As filed with the Securities and Exchange Commission on December 10, 1998.
File No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM SB-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
iQ POWER TECHNOLOGY INC.
(Name of small business issuer in its charter)
3690
Canada (Primary Standard Not Applicable
(State or jurisdiction of Industrial Classification (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
Suite 708-A, 1111 West Hastings Street
Vancouver, British Columbia V6E 2J3
(604) 669-3132
(Address and telephone number of principal executive offices)
Erlenhof Park
Inselkammer Strasse 4
D-82008 Unterhaching, Germany
(Address of principal place of business or intended principal place of business)
Bogle and Co.
Suite 4700
601 Union Street
Seattle, Washington 98101-2346
(206) 682-5151
(Name, address and telephone number of agent for service)
---------------------
Copies to:
Greg A. Sasges, Esq. Randal R. Jones, Esq.
Kjeld Werbes, Esq. Matthew D. Latimer, Esq.
Werbes Sasges & Company Bogle & Gates P.L.L.C.
1111 West Hastings Street Two Union Square
Suite 708 601 Union Street
Vancouver, British Columbia Seattle, Washington 98101-2346
Canada V6E 2J3
Approximate date of proposed sale to the public: As soon as practicable after
Registration Statement becomes effective.
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
[ ] ----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ] ----------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ] ----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
<TABLE>
====================================================================================================================
Proposed Proposed Amount of
Title of each class of securities Amount to be maximum offering maximum aggregate registration
to be registered registered price per share (1) offering price (1) fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares, without par value 5,000,000 shares US$1.00 US$5,000,000 US$1,390
==================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(a), the proposed maximum offering price per share and
the proposed maximum aggregate offering price are estimated solely for the
purpose of calculating the registration fee.
-----------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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Disclosure alternative used (check one): Alternative 1[ ] Alternative 2 [X]
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER 9, 1998
iQ POWER TECHNOLOGY INC.
(the "Company" or "iQ Canada")
5,000,000 Common Shares (Total Maximum)
3,000,000 Common Shares (Total Minimum)
We are offering and selling all of the Common Shares listed above. IPO Capital
Corp. ("IPO") is acting as our selling agent outside the United States, and
sales agents selected by IPO may act as our sales agents in the United States.
IPO and the other sales agents are selling the Common Shares on a "best efforts"
basis. The offering price will be US$1.00 per Common Share. The minimum
subscription per investor is 25,000 Common Shares for US$25,000. Prior to this
offering, the Common Shares have not been traded publicly.
-----------------------
The Common Shares we are offering involve a high
degree of risk. See "Risk Factors" at page 4.
-----------------------
We have the right to reject orders to purchase Common Shares in whole or in
part. If we reject your order, we will return your money to you without interest
or deduction on the next business day after our rejection. IPO will hold the
subscription funds and will release the subscription funds to us after (i) we
have received subscriptions for the minimum number of Common Shares and (ii) our
registration statement on Form 8-A under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), has been declared effective by the
Securities and Exchange Commission (the "SEC").
This Prospectus is not complete and may be amended. We have filed a registration
statement for the Common Shares with the SEC. We cannot sell or accept any
offers to buy the Common Shares before the registration statement becomes
effective. We have not given any person authority to give any information or
make any representation that is not in this Prospectus. You should not assume
that the information in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<TABLE>
Price to Discounts
Public and Commissions(1) Proceeds to Issuer(2)
-------- ------------------ ---------------------
<S> <C> <C> <C>
Per Common Share.............. US$1.00 US$0.10 US$0.90
Total Minimum................. US$3,000,000 US$300,000 US$2,700,000
Total Maximum................. US$5,000,000 US$500,000 US$4,500,000
</TABLE>
(1) In addition to the commissions listed above, we have also agreed to grant
to IPO warrants to purchase an amount of Common Shares equal to 10% of the
Common Shares sold in the Offering and to pay to IPO a corporate finance
fee of US$50,000. See "Plan of Distribution."
(2) Before deducting offering expenses we will pay of approximately US$260,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is ,1998
-----------------------
IPO CAPITAL CORP.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
FORWARD LOOKING STATEMENTS......................................................................................iii
NARRATIVE INFORMATION REQUIRED IN PROSPECTUS.....................................................................iv
Item 2. Significant Parties................................................................................iv
Item 3. Relationship with Issuer of Experts Named in Prospectus............................................vi
Item 4. Legal Proceedings..................................................................................vi
Item 5. Changes in and Disagreements with Accountants......................................................vi
Item 6. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................vi
SUMMARY...........................................................................................................1
THE OFFERING......................................................................................................3
RISK FACTORS......................................................................................................4
Limited Operating History....................................................................................4
Expectation of Continuing Losses; Negative Cash Flow; Need for Additional Financing..........................4
Competition..................................................................................................5
Reliance on Unproven Applications of Technology; Dependence on Single Product................................5
New Products and Technological Change........................................................................6
Uncertainty of Market Acceptance; Customer Concentration.....................................................6
Reliance on Strategic Relationships..........................................................................6
No Marketing, Manufacturing or Distribution Experience.......................................................7
Cyclical Industry; Seasonality and Weather...................................................................7
Dependence on Key Personnel..................................................................................7
Proprietary Technology.......................................................................................8
International Operations; Currency Risk......................................................................8
Lack of Public Market........................................................................................8
THE COMPANY.......................................................................................................9
EXCHANGE RATES...................................................................................................10
CAPITALIZATION...................................................................................................11
DILUTION.........................................................................................................12
PLAN OF DISTRIBUTION.............................................................................................14
USE OF PROCEEDS..................................................................................................15
BUSINESS.........................................................................................................16
Overview....................................................................................................16
Industry Background.........................................................................................16
The iQ Technology...........................................................................................18
Performance Specifications and Test Results.................................................................20
The Company Strategy........................................................................................21
Industry Relationships......................................................................................22
Research and Development....................................................................................23
Competition.................................................................................................23
Intellectual Property Rights................................................................................24
Employees...................................................................................................24
Facilities..................................................................................................25
Legal Proceedings...........................................................................................25
SELECTED FINANCIAL DATA..........................................................................................26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................27
Overview....................................................................................................27
Acquisition of iQ Germany...................................................................................27
Results of Operations of the Company........................................................................28
<PAGE>
Results of Operations of iQ Germany.........................................................................28
Liquidity and Capital Resources.............................................................................29
Year 2000 Issue.............................................................................................29
Foreign Currency Translation Risk...........................................................................30
Recent Accounting Pronouncements............................................................................30
DIRECTORS AND EXECUTIVE OFFICERS.................................................................................31
Directors and Executive Officers............................................................................31
REMUNERATION OF DIRECTORS AND OFFICERS...........................................................................33
Director Compensation.......................................................................................33
Options to Purchase Securities..............................................................................33
Employment Agreements.......................................................................................33
1998 Stock Option Plan......................................................................................34
Indebtedness Of Directors And Senior Officers...............................................................34
PRINCIPAL SHAREHOLDERS...........................................................................................35
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.......................................................36
DESCRIPTION OF CAPITAL STOCK.....................................................................................38
Common Shares...............................................................................................38
Special Warrants............................................................................................38
Certain Rights of Shareholders..............................................................................38
Exchange Controls and Other Limitations Affecting Holders of Common Shares..................................38
Pooling and Escrow Agreements...............................................................................39
Transfer Agent and Registrar................................................................................39
DIVIDEND POLICY..................................................................................................40
CERTAIN TAX CONSIDERATIONS.......................................................................................40
United States Federal Income Tax Considerations.............................................................40
Personal Holding Companies..................................................................................41
Foreign Personal Holding Companies..........................................................................42
Passive Foreign Investment Companies........................................................................42
Controlled Foreign Corporation..............................................................................44
Certain Canadian Federal Income Tax Considerations..........................................................45
SECURITIES ELIGIBLE FOR FUTURE SALE..............................................................................46
AVAILABLE INFORMATION............................................................................................47
LEGAL MATTERS....................................................................................................48
INTRODUCTION TO FINANCIAL STATEMENTS.............................................................................48
</TABLE>
<PAGE>
FORWARD LOOKING STATEMENTS
We have made forward-looking statements in this Prospectus. These statements
involve risks and uncertainties. Such statements include statements of the
Company's plans, objectives, expectations and intentions. You should read the
cautionary statements made in this Prospectus as if they were applicable to all
forward-looking statements in this Prospectus. Our Company's actual results
could differ materially from those anticipated in these forward-looking
statements because of certain factors, including those factors listed under
"Risk Factors" and other places in this Prospectus.
