.
NOTE B - RELATED PARTY TRANSACTIONS
Note payable to principal stockholder in the amount of $15,000
is payable in full plus interest at the rate of 8% per annum on
October 15, 1998.
Interest expense related to this note was $250 for the period
ended December 31, 1997.
NOTE C - INCOME TAXES
As of December 31, 1997, the Company had available for federal
income tax purposes a net operating loss carry forward of
approximately $151,668, which expired in various years through
2012.
NOTE D - LEASING ARRANGEMENTS
<PAGE>
The Company conducts its operations from facility that is
leased under a two-year noncancelable operating lease expiring
in April 1999.
In addition, the Company is leasing office equipment under a
three year lease expiring in November 2000.
The following is a schedule of future minimum rental payments
under the above operating leases as of December 31, 1997:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
<S> <C>
1998 $16,594
1999 6,994
2000 3,394
$26,982
Rental expense amounted to $15,695 in 1997.
</TABLE>
- - --------------------------------------------------------
Notes to Consolidated Financial Statements (continued)
(Information relating to the three months ended September 30,
1998
and 1997 is unaudited)
- - --------------------------------------------------------
Note 1. Interim financial statements
The accompanying balance sheet as of September 30, 1998 and
the statements of operations and cash flows for the three month
periods ended September 30, 1997 and 1998, respectively, have
not been audited. However, these financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In management's opinion, the accompanying interim
financial statements reflect all material adjustments
(consisting only of normal recurring accruals) necessary for a fair
statement of the results for the interim periods presented. The results
for the interim periods are not necessarily indicative of the
results which will be reported for the entire year.
Note 2. Lease Commitments
Operating leases
The Company leases its office facility under cancelable
operating lease agreements expiring on February 28, 1999. The
lease calls for monthly payments of approximately $1,904.
In addition, the Company leases certain office equipment under
non-cancelable operating lease agreements expiring at various
times through December 2002. The leases call for aggregate monthly
payments of approximately $500.
<page
Capital lease
The Company leases an automobile under a capital lease
agreement, due in monthly installments of $389 through November
2002. The automobile that collateralizes the lease has a net
book value of $26,000.
The company leases a copy machine under a lease agreement, due
in monthly installments of $283 through April 2000 as well as
various pieces of office furniture with monthly installments
with no definite term commitment.
Note 3. Related Party Transactions
Note payable to stockholder and affiliate
The Company received a loan in the amount of $15,000 from a
director. The note payable was unsecured, due on demand and
provided for interest at a fixed rate of 8%. Total interest
expense incurred by the Company on this notes payable for the years
ended December 31, 1997 was paid in the form of Common Stock in the
amount of 4,000 shares.
Stock options
Stock options for directors of the company are outlined in
their employment agreements referenced herein. Stock options
for licensors are outlined in the licensing agreements referenced
herein.
Note 4. Income Taxes
As of September 30, 1998, the Company had available for
federal income tax purposes a net operating loss carry forward
of approximately $465,517.
Item 14. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosures
None
<page
Item 15. Index to Exhibits
Exhibit No. Description
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation
3.3 By-laws
4.1 Specimen Certificate of Common Stock
4.2 Specimen Warrant Certificate of Common
Stock
10.1 Employment Agreement dated, July 15, 1997
between the Company and President/CEO,
Dianna Cleveland
10.2 Employment Agreement dated, July 15, 1997
between the Company and Vice President/CFO/COO,
Lee A. Namisniak
10.3 Exclusive Product Licensing Agreement for
the Private Practice(tm) Vibration Reminder Disk
10.4 Addendum to Licensing Agreement - Schedule A & B
10.5 Licensing Agreement for the Smart Kitchen(tm) Food Tracking System
10.6 Addendum to Licensing Agreement - Schedule A & B
27.1 Financial Data Schedule
<page
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
INNOVATIVE TRACKING SOLUTIONS CORPORATION
By_/s/________________________________________
DIANNA CLEVELAND, President and C.E.O.
Director
Date:_________
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
_/s/__________________________________________
LEE A. NAMISNIAK, Chief Financial/Operating Officer.
Director
Date:__________
_/s/__________________________________________
LOU WEISS, Director
Date:__________
<page
Exhibit 3.1
ARTICLES OF INCORPORATION
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/04/1996
960256545 - 2659172
CERTIFICATE OF INCORPORATION
OF
Innovative Tracking Solutions Corporation
A CLOSE CORPORATION
FIRST: The name of this corporation is Innovative Tracking
Solutions Corporation
SECOND: Its registered office in the State of Delaware is to be
located at 1313 N. Market St., Wilmington, DE
19801-1151, County of New Castle. The registered agent in
charge thereof is The Company Corporation, address "same as
above".
THIRD: The nature of the business and the objects and purposes
proposed to be transacted, promoted and carried on, are to
engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The amount of total authorized shares of stock of this
corporation is 1,500 shares of NO per value.
FIFTH: The name an mailing address of the incorporation is:
Regina Cephas, 1313 N. Market St., Wilmington, DE 19801-1151
SIXTH: All of the corporation's issued stock, exclusive of
treasury shares, shall be held of record by not more than thirty
(30) persons.
SEVENTH: All of the issued stock of all classes shall be
subject to one or more of the restrictions on transfer permitted
by Section 202 of the General Corporation Law.
EIGHTH: The corporation shall make no offering of any of its
stock of any class which would constitute a "public offering"
within the meaning of the United States Securities Act of 1933 as it
may be amended from time to time.
NINTH: Directors of the corporation shall not be liable to
either the corporation or its stockholders for monetary damages
for a breach of fiduciary duties unless the breach involves: (1) a
director's duty of loyalty to the corporations or its
stockholders;
(2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (3) liability for
unlawful payments of dividends or unlawful stock purchases or redemption
by the corporation; or (4) a transaction from which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation
under the laws of the State of Delaware, do make, file and
record this Certificate and do certify that the facts herein are true, and I
have accordingly hereunto set my hand.
DATED: SEPTEMBER 4, 1996
<page
Exhibit 3.2
AMENDMENT TO ARTICLES OF INCORPORATION
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/21/1997
971166640 - 2659172
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
Innovative Tracking Solutions Corporation, a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
Innovative Tracking Solutions Corporation, resolutions were duly
adopted setting forth a proposed amendment of the Certificate of
Incorporation of said corporation, declaring said amendment to
be advisable and resolution setting forth the proposed amendment is
as follows:
RESOLVED: That the Certificate of incorporated of this
corporation be amended by deleting the Heading,. Article(s)
Ninth and changing Article(s) Fourth, Seventh, and Eighth so that the
document shall read as follows:
FOURTH: The amount of the total authorized capital
stock of this corporation is (ten million) 10,000,000 shares of
$.001 Par Value.
SEVENTH: The Directors shall have power to make and to
alter or amend the By-Laws; to fix the amount to be reserved as
working capital, and to authorize and cause to be executed,
mortgages and liens without limit as to the amount, upon the
property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of
the holders of a majority of the capital stock issued and
outstanding, the Directors shall have the authority to dispose,
in any manner, of the whole property of this corporation.
The By-Laws shall determine whether and to what extent
the accounts and books of this corporation, or any of them shall
be open to the inspection of the stockholders; and no stockholder
shall have any right of inspecting any account, or book or
document of this corporation, except as conferred by the law or the By-
Laws or by resolution of the stockholders or directors, except as
otherwise required by the laws of the State of Delaware.
It is the intention that the objects, purposes and powers
specified in the Third paragraph hereof shall, except where
otherwise specified in said paragraph, be nowise limited or
restricted by reference to or inference from the terms of any
purpose and powers specified in the Third paragraph and in each
of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes and powers.
<page
EIGHTH: Directors of the corporation shall not be liable
to either the corporation or its stockholders for monetary
damages for a breach of fiduciary duties unless the breach involves:
(1) a director's duty of loyalty to the corporation or its
stockholders; (2) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law;
(3) liability for unlawful payments of dividends or unlawful stock
purchases or redemption by the corporation; or (4) a transaction
from which the director derived an improper personal benefit.
Exhibit 3.3
BY-LAWS
- - -OF-
INNOVATIVE TRACKING SOLUTIONS CORPORATION
A Close Corporation
ARTICLE I- OFFICES
The office of the Corporation shall be located in the City,
County and State designated in the Certificate of
Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the
Shareholders may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation
shall be held within five months after the close of the
fiscal year of the corporation, for the purpose of electing
officers and transacting such other business as may properly
come before the meeting
Section 2 - Regular Meetings
The shareholders may provide by resolution, from time to
time, for the holding of regular meetings of the shareholders
and may affix the time and place thereof.
<page
Section 3 - Special Meetings:
Special meetings of the shareholders may be called at any
time by the President, and shall be called by the President
or the Secretary at the written request of the holders of ten
percent (10%) of the shares then outstanding and entitled to
vote thereat, or as otherwise required under the provisions
of the Corporation Law.
Section 4 - Place of Meetings
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places within the
United States as shall be designated in the notices or
waivers of notice of such meetings.
Section 5 - Notice of Meetings
(a) Written notice of each meeting of shareholders, whether
annual or special, stating the time when and place where it
is to he held, shall be served either personally or by mail,
not less than ten or more than fifty days before the meeting,
upon each shareholder of record entitled to vote as such
meeting, and to any other shareholder to whom the giving of
notice may be required by law. Notice of a special meeting
shall also state the purpose or purposes for which the
meeting is called, and shall indicate that it is being issued
by, or at the direction of, the person or persons calling the
meeting. If, at any meeting, action is proposed to be taken
that would if taken, entitle shareholders to receive payment
for their shares pursuant to the Business Corporation Law,
the notice of such meeting shall include a statement of that
purpose and to that effect. If mailed, such notice shall be
directed to each such shareholder at his address, as it
appears on the records of the shareholders of the
Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which
case, it shall be mailed to the address designated in such
request.
(b) Notice of any meeting need not be given to any person who
may become a shareholder of record after the mailing of such
notice and prior to the meeting, or to any shareholder who
attends such meeting, in person or by proxy, or to any
shareholder, who, in person or by proxy, submits a signed
waiver of notice either before or after such meeting. Notice
of any adjourned meeting of shareholders need not be given,
unless otherwise required by statute.
<page
Section 6 - Chairman of Meetings
At all meetings of the Shareholders, the President, if
present, shall preside. If there shall be no President, or
he shall be absent, then a Chairman of the meeting, chosen by
the shareholders, shall preside.
Section 7 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in
the Certificate of Incorporation (such Certificate and any
amendments thereof being hereinafter collectively referred to
as the "Certificate of Incorporation"), at all meetings of
shareholders of the Corporation, the presence at the
commencement of such meetings in person or by proxy of
shareholders holding of record a majority of the total number
of shares of the corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The
withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of
the votes cast by the holders of shares entitled to vote
thereon, way adjourn the meeting. At any such adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called if a quorum had been present.
Section 8 - Voting:
(a) Except as otherwise provided herein or by statute, or by
the Certificate of Incorporation, any corporate action, to be
taken by vote of the shareholders, shall be authorized by a
majority of votes cast at a meeting of shareholders by the
holders of shares entitled to vote thereon.
(b) Except as otherwise provided herein or by statute or by
the certificate of Incorporation, at each meeting of
shareholders, each holder of record of stock of the
corporation entitled to vote thereat, shall be entitled to
one vote for each share of stock registered in his name on
the books of the Corporation.
<page
(c) Each shareholder entitled to vote or to express consent
or dissent without a meeting, may do so by proxy; provided,
however, that the instrument authorizing such proxy to act
shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized
in writing. No proxy shall be valid after the expiration of
eleven months from the date of its execution, unless the
persons executing it shall have specified therein the length
of time it is to continue in force. Such instrument shall be
exhibited to the secretary at the meeting and shall be filed
with the records of the corporation.