-iii-
<PAGE>
NARRATIVE INFORMATION REQUIRED IN PROSPECTUS
Item 2. Significant Parties
(1) The full names and business and residential addresses, as applicable,
of iQ Canada's directors are as follows:
Name: Russell French
Business Address: Suite 708-A, 1111 West Hastings Street, Vancouver,
British Columbia, Canada
Home Address: 3677 Regent Avenue, North Vancouver, British Columbia,
Canada V7N 2C3
Name: Peter E. Braun
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Reineke Strasse 56, 81545 Munich, Germany
Name: Gunther C. Bauer
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany
(2) The full names and business and residential addresses, as applicable,
of iQ Canada's officers are as follows:
Name: Peter E. Braun
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Reineke Strasse 56, 81545 Munich, Germany
Name: Gerhard Trenz, Vice-President, Finance
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Heimstettener Strasse 56, 85551 Kirchheim, Germany
Name: Gunther C. Bauer
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany
(3) iQ Canada is organized as a corporation and has no general partners.
(4) As of December 1, 1998, the names and business and residential
addresses of record owners of the five percent (5%) or more of any class of iQ
Canada's equity securities are as follows:
Name: Peter E. Braun
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Reineke Strasse 56, 81545 Munich, Germany
-iv-
<PAGE>
Name: Gunther C. Bauer
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany
Name: Horst Dieter Braun
Business Address: Not applicable
Home Address: Schrenckweg 1, 85658 Egmating, Germany
Name: Karin Wittkewitz
Business Address: Not applicable
Home Address: Schrenckweg 1, 85658 Egmating, Germany
Name: Rainer Welke
Business Address: Ascheberger Strasse 2, 48308 Senden, Germany
Home Address: Kreuzbauerschaft 79, 48308 Senden, Germany
Name: Helmut Krack
Business Address: Not applicable
Home Address: Weinerstrasse 7, 48145 Muster, Germany
(5) The names and business and residential addresses of beneficial owners
of five percent (5%) or more of any class of iQ Canada's equity securities
include those persons set forth in response to Item 2(4) as well as:
None.
(6) The name and business and residential address of the promoter of iQ
Canada is.
Name: Russell French
Business Address: Suite 708-A, 1111 West Hastings Street, Vancouver,
British Columbia, Canada
Home Address: 3677 Regent Avenue, North Vancouver, British Columbia,
Canada V7N 2C3
(7) The names and business and residential addresses of affiliates of iQ
Canada are set forth in response to Items 2(1), (2) and (4) as well as:
Name: iQ Battery Research & Development GmbH
Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008
Unterhaching, Germany
Home Address: Not applicable
(8) Werbes Sasges & Company, 1111 West Hastings Street, Suite 708,
Vancouver, Canada V6E 2J3 is counsel to the Company. Bogle & Gates P.L.L.C., Two
Union Square, 601 Union Street, Seattle, Washington 98101-2346 is special U.S.
counsel to iQ Canada in connection with the proposed offering.
(9) None.
(10) Not applicable.
-v-
<PAGE>
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
Item 3. Relationship with Issuer of Experts Named in Prospectus
We have not engaged any expert named in the Prospectus as having prepared or
certified any part of it on a contingent basis. No expert had or has a material
interest in iQ Canada or is connected with iQ Canada as a promoter, underwriter,
voting trustee, director, officer or employee.
Item 4. Legal Proceedings
As of the date of this Prospectus, there is no material litigation pending
against the Company.
Item 5. Changes in and Disagreements with Accountants
Not applicable.
Item 6. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
To the extent indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of our Company pursuant to our Company's Articles of
Incorporation, contractual agreements or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
-iv-
<PAGE>
SUMMARY
This is a summary of information about the Offering. This is a summary only, and
you should read the more detailed information contained in this Prospectus,
including the information under the heading "Risk Factors." We urge you to read
this entire Prospectus.
THE COMPANY
THE COMPANY: Our Company, iQ Power Technology Inc., was founded in
December 1994 and is a corporation organized under the
Canadian Business Corporations Act. In August 1998, we
acquired all the issued and outstanding shares of iQ Battery
Research and Development GmbH ("iQ Germany") by exchanging
shares of our Company for shares of iQ Germany held by iQ
Germany's shareholders. The Share Exchange Agreement between
our Company and the former shareholders of iQ Germany
provides that the former shareholders of iQ Germany, as a
group, have a limited right to require us to repurchase all,
but not less than all, of our Common Shares received by such
shareholders (the "Put Option"). The shareholders may
exercise the Put Option at and after the four month
anniversary of the initial filing of this Prospectus if (i)
we have failed to complete an equity offering with gross
proceeds of at least US$3 million; and (ii) such
shareholders have repaid to us the full amount of all funds
we have advanced or invested in iQ Germany. The Put Option
will terminate at the close of this Offering.
PRINCIPAL BUSINESS: We, through our wholly-owned subsidiary, iQ Germany, develop
and market technology related to starting, lighting and
ignition batteries (the "iQ Technology").
TERMS OF THE
OFFERING: We are offering a maximum of 5,000,000 Common Shares and a
minimum of 3,000,000 Common Shares. We will offer the Common
Shares for US$1.00 per share. The minimum subscription is
25,000 Common Shares or US$25,000 per investor, but we may,
at our option, accept a lesser amount. IPO will release the
offering proceeds to us and we will issue the shares to you
when (i) we have received subscriptions for the minimum
number of Common Shares and (ii) our registration statement
on Form 8-A under the Exchange Act has been declared
effective by the SEC.
USE OF PROCEEDS: After commissions and offering expenses of US$260,000 are
deducted, we will receive approximately US$4,240,000 in net
proceeds from the Offering if we sell 5,000,000 Common
Shares and approximately US$2,440,000 in net proceeds from
the Offering if we sell 3,000,000 Common Shares.
We expect to use the proceeds from the Offering for research
and development of our battery technologies, expansion of
our marketing and sales organization and for general working
capital. We may also use some of the proceeds to acquire or
invest in businesses, products or technologies that enhance
our existing business.
Until we use the funds, we will invest the net proceeds from
this Offering in government securities or short-term,
interest- or dividend-bearing investment-grade securities.
See "Use of Proceeds."
-1-
<PAGE>
CAPITALIZATION: We may issue an unlimited number of Common Shares.
Currently, there are 18,479,425 Common Shares (including
2,300,000 Common Shares issuable upon the exercise of
special warrants) issued and outstanding as of the date of
this Prospectus. See "Description of Capital Stock."
MANAGEMENT: The President and Chief Executive Officer of the Company is
Peter E. Braun.
RISK FACTORS: Our Company is a development stage company with new and
untested technology. We cannot guarantee that our Company
will produce revenues. Your investment in the Common Shares
involves a high degree of risk. See "Risk Factors."
FORWARD-LOOKING
STATEMENTS: We have made forward-looking statements in this Prospectus
about our Company's plans, intentions, strategies,
expectations, predictions, financial projections and beliefs
concerning our future activities, results of operations and
other future events or conditions. Actual results, events or
conditions could differ materially from those projected by
us due to a variety of factors, some of which are beyond our
control. See "Forward-Looking Statements" and "Risk
Factors."
-2-
<PAGE>
THE OFFERING
Number of Common Shares
offered hereby..........5,000,000 shares (maximum); 3,000,000 shares (minimum)
Common Shares
outstanding after the
Offering................23,479,425 shares(1)
Use of proceeds...........Working capital, general corporate purposes,
including research and development, sales and
marketing activities and potential acquisitions.
Risk Factors..............The Common Shares offered involve a high degree
of risk. See "Risk Factors."
Summary Financial Data
<TABLE>
Fiscal
Period Years Ended 6 Months Ended
Ended December 31, June 30,
--------------------------- ---------------------------------------
Statement of Operations Data: December
31, 1996 1997 1998
(seven Pro Forma Pro Forma
months) 1997 (unaudited)(2)(3) 1997 1998 (unaudited)(2)(4)
------- ---- ----------------- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $ -- $ - - $ 27,000 $ -- $ $ --
Operating Expenses...................... 10,504 135,236 760,000 42,471 101,211 457,000
Operating income (loss)................. (10,504) (135,236) (779,000) (42,471) (101,211 (457,000)
Net income (loss) for the period........ (10,504) (135,236) (779,000) (42,471) (101,211) (463,000)
Net income (loss) per share............. N/A (0.14) (0.06) (0.08) (0.04) (0.03)
Weighted average shares outstanding..... -- 950,294 13,750,294 547,271 2,286,461 15,086,461
</TABLE>
<TABLE>
As at June 30, 1998
----------------------------------------------------------------------------
As Adjusted(5) Proforma
Actual (unaudited) (unaudited)(2)(6)
----------------------- ---------------------------------------------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.......... $ 78,731 $ 4,318,000 $ 4,335,000
Working capital.................... 388,855 4,629,000 3,826,000
Total assets....................... 553,588 4,793,000 4,797,000
Non-current liabilities............ -- -- 307,000
Shareholders' equity (deficiency).. 388,855 4,629,000 3,725,000
- ------------------------------
</TABLE>
(1) Based upon shares outstanding as of December 1, 1998, and assumes the sale
of 5,000,000 Common Shares pursuant to the offering. This number includes
2,300,000 Common Shares issuable upon the exercise of outstanding Special
Warrants, but does not include 2,875,000 outstanding options to purchase
Common Shares issued by the Company under its Stock Option Plan at an
exercise price of US$1.00 per share.