(d) Any resolution in writing, signed by all of the
shareholders entitled to vote thereon, shall be and constitute
action by such shareholders to the effect therein expressed,
with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of
shareholders and such resolution so signed shall be inserted
in the Minute nook of the corporation under its proper date.
Section 9 - Duties and Powers:
The Shareholders shall be responsible for the control and
management of the affairs, property and interests of the
Corporation, and may exercise all powers of the Corporation.
Section 10 - Contracts:
(a) No contract or other transaction between this Corporation
and any other corporation shall be impaired, affected or
invalidated, nor shall any shareholder be liable in any way by
reason of the fact that such shareholder of this Corporation
is interested in, or is a shareholder, director or officer of
such other corporation, provided that such facts are disclosed
or wade known to the remaining shareholders.
(b) Any shareholder, personally and individually, may be a
party to or may be interested in any contract or transaction
of the corporation, and no shareholder shall be liable in any
way by reason of such interest, provided that the fact of such
interest be disclosed or made known to the other shareholders,
and provided that the shareholders shall authorize, approve or
ratify such contract or transaction by a majority vote not
counting the shares of any such shareholder, notwithstanding
the presence of any such shareholder at the meeting at which
such action is taken. The shares of such shareholder or
shareholders may be counted in determining the presence of a
quorum at such meeting. This Section shall not be construed to
impair or invalidate or in any way affect any contract or
other transaction which would otherwise be valid under the law
(common statutory, or otherwise) applicable thereto.
<PAGE>
Section 11 - Committees:
The shareholders may, from time to time, designate from among
its members an executive committee and such other committees,
and alternate members thereof, as they deem desirable, each
consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided
in such resolution. Each such committee shall serve at the
pleasure of the shareholders. At all meetings of a committee,
the presence of all members at the committee shall be
necessary to constitute a quorum for the transaction of
business, except as otherwise provided for by the
shareholders. Participation of any one or more members of the
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in
the meeting to hear each other at the same time, shall
constitute presence in person at any such meeting. Any action
authorized in writing by all of the members of a committee
entitled to vote thereon and filed with the minutes of the
Committee shall be the act of the committee with the same
force and effect as if the same had been passed by unanimous
vote at a duly called meeting of the committee.
ARTICLE III - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a
president, a Secretary, a Treasurer, and such other officers,
as the shareholders may from time-to-time deem advisable.
Any two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the
shareholders at the regular annual meeting of the
shareholders.
(c) Each officer shall hold office until the annual meeting of
the shareholders next succeeding his election, and until his
successor shall have been elected and qualified, or until his
death, resignation or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice
of such resignation to the President or the Secretary of the
Corporation, unless otherwise specified in such written
notice, such resignation shall take effect upon receipt
thereof by such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
<page
Section 3 - Removal
Any officer may be removed, either with or without cause, and
a successor elected by the shareholders at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation,
inability to act, disqualification, or any other cause, may
at any time be filled for the unexpired portion of the term
by the shareholders.
Section 5 - Duties of Officers
Officers of the corporation shall, unless otherwise provided
by the shareholders, each have such powers and duties as
generally pertain to their respective offices as well as such
powers and duties as may be set forth in these by-laws or may
from time to time be specifically conferred or imposed by the
shareholders. The President shall be the chief executive
officer of the corporation.
Section 6 - Sureties and Bonds:
In case the shareholders shall so require, any officer,
employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or
sureties as the shareholders may direct, conditioned upon
the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the
accounting for all property, funds or securities of the
Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other
Corporation, any right or power of the Corporation as such
shareholder (including the attendance, acting and voting at
shareholders' meetings and execution of waivers, consents.
proxies or other instruments,) may be exercised on behalf of
the Corporation by the President, any Vice President or such
other person as the shareholder may authorize.
<PAGE>
ARTICLE IV SHARES OF STOCK
Section 1 - Certificate of Stock-
(a) The certificates representing shares of the Corporation
shall be in such form as shall be adopted by the
shareholders, and shall be numbered and registered in the
order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the president
or Vice President, and (ii) the Secretary or Treasurer, or
any Assistant Secretary or Assistant Treasurer, and may bear
the corporate seal.
(b) No certificate representing shares shall be issued until
the full amount of consideration therefor has been paid,
except as otherwise permitted by law.
(c) The shareholders may authorize the issuance of
certificates for fractions of a share which shall entitle the
holder to exercise voting rights, receive dividends and
participate in liquidating distributions, in proportion to the
fractional holdings; or it may authorize the payment in cash of
the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it
may authorize the issuance, subject to such conditions as may
be permitted by law, of script in registered or bearer form
over the signatures of an officer or agent of the Corporation,
exchangeable as therein provided for full shares, but such
script shall not entitle the holder to any rights of a
shareholder, except as therein provided for full shares, but
such script shall not entitle the holder to any rights of a
shareholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the
Corporation shall immediately notify the Corporation of any
loss or destruction of the certificate representing the
same. The Corporation may issue a new certificate in the
place of any certificate theretofore issued by it, alleged
to have been lost or destroyed. On production of such
evidence of loss or destruction as the shareholders in their
discretion, may require, the shareholders may, in their
discretion, require the owner of the lost or destroyed
certificate or his legal representatives, to give the
Corporation a bond in such sum as they may direct, and with
such surety or sureties as may be satisfactory to them, to
indemnify the Corporation against any claims, loss,
liability or damage it may suffer on account of the issuance
of the new certificate. A new certificate may be issued
without requiring any such evidence or bond when, in the
judgment of the shareholders, it is proper so to do.
<PAGE>
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on
the share records of the Corporation only by the holder of
record thereof, in person or by his duly authorized
attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment
or power of transfer endorsed thereon or delivered
therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer
and of payment of transfer taxes as the Corporation or
agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares the absolute owner thereof for
all purposes and, accordingly, shall not be bound to
recognize any legal, equitable or other claim to, or
interest in, such share or shares on the part of any other
person; whether or not it shall have express or other notice
thereof, except as otherwise expressly provided by law.
Section 4 - Record Date'
In lieu of closing the share records of the corporation, the
shareholders may fix, in advance, a date not exceeding fifty
days, nor less than ten days, as the record date for the
determination of shareholder entitled to receive notice of,
or to vote at, any meeting of shareholders, or to consent to
any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any
dividends or allotment of any rights, or for the purpose of
any other action. If no record date is fixed, the record
date for the determination of 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 no notice is given, the day
on which the meeting is held; the record date for
determining shareholders for any other purpose shall be the
close of business on the day on which the resolution of the
directors relating thereto is adopted. When a determination
of shareholders of record entitled to notice of or to vote
at any meeting of shareholders has been made as provided for
herein, such determination shall apply to any adjournment
thereof, unless the directors fix a new record date for the
adjourned meeting
ARTICLE V - DIVIDENDS
Subject to applicable law, dividends may be declared and
paid out of any funds available therefor, as often, in such
amounts, and at such time or times as the shareholders may
determine.
<PAGE>
ARTICLE VI - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the
shareholders from time to time, subject to applicable law.
ARTICLE VII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall
be approved from time to time by the shareholders.
ARTICLE VIII - AMENDMENTS
Except as otherwise provided by statute or by the Certificate
of Incorporation, all by-laws of the Corporation shall be
subject to alteration or repeal, and new by-laws may be made
by a majority vote of the shareholders.
RESOLUTIONS ADOPTED BY INCORPORATOR
OF
INNOVATIVE TRACKING SOLUTIONS CORPORATION
The undersigned, being the sole Incorporator of the
corporation, hereby adopts the following resolutions:
(1) RESOLVED, that a copy of the Certificate of
Incorporation of the Corporation, together with the
original receipt showing payment of the statutory
organization tax and filing fee, be inserted in the
Minute Book of the Corporation.
(2) RESOLVED, that the form of First By-Laws
submitted to the meeting be, and the same hereby are,
adopted as and for the fly-Laws of the Corporation,
and that a copy thereof be placed in the Minute Book
of the Corporation, directly following the Certificate
of Incorporation.
(3) RESOLVED, that the election is hereby made not to
have a Board of Directors.
Dated:
/s/
Incorporator
<PAGE>
Exhibit 4.1
<SEQUENCE>4
[DESCRIPTION]SPECIMEN OF COMMON STOCK CERTIFICATE
<PAGE>
EXHIBIT
INNOVATIVE TRACKING SOLUTIONS CORPORATION
NUMBER
SHARES
[________]
[________]
AUTHORIZED COMMON STOCK; 10,000,000 SHARES
PAR VALUE $.001
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE
COMMON STOCK CUSIP
45765S 10 8
THIS CERTIFIES THAT
Is the RECORD HOLDER OF
SHARES OF INNOVATIVE TRACKING SOLUTIONS CORPORATION
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 signatures of its duly authorized officers.
Dated:
[SEAL OF INNOVATIVE TRACKING SOLUTIONS CORPORATION]
/s / LEE A. NAMISNIAK /s/ DIANNA CLEVELAND
- - - ----------------------- ---------------------
Secretary PRESIDENT
By: ^^Illegible Signature^^
Atlas Stock Transfer Corporation
5899 south State Street
Salt Lake City, UT 84107
This Certificate is not valid unless countersigned by the
Transfer Agent.
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a
member of a registered national stock exchange, or by a bank
(other than a savings bank) , or a trust company.
The following abbreviation, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
_______Custodian_______
TENANT - as tenants by the entireties (Cust)
(Minor)
JT TEN - as joint tenants with right
under Uniform Gifts
to Minors
of survivorship and not as Act
________________________
tenants in common (State)
Additional abbreviation may also be used though
not in above list.
FOR VALUE RECEIVED, _________hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - - --------------------------------------
- - - --------------------------------------
______________________________________________________________
____________
(Please print or typewrite name and address including zip code
of assignee)
______________________________________________________________
____________
________________________________________________________________
___
_______
________________________________________________________________
___
_______
Shares of the capital stock represented by the within
Certificate,
and do hereby
irrevocably constitute and appoint
________________________________________________________________
___
____________
Attorney to transfer the said stock on the books of the
within-named Corporation with full power of substitution in the
premises.
Dated,
---------------------------------
----------------------------
- - ------------
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the Certificate, in every
particular, without alteration or enlargement, or any change
whatever.
<PAGE>
Exhibit 4.2
SPECIMEN FORM OF WARRANT CERTIFICATE
Warrant Number Number of
Warrants
COMMON STOCK PURCHASE WARRANT
Innovative Tracking Solutions
(A Delaware Company)
Cusip No. 457655 11 6
This certifies that FOR VALUE RECEIVED,
Or registered assigns (the "Holder") is the owner of
Common Stock Purchase Warrants. Each entitles the Holder to
purchase at any time between July 21, 1997, and July 21, 1998,
subject to the terms and conditions set forth in this
certificate and the Warrant Agreement (as hereinafter defined), for an
exercise price of $2.00, one fully paid and non-assessible share of
common stock, $0.001 par value, of Innovative Tracking Solutions
Corporation, a Delaware corporation (the "Company"). After July
21, 1998, each Warrant that has not been exercised will expire.
Shares of common stock are issuable on the presentation and
surrender of this Warrant Certificate with the subscription form
on the reverse side hereof duly executed at the principal office of
the Company or its duly appointed agent, Atlas Stock Transfer
Corporation, or its successor (the "Warrant Agent") accompanied
by payment in lawful money of the United States of America in cash
of by official bank or certified check payable to the Company.