(2) For your convenience, we have converted Deutschmark income statement
amounts into U.S. dollars using the average noon buying rate in New York
City for cable transfers payable in Deutschmarks as certified for customs
purposes by the Federal Reserve Bank of New York for the relevant period.
We have also converted Deutschmark balance sheet amounts using the relevant
period-end noon buying rate, as set forth in "Exchange Rate Information."
These translations do not necessarily represent the amounts that would have
been reported if iQ Germany had historically reported its financial
statements in U.S. dollars. In addition, the exchange rates used are not
necessarily indicative of the rates in effect at any other time. (3) Gives
effect to the business combination with iQ Germany as if it had occurred on
January 1, 1997. (4) Gives effect to the business combination with iQ
Germany as if it had occurred on January 1, 1998. (5) Adjusted to give
effect to the net proceeds from our sale of the maximum (5,000,000) Common
Shares offered in the Offering (at an assumed offering price of US$1.00 per
Common Share and after deducting the estimated agents' fees and commissions
and estimated offering expenses payable by the Company). (6) Gives effect
to the business combination with iQ Germany as if it had occurred on June
30, 1998.
-3-
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, you should consider the
following factors carefully as you evaluate whether or not to invest in the
Common Shares.
Limited Operating History
Our Company was incorporated in December 1994. iQ Germany was established in
1991 to develop technology to improve the performance of conventional lead-acid
batteries. Both iQ Germany and our Company have limited operating histories and
have not licensed any technologies or sold any products based on the iQ
Technology. Our Company and iQ Germany, like most new business enterprises, are
subject to a number of risks, including having a limited amount of cash and
other financial resources and the fact that other more established businesses
with more resources are our competitors. Neither our Company nor iQ Germany have
received any material revenues from operations, and we cannot assure you that we
will ever receive any revenues from operations, or that we will ever be
commercially profitable. Neither we nor iQ Germany have ever been profitable.
Expectation of Continuing Losses; Negative Cash Flow; Need for Additional
Financing
We were organized to acquire iQ Germany and the iQ Technology. iQ Germany is a
development stage company which means that it is still developing the iQ
Technology for commercial use. The iQ Technology is in the early stages of
development and iQ Germany has not produced any commercial products based on it.
To date, iQ Germany has concentrated on strategic planning, developing the iQ
Technology, developing and testing product prototypes, developing strategic
relationships with automakers and third party manufacturers of batteries and
conducting market research. We have focused mainly on raising financing for the
acquisition of iQ Germany. We have not generated any revenues from our
operations and have incurred losses of approximately US$135,236 during the
fiscal year ended December 31, 1997 and US$101,211 during the six month period
ended June 30, 1998. At December 31, 1997 and June 30, 1998, the Company had an
accumulated deficit of US$145,740 and US$246,951, respectively. iQ Germany
incurred losses of approximately DM1,034,000 (US$570,000) in the fiscal year
ended December 31, 1997 and DM773,000 (US$426,000) in the fiscal period ended
June 30, 1998. At December 31, 1997 and June 30, 1998, iQ Germany had an
accumulated deficit of DM1,397,000 (US$776,000) and DM1,790,000 (US$993,000),
respectively. We do not anticipate having any material revenues from operations
until at least the year 2000. Our ability to generate revenues and to make a
profit in the future will depend upon a number of factors, including our ability
to develop the iQ Technology for commercial use in a timely manner, our ability
to license the iQ Technology successfully and, if we decide to sell batteries
directly, our ability to enter into contracts with third party manufacturers to
manufacture batteries based on the iQ Technology, to develop a marketing and
distribution network to sell our products and our customers' acceptance of our
products.
We cannot guarantee that we will be able to successfully license the iQ
Technology to other companies or that we will be successful in marketing and
distributing products based on the iQ Technology. We may never have enough
revenues from licensing the iQ Technology or selling products to make a profit.
We anticipate that the net proceeds we receive from this Offering will be
sufficient to satisfy our cash needs for about twelve months after this
Offering. Thereafter, the Company's capital requirements will depend on several
factors, including the success and progress of our product development programs,
the resources we devote to developing our products, the extent to which our
products achieve market acceptance and other factors. We expect to devote
substantial capital resources for research and development. Consequently, in
order to fund such research and development, we may be required to raise
additional funds by issuing debt or equity securities, or both. We may also
require additional money if we experience delays, cost overruns, additional
funding needs for joint ventures or other unanticipated developments. We cannot
give you any assurance that we will be able to obtain more financing on
favorable terms, if at all, or that we will be able to obtain financing on a
timely basis. If we fail to get the necessary financing on a timely basis it
might delay and increase the costs of development and commercialization of the
iQ Technology, cause us to default on some of our financial commitments, prevent
us from being able to commercialize the iQ Technology and force us to
discontinue our operations or to look for a
-4-
<PAGE>
purchaser for the iQ Technology or our business. If we issue additional equity
securities, it could cause substantial reduction in the value of stock held by
existing shareholders.
Competition
The lead-acid battery industry is highly competitive and includes many firms
with greater financial, technological, manufacturing, marketing and other
resources than either us or iQ Germany, and that have longer operating histories
than our Company or iQ Germany. Many of our competitors have devoted substantial
resources to research and development, manufacturing, marketing and
commercializing products. We expect competition in the battery industry to
intensify because many battery companies are consolidating or vertically
integrating which, because they own all stages of production, allows them to
make batteries at lower cost. Our competitors range from development stage
companies to major domestic and international companies. Many of our
competitors' products and technologies are widely accepted by retail consumers
and other buyers of batteries and have long histories of reliable and effective
use. Our competitors also have established reputations and long-standing
relationships with original equipment manufacturers that may give them a
substantial competitive advantage over us and could pose a significant barrier
to our entry to the marketplace. In recent years, buyers of lead-acid batteries
have also consolidated, reducing the number of customers for lead-acid batteries
and increasing price competition.
We cannot assure you that the iQ Technology or products using the iQ Technology
will be accepted in the market. Additionally, even if the iQ Technology is
widely accepted, our competitors may develop alternative or competing
technologies that are more efficient than ours. Advances in battery technology
may render our products or technology obsolete or noncompetitive. In addition,
consumers may not see any advantage in purchasing products based on the iQ
Technology over the products of our competitors. The development of alternative
or competitive technologies or the lack of market acceptance of the iQ
Technology could have a material adverse effect on our business, financial
condition and the results of our operations. See "Business--Competition."
North America. The United States and Canadian market for starting, lighting, and
ignition ("SLI") and specialty batteries is mature and highly competitive.
Battery manufacturers compete primarily on the basis of price, quality, service,
warranty period and timeliness of delivery. Generally, manufacturers make sales
without long-term contracts. Because the industry has had excess capacity,
competition and increased pressure for cost reduction has resulted in declining
prices in the last several years. Our primary domestic competitors in North
America are Johnson Controls, Inc., Delco Remy (a division of General Motors
Corporation), Exide Corporation and GNB Incorporated. Although the U.S. market
is currently dominated by domestic manufacturers, foreign competition could
increase depending on changes in relative prices, duties, tariffs, freight
costs, currency exchange rates or changes in technology.
Europe. The SLI battery market in Europe is also highly competitive. Competition
in this market has intensified because of reduced demand. European manufacturers
compete primarily on the same bases as manufacturers in the United States. The
excess production capacity in the industry, competition and increased pressure
for cost reduction from large customers has caused prices to decline. Currency
fluctuations among the European countries can also have considerable effects on
the amount of revenues generated in the market. Among our competitors in Europe
are VB Autobatterie GmbH, Hawker Batteries, Fiamm, Delco Remy, Exide
Corporation, Autosil, Hoppecke, Yuasa and Matsushita.