The Warrant Certificate and each Warrant represented hereby
are issued under and are subject in all respects to the terms
and conditions set forth in the Warrant Agreement (the "Warrant
Agreement") dated as of April 30, 1997, between the Company and
the Warrant Agent. A copy of the Warrant Agreement is on file at
the principal office of the Warrant Agent, and a copy will be
provided by the Company to each Holder on request at no charge.
The term "Expiration Date" shall mean 11:59 p.m. (Pacific
Standard Time) July 21, 1998. If such date shall in the state
of California be a holiday or a day on which banks are authorized
to close, then the Expiration Date shall mean 11:59 p.m. (Pacific
Standard Time) the next following date which in the state of
California is not a holiday or a day on which banks are
authorized to close.
The company has the right to call in each Warrant represented
hereby upon 15 days notice to the Holder, if not exercised by
the Holder prior to the expiration of the 15 day period, should the
Company's Common Stock trade at or above a $2.50 reported
closing bid or trade price for at least 10 consecutive trading days.
This Warrant shall not be exercisable and the Company shall
not be obligated to deliver any securities pursuant to this
Warrant unless a registration statement under the Securities Act of
1933, as amended and under applicable state securities laws with
respect to such securities is effective or there is an available
exemption from such federal and state registration requirements. This
Warrant shall not be exercisable by a Holder in any state where
such exercise would be unlawful.
This warrant shall not be valid unless countersigned by the
Warrant Agent.
Date:
Secretary
President
Corporate Seal
<PAGE>
FORM OF EXERCISE
(Form of exercise to be executed by the Holder at the time
of exercise)
TO ATLAS STOCK TRANSFER CORPORATION, THE WARRANT AGENT:
The undersigned, the Holder of the within Warrant, hereby
(1) exercise his right to purchase shares of Common Stock, par
value $0.001 per share, of Innovative Tracking Solutions
Corporation, at any time between July 21, 1997, and July 21,
1998, which the undersigned is entitled to purchase under the terms of
the within Warrant; and (2) makes payment in full for the number
of shares of Common Stock so purchased by payment of dollars ($).
Please issue the certificate for shares of Common Stock in the
name of, and pay any cash for any fractional shares to:
Print Type Name
Social Security Number or Other Identifying Number
Street Address
City
State
Zip Code
and, if said number of shares purchasable hereunder, please
issue a new Warrant for the unexercised portion of the within
Warrant to:
Print Type Name
Social Security Number or Other Identifying Number
Street Address
City
State
Zip Code
Date:
(Signature Must Conform in all Respects to Name of Holder as
Specified on the Face of the Warrant)
ASSIGNMENT
(Form of Assignment to be Executed if Holder Desires to Transfer
Certificate)
FOR VALUE RECEIVED, hereby sells, assigns, and transfers
unto the right represented by the within Warrant to purchase
shares of Common Stock, par value $0.001 per share, of
Innovative Tracking Solutions Corporation, to which the within Warrant
relates and appoints attorney to transfer such right on the books of
the Warrant Agent with full power of substitution in the premises.
Dated:
(Signature Guaranteed)
Signature
(Signature Must Conform in All Respects to Name of Holder as
Specified on the Face of the Warrant.)
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into on
July 15, 1997, between INNOVATIVE TRACKING SOLUTIONS
CORPORATION, INC., a Delaware corporation ("Company"), and DIANNA L.
CLEVELAND ("Executive").
R E C I T A L
Company wishes to employ Executive, and Executive agrees to
serve, as President and Chief Executive Officer of Company,
subject to the terms and conditions set forth below.
AGREEMENT
It is agreed as follows:
1. TERM OF EMPLOYMENT. Company hereby employs Executive, and
Executive hereby accepts employment with Company, for a period
of five (5) years terminating July 15, 2002 ("Employment
Period"); provided that this Agreement shall be automatically
renewed for successive five (5) year terms unless either party
elects not to renew this Agreement by delivering written
notice of its election to the other party no later than one
hundred twenty (120) days prior to the end of the current
term. Notwithstanding anything in this Paragraph 1 to the
contrary, this Agreement may be terminated at any time in
accordance with Paragraph 7.
2. DUTIES OF EXECUTIVE. Executive shall serve in the capacity
as President and Chief Executive Officer of Company at Company's
office in Laguna Hills, California, or at such other place as
Company may direct provided that Company shall not direct or
cause Executive to perform her services from an office outside
of Orange County, California. Executive's principal duties and
responsibilities shall consist of primary responsibility for
all (i) sales and marketing and activities; (ii)
administrative matters; and (iii) Executive management and
supervision. Executive shall perform such other services and
duties as may from time to time be assigned to Executive by
Company's board of directors provided that such other services
and duties are not inconsistent with any other term of this
Agreement. Except during vacation periods or in accordance
with Company's personnel policies covering executive leaves
and reasonable periods of illness or other incapacitation,
Executive shall devote her services to Company's business and
interests in a manner consistent with Executive's title and
office and Company's needs for her services. Executive shall
perform the duties of Executive's office and those assigned to
Executive by the Company's board of directors with fidelity,
to the best of Executive's ability, and in the best interest
of Company.
<page
3. COMPENSATION OF EXECUTIVE.
a) Base Compensation. At such time that it becomes
economically feasible for the Company with due regard to
the financial conditions and prospects of the business,
the Company will pay Executive for services hereunder an
annual base salary of Seventy Five Thousand Dollars
($75,000). If after one year from the date of this
Agreement, the Company has not been able to begin and
maintain said Base Salary, the Company hereby agrees to
award to Executive, Five Thousand (5,000) shares of
restricted common stock in the Company for each week
earned during the first year of this Agreement. Any
stock awarded shall not be construed as payment in lieu
of Executive's Base Salary.
b) Increases To Base Compensation: Effective one year from
the date of this Agreement. Executive shall receive an
increase in annual base salary to One Hundred Twenty Five
Thousand Dollars ($125,000) for the remaining term of
this Agreement. For all subsequent years, Executive shall
be entitled to receive an annual increase in base salary
equal to the cost of living adjustment to base salary
based on the percentage of the federal annual increase of
the cost of living which, in addition to any merit
increases awarded in the sole discretion of the Company,
create an annual base salary rate. Said annual increase
in base salary shall at no time for the term of this
Agreement be less than ten percent (10%) of Executive's
previous year's base salary.
c) Bonus Compensation. As additional compensation for
Executive's services hereunder, Executive shall be paid
a cash bonus up to one hundred percent (100%) of
Executive's base salary for each calendar year from
January 1, 1999 and ending December 31, 2002, if the
Company earns a Net Profit (as defined below) of one
million dollars ($1,000,000) within that respective
calendar year. As used herein, the term "Net Profit"
shall mean the gross revenue generated from all products
and services sold by the Company, less all related costs
and overhead, such costs to include all costs including,
but not limited to, pay-outs to subscribers, insurance,
labor (including wages and salaries of officers,
directors, Executives, independent contractors),
equipment costs, technical fees and training costs.
Executive may elect to receive said bonus in common stock
based on a valuation of one-half 1/2 of the then current
fair market value for the stock or to receive bonus in
any combination of cash and stock.
d) Stock Options. As additional compensation for
Executive's services hereunder, Executive shall be
granted stock options each year to purchase Two Hundred
Fifty Thousand (250,000) shares of Common Stock in the
Company at $.50 per share. Options granted each year
shall hold a five year expiration.
<page
4. EXPENSE REIMBURSEMENTS. Executive shall be reimbursed for
reasonable and actual out-of-pocket expenses incurred by
Executive in performance of Executive's duties and
responsibilities hereunder in accordance with Company's
established personnel policy covering executive officer
expense reimbursements, as such policy may be amended, revised
or otherwise changed from time to time. Executive shall
furnish proper vouchers and expense reports and shall be
reimbursed only for those expenses which shall be
reimbursable. The Company shall reimburse Executive for all
reasonable and necessary relocation expenses in the event the
Company chooses to relocate the business outside of Orange
County, California.
5. STOCK INCENTIVES. The Company intends to adopt a
"performance-based compensation" plan, the Compensation Incentive Plan
(CIP), that is tax deductible by the Company without
limitation under Section 162(m) of the Code. The Company
Board of Directors believes that attracting and retaining key
employees of high quality is essential to the Company's growth
and success. In addition, the Company Board believes that the
long term success of the Company is enhanced by a competitive
and comprehensive compensation program which may include
tailored types of incentives designed to motivate executives
and reward key employees for outstanding service, including
awards that link compensation to applicable measures of the
Company's performance and the creation of stockholder value.
In this regard, stock options and other stock-related awards
will be an important element of compensation for key
employees. Such awards will enable the Company to attract and
retain executives and key employees and enable such persons to
acquire a proprietary interest in the Company and thereby
align their interests with the interests of the Company's
stockholders. In addition, the Company Board has concluded
that the Company Board (the "Compensation Committee") should
be given as much flexibility as possible to provide for annual
and long-term incentive awards contingent on performance.
Executive shall be included in all programs of this type
adopted by Company.
6. VACATION, SICK LEAVE AND OTHER FRINGE BENEFITS.
a) Executive shall be entitled to a four (4) weeks paid
vacation per every twelve (12) month period of employment
hereunder. Executive must use a minimum of two (2) weeks
vacation per every twelve (12) month period. Executive
may choose carryover a maximum of two (2) weeks vacation
per every twelve (12) month period.
b) Executive shall also be entitled to leaves for illness or
other incapacitation as is consistent with Executive's
title and the Company's needs for Executive's services,
except as otherwise provided for disability in Paragraph
6.2.
<page
c) Executive shall be entitled during Executive's employment
hereunder to share or participate in such medical
insurance programs or other "fringe" benefit plans or
programs as shall be made available to executive officers
employed by Company generally, in accordance with
Company's established personnel policies, if any, or as
established, amended, revised or otherwise changed from
time to time, covering executive officer Executive
benefits.
7. TERMINATION.
a) Termination by Company for Cause. Company may terminate
this Agreement and Executive's employment hereunder for
Cause (as defined herein) any time effective upon 15 days
written notice to Executive. As used herein, the term
"Cause" shall mean:
i) Habitual neglect in the performance of Executive's
material duties as set forth in Paragraph 2 which
continues uncorrected for a period of thirty (30)
days after written notice thereof by Company to
Executive; or
ii) Gross negligence involving misfeasance or
nonfeasance by Executive in the performance of
Executive's material duties as set forth in
Paragraph 2 which continues uncorrected for a
period of thirty (30) days after written notice
thereof by Company to Executive.
b) Termination Upon Death or Disability. This Agreement and
Executive's employment hereunder shall terminate upon
Executive's death or Disability (as defined herein). For
this purpose, "Disability" means incapacity, whether by
reason of physical or mental illness or disability, which
prevents Executive from substantially performing
Executive's material duties as set forth in Section 2 for
six (6) months, or for shorter periods aggregating six
(6) months in any twelve (12) successive calendar months.
Upon termination for death, and unless Company shall have
in force a disability insurance policy providing for
benefits in an amount at least equal thereto, upon
termination for Disability, Company shall continue to pay
the base compensation payments pursuant to Paragraph 3.1
to the surviving spouse of Executive (or if there is none
to Executive's estate) in the case of death and to
Executive or Executive's court appointed conservator in
the case of Disability until the date three (3) months
thereafter. Termination for death shall become effective
upon the occurrence of such event and termination for
Disability shall become effective upon written notice by
Company to Executive.
<page
c) Other Termination. In the event the Company terminates
Executive's employment without Cause, or Executive
terminates Executive's employment for Good Reason (as
such terms are defined below), Executive will receive
severance benefits. If termination is prior to a change
in control of the Company (as defined below), the
benefits will include continuation of salary, bonus and
other benefits, and continued vesting of options and
restricted stock, for five (5) years following
termination. If termination is within five years after a
change in control, the benefits will include a lump sum
payment equal to five times Executive annual salary and
bonus, immediate vesting of all options and restricted
stock, and continuation of other benefits for five years
following termination. Additionally, if any payment or
distribution to Executive would be subject to any "golden
parachute payment" excise tax or similar tax, then
Executive will be entitled to receive gross-up payments
in an amount such that, after payment of such excise tax
or similar tax, and all taxes attributable to such gross-
up payments, Executive retains an amount equal to the
amount he would have retained if such excise tax or
similar tax had not applied.
i) A "change in control" will be defined as the
acquisition of 30% or more of the Company's Common
Stock or voting securities by a person or group
(subject to specified exceptions), certain changes
in the majority of the Company's Board of
Directors, certain mergers involving the Company,
or the liquidation, dissolution or sale of all or
substantially all of the assets of the Company.
ii) "Good reason" is defined generally as demotion,
reduction in compensation, unapproved relocation or
a material breach of the Employment Agreement by
the Company.
8. EVENTS UPON TERMINATION. The termination of this Agreement
pursuant to Section 6 shall also result in the termination of
all rights and benefits of Executive under this Agreement
except for any rights to compensation accrued under Paragraph
3 prior to the date of termination or rights to expense
reimbursement under Paragraph 4.
9. EXECUTIVE'S REPRESENTATIONS. Executive represents and
warrants that Executive is free to enter into this Agreement
and to perform each of the provisions contained herein.
Executive represents and warrants that Executive is not
restricted or prohibited, contractually or otherwise, from
entering into and performing this Agreement, and that
Executive's execution and performance of this Agreement is not
a violation or breach of any agreement between Executive and
any other person or entity.
<page
10. GENERAL PROVISIONS.
a) Severable Provisions. The provisions of this Agreement
are severable, and if any one or more provisions may be
determined to be judicially unenforceable, in whole or in
part, the remaining provisions shall nevertheless be
binding and enforceable.
b) Assignment. Neither this Agreement nor any of the rights
or obligations of Executive or the Company hereunder
shall be assignable.
c) Attorneys' Fees. If any legal action arises under this
Agreement or by reason of any asserted breach of it, the
prevailing party shall be entitled to recover all costs
and expenses, including reasonable attorneys' fees,
incurred in enforcing or attempting to enforce any of the
terms, covenants or conditions, including costs incurred
prior to commencement of legal action, and all costs and
expenses, including reasonable attorneys' fees, incurred
in any appeal from an action brought to enforce any of
the terms, covenants or conditions.
d) Notices. Any notice to be given to Company under the
terms of this Agreement shall be addressed to Company at
the address of Company's principal place of business, and
any notice to be given to Executive shall be addressed to
Executive at her home address last shown on the records
of Company, or at such other address as either party may
hereafter designate in writing to the other. Any notice
required or permitted under this Agreement shall be in
writing and shall be deemed effective: (i) upon receipt
in the event of delivery by hand, including delivery made
by private delivery or overnight mail service where
either the recipient or delivery agent executes a written
receipt or confirmation of delivery; or (ii) 48 hours
after deposited in the United States mail, registered or
certified mail, return receipt requested, postage
prepaid.
e) Waiver. Either party's failure to enforce any provision
or provisions of this Agreement shall not in any way be
construed as a waiver of any such provision or
provisions, or prevent that party thereafter from
enforcing each and every other provision of this
Agreement.
f) Entire Agreement; Amendments. This Agreement supersedes
any and all other agreements, either oral or in writing,
between the parties hereto with respect to the employment
of Executive by Company and contains all of the covenants
and Agreements between the parties with respect to the
employment of Executive by Company. Each party to this
Agreement
<page
acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been
made by any party, or anyone acting on behalf of any
party, which are not embodied herein, and that no other
agreement, statement or promise not contained in this
Agreement will be effective only if it is in writing
signed by the party to be charged.
g) Titles and Headings. Titles and headings to sections of
this Agreement are for the purpose of reference only and
shall in no way limit, define or otherwise affect the
interpretation or construction of such provisions.
h) Construction And Performance . This Agreement shall not
be construed against the party preparing it, but shall be
construed as if both parties prepared this Agreement. As
used herein the singular and plural number, the
masculine, feminine and neutral genders include on
another.
i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California without regard for conflicts of laws statutes.
Any suit or action brought to resolve a dispute arising
from the terms of this Agreement shall be brought in a
court of competent jurisdiction in the County of Orange,
State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"COMPANY"
INNOVATIVE TRACKING SOLUTIONS CORPORATION, INC.,
a Delaware corporation
By:
/s/
Lee A. Namisniak, Chief Financial Officer/Vice President
/s/
Lou Weiss, Director
"EXECUTIVE"
/s/
Dianna L. Cleveland
<page
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into on
July 15, 1997, between INNOVATIVE TRACKING SOLUTIONS
CORPORATION,
INC., a Delaware corporation ("Company"), and LEE A. NAMISNIAK
("Employee").
R E C I T A L
Company wishes to employ Employee, and Employee agrees to
serve, as Vice President and Chief Financial and Operating
Officer of Company, subject to the terms and conditions set forth below.
AGREEMENT
It is agreed as follows:
1. TERM OF EMPLOYMENT. Company hereby employs Employee, and
Employee hereby accepts employment with Company, for a period of
five (5) years terminating July 15, 2002 ("Employment Period");
provided that this Agreement shall be automatically renewed for
successive five (5) year terms unless either party elects not to
renew this Agreement by delivering written notice of its
election to the other party no later than one hundred twenty
(120) days prior to the end of the current term.
Notwithstanding anything in this Paragraph 1 to the contrary,
this Agreement may be terminated at any time in accordance with
Paragraph 7.
2. DUTIES OF EMPLOYEE. Employee shall serve in the capacity as
Vice President and Chief Financial and Operating Officer of Company
at Company's office in Laguna Hills, California, or at such
other place as Company may direct provided that Company shall
not direct or cause Employee to perform his services from an
office outside of Orange County, California. Employee's
principal duties and responsibilities shall consist of primary
responsibility for all (i) financial and operations activities;
(ii) administrative matters; and (iii) Employee management and
supervision. Employee shall perform such other services and
duties as may from time to time be assigned to Employee by
Company's board of directors provided that such other services
and duties are not inconsistent with any other term of this
Agreement. Except during vacation periods or in accordance with
Company's personnel policies covering Employee leaves and
reasonable periods of illness or other incapacitation, Employee
shall devote his services to Company's business and interests in
a manner consistent with Employee's title and office and
Company's needs for his services. Employee shall perform the
duties of Employee's office and those assigned to Employee by
the Company's board of directors with fidelity, to the best of
Employee's ability, and in the best interest of Company.
3. COMPENSATION OF EMPLOYEE
a) Base Compensation. At such time that it becomes
economically feasible for the Company with due regard to the financial
conditions and prospects of the business, the Company will pay
Employee for services hereunder an annual base salary of Sixty
Thousand Dollars ($60,000). If after one year from the date
of this Agreement, the Company has not been able to begin and
maintain said Base Salary, the Company hereby agrees to award
to Employee, Four Thousand (4,000) shares of restricted common
stock in the Company for each week earned during the first
year of this Agreement. Any stock awards shall not be
construed as payment in lieu of Employee's Base Salary.
b) Increases To Base Compensation: Effective one year from the
date of this Agreement. Employee shall receive an increase in
annual base salary to One Hundred Thousand Dollars ($100,000)
for the remaining term of this Agreement. For all subsequent
years, Employee shall be entitled to receive an annual
increase in base salary equal to the cost of living adjustment
to base salary based on the percentage of the federal annual
increase of the cost of living which, in addition to any merit
increases awarded in the sole discretion of the Company,
create an annual base salary rate. Said annual increase in
base salary shall at no time for the term of this Agreement be
less than ten percent (10%) of Employee's previous year's base
salary.
c) Bonus Compensation. As additional compensation for
Employee's services hereunder, Employee shall be paid a cash bonus up to
one hundred percent (100%) of Employee's base salary for each
calendar year from January 1, 1999 and ending December 31,
2002, if the Company earns a Net Profit (as defined below) of
one million dollars ($1,000,000) within that respective
calendar year. As used herein, the term "Net Profit" shall
mean the gross revenue generated from all products and
services sold by the Company, less all related costs and
overhead, such costs to include all costs including, but not
limited to, pay-outs to subscribers, insurance, labor
(including wages and salaries of officers, directors,
Employees, independent contractors), equipment costs,
technical fees and training costs. Employee may elect to
receive said bonus in common stock based on a valuation of
one-half 1/2 of the then current fair market value for the
stock or to receive bonus in any combination of cash and
stock.
d) Stock Options. As additional compensation for Employee's
services hereunder, Employee shall be granted stock options
each year to purchase Two Hundred Thousand (200,000) shares of
Common Stock in the Company at $.50 per share. Options granted
each year shall hold a five year expiration.
4. EXPENSE REIMBURSEMENTS. Employee shall be reimbursed for
reasonable and actual out-of-pocket expenses incurred by
Employee in performance of Employee's duties and
responsibilities hereunder in accordance with Company's
established personnel policy covering Employee officer expense
reimbursements, as such policy may be amended, revised or
otherwise changed from time to time. Employee shall furnish
proper vouchers and expense reports and shall be reimbursed only
for those expenses which shall be reimbursable. The Company
shall reimburse Employee for all reasonable and necessary
relocation expenses in the event the Company chooses to relocate
the business outside of Orange County, California.
<page
5. STOCK INCENTIVES. The Company intends to adopt a
"performance-
based compensation" plan, the Compensation Incentive Plan (CIP),
that is tax deductible by the Company without limitation under
Section 162(m) of the Code. The Company Board of Directors
believes that attracting and retaining key employees of high
quality is essential to the Company's growth and success. In
addition, the Company Board believes that the long term success
of the Company is enhanced by a competitive and comprehensive
compensation program which may include tailored types of
incentives designed to motivate Employees and reward key
employees for outstanding service, including awards that link
compensation to applicable measures of the Company's performance
and the creation of stockholder value. In this regard, stock
options and other stock-related awards will be an important
element of compensation for key employees. Such awards will
enable the Company to attract and retain Employees and key
employees and enable such persons to acquire a proprietary
interest in the Company and thereby align their interests with
the interests of the Company's stockholders. In addition, the
Company Board has concluded that the Company Board (the
"Compensation Committee") should be given as much flexibility as
possible to provide for annual and long-term incentive awards
contingent on performance. Employee shall be included in all
programs of this type adopted by Company.
6. VACATION, SICK LEAVE AND OTHER FRINGE BENEFITS.
a) Employee shall be entitled to a four (4) weeks paid vacation
per every twelve (12) month period of employment hereunder.
Employee must use a minimum of two (2) weeks vacation per
every twelve (12) month period. Employee may choose carryover
a maximum of two (2) weeks vacation per every twelve (12)
month period.
b) Employee shall also be entitled to leaves for illness or
other incapacitation as is consistent with Employee's title and the
Company's needs for Employee's services, except as otherwise
provided for disability in Paragraph 6.2.
c) Employee shall be entitled during Employee's employment
hereunder to share or participate in such medical insurance
programs or other "fringe" benefit plans or programs as shall
be made available to Employee officers employed by Company
generally, in accordance with Company's established personnel
policies, if any, or as established, amended, revised or
otherwise changed from time to time, covering Employee officer
Employee benefits.