Reliance on Unproven Applications of Technology; Dependence on Single Product
The iQ Technology uses an insulated double-walled case, an internal
microprocessor and a battery acid anti-stratification device to increase the
charging, storage and power delivery capabilities of a conventional lead acid
battery. This design requires us to integrate the iQ Technology with existing
lead acid battery technology. Neither we nor iQ Germany have manufactured
prototypes in commercial quantities or used a commercial manufacturing process.
We cannot guarantee that the iQ Technology can be successfully integrated into
lead acid batteries on a commercial basis. In addition, we may not be successful
in developing a manufacturing process that will permit us to commercialize our
battery products. Although we believe that the iQ Technology can be integrated
into lead acid
-5-
<PAGE>
batteries on a commercial basis, and that a commercially feasible manufacturing
process can be developed, we cannot guarantee success.
We anticipate that all of our revenues will initially come from fees derived
from licensing the iQ Technology or, possibly, from the sale of batteries that
incorporate the iQ Technology. See "Business -- The iQ Technology." We cannot
guarantee that we will receive any revenues from the licensing of the iQ
Technology or from the sale of batteries incorporating the iQ Technology or that
we can generate a profit. If we receive any revenues, the revenues may decrease
after an initial period of market introduction due to factors such as
competition, changes in consumer preferences, changes in customer
specifications, market saturation, changes in demand from original equipment
manufacturers ("OEM"), changes in demand for automobiles, changes in economic
conditions, or other factors, many of which are beyond our control. Any decline
in the demand for batteries could have a material adverse effect on our
business, results of operations and financial condition. See "New Products and
Technological Change," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Industry Background" and
"Competition."
New Products and Technological Change
We believe our growth will depend upon our ability to develop and commercialize
the iQ Technology and to introduce new products and technologies that are
attractive to consumers, OEMs, automobile manufacturers, automobile service
providers and retailers of automotive batteries. The process of creating,
developing, researching and commercializing battery and power technologies is
risky. We may experience delays in the process, and we cannot assure you that we
will successfully complete the development or introduction of any new
technologies or products, or that such technologies or products will achieve
market acceptance. If we fail to anticipate or respond adequately to changes in
technology and consumer preferences, our development and introduction of new
technologies or products may be delayed and such delays could have a material
adverse effect on our business, results of operations and financial condition.
See "Business--The iQ Technology" and "Reliance on Strategic Relationships."
Uncertainty of Market Acceptance; Customer Concentration
There are currently no lead-acid batteries that use technology that is similar
to the iQ Technology. As a result, the potential demand for products that use
the iQ Technology and the degree to which the iQ Technology can meet market
demand is difficult to estimate. We cannot guarantee that there will be enough
demand for the iQ Technology or products that incorporate the iQ Technology to
generate enough revenues or cash flows so that we will achieve commercial
profitability. Our success in gaining market acceptance for the iQ Technology
will be affected by a number of factors that are beyond our control, such as,
the license fees for the iQ Technology, the willingness of consumers to pay a
premium price for batteries incorporating the iQ Technology, specifications of
automobile manufacturers, the marketing and pricing strategies of competitors,
the development of alternative technologies and general economic conditions.
We anticipate that a significant portion of our revenues and accounts receivable
will be from license fees from a limited number of key customers that may
include automobile manufacturers, aftermarket resellers and OEMs. We have not
yet entered into any licensing agreements for the iQ Technology. To the extent
we depend upon these key customers for a large percentage of our revenues, the
loss of one or more of them or a significant reduction in licensing fees from
them could have a material adverse affect on our business and the results of our
operations.
Reliance on Strategic Relationships
Our future success is dependent on the development and maintenance of strategic
relationships. We may rely upon strategic partners to assist us in the research
and development of the iQ Technology and future technologies, to participate in
the later stage development and testing of commercial prototypes, to manufacture
products based on the iQ Technology and to market and distribute such products.
We intend to license the iQ Technology to strategic partners for up-front
licensing fees, royalties or previously agreed upon transfer prices on the sale
of battery products that use our technology. Alternatively, we may enter into a
strategic relationship with a third party manufacturer to manufacture a line of
batteries under our brand name and to distribute and market such batteries to
-6-
<PAGE>
the automotive manufacturing industry and the aftermarket automotive industry.
If such strategic partners or third parties fail to perform effectively, we may
fail to generate any revenues or a profit. There is no guarantee that any
relationship will continue or result in any successful developments or profits
to us. See "Business -- Industry Relationships."
No Marketing, Manufacturing or Distribution Experience
We have no experience in marketing of battery technology or products. We cannot
be certain that the iQ Technology will be successfully integrated into a
commercially manufactured product at costs or in quantities necessary to make
them commercially viable. If we elect to develop and market our own product
line, we will likely contract with a third-party manufacturer to manufacture,
assemble, test and package our products to our specifications. We cannot
guarantee that we will be able to enter into contracts with third-party
manufacturers to manufacture a product line to our specifications on terms that
are acceptable to us. In addition, third-party manufacturers are required to
meet governmental and regulatory requirements including environmental and
consumer safety requirements. If the third-party manufacturer we select should
fail to comply with the regulatory requirements or be unable to meet our
quantity and quality requirements, we will be required to select another
manufacturer, which may result in delays in delivering products to distributors
or other purchasers.
We cannot guarantee that we or any third-party manufacturer can obtain, on
acceptable terms, enough of the required components and substances necessary to
manufacture our products. If they should encounter delays or difficulties in
their relationships with suppliers and third-party vendors, their development
and testing efforts will likely be delayed. If these delays occur, the market
introduction and subsequent sales of our products may be delayed. Any delay will
have a material adverse effect on our business, financial condition and the
results of our operations.
Neither we nor iQ Germany has sales, marketing or distribution experience. We
may have to rely on experienced employees, strategic partners, distributors and
third-party manufacturer's representatives to market our products. We cannot
guarantee that such efforts will lead to a successful and effective sales force
and distribution system. To the extent that we depend on our strategic partners
or third parties for marketing and distribution, any revenues received by us
will depend upon their efforts. If we are unable to maintain or establish
third-party distribution relationships, we may have to develop our own marketing
and sales force with technical expertise and supporting distribution
capabilities.
Cyclical Industry; Seasonality and Weather
The automotive aftermarket is seasonal as retail sales of replacement batteries
are generally higher in the fall and winter. Accordingly, demand for automotive
batteries is generally highest in the fall and early winter because retailers
are building inventories in anticipation of the winter season. European sales
are usually concentrated in the fourth calendar quarter because of the practice
of many industrial battery customers (particularly governmental and quasi
governmental entities) of deferring purchasing decisions until the end of the
calendar year. Demand for automotive batteries is significantly affected by
weather conditions. Unusually cold winters or hot summers accelerate battery
failure and increase demand for automotive replacement batteries. We anticipate
that, if we decide to market products based on the iQ Technology, such products
will be subject to factors over which we have no control that affect pricing and
net sales, such as general economic and industry conditions. In particular, the
battery markets in which such products are likely to compete are cyclical in
nature and are sensitive to the rate of economic growth in the U.S. and other
world economies. Future economic downturns could adversely affect our results of
operations and financial condition.
Dependence on Key Personnel
Our performance and future operating results substantially depend on the
continued service and performance of our Company's senior management and key
technical personnel. We intend to hire a significant number of additional
technical and sales personnel in the next year. Competition for qualified
personnel is intense, and we cannot be sure we will retain our key technical,
sales and managerial employees, or that we will be able to attract or retain
highly-qualified technical and managerial personnel in the future. If we lose
the services of any of our senior management
-7-
<PAGE>
or other key employees, or if we are unable to attract and retain necessary
sales, technical and managerial personnel, it could have a material adverse
effect on our business, operating results and financial condition.
See "Business -- Employees" and "Directors and Executive Officers."
Proprietary Technology
Our success is dependent upon iQ Germany's ability to protect its intellectual
property rights. iQ Germany relies principally upon a combination of copyright,
trademark, trade secret and patent laws, non-disclosure agreements and other
contractual provisions to establish and maintain its rights. iQ Germany's policy
is to enter into nondisclosure and confidentiality agreements with each of its
consultants, distributors, customers and corporate partners to limit access to
and distribution of the iQ Technology, documentation and other proprietary
information. We cannot guarantee that iQ Germany's efforts to protect its
intellectual property rights will be successful.
Although we believe that the iQ Technology and products do not infringe upon the
intellectual property rights of third parties, we cannot be sure that third
parties will not bring infringement claims (or claims for indemnification
resulting from infringement claims) against us or iQ Germany with respect to
copyrights, trademarks, patents and other proprietary rights. Any such claims,
whether with or without merit, could be time consuming, result in costly
litigation and diversion of resources, cause product shipment delays or require
us or iQ Germany to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on acceptable terms, if
at all. A claim of product infringement against us or iQ Germany and our or iQ
Germany's failure or inability to license the infringed or similar technology,
could have a material impact on our business, operating results and financial
condition.