<page
7. TERMINATION.
a) Termination by Company for Cause. Company may terminate this
Agreement and Employee's employment hereunder for Cause (as
defined herein) any time effective upon 15 days written notice
to Employee. As used herein, the term "Cause" shall mean:
I. Habitual neglect in the performance of Employee's material
duties as set forth in Paragraph 2 which continues
uncorrected for a period of thirty (30) days after written
notice thereof by Company to Employee; or
II. Gross negligence involving misfeasance or nonfeasance by
Employee in the performance of Employee's material duties
as set forth in Paragraph 2 which continues uncorrected for
a period of thirty (30) days after written notice thereof
by Company to Employee.
b) Termination Upon Death or Disability. This Agreement and
Employee's employment hereunder shall terminate upon Employee's
death or Disability (as defined herein). For this purpose,
"Disability" means incapacity, whether by reason of physical or
mental illness or disability, which prevents Employee from
substantially performing Employee's material duties as set forth
in Section 2 for six (6) months, or for shorter periods
aggregating six (6) months in any twelve (12) successive
calendar months. Upon termination for death, and unless Company
shall have in force a disability insurance policy providing for
benefits in an amount at least equal thereto, upon termination
for Disability, Company shall continue to pay the base
compensation payments pursuant to Paragraph 3.1 to the surviving
spouse of Employee (or if there is none to Employee's estate) in
the case of death and to Employee or Employee's court appointed
conservator in the case of Disability until the date three (3)
months thereafter. Termination for death shall become effective
upon the occurrence of such event and termination for Disability
shall become effective upon written notice by Company to
Employee.
c) Other Termination. In the event the Company terminates
Employee's employment without Cause, or Employee terminates
Employee's employment for Good Reason (as such terms are defined
below), Employee will receive severance benefits. If termination
is prior to a change in control of the Company (as defined
below), the benefits will include continuation of salary, bonus
and other benefits, and continued vesting of options and
restricted stock, for five (5) years following termination. If
termination is within five years after a change in control, the
benefits will include a lump sum
d) <PAGE>
e) payment equal to five times Employee annual salary and bonus,
immediate vesting of all options and restricted stock, and
continuation of other benefits for five years following
termination. Additionally, if any payment or distribution to
Employee would be subject to any "golden parachute payment"
excise tax or similar tax, then Employee will be entitled to
receive gross-up payments in an amount such that, after payment
of such excise tax or similar tax, and all taxes attributable to
such gross-up payments, Employee retains an amount equal to the
amount he would have retained if such excise tax or similar tax
had not applied.
I. A "change in control" will be defined as the acquisition of
30% or more of the Company's Common Stock or voting
securities by a person or group (subject to specified
exceptions), certain changes in the majority of the
Company's Board of Directors, certain mergers involving the
Company, or the liquidation, dissolution or sale of all or
substantially all of the assets of the Company.
II. "Good reason" is defined generally as demotion, reduction
in compensation, unapproved relocation or a material breach
of the Employment Agreement by the Company.
8. EVENTS UPON TERMINATION. The termination of this Agreement
pursuant to Section 6 shall also result in the termination of
all rights and benefits of Employee under this Agreement except
for any rights to compensation accrued under Paragraph 3 prior
to the date of termination or rights to expense reimbursement
under Paragraph 4.
9. EMPLOYEE'S REPRESENTATIONS. Employee represents and warrants
that Employee is free to enter into this Agreement and to
perform each of the provisions contained herein. Employee
represents and warrants that Employee is not restricted or
prohibited, contractually or otherwise, from entering into and
performing this Agreement, and that Employee's execution and
performance of this Agreement is not a violation or breach of
any agreement between Employee and any other person or entity.
10. GENERAL PROVISIONS.
a) Severable Provisions. The provisions of this Agreement are
severable, and if any one or more provisions may be determined
to be judicially unenforceable, in whole or in part, the
remaining provisions shall nevertheless be binding and
enforceable.
b) Assignment. Neither this Agreement nor any of the rights or
obligations of Employee or the Company hereunder shall be
assignable.
<page
c) Attorneys' Fees. If any legal action arises under this
Agreement or by reason of any asserted breach of it, the
prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, incurred in
enforcing or attempting to enforce any of the terms, covenants
or conditions, including costs incurred prior to commencement
of legal action, and all costs and expenses, including
reasonable attorneys' fees, incurred in any appeal from an
action brought to enforce any of the terms, covenants or
conditions.
d) Notices. Any notice to be given to Company under the terms
of
this Agreement shall be addressed to Company at the address of
Company's principal place of business, and any notice to be
given to Employee shall be addressed to Employee at his home
address last shown on the records of Company, or at such other
address as either party may hereafter designate in writing to
the other. Any notice required or permitted under this
Agreement shall be in writing and shall be deemed effective:
(i) upon receipt in the event of delivery by hand, including
delivery made by private delivery or overnight mail service
where either the recipient or delivery agent executes a
written receipt or confirmation of delivery; or (ii) 48 hours
after deposited in the United States mail, registered or
certified mail, return receipt requested, postage prepaid.
e) Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed
as a waiver of any such provision or provisions, or prevent
that party thereafter from enforcing each and every other
provision of this Agreement.
f) Entire Agreement; Amendments. This Agreement supersedes any
and all other agreements, either oral or in writing, between
the parties hereto with respect to the employment of Employee
by Company and contains all of the covenants and Agreements
between the parties with respect to the employment of Employee
by Company. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally
or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein, and that
no other agreement, statement or promise not contained in this
Agreement will be effective only if it is in writing signed by
the party to be charged.
g) Titles and Headings. Titles and headings to sections of this
Agreement are for the purpose of reference only and shall in
no way limit, define or otherwise affect the interpretation or
construction of such provisions.
<page
h) Construction And Performance . This Agreement shall not be
construed against the party preparing it, but shall be
construed as if both parties prepared this Agreement. As used
herein the singular and plural number, the masculine, feminine
and neutral genders include on another.
i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California without regard for conflicts of laws statutes. Any
suit or action brought to resolve a dispute arising from the
terms of this Agreement shall be brought in a court of
competent jurisdiction in the County of Orange, State of
California.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"COMPANY"
INNOVATIVE TRACKING SOLUTIONS CORPORATION, INC.,
a Delaware corporation
By:
/s/
Dianna L. Cleveland, President/Chief Employee Officer
/s/
Lou Weiss, Director
"EMPLOYEE"
/s/
Lee A. Namisniak
<page
Exhibit 10.3
LICENSE AGREEMENT
THIS AGREEMENT, effective on August 9, 1997, is entered into by
Dianna L. Cleveland and Lee A. Namisniak, having their principal
place of residence at 22592 Ledana, Mission Viejo CA,
(hereinafter called "LICENSORS"), and INNOVATIVE TRACKING SOLUTIONS
CORPORATION, D.B.A., InTracks Corporation, a Delaware
corporation, having its principal place of business at 23232 Peralta Drive,
Suite 209, Laguna Hills, CA (hereinafter called LICENSEE).
1.0 Definitions
1.1 EFFECTIVE DATE shall be August 9, 1997.
1.2 LICENSED TERRITORY means:
(a) the United States of America, its territories and
possessions, and
(b) International Markets
1.3 LICENSED PRODUCTS means products embodying or made in
accordance with one or more claims of the LICENSED
PATENTS.
1.4 LICENSED PATENTS AND TRADEMARKS means only the patents
enumerated in Schedule A and reissues and any extensions,
continuations or continuations-in-part; any corresponding
FOREIGN PATENTS thereof; and trademarks enumerated in
Schedule B (Schedules A & B are attached hereto and
incorporated by reference herein.)
1.5 FOREIGN PATENTS means patents in foreign countries within
the LICENSED TERRITORY which correspond to the LICENSED
PATENTS herein.
1.6 IMPROVEMENT means any modification to a LICENSED PATENT
which, if unlicensed, would infringe one or more claims
of LICENSED PATENTS AND TRADEMARKS. IMPROVEMENT also
means a further modification which would, if unlicensed,
infringe a prior hypothetically patented IMPROVEMENT.
1.7 ROYALTY PERCENTAGE means the royalty percentage as
outlined in Schedule A and Schedule B.
1.8 GRANTED RIGHTS means rights:
(a) including only the right to make, design, modify,
improve, use, offer for sale, sell, and import; and
excluding, because this is a personal contract, the
right to sub-license, assign, or have made by anyone
other than LICENSEE without LICENSOR'S prior written
permission; and
(b) excluding any right under any other patent not
explicitly enumerated under the term LICENSED PATENTS
AND TRADEMARKS.
1.9 LICENSE TERM means the sooner of:
(a) the life of the LICENSED PATENTS, or in the case
of the LICENSED TRADEMARKS, the life of the LICENSED
PRODUCTS manufactured or marketed by LICENSEE; or the
date of termination of this agreement under the
provisions of this agreement
2.0 Exclusive License Grants
2.1 LICENSORS hereby grants to the LICENSEE an exclusive
license to exercise the GRANTED RIGHTS for the LICENSED
PRODUCTS to the extent of the LICENSED TERRITORY for the
LICENSE TERM.
<page
3.0 Improvements by Licensee
3.1 LICENSEE hereby assigns to LICENSORS any further
improvement to the LICENSED PATENTS made, invented, or
acquired by LICENSEE during the term of this Agreement.
LICENSEE agrees to disclose promptly to LICENSORS any
such improvements, and to cooperate with LICENSORS in
LICENSOR'S obtaining legal patent for any such
improvement which in the opinion of LICENSORS shall be
patentable. LICENSEE shall have the right to use such
improvements without an increase in ROYALTY PERCENTAGE
during the term of this Agreement. In the event of
termination of this Agreement, LICENSEE'S rights in such
improvement shall terminate.
3.2 LICENSEE agrees that it will obtain from its officers,
employees, agents, contractors, dealers and
representatives agreements thereby unconditionally and
perpetually assigning to LICENSORS all rights to
IMPROVEMENTS to the LICENSED PATENTS made by such
persons, and agreeing to disclose such IMPROVEMENTS to
LICENSORS.
3.3 LICENSEE agrees to bear all costs including attorneys
fees and filing fees to acquire in LICENSORS' name all
potential patent and trademarks rights for the LICENSED
TERRITORY for IMPROVEMENTS derived from the LICENSED
PRODUCTS, LICENSED PATENTS and LICENSED TRADEMARKS.
4.0 Patent Marking
4.1 LICENSEE agrees to place in a conspicuous location on
each LICENSED PRODUCT sold by it a patent notice, as
required by the applicable statutes relating to the
marking of patented articles.
5.0 LUMP SUM Advance of Future Royalty
5.1 In consideration for the rights granted by LICENSORS
under this Agreement, LICENSEE hereby agrees to pay to
LICENSORS the LUMP SUM of Seventy Five Thousand Dollars
($75,000) in United States currency at such time that it
becomes economically feasible for LICENSEE with due
regard to the financial conditions and prospects of the
business of the LICENSEE. LUMP SUM payment shall be
considered to be an advance of future royalties as
outlined in section 6.0.
5.2 If LUMP SUM payment has not been paid to LICENSORS within
eighteen (18) months of the date of this Agreement,
LICENSEE hereby agrees to award to LICENSORS, Two Hundred
Fifty Thousand (250,000) shares of the LICENSEE'S
restricted common stock (hereinafter referred to as Stock
Royalty Payment). Stock Royalty Payment shall not be
construed as payment in lieu of LUMP SUM currency
payment. If LUMP SUM payment is not made within the time
frame specified herein and as a result LICENSEE pays
Stock Royalty Payment to LICENSOR, LICENSEE hereby agrees
to still pay LUMP SUM currency payment as soon as it
becomes economically feasible for LICENSEE.