International Operations; Currency Risk
iQ Germany's operations in Germany are subject to the risks usually associated
with foreign operations, including the disruption of markets, changes in export
or import laws, restrictions on currency exchanges, and the modification or
introduction of other governmental policies with potential adverse effects.
Because of the nature of these operations, we anticipate that a substantial
portion of our future revenues and expenses may be denominated in currencies
other than U.S. dollars and changes in exchange rates will therefore have a
greater effect on our results of operations.
We currently do not hedge foreign exchange risks, but may do so in the future.
We cannot be sure that this can be accomplished on satisfactory terms. To the
extent we do not take steps to effectively reduce the changes in the relative
value of the U.S. dollar and these foreign currencies, our results of operations
and financial condition could be adversely affected.
In addition, we may expand into other countries through joint ventures involving
local partners who may have economic, business or legal interests or goals which
are inconsistent with those of the joint venture or us or who may be unable to
meet their financial or other obligations to the joint venture. We cannot
guarantee that we will be able to effectively protect our economic, business or
legal interest with such joint venture partners.
Lack of Public Market
The Common Shares have no established trading market. Although we intend to take
steps to permit the development of a market in the Common Shares on the Nasdaq
OTC Bulletin Board, we cannot guarantee that an active trading market for the
Common Shares will ever develop.
-8-
<PAGE>
THE COMPANY
iQ Germany was formed in 1991 to research and evaluate methods of maximizing
lead-acid battery performance. On August 25, 1998, the Company acquired all the
issued and outstanding capital stock of iQ Germany. The Company was formed to
acquire iQ Germany and to license the iQ Technology or to market products based
on the iQ Technology.
The Share Exchange. In August of 1998, the Company acquired all the issued and
outstanding stock of iQ Germany in exchange for 10,000,000 common shares of the
Company at a deemed price of US$0.25 per common share for a total purchase price
of US$2,500,000. Pursuant to the terms of the Share Exchange Agreement, the
former shareholders of iQ Germany, as a group, have a limited right to require
iQ Canada to repurchase all, but not less than all, of the iQ Canada Common
Shares received by such shareholders (the "Put Option"). The Put Option is
exercisable at and after the four month anniversary of the initial filing of
this Prospectus if (i) iQ Canada has failed to complete an equity offering with
gross proceeds of at least US$3 million; and (ii) such shareholders have repaid
to iQ Canada the full amount of all funds iQ Canada has advanced or invested in
iQ Germany. The Put Option will terminate at the close of this Offering.
Pursuant to the terms of Atypical Share Exchange Agreements, the Company has
also issued into escrow an additional 2,800,000 Common Shares against the
deposit into escrow of "atypical shares" of iQ Germany held by all of iQ
Germany's atypical shareholders (the "Atypical Shareholders"). The Common Shares
and the "atypical shares" will be released from escrow to the Atypical
Shareholders and the Company, respectively, at the close of this Offering. In
the event the Put Option is exercised, the Common Shares and the "atypical
shares" will be released from escrow and returned to the Company and the
Atypical Shareholders, respectively.
In connection with the Share Exchange, the former shareholders and Atypical
shareholders of iQ Germany and certain shareholders of iQ Canada have entered
into a pooling agreement pursuant to which they have agreed to escrow their
shares in iQ Canada. See "Description of Capital Stock -- Pooling and Escrow
Agreements." We have been advised that the former Shareholders of iQ Germany
have also entered into a Shareholders Agreement pursuant to which they have
agreed to act jointly with respect to the voting of their shares in iQ Canada.
In addition, certain former shareholders of iQ Germany have entered into
employment, confidentiality and non-competition agreements with the Company. See
"Remuneration of Directors and Officers -- Employment Agreements" and "Interests
of Management and Others in Certain Transactions."
The business combination with iQ Germany will be accounted for by the Company
under the purchase method of accounting with iQ Germany being identified as the
acquiror. Until all of the conditions have been satisfied with respect to the
closing of the acquisition, the financial results of the Company and iQ Germany
cannot be reported on a consolidated basis. Accordingly, unless otherwise stated
herein, the financial information presented is that of the Company only. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Acquisition of iQ Germany" and the Unaudited Pro Forma
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus.
The Company was incorporated on December 20, 1994 under the Canada Business
Corporations Act as 3099458 Canada Inc. The Company changed its name to iQ Power
Technology Inc. on May 9, 1997. Unless the context requires otherwise,
references to "iQ Canada" and the "Company" refer only to iQ Power Technology
Inc. The Company's principal executive offices are located at Suite 708-A, 1111
West Hastings Street, Vancouver, British Columbia, Canada V6E 2J3, and its
telephone number at that location is (604) 669-3132.
-9-
<PAGE>
EXCHANGE RATES
The historical financial statements of iQ Germany are in Deutschmarks (DM).
Accordingly, set forth below, for each period presented, are the exchange rates
at the end of the period, the average exchange rates on the last day of each
month during the period and the high and low exchange rates for one Deutschmark,
expressed in U.S. dollars, based on the noon buying rate in New York City for
cable transfers payable in Deutschmarks as certified for customs purposes by the
Federal Reserve Bank of New York.
<TABLE>
U.S. Dollars Per Deutschmark
Six Months
Ended
Year Ended December 31, June 30,
---------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Period End.................... US$0.6020 US$0.6454 US$0.6971 US$0.6499 US$0.5558 US$0.5545
Average....................... 0.5749 0.6204 0.7012 0.6636 0.5749 0.5516
High.......................... 0.6380 0.6702 0.7372 0.6967 0.6488 0.5685
Low........................... 0.5745 0.5673 0.6405 0.6388 0.5316 0.5393
</TABLE>
On November 30, 1998, the noon buying rate was DM1.00 = US$0.5900. The DM is
convertible into U.S. dollars at freely floating rates, and there are currently
no restrictions on the flow of German currency between Germany and the United
States.
-10-
<PAGE>
CAPITALIZATION
The following table sets forth, at June 30, 1998, the capitalization of the
Company (after giving effect to the issuance of 14,036,300 Common Shares issued
after June 30, 1998 and the issuance of 2,300,000 Special Warrants) and the
capitalization as adjusted to give effect to the issuance and sale by the
Company of the maximum amount (5,000,000) of Common Shares offered hereby, at an
assumed public offering price of US$1.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. This
table should be read in conjunction with the Consolidated Financial Statements
and the Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
June 30, 1998
-------------------------
As
Actual Adjusted
-------- -------------
(in thousands)
<S> <C> <C>
Long Term Bank Debt............................................ 136 136
Non-Current due to Shareholders................................ 303 303
--- ---
439 439
Shareholders' equity
Common Shares, without par value,
unlimited number of shares authorized; 16,179,425
shares issued, actual; 21,179,425 shares
issued, as adjusted ...................................... $1,808 $6,808
Special Warrants, 2,300,000 issued and outstanding(1)....... 575 575
Cumulative Foreign Exchange Adjustment...................... 153 153
Retained earnings (deficit)................................. (2,263) (3,028)
----- -----
Total shareholders' equity................................ 273 4,508
--- -----
Total capitalization........................................... $712 $4,947
==== ======
</TABLE>
- --------------------------------
(1) Each Special Warrant is exchangeable, without payment of additional
consideration, into one Common Share.
-11-
<PAGE>
DILUTION
As of June 30, 1998, the pro forma net tangible book value of the Company's
Common Shares was US$124,905, or US$0.01 per share. Pro forma net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of Common Shares outstanding after giving
effect to the issuance of an additional 13,636,200 Common Shares issued after
June 30, 1998 and the conversion of 2,300,000 Special Warrants outstanding as of
December 1, 1998. After giving effect to the sale by the Company of the maximum
number of Common Shares offered hereby (5,000,000) at an assumed offering price
of US$1.00 per share and after deducting the commissions and estimated offering
expenses payable by the Company, the pro forma net tangible book value of the
Company as of June 30, 1998 would have been US$4,364,905, or US$0.20 per share.
This represents an immediate increase in net tangible book value of US$0.19 per
share to existing shareholders and an immediate dilution of US$0.80 per Common
Share to new investors purchasing the Common Shares in this offering. Dilution
is determined by subtracting pro forma net tangible book value per share after
the offering from the amount of cash paid by a new investor for a Common Share.
The following table illustrates this per share dilution:
Assumed offering price per share ........................ US$1.00
Pro forma net tangible book value (deficiency)
per share as of June 30, 1998........................... US$0.01
Increase per share attributable to the offering.......... US$0.19
--------
Pro forma net tangible book value per share after
this offering........................................... US$0.20
Dilution per share to new investors....................... US$0.80
=======
The following table summarizes, on a pro forma basis as of December 1, 1998, the
number of Common Shares purchased from the Company, the total consideration paid
to the Company and the average price per share paid by existing shareholders and
by new investors purchasing the maximum amount of Common Shares offered hereby
based on an assumed offering price of US$1.00 per share (before deducting
discounts and commissions and estimated offering expenses payable by the
Company):
<TABLE>
Average
Shares Purchased Total Consideration Price
---------------------------------------------------------------------
Number Percent Amount Percent Per Share
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders, pro forma basis..... 18,479,425 78.7% US$4,619,856 48.0% US$0.25
New investors.............................. 5,000,000 21.3% US$5,000,000 52.0% US$1.00
--------- ---- ---------- ---
Total .................................... 23,479,425 100% US$9,619,856 100%
========== === ========== ===
</TABLE>
After giving effect to the sale by the Company of the minimum Common Shares
offered hereby (3,000,000) at an assumed offering price of US$1.00 per share and
after deducting the commissions and estimated offering expenses payable by the
Company, the pro forma net tangible book value of the Company as of June 30,
1998 would have been US$2,564,905, or US$0.12 per share. This represents an
immediate increase in net tangible book value of US$0.11 per share to existing
shareholders and an immediate dilution of US$0.88 per Common Share to new
investors purchasing the Common Shares in this offering.
-12-
<PAGE>
The following table illustrates this per share dilution:
Assumed offering price per share ........................ US$1.00
Pro forma net tangible book value (deficiency)
per share as of June 30, 1998........................... US$0.01
Increase per share attributable to the offering.......... US$0.11
--------
Pro forma net tangible book value per share after
this offering........................................... US$0.12
Dilution per share to new investors....................... US$0.88
=======
The following table summarizes, on a pro forma basis as of December 1, 1998, the
number of Common Shares purchased from the Company, the total consideration paid
to the Company and the average price per share paid by existing shareholders and
by new investors purchasing the minimum amount of Common Shares offered hereby
based on an assumed offering price of US$1.00 per share (before deducting
discounts and commissions and estimated offering expenses payable by the
Company):
<TABLE>
Average
Shares Purchased Total Consideration Price
---------------------------------------------------------------------
Number Percent Amount Percent Per Share
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders, pro forma basis..... 18,479,425 86.0% US$4,619,856 60.6% US$0.25
New investors.............................. 3,000,000 14.0% US$3,000,000 39.4% US$1.00
--------- ---- ---------- ---
Total .................................... 21,479,425 100% US$7,619,856 100%
========== === ========== ===
</TABLE>
The foregoing computations include 2,300,000 Common Shares issuable upon the
exercise of outstanding Special Warrants and exclude, as of December 1, 1998,
the possible issuance of 2,875,000 Common Shares at an average exercise price of
$1.00 per share pursuant to outstanding stock options. In addition, the
foregoing computations exclude an aggregate of 325,000 Common Shares reserved
for issuance upon exercise of options to be granted under the Company's 1998
Stock Option Plan. To the extent such stock options are exercised, or such
Common Shares are granted, there will be further dilution to new investors in
the offering. See "Principal Shareholders" and "Remuneration of Directors and
Executive Officers - Stock Option Plan."
-13-
<PAGE>
PLAN OF DISTRIBUTION
Under the terms and subject to the conditions contained in the Agency Agreement,
IPO has agreed to sell the Common Shares on a "best efforts" basis. IPO will
offer the Common Shares at the offering price set forth on the cover page of
this Prospectus and the Company will allow IPO a commission equal to 10% of the
offering price. IPO may engage other broker-dealers registered with the NASD and
in applicable jurisdictions and selected securities dealers in Canada to
participate in this Offering and IPO may pay a commission to these dealers. IPO
will not effect any sales to discretionary accounts. The Company has agreed to
indemnify IPO against certain liabilities including liabilities under the
Securities Act, or to contribute to payments IPO may be required to make in
respect thereof.
The Offering will begin on the date of this Prospectus and will continue until
the later of (i) the date that is four months after the date of this Prospectus
or (ii) such later date as may be agreed upon by the Company and IPO (the
"Expiration Date"). When collected, subscription funds will be held by IPO in an
interest-bearing escrow account. The Company reserves the right to reject orders
for the purchase of Common Shares in whole or in part, and if a subscription is
rejected, the subscriber's funds will be returned without interest the next
business day after rejection.
The Offering will be terminated, no Common Shares will be sold, and no
subscription proceeds will be released from escrow to the Company unless on or
before the Expiration Date (i) the Company has accepted subscriptions and
payment in full for the minimum number of Common Shares and (ii) the Company's
registration statement on Form 8-A under the Exchange Act has been declared
effective by the SEC. If the foregoing conditions have not been satisfied by the
Expiration Date, or the Offering is otherwise earlier terminated, accepted
subscriptions will be of no future force or effect. In such event, IPO will
promptly return to all subscribers all subscription funds, without any interest
thereon.
If the minimum number of Common Shares are sold and the Company's registration
statement on Form 8-A has been declared effective under the Exchange Act, the
subscription amounts held in escrow, including any interest thereon, shall be
released to the Company for its immediate use. Any subscriptions accepted after
the sale of the minimum number of Common Shares but before the termination of
the Offering will be held by IPO pending acceptance or rejection of
subscriptions. Upon acceptance, such proceeds will be available for immediate
use by the Company.
In connection with the Offering, the Company has agreed to issue to IPO warrants
to purchase Common Shares in an amount equal to 10% of the Common Shares sold in
the Offering. The warrants are exercisable for a period of two years from the
date of IPO having received a letter from the Company indicating that Company's
registration statement on Form 8-A has been declared effective by the SEC. The
exercise price for the first year is US$1.00 per Common Share and for the second
year is US$1.50 per Common Share. The Company has also agreed to pay IPO a
corporate finance fee of US$50,000.
Before this Offering, there has been no market for the Company's Common Shares.
The offering price of the Common Shares was determined by negotiation between
the Company and IPO and does not necessarily bear any relationship to the
Company's assets, book value, revenues or other established criteria of value,
and should not be considered indicative of the actual value of the Common
Shares. Factors considered in determining such offering price, in addition to
prevailing market conditions, include the history of, and prospects for, the
industry in which the Company competes, and assessment of the Company's
management, its past and present operations, the prospects of the Company, its
capital structure and such other factors as were deemed relevant.
-14-
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Shares being offered
hereby, based on an offering of 3,000,000 to 5,000,000 Common Shares at an
assumed initial public offering price of US$1.00 per share and after deducting
commissions and estimated offering expenses payable by the Company, estimated to
be approximately US$260,000, are estimated to be between US$2,440,000 and
US$4,240,000.
The Company expects to use the proceeds from the Offering for research and
development of new products and technologies, expansion of the Company's
marketing and sales organization and activities and general working capital. The
Company may also use a portion of the proceeds to acquire or invest in
businesses, products or technologies that expand, complement or are otherwise
related to the Company's existing business. The Company has no present plans,
agreements or commitments, and is not currently engaged in any negotiations,
with respect to any such transactions.
Pending their application, the Company will invest the net proceeds from this
Offering in government securities or short-term, interest- or dividend-bearing
investment-grade securities.
-15-
<PAGE>
BUSINESS
Overview
The Company is engaged in the development and commercialization of electrical
power system components for the automotive industry. The Company's primary
technology relates to a "smart" automotive starter battery (the "iQ Battery")
which combines several proprietary features. These features include an insulated
case to minimize temperature fluctuation, an internal microprocessor to monitor
and control the changing and discharging process and a battery acid
anti-stratification device, to create a battery with more efficient charging,
storage and power delivery than conventional automotive batteries. Compared to
conventional OEM batteries, the iQ Battery is lighter, has increased
cold-weather starting performance and increased life expectancy.
The starting, lighting and ignition ("SLI") battery industry is a mature and
stable industry that is composed of a limited number of aftermarket resellers
and OEMs. Over the last ten years, new competition and changes in the automotive
industry have increased pressure on SLI battery manufacturers to reduce costs
and to improve the power and efficiency of the batteries they produce. In
response to these conditions and to the increased market demand for smaller and
lighter SLI batteries that produce adequate amounts of electrical power, the
Company has developed the iQ Technology, a battery technology that lowers the
weight and increases the electrical output of SLI batteries.