6.0 Royalty Payments
6.1 LICENSEE agrees to pay to LICENSORS by the PAYMENT DUE
DATE each quarter, royalties equaling the ROYALTY BASE
multiplied by the ROYALTY PERCENTAGE.
6.2 The PAYMENT DUE DATE shall be thirty (30) days after the
last day of each quarter.
6.3 The ROYALTY BASE is the dollar revenue derived from
LICENSED PRODUCTS MANUFACTURED AND SOLD in a quarter.
6.4 LICENSED PRODUCTS shall be deemed to be MANUFACTURED AND
SOLD for the purposes of computing royalties when billed
out, or when shipped, or when paid for; whichever shall
occur first.
<PAGE>
6.5 The TOTAL ROYALTY Percentage shall equal those
percentages shown in Schedule A (or as shown in a revised
schedule reached by agreement or arbitration) for all
LICENSED PATENTS and those percentages shown in Schedule
B for all LICENSED TRADEMARKS. The obligation to pay
royalties shall terminate as to each of the LICENSED
PATENTS upon its expiration date and as to the end of the
LICENSED TRADEMARKS upon the cessation of the manufacture
or marketing of the LICENSED PRODUCTS AND TRADEMARKS. All
sales or orders taken, achieved or accrued prior to each
respective expiration date shall still be subject to
payment under this Agreement even if the terms of
Paragraph 6.4 above are not satisfied until after a
respective expiration date occurs.
6.6 All foreign taxes, assessments or other charges made in
respect to this Agreement or to royalties payable
hereunder shall be borne and paid by LICENSEE. Royalties
shall be paid to LICENSORS free and clear of all foreign
taxes.
7.0 Interest Due on Overdue Payments
7.1 LICENSEE hereby agrees to pay INTEREST to LICENSORS upon
royalty payments that are OVERDUE at the PENALTY RATE,
calculated from the PAYMENT DUE DATE to the date of
payment.
7.2 Royalty payment shall be deemed OVERDUE if it is not paid
within 30 days of the PAYMENT DUE DATE.
7.3 PENALTY RATE means one and a half percent (1.5%) per
month.
8.0 Books & Records
8.1 LICENSEE agrees to keep accurate and complete records and
books of account conforming to Generally Accepted
Accounting Principles (GAAP), showing sufficient
information to enable the calculation of royalties.
8.2 LICENSEE agrees to maintain, at a minimum, separate Sales
Accountings showing the date, quantity of units, and
description of each LICENSED PRODUCT;
(a) billed out,
(b) shipped, or
(c) paid for.
8.3 LICENSEE agrees to make quarterly audited reports
available to LICENSORS showing the calculation of
royalties accrued for that quarter, and including a
summary of the quantity of LICENSED PRODUCTS manufactured
and sold that quarter. Payment will accompany the report.
8.4 All quarterly reports shall be subject to independent
verification, at the option and expense of LICENSORS by
an independent certified public accountant selected by
LICENSORS, to whom all books and records relating to
LICENSED PRODUCTS and reasonably necessary to verify said
reports shall be accessible at reasonable times and for
reasonable periods to verify the reports and payments
required by this Agreement.
(a) LICENSORS agree that no more than one audit shall
be made during each calendar year.
(b) The accountant shall not disclose to LICENSORS the
names of LICENSEE'S customers.
<page
9.0 Royalty and Audit Information to be Maintained Confidential
9.1 LICENSORS agree to hold strictly confidential the
information concerning royalty payments and reports and
the information learned in the course of any audit
hereunder, except:
(a) when it is necessary for LICENSORS to reveal such
information in order to enforce its rights under this
Agreement, or
(b) when required by law for tax purposes or
otherwise, to reveal such information.
10.0 Representations and Warranties, Limitations
10.1 Nothing in this agreement shall be construed as:
(a) A warranty or representation by LICENSORS as to
the validity or scope of any LICENSED PATENT; or
(b) A warranty or representation that anything made,
used, sold, or otherwise disposed of under any
license granted in this agreement is or will be free
from infringement of patents of third parties, or
(c) A requirement that LICENSORS shall file any patent
application, secure any patent, or maintain any
patent in force.
11.0 Foreign Governmental Approval of Agreement
11.1 This Agreement shall not become effective in foreign
countries until LICENSEE furnishes LICENSORS with (1)
written evidence that the Foreign Government approves
this Agreement and the payment of royalties in United
States currency as provided herein, and (2) a written
opinion satisfactory to LICENSORS from an independent
attorney and counselor at law licensed to practice in the
Foreign Country to the effect that no provision of this
Agreement contravenes any law of the Foreign Country.
12.0 Non-Competition/Exclusivity
12.1 LICENSEE and LICENSORS agree that this Agreement is
intended to create a mutually exclusive relationship
between the parties. Thus, LICENSEE agrees that it will
not manufacture, market, sell or distribute products
similar to those of LICENSOR'S or derived from LICENSEE'S
exposure to the LICENSED PRODUCTS, but not created by
LICENSORS. LICENSEE further agrees that it will not
enter into any agreement, discussions, correspondence or
other communications with any other person or entity who
is attempting to compete with or circumvent the patents,
trademarks, copyrights and other intellectual property
rights of LICENSORS for the term of this Agreement.
LICENSORS agree not to create, design, market, sell,
manufacture or distribute products of the type addressed
under this Agreement to any person or entity except
LICENSEE for the term of this Agreement.
13.0 Termination
13.1 This Agreement shall remain in force for the duration of
the LICENSE TERM regardless of any "change in control"
of the LICENSEE'S business so long as the LICENSEE
continues to manufacture or market the LICENSED PRODUCTS.
13.2 LICENSOR hereby reserves the right to terminate this
Agreement upon ninety (90) days notice if the ROYALTY
BASE multiplied by the ROYALTY RATE for any given
calendar year, beginning in the year 2000 and continuing
for the duration of the LICENSE TERM fails to exceed one
million dollars ($1,000,000), or if LICENSEE fails to
devote
<page
sufficient and reasonable efforts and resources to the
manufacture and marketing of LICENSED PRODUCTS covered by
this Agreement including, but not limited to, expending
fifteen percent (15%) of gross sales of the LICENSED
PRODUCTS for costs of sales of the LICENSED PRODUCTS in
each and every calendar year.
13.3 This Agreement shall be terminated automatically in any
one or more of the following circumstances:
(a) in the event that LICENSEE is ordered or adjudged
bankrupt or is placed in the hands or a receiver or
otherwise enters into any scheme or composition with
its creditors or makes an unauthorized assignment for
the benefit of creditors; or
(b) in the event that the assets of LICENSEE are
seized or attached, in conjunction with any action
against it by any third party; or
(c) in the event that LICENSEE is dissolved, or that a
sale of all or substantially all of the assets of
LICENSEE is made, or
(d) in the event that this Agreement is attempted to
be assigned or sublicensed by LICENSEE without the
prior written consent of LICENSOR.
(e) in the event false or inaccurate accountings of
manufacturing and sales as required of LICENSEE under
this Agreement are submitted to LICENSORS;
(f) in the event LICENSEE fails to make a required
payment under this Agreement when due;
(g) in the event either party violates the non-
competition requirements of this Agreement; or
(h) The violation of any other provision or
requirement of this Agreement that is not corrected
within five (5) days after notice of the violation is
given.
13.4 In the event of termination, any rights and claims of
the parties which may have accrued prior to termination
hereof shall survive such termination.
14.0 Release
14.1 LICENSORS hereby release LICENSEE and its customers from
all claims arising out of infringement of any LICENSED
PATENT by the LICENSEE'S manufacture, use, or sale of
LICENSED PRODUCTS prior to the EFFECTIVE DATE of this
agreement, such release being conditioned upon the
payment of the LUMP SUM under this Agreement.
15.0 Enforcement of Licensed Rights;
15.1 LITIGATION RIGHTS AND OBLIGATIONS: At LICENSEE'S own
expense, LICENSEE shall take all actions necessary to
preserve and protect all rights conferred on LICENSEE
under this Agreement, including exclusive use of the
patents and other intellectual property rights of
LICENSORS, including instituting and maintaining a
lawsuit against any infringer as prudent. LICENSORS
agree to cooperate with and assist LICENSEE in the
prosecution of such claims. Any sums recovered in the
prosecution of such claims shall go first to reimburse
LICENSEE and LICENSORS for all direct out-of-pocket
expenses of every kind and character, including
reasonable attorney's fees, expert witness fees, travel
costs, court costs and the like incurred in the
prosecution of any suit and for the reasonable loss of
profit for LICENSEE and LICENSORS. If after such
<PAGE>
reimbursement any funds shall remain from said recovery, such
fund shall be split equally.
16.0 Choice of Law and Forum
16.1 This Agreement shall be governed in all respects by the
laws of the State of California without regard to any
conflicts of laws statutes and all actions to resolve
disputes arising from the terms of this Agreement whether
by suit or arbitration shall be brought in the County of
Orange, State of California unless otherwise agreed to in
writing by both parties.
17.0 Arbitration
17.1 Any controversy or claim arising under this Agreement
which involves a question of infringement or any of the
LICENSED PATENTS shall be settled by arbitration in
accordance with the Patent Rules of the American
Arbitration Association, and judgment upon the award
rendered by the Arbitrator(s) may be entered in any court
having jurisdiction thereof.
18.0 Integration
18.1 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject
matter contained herein and merges all prior discussions
between them and neither party shall be bound by any
definition, condition, warranty, or representation other
than as expressly stated in this Agreement or as
subsequently set forth in writing signed by the party to
be bound thereby.
19.0 Modification
19.1 This Agreement may be amended, modified, or revoked in
whole
or in part, but only by a written instrument which refers to
this Agreement and expressly states that it constitutes an
amendment, modification, or revocation hereof, as the case
may be, and only if such written instrument has been duly
signed by a duly authorized person of all parties.
20.0 Binding
20.1 This Agreement shall be binding upon the inure to the
benefit of the parties and their successors and assigns.
21.0 Attorneys' Fees in Event of Dispute
21.1 If any arbitration, legal action, or other proceeding is
brought for the enforcement of this Agreement, the successful
or prevailing party or parties shall be entitled to recover
reasonable attorney's fees and other costs incurred in that
action or proceeding, in addition to any other relief to
which it may be entitled.
22.0 Construction and Performance
22.1 This Agreement shall not be construed against the party
preparing it, but shall be construed as if both parties
prepared this Agreement. As used herein the singular and
plural number, the masculine, feminine and neutral genders
include on another.
23.0 Waiver
23.1 No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
<PAGE>
24.0 Counterparts
24.1 This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original Agreement, and all
of which shall constitute one Agreement.
25.0 Captions
25.1 The various captions are inserted for convenience of
reference only and do not affect the meaning or
interpretation of this Agreement or any section thereof.
26.0 Invalidity of Provisions
26.1 If any provision of this Agreement as applied to either
party or to any circumstance, shall be adjudicated by a court
to be void and unenforceable, the same shall in no way
affect: any other provision in this Agreement; the
application of such provision in any other circumstance; or
the validity or enforceability of the Agreement as a whole.