The Company has produced prototype batteries based on the iQ Technology for
testing by several major automotive manufacturers, including Daimler-Benz, BMW
and Audi. As a result of these tests and extensive testing by the Company, the
Company believes that when compared to a conventional 12 volt automotive
battery, a comparable iQ Battery will:
o weigh 40% less;
o have six times the recharging capacity in cold conditions;
o require 40% less lead;
o have increased service life; and
o have increased low-temperature starting capacity.
The Company intends to market the iQ Battery to automakers in order to stimulate
demand for the iQ Technology. The Company anticipates that it will eventually
license the iQ Technology to automobile suppliers and battery manufacturers or
enter into one or more strategic relationships with established battery
manufacturers to produce and distribute the iQ Battery.
Industry Background
The SLI battery industry is a stable, mature industry that is composed of a
limited number of aftermarket resellers and OEM's. In 1997, worldwide unit sales
in the SLI battery market have been estimated at approximately 235 million units
with a value of US$7.5 billion. The SLI battery industry is highly-concentrated
and is dominated by eight SLI battery manufacturers who, in 1997, accounted for
approximately 66% of the worldwide market share. The following graph sets forth
the approximate world SLI battery market share of the principal battery
manufacturers in 1997.
-16-
<PAGE>
[Pie chart setting forth the approximate world SLI battery market share of
principal battery manufacturers in 1997. The information contained in the chart
is as follows:
Manufacturer Market Share
Exide 20%
Yuasa (Japan) 10%
GNB (Australia) 8%
Hawker (England) 7%
Johnson Controls (U.S.) 6%
Varta (Germany 5%
JSB (Japan) 5%
Delco Remy (U.S. 5%
Others 34%]
The SLI battery industry, over the past 30 years, has had a relatively low level
of product innovation and has been slow to respond to changes in automotive
technology and performance requirements. However, new competition within the SLI
battery industry and changes in the automotive manufacturing industry have
placed increased pressure on SLI battery manufacturers to reduce costs and to
increase the power and efficiency of the batteries they produce. In recent
years, many automotive manufacturers have begun divesting their component
manufacturing divisions in an effort to streamline production processes. This
divestment has resulted in increased competition and lower overall prices for
SLI batteries. At the same time, many automobile manufacturers, in an effort to
reduce costs, have begun to apply strict conditions to their relationships with
OEM's, such as requiring "just-in-time" delivery and "in house" assembly of
components. Many automobile manufacturers have also adopted a policy of having
at least two alternative sources of supply, thus requiring any developer of new
battery technologies to persuade other OEM's to adopt similar technologies.
Recent advances in automobile technology and design have placed increasing
demands on the electrical output generated by an automobile battery. Despite
these changes, conventional lead acid batteries have remained relatively
unchanged since they were first introduced as an electrical power source for the
auto industry. Conventional lead acid batteries are extremely sensitive to
changes in temperature and continuously lose output capacity due to temperature
fluctuations, vibration damage and corrosion and sulfatation inside the battery.
As a result, in order to compensate for the tendency of conventional lead acid
batteries to lose much of their output capacity over time, conventional battery
manufacturers are required to manufacture larger and heavier batteries with
increased initial output capacity. Such batteries not only add additional weight
to the vehicle, but are also often more difficult to integrate into modern
engine configurations. At the same time, fuel efficiency requirements and engine
designs require that battery size and weight be reduced to ensure maximum fuel
efficiency.
The Company believes that increased competition in the SLI battery manufacturing
industry along with increased demands for high-powered, lightweight, efficient
SLI batteries that can be used in both traditional and alternative vehicle
applications, will facilitate the adoption of the Company's "smart battery"
technology by aftermarket resellers and OEM's.
-17-
<PAGE>
[Picture of iQ Battery]
The iQ Technology
Over time, lead-acid batteries lose output capacity due to, among other things,
temperature fluctuations and corrosion of the internal lead plates. The iQ
Battery utilizes an insulated case, an internal microprocessor and a battery
acid anti-stratification device to minimize the loss of output capacity. As a
result, the iQ Battery requires fewer lead plates than a conventional lead acid
battery to deliver the required output capacity for a specific application.
Double-Walled Casing
Conventional lead-acid batteries are vulnerable to damage caused by temperatures
above 50 degrees Centigrade (122 degrees Fahrenheit) and to loss of starting
performance when temperatures fall below freezing (0 degrees Celsius or 32
degrees Fahrenheit). Some auto manufacturers have attempted to protect batteries
from the high temperatures found in the car's engine compartment by installing
the batteries in the rear of the vehicle. Although this placement protects
batteries from heat, it requires the use of long, thick cables to connect the
battery to the engine. The cables not only increase the weight of the car, they
also produce electrical losses in cold starting conditions. To offset these
losses, manufacturers must use batteries with larger amounts of lead and acid,
thus further increasing the total weight of the automobile.
In order to minimize the loss of performance caused by temperature extremes, the
Company engaged BASF, Germany's largest chemical company, to develop a
double-walled battery case made from a polypropylene foam material called
Neopolen(R), a thermoplastic particle foam. When a battery is placed inside the
Neopolen case, it is protected against the extreme temperature fluctuations by
the thermal insulation properties of the material.
In addition, Neopolen has mechanical properties which lends itself to
integrating with battery technology. The cells of this ductile material remain
intact under mechanical pressure and, after protracted compression, the material
returns to its original shape. The Company believes that the structural
stability of the Neopolen case will provide additional protection to the
internal battery components.
-18-
<PAGE>
Energy Control System
Although the insulated case of the iQ Battery provides protection against
extreme high temperatures, the insulated case cannot protect the battery from
extended low temperatures. Temperatures below freezing dramatically reduce the
ability of a battery to start an automobile engine and to be recharged by a
running car's generator. To prevent the loss of performance caused by low
temperatures, the iQ Battery incorporates an energy control system to maintain
or reestablish optimal internal battery temperatures.
The energy control system consists of a sensor and control system and an
internal heating component. The sensor and control unit is designed to measure
and record a variety of internal and external factors, including:
o outside temperature
o changes in outside temperature
o inside temperatures
o changes in inside temperature
o the revolutions per minute ("RPMs") at which the engine was cranked
o the time of travel and the RPMs during travel
o voltage
o changes in voltage
Using this information, the energy control system determines when the heating
component must be activated and the amount of power that may be used to maintain
optimum internal battery temperature without draining the battery to the point
that damage occurs. The Company anticipates that, in the future, automobiles
will have real time electronic information displays linked to the vehicle's
on-board computer system to provide the driver information relating to battery
charge levels, electrical outputs, temperature and other information.
The Company has initiated programs to complete the production design of the
integrated circuits necessary for the internal sensor and control unit. As part
of this process, the Company has received bids, from several manufacturers, each
of which has established, at its own cost, design teams to compete for
anticipated production orders. At the present time, each manufacturer has
developed and presented functional prototypes meeting the Company's
specifications. If the Company elects to produce the iQ Battery, rather than
license the iQ Technology, the Company anticipates that it will select one of
these manufacturers for the production of the energy control system components.
The Anti-Stratification Component
Acid stratification is a less well-known, but significant, problem associated
with lead-acid batteries. Lead-acid batteries utilize a mixture of sulfuric acid
and distilled water. Because the specific gravity of water is less than that of
sulfuric acid, over time gravity causes the acid and the water to separate. When
this separation occurs, the battery is not able to produce or store electric
power in the upper parts of the internal lead plates that are surrounded by
water. In addition, if pure sulfuric acid becomes concentrated in the lower
parts of the battery, the highly corrosive effects of the acid tend to override
the electrochemical process in the lower parts of the internal lead plates.
The problems caused by acid stratification can be alleviated by continuously
mixing the acid and water. In the past, manufacturers have sought to address
this problem with acid pumps and other methods, but such efforts have not been
successfully adapted for commercial application in the automotive starter
battery market.
Instead of using moving parts or pumps, the iQ Technology uses hydrodynamic
principles to facilitate continuous mixing of the sulfuric acid and the
distilled water inside the battery. A simple plastic baffle is integrated into
each cell of the battery. When the vehicle is moving, e.g., accelerating or
braking, the inertial energy acts with the baffle to produce internal fluid
pressure that causes the sulfuric acid at the bottom of the battery to travel
through a corridor to the top of the battery. Specially designed "gating"
mechanisms inhibit the reversal of the fluid flow. In
-19-
<PAGE>
addition, when the vehicle is not moving, the internal baffle system acts as a
hydrodynamic pump that moves fluid to the top of the battery in response to the
battery's internal heating element.