LICENSOR(S)
_/s/______________________________________Date
___________________
Dianna Cleveland
____/s/___________________________________Date
___________________
Lee A. Namisniak
LICENSEE
CORPORATION,
Innovative Tracking Solutions Corporation
By:
_/s/______________________________________Date
___________________
Dianna Cleveland, President/CEO
_/s/______________________________________Date
___________________
Lee A. Namisniak, Vice President/CFO/COO
_/s/______________________________________Date
___________________
Lou Weiss, Director
<PAGE>
SCHEDULE A - PATENTS
LICENSED PRODUCTS ROYALTY PERCENTAGE
Private Practice Vibration Reminder Disk
8%
U.S. Serial No. Filing or
Issue
Type of Patent or Patent No. Date of Patent
Utility Patent 08/907,440 08/08/97
"Private Alarm System
For Muscle Flexing Regimen"
Utility Patent 4,801,921 1/31/89
Assignment to LICENSOR
Assignment
Pending
SCHEDULE B - TRADEMARKS
LICENSED PRODUCTS ROYALTY
PERCENTAGE
Private Practice(tm) Vibration Reminder Disk
1%
U.S. Serial No. Filing or Issue
Name of Trademark or Trademark No.
Date of Trademark
"Private Practice" Pending
<PAGE>
Exhibit 10.4
Addendum to Licensing Agreement
It is hereby agreed between DIANNA L. CLEVELAND and LEE A.
NAMISNIAK as "LICENSORS" AND INNOVATIVE TRACKING SOLUTIONS
CORPORATION, d.b.a., InTracks Corporation, a Delaware
corporation, as "LICENSEE" that the following patents and trademarks shall be
as of September 20, 1998 considered added and incorporated into
Schedules A & B of the Licensing Agreement executed August 9, 1997 between
the parties and therefore subject to all the terms of that
Licensing Agreement.
SUPPLEMENT TO SCHEDULE A - PATENTS
LICENSED PRODUCTS ROYALTY PERCENTAGE
Private Practice Vibration Reminder Disk
8%
U.S. Serial No. Filing or Issue
Type of Patent or Patent No. Date of Patent
Utility Patent #4,801,921 1/31/89
Assignment to LICENSOR
Granted and Recorded
on Reel 8773, Frame 0149 10/30/97
Utility Patent No. 08/907,440
8/8/97
Notice of Allowance issued:
4/28/98
Utility Patent No. 09/153,984
9/16/98
SUPPLEMENT TO SCHEDULE B - TRADEMARKS
LICENSED PRODUCTS ROYALTY PERCENTAGE
Private Practice Vibration Reminder Disk
1%
U.S. Serial No. Filing or Issue
Name of Trademark or Trademark No.
Date of Trademark
"Private Practice" Serial No.75347416
08/26/97
"Pouch-Patch" Serial No 75437265. 02/19/98
LICENSOR(S)
____/s/___________________________________Date _________________
Dianna L. Cleveland
_/s/______________________________________Date _________________
Lee A. Namisniak
LICENSEE CORPORATION,
Innovative Tracking Solutions Corporation
By:
_/s/______________________________________Date _________________
Dianna Cleveland, President/CEO
_/s/______________________________________Date _________________
Lee A. Namisniak, Vice President/CFO/COO
<PAGE>
Exhibit 10.5
LICENSE AGREEMENT
THIS AGREEMENT, effective on February 1, 1997, is entered into
by
Lee A. Namisniak and Dianna Cleveland Namisniak, having their
principal place of residence at 22592 Ledana, Mission Viejo CA,
(hereinafter called "LICENSORS"), and INNOVATIVE TRACKING
SOLUTIONS CORPORATION, D.B.A., InTracks Corporation, a Delaware
corporation, having its principal place of business at 23232
Peralta Drive, Suite 209, Laguna Hills, CA (hereinafter called
LICENSEE).
1.0 Definitions
1.1 EFFECTIVE DATE shall be February 1, 1997.
1.2 LICENSED TERRITORY means:
(a) the United States of America, its territories and
possessions, and
(b) International Markets
1.3 LICENSED PRODUCTS means products embodying or made in
accordance with one or more claims of the LICENSED
PATENTS.
1.4 LICENSED PATENTS AND TRADEMARKS means only the patents
enumerated in Schedule A and reissues and any extensions,
continuations or continuations-in-part; any corresponding
FOREIGN PATENTS thereof; and trademarks enumerated in
Schedule B (Schedules A & B are attached hereto and
incorporated by reference herein.)
1.5 FOREIGN PATENTS means patents in foreign countries within
the LICENSED TERRITORY which correspond to the LICENSED
PATENTS herein.
1.6 IMPROVEMENT means any modification to a LICENSED PATENT
which, if unlicensed, would infringe one or more claims
of LICENSED PATENTS AND TRADEMARKS. IMPROVEMENT also
means a further modification which would, if unlicensed,
infringe a prior hypothetically patented IMPROVEMENT.
1.7 ROYALTY PERCENTAGE means the royalty percentage as
outlined in Schedule A and Schedule B.
1.8 GRANTED RIGHTS means rights:
(a) including only the right to make, design, modify,
improve, use, offer for sale, sell, and import; and
excluding, because this is a personal contract, the
right to sub-license, assign, or have made by anyone
other than LICENSEE without LICENSOR'S prior written
permission; and
(b) excluding any right under any other patent not
explicitly enumerated under the term LICENSED PATENTS
AND TRADEMARKS.
1.9 LICENSE TERM means the sooner of:
(a) the life of the LICENSED PATENTS, or in the case
of the LICENSED TRADEMARKS, the life of the LICENSED
PRODUCTS manufactured or marketed by LICENSEE; or the
date of termination of this agreement under the
provisions of this agreement
2.0 Exclusive License Grants
2.1 LICENSORS hereby grants to the LICENSEE an exclusive
license to exercise the GRANTED RIGHTS for the LICENSED
PRODUCTS to the extent of the LICENSED TERRITORY for the
LICENSE TERM.
<PAGE>
3.0 Improvements by Licensee
3.1 LICENSEE hereby assigns to LICENSORS any further
improvement to the LICENSED PATENTS made, invented, or
acquired by LICENSEE during the term of this Agreement.
LICENSEE agrees to disclose promptly to LICENSORS any
such improvements, and to cooperate with LICENSORS in
LICENSOR'S obtaining legal patent for any such
improvement which in the opinion of LICENSORS shall be
patentable. LICENSEE shall have the right to use such
improvements without an increase in ROYALTY PERCENTAGE
during the term of this Agreement. In the event of
termination of this Agreement, LICENSEE'S rights in such
improvement shall terminate.
3.2 LICENSEE agrees that it will obtain from its officers,
employees, agents, contractors, dealers and
representatives agreements thereby unconditionally and
perpetually assigning to LICENSORS all rights to
IMPROVEMENTS to the LICENSED PATENTS made by such
persons, and agreeing to disclose such IMPROVEMENTS to
LICENSORS.
3.3 LICENSEE agrees to bear all costs including attorneys
fees and filing fees to acquire in LICENSORS' name all
potential patent and trademarks rights for the LICENSED
TERRITORY for IMPROVEMENTS derived from the LICENSED
PRODUCTS, LICENSED PATENTS and LICENSED TRADEMARKS.
4.0 Patent Marking
4.1 LICENSEE agrees to place in a conspicuous location on
each LICENSED PRODUCT sold by it a patent notice, as
required by the applicable statutes relating to the
marking of patented articles.
5.0 LUMP SUM Advance of Future Royalty
5.1 In consideration for the rights granted by LICENSORS
under this Agreement, LICENSEE hereby agrees to pay to
LICENSORS the LUMP SUM of Seventy Five Thousand Dollars
($75,000) in United States currency at such time that it
becomes economically feasible for LICENSEE with due
regard to the financial conditions and prospects of the
business of the LICENSEE. LUMP SUM payment shall be
considered to be an advance of future royalties as
outlined in section 6.0.
5.2 If LUMP SUM payment has not been paid to LICENSORS within
eighteen (18) months of the date of this Agreement,
LICENSEE hereby agrees to award to LICENSORS, Two Hundred
Fifty Thousand (250,000) shares of the LICENSEE'S
restricted common stock (hereinafter referred to as Stock
Royalty Payment). Stock Royalty Payment shall not be
construed as payment in lieu of LUMP SUM currency
payment. If LUMP SUM payment is not made within the time
frame specified herein and as a result LICENSEE pays
Stock Royalty Payment to LICENSOR, LICENSEE hereby agrees
to still pay LUMP SUM currency payment as soon as it
becomes economically feasible for LICENSEE.
6.0 Royalty Payments
6.1 LICENSEE agrees to pay to LICENSORS by the PAYMENT DUE
DATE each quarter, royalties equaling the ROYALTY BASE
multiplied by the ROYALTY PERCENTAGE.
6.2 The PAYMENT DUE DATE shall be thirty (30) days after the
last day of each quarter.
6.3 The ROYALTY BASE is the dollar revenue derived from
LICENSED PRODUCTS MANUFACTURED AND SOLD in a quarter.
6.4 LICENSED PRODUCTS shall be deemed to be MANUFACTURED AND
SOLD for the purposes of computing royalties when billed
out, or when shipped, or when paid for; whichever shall
occur first.
<PAGE>
6.5 The TOTAL ROYALTY Percentage shall equal those
percentages shown in Schedule A (or as shown in a revised
schedule reached by agreement or arbitration) for all
LICENSED PATENTS and those percentages shown in Schedule
B for all LICENSED TRADEMARKS. The obligation to pay
royalties shall terminate as to each of the LICENSED
PATENTS upon its expiration date and as to the end of the
LICENSED TRADEMARKS upon the cessation of the manufacture
or marketing of the LICENSED PRODUCTS AND TRADEMARKS. All
sales or orders taken, achieved or accrued prior to each
respective expiration date shall still be subject to
payment under this Agreement even if the terms of
Paragraph 6.4 above are not satisfied until after a
respective expiration date occurs.
6.6 All foreign taxes, assessments or other charges made in
respect to this Agreement or to royalties payable
hereunder shall be borne and paid by LICENSEE. Royalties
shall be paid to LICENSORS free and clear of all foreign
taxes.
7.0 Interest Due on Overdue Payments
7.1 LICENSEE hereby agrees to pay INTEREST to LICENSORS upon
royalty payments that are OVERDUE at the PENALTY RATE,
calculated from the PAYMENT DUE DATE to the date of
payment.
7.2 Royalty payment shall be deemed OVERDUE if it is not paid
within 30 days of the PAYMENT DUE DATE.
7.3 PENALTY RATE means one and a half percent (1.5%) per
month.
8.0 Books & Records
8.1 LICENSEE agrees to keep accurate and complete records and
books of account conforming to Generally Accepted
Accounting Principles (GAAP), showing sufficient
information to enable the calculation of royalties.
8.2 LICENSEE agrees to maintain, at a minimum, separate Sales
Accountings showing the date, quantity of units, and
description of each LICENSED PRODUCT;
(a) billed out,
(b) shipped, or
(c) paid for.
8.3 LICENSEE agrees to make quarterly audited reports
available to LICENSORS showing the calculation of
royalties accrued for that quarter, and including a
summary of the quantity of LICENSED PRODUCTS manufactured
and sold that quarter. Payment will accompany the report.
8.4 All quarterly reports shall be subject to independent
verification, at the option and expense of LICENSORS by
an independent certified public accountant selected by
LICENSORS, to whom all books and records relating to
LICENSED PRODUCTS and reasonably necessary to verify said
reports shall be accessible at reasonable times and for
reasonable periods to verify the reports and payments
required by this Agreement.
(a) LICENSORS agree that no more than one audit shall
be made during each calendar year.
(b) The accountant shall not disclose to LICENSORS the
names of LICENSEE'S customers.
<page
9.0 Royalty and Audit Information to be Maintained Confidential
9.1 LICENSORS agree to hold strictly confidential the
information concerning royalty payments and reports and
the information learned in the course of any audit
hereunder, except:
(a) when it is necessary for LICENSORS to reveal such
information in order to enforce its rights under this
Agreement, or
(b) when required by law for tax purposes or
otherwise, to reveal such information.
10.0 Representations and Warranties, Limitations
10.1 Nothing in this agreement shall be construed as:
(a) A warranty or representation by LICENSORS as to
the validity or scope of any LICENSED PATENT; or
(b) A warranty or representation that anything made,
used, sold, or otherwise disposed of under any
license granted in this agreement is or will be free
from infringement of patents of third parties, or
(c) A requirement that LICENSORS shall file any patent
application, secure any patent, or maintain any
patent in force.
11.0 Foreign Governmental Approval of Agreement
11.1 This Agreement shall not become effective in foreign
countries until LICENSEE furnishes LICENSORS with (1)
written evidence that the Foreign Government approves
this Agreement and the payment of royalties in United
States currency as provided herein, and (2) a written
opinion satisfactory to LICENSORS from an independent
attorney and counselor at law licensed to practice in the
Foreign Country to the effect that no provision of this
Agreement contravenes any law of the Foreign Country.
12.0 Non-Competition/Exclusivity
12.1 LICENSEE and LICENSORS agree that this Agreement is
intended to create a mutually exclusive relationship
between the parties. Thus, LICENSEE agrees that it will
not manufacture, market, sell or distribute products
similar to those of LICENSOR'S or derived from LICENSEE'S
exposure to the LICENSED PRODUCTS, but not created by
LICENSORS. LICENSEE further agrees that it will not
enter into any agreement, discussions, correspondence or
other communications with any other person or entity who
is attempting to compete with or circumvent the patents,
trademarks, copyrights and other intellectual property
rights of LICENSORS for the term of this Agreement.
LICENSORS agree not to create, design, market, sell,
manufacture or distribute products of the type addressed
under this Agreement to any person or entity except
LICENSEE for the term of this Agreement.
13.0 Termination
13.1 This Agreement shall remain in force for the duration of
the LICENSE TERM regardless of any "change in control"
of the LICENSEE'S business so long as the LICENSEE
continues to manufacture or market the LICENSED PRODUCTS.
<PAGE>
13.2 LICENSOR hereby reserves the right to terminate this
Agreement upon ninety (90) days notice if the ROYALTY
BASE multiplied by the ROYALTY RATE for any given
calendar year, beginning in the year 2000 and continuing
for the duration of the LICENSE TERM fails to exceed one
million dollars ($1,000,000), or if LICENSEE fails to
devote sufficient and reasonable efforts and resources to
the manufacture and marketing of LICENSED PRODUCTS
covered by this Agreement including, but not limited to,
expending fifteen percent (15%) of gross sales of the
LICENSED PRODUCTS for costs of sales of the LICENSED
PRODUCTS in each and every calendar year.
13.3 This Agreement shall be terminated automatically in any
one or more of the following circumstances:
(a) in the event that LICENSEE is ordered or adjudged
bankrupt or is placed in the hands or a receiver or
otherwise enters into any scheme or composition with
its creditors or makes an unauthorized assignment for
the benefit of creditors; or
(b) in the event that the assets of LICENSEE are
seized or attached, in conjunction with any action
against it by any third party; or
(c) in the event that LICENSEE is dissolved, or that a
sale of all or substantially all of the assets of
LICENSEE is made, or
(d) in the event that this Agreement is attempted to
be assigned or sublicensed by LICENSEE without the
prior written consent of LICENSOR.
(e) in the event false or inaccurate accountings of
manufacturing and sales as required of LICENSEE under
this Agreement are submitted to LICENSORS;
(f) in the event LICENSEE fails to make a required
payment under this Agreement when due;
(g) in the event either party violates the non-
competition requirements of this Agreement; or
(h) The violation of any other provision or
requirement of this Agreement that is not corrected
within five (5) days after notice of the violation is
given.
13.4 In the event of termination, any rights and claims of the
parties which may have accrued prior to termination
hereof shall survive such termination.
14.0 Release
14.1 LICENSORS hereby release LICENSEE and its customers from
all claims arising out of infringement of any LICENSED
PATENT by the LICENSEE'S manufacture, use, or sale of
LICENSED PRODUCTS prior to the EFFECTIVE DATE of this
agreement, such release being conditioned upon the
payment of the LUMP SUM under this Agreement.
<page
15.0 Enforcement of Licensed Rights;
15.1 LITIGATION RIGHTS AND OBLIGATIONS: At LICENSEE'S own
expense, LICENSEE shall take all actions necessary to
preserve and protect all rights conferred on LICENSEE
under this Agreement, including exclusive use of the
patents and other intellectual property rights of
LICENSORS, including instituting and maintaining a
lawsuit against any infringer as prudent. LICENSORS
agree to cooperate with and assist LICENSEE in the
prosecution of such claims. Any sums recovered in the
prosecution of such claims shall go first to reimburse
LICENSEE and LICENSORS for all direct out-of-pocket
expenses of every kind and character, including
reasonable attorney's fees, expert witness fees, travel
costs, court costs and the like incurred in the
prosecution of any suit and for the reasonable loss of
profit for LICENSEE and LICENSORS. If after such
reimbursement any funds shall remain from said recovery,
such fund shall be split equally.
16.0 Choice of Law and Forum
16.1 This Agreement shall be governed in all respects by the
laws of the State of California without regard to any
conflicts of laws statutes and all actions to resolve
disputes arising from the terms of this Agreement whether
by suit or arbitration shall be brought in the County of
Orange, State of California unless otherwise agreed to in
writing by both parties.
17.0 Arbitration
17.1 Any controversy or claim arising under this Agreement
which involves a question of infringement or any of the
LICENSED PATENTS shall be settled by arbitration in
accordance with the Patent Rules of the American
Arbitration Association, and judgment upon the award
rendered by the Arbitrator(s) may be entered in any court
having jurisdiction thereof.
18.0 Integration
18.1 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject
matter contained herein and merges all prior discussions
between them and neither party shall be bound by any
definition, condition, warranty, or representation other
than as expressly stated in this Agreement or as
subsequently set forth in writing signed by the party to
be bound thereby.
19.0 Modification
19.1 This Agreement may be amended, modified, or revoked in
whole
or in part, but only by a written instrument which refers to
this Agreement and expressly states that it constitutes an
amendment, modification, or revocation hereof, as the case
may be, and only if such written instrument has been duly
signed by a duly authorized person of all parties.
20.0 Binding
20.1 This Agreement shall be binding upon the inure to the
benefit of the parties and their successors and assigns.
21.0 Attorneys' Fees in Event of Dispute
21.1 If any arbitration, legal action, or other proceeding is
brought for the enforcement of this Agreement, the successful
or prevailing party or
<page
parties shall be entitled to recover reasonable attorney's
fees and other costs incurred in that action or proceeding,
in addition to any other relief to which it may be entitled.
22.0 Construction and Performance
22.1 This Agreement shall not be construed against the party
preparing it, but shall be construed as if both parties
prepared this Agreement. As used herein the singular and
plural number, the masculine, feminine and neutral genders
include on another.
23.0 Waiver
23.1 No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
24.0 Counterparts
24.1 This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original Agreement, and all
of which shall constitute one Agreement.
25.0 Captions
25.1 The various captions are inserted for convenience of
reference only and do not affect the meaning or
interpretation of this Agreement or any section thereof.
26.0 Invalidity of Provisions
26.1 If any provision of this Agreement as applied to either
party or to any circumstance, shall be adjudicated by a court
to be void and unenforceable, the same shall in no way
affect: any other provision in this Agreement; the
application of such provision in any other circumstance; or
the validity or enforceability of the Agreement as a whole.
LICENSOR(S)
____/s/___________________________________Date _________________
Lee A. Namisniak
_/s/______________________________________Date _________________
Dianna Cleveland Namisniak
LICENSEE
CORPORATION,
Innovative Tracking Solutions Corporation
By:
_/s/______________________________________Date _________________
Dianna Cleveland, President/CEO
_/s/______________________________________Date _________________
Lee A. Namisniak, Vice President/CFO/COO
_/s/______________________________________Date _________________
Lou Weiss, Director
<page
SCHEDULE A - PATENTS
LICENSED PRODUCTS ROYALTY
PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
8%
U.S. Serial No. Filing or Issue
Type of Patent or Patent No. Date of Patent
Utility Patent 5,335,509
08/09/94
Utility Patent 5,487,276 01/30/96
SCHEDULE B - TRADEMARKS
LICENSED PRODUCTS ROYALTY
PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
1%
U.S. Serial No. Filing or Issue
Name of Trademark or Trademark No. Date of
Trademark
"Leftover Lifeguard" Reg. No.1,947,954 01/16/96
<page
Exhibit 10.6
ADDENDUM
ADDENDUM TO LICENSING AGREEMENT DATED FEBRUARY 1, 1997
BY AND BETWEEN DIANNA L. NAMISNIAK AND LEE A. NAMISNIAK
AND INNOVATIVE TRACKING SOLUTIONS CORP.
THIS ADDENDUM IS EFFECTIVE ON FEBRUARY 2, 1998 AND
RELATIVE TO ITEM 3.0 OF "LICENSING AGREEMENT"
SUPPLEMENT TO SCHEDULE A - PATENTS
LICENSED PRODUCTS ROYALTY PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
8%
U.S. Serial No. Filing or Issue
Type of Patent or Patent No. Date of Patent
Utility Patent 5,711,160 01/27/98
SUPPLEMENT TO SCHEDULE B - TRADEMARKS
LICENSED PRODUCTS ROYALTY
PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
1%
U.S. Serial No. Filing or Issue
Name of Trademark or Trademark No.
Date of Trademark
"Smart Kitchen" Serial No.75291283 05/13/97
"Pocket Kitchen" Serial No.75294206
05/19/97
"Sharp Kitchen" Serial No.75294205 05/19/97
<PAGE>
Exhibit 10.6
Addendum to Licensing Agreement
It is hereby agreed between LEE A. NAMISNIAK and DIANNA L.
NAMISNIAK as "LICENSORS" AND INNOVATIVE TRACKING SOLUTIONS
CORPORATION, d.b.a., InTracks Corporation, a Delaware
corporation, as
"LICENSEE" that the following patents and trademarks shall be as
of
February 25, 1998 considered added and incorporated into
Schedules
A & B of the Licensing Agreement executed February 1, 1997
between
the parties and therefore subject to all the terms of that
Licensing Agreement.
SUPPLEMENT TO SCHEDULE A - PATENTS
LICENSED PRODUCTS ROYALTY PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
8%
U.S. Serial No. Filing or Issue
Type of Patent or Patent No. Date of Patent
Utility Patent 5,711,160 01/27/98
SUPPLEMENT TO SCHEDULE B - TRADEMARKS
LICENSED PRODUCTS ROYALTY
PERCENTAGE
Leftover Lifeguard Food Storage Tracking System
1%
U.S. Serial No. Filing or Issue
Name of Trademark or Trademark No.
Date of Trademark
"Smart Kitchen" Serial No.75291283 05/13/97
"Pocket Kitchen" Serial No.75294206
05/19/97
"Sharp Kitchen" Serial No.75294205 05/19/97
LICENSOR(S)
____/s/___________________________________Date ________________
Lee A. Namisniak
_/s/______________________________________Date _______________
Dianna Cleveland Namisniak
LICENSEE
CORPORATION,
Innovative Tracking Solutions Corporation
By:
_/s/______________________________________Date ________________
Dianna Cleveland, President/CEO
_/s/______________________________________Date ________________
Lee A. Namisniak, Vice President/CFO/COO
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
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<PERIOD-START> Jul-01-1998
<PERIOD-END> Sep-30-1998
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