Performance Specifications and Test Results
The outer dimensions of the iQ Battery are identical to a standard conventional
12 volt lead acid battery in order to facilitate ease of replacement in existing
vehicles. In addition, the dimensions and shape of the iQ Battery's terminals
are identical to those of conventional batteries. The iQ Battery, however, loses
charging capacity at a much lower rate than conventional batteries. As a result,
the iQ Battery requires less amp output to deliver the same performance over
time, and therefore, weighs approximately 40% less than conventional batteries.
The Company's prototype batteries have been tested extensively both in-house and
by third-party organizations. The following tables detail the results of tests
performed by a major auto manufacturer. All tests compared the prototype iQ
Battery with a premium class, 12 volt, 100 amp battery that is normally used as
OEM equipment in German luxury cars.
Car Power System Test
[Bar graph showing electrical output for the iQ Battery and a standard battery
under two different temperature conditions: -20 degrees Celcius and 20 degrees
Celcius. The results reflected in the graph are as follows:
-20 degrees Celsius Relative Amp Value
------------------- ------------------
Standard Battery 0.3
iQ Battery 1.22
20 degrees Celsius Relative Amp Value
------------------- ------------------
Standard Battery 5.66
iQ Battery 6.98]
In the car power system test, the tested batteries were inserted into the power
system of a standard automobile. A winter night drive was then simulated by
placing the power system under load by adding additional power consumers, such
as a heater, headlights, a stereo, power windows, etc. The electrical current
output of the batteries was then measured under two different temperature
conditions, 20 degrees Celsius and -20 degrees Celsius. The results indicate
that at 20 degrees Celsius, the electrical current output of the iQ Battery was
125% of a conventional battery. At -20 degrees Celsius, the electrical current
output of the iQ Battery was 420% of a conventional battery.
Battery Test
[Bar graph showing total cycle time (in hours) for the iQ Battery and a standard
battery under 3 different temperature conditions: -20 degrees Celcius, 0 degrees
Celcius and 20 degrees Celcius. The results reflected in the graph are as
follows:
-20 degrees Celsius Cycle Time (Hours)
------------------- -----------------
Standard Battery 62
iQ Battery 20
0 degrees Celsius Cycle Time (Hours)
------------------ -----------------
Standard Battery 19
iQ Battery 20
20 degrees Celsius Cycle Time (Hours)
------------------- -----------------
Standard Battery 19
iQ Battery 19]
In the battery test, the tested batteries were charged and discharged multiple
times at different temperature levels. The amount of time necessary to complete
a full charging cycle (e.g., fully charge after being fully discharged) was
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<PAGE>
measured. The tests showed that the iQ Battery's recharging times were
substantially equivalent to conventional batteries in moderate to warm
temperatures and over 40 hours less than the recharge time of a conventional
battery in extreme cold conditions.
Climate Room Test
[Bar graph showing total revolutions per minute attributable to electrical
output from the iQ Battery and a standard battery. The results reflected in the
graph are as follows:
Revolutions Per Minute
----------------------
iQ Battery 83
Standard Battery 71]
In the climate room test, the batteries were mounted in automobiles and placed
in cold conditions (-25 degrees Celsius). The car's engine was then cranked and
the number of revolutions per minute was recorded. The higher the revolutions,
the more starting power can be attributed to the tested battery. Based on the
results of the climate room test, the iQ Battery performed better than the
conventional battery in cold starting conditions.
Life Cycle Test
[Bar graph showing total percentage reduction in battery capacity in the iQ
Battery and in a standard battery. The results reflected in the graph are as
follows:
Percentage Reduction in Capacity
--------------------------------
iQ Battery 14%
Standard Battery 22%]
In the life cycle test, the batteries were run through a series of industry
standard tests that simulated the normal life cycle of a automobile SLI battery.
At the end of the test, the lead battery plates were examined and the charging
capacity of the batteries was measured to determine the percentage of battery
capacity that was lost over time. The iQ Battery lost approximately 14% of its
capacity compared with the loss of approximately 22% of capacity for the
conventional battery.
The Company Strategy
The Company's objective is to license the iQ Technology to leading manufacturers
of automotive batteries and to position itself as a leading provider of
electrical power system components and technology to the automotive industry.
The Company's strategy encompasses the following elements:
o Marketing to Automakers. The Company and iQ Germany have begun marketing
production-ready prototypes of the iQ Battery to major automakers in order
to stimulate demand for the iQ Technology. The Company
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<PAGE>
anticipates that its initial marketing efforts with automakers will be
concentrated on a relatively small group of companies and will be directed
by a small and highly-skilled sales force of sales and application
engineers.
o License the iQ Technology and Develop Manufacturing Relationships. Once
automaker and manufacturer demand has been developed, the Company intends
to license the iQ Technology to major automakers and established
third-party manufacturers of SLI batteries. The Company may also establish
strategic relationships with manufacturers and suppliers of SLI batteries
in order to produce commercial quantities of SLI batteries utilizing the iQ
Technology.
o Competitive Pricing. The Company anticipates that the retail price of the
iQ Battery will be comparable to the retail prices of other premium priced
SLI batteries.
Industry Relationships
The Company and iQ Germany have established relationships with a number of
companies engaged in the automotive and electronics industries which are
described below:
Suppliers and Manufacturers
BASF
iQ Germany has entered into a Cooperation Agreement with BASF, a leading
international chemical and textile manufacturer, pursuant to which BASF has
agreed to participate with the iQ Germany in developing and marketing of the
Neopolen battery case. Under the agreement, iQ Germany has agreed to exclusively
use the Neopolen material produced by BASF in its battery designs in return for
a payment by BASF to iQ Germany on every kilogram of Neopolen sold by BASF to
battery manufacturers.
Akkumulatorenfabrik Moll
iQ Germany has established a relationship with Moll, a leading battery
manufacturer, pursuant to which Moll has manufactured prototypes of a battery
based on the iQ Technology. Currently, iQ Germany and Moll are negotiating a
cooperation agreement relating to the joint development, production and
marketing of batteries incorporating the iQ Technology.
Automakers
Daimler-Benz
iQ Germany has provided prototypes of the iQ Battery to Daimler-Benz, which is
currently performing in-the-car and out-of-the-car tests. See "Business --
Performance Specifications and Test Results."
BMW
iQ Germany has provided prototypes of the iQ Battery to BMW, which is currently
testing such prototypes. iQ Germany has also purchased and installed BMW battery
test and electronic lab equipment in iQ Germany's laboratories in Chemnitz,
Germany, for the purposes of conducting tests on the iQ Battery prototypes.
Other Relationships
In addition to the above relationships, the Company, via iQ Germany, has also
had discussions, and in some cases, delivered prototypes of the iQ Battery to
Audi, Volkswagen and Porsche for testing. In addition to these German
automakers, the Company is also pursuing contacts with other major automakers
worldwide.
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<PAGE>
The Company has previously engaged in discussions with established battery
manufacturers regarding the possibility of a joint venture in which small
quantities of batteries using the iQ Technology can be produced in order to
stimulate market interest or to satisfy niche market demands. In the event the
Company is unsuccessful in its primary marketing strategy of licensing the iQ
Technology to major automakers and established battery manufacturers, the
Company anticipates that this type of arrangement may provide an alternative
means of market entry for the Company. There can be no assurance that the
Company will be able to successfully establish a joint venture arrangement with
a battery manufacturer on terms favorable to the Company, if at all.
Research and Development
The Company and iQ Germany are focusing their research and development efforts
on improving the iQ Technology and the development of process technology
required to manufacture the iQ Battery. A key element of the Company's strategy
is to complete development of a battery that has undergone all relevant testing
programs by German auto manufacturers and can be produced in commercial
quantities. Over the most recent three fiscal years, iQ Germany has spent a
total of DM 2,198,000 (US$1,403,000) on research and development.
The Company believes that its highly-qualified engineering and scientific
personnel provide it with a significant competitive advantage. iQ Germany
currently employs 12 engineers and scientists in its Chemnitz plant on a full-
and part-time basis, whose primary focus is research and development. The
Company's and iQ Germany's personnel have considerable experience with the
development of SLI battery systems and applications. The Company believes that
this combination of expertise has allowed iQ Germany, and will continue to allow
the Company to design and develop battery technologies that can be implemented
in a timely and cost-effective manner.
Competition
Competition in the battery industry is, and is expected to remain, intense. The
competitors range from development stage companies to major domestic and
international companies. Many of these companies have financial, technical,
marketing, sales, manufacturing, distribution, and other resources significantly
greater than those of the Company. In addition, many of these companies have
name recognition, established positions in the market, and long-standing
relationships with OEMs and other customers. There is significant development
work being done by these competitors on various battery systems (including
electrochemistries such as NiCd, NiMH and lithium), with significant effort
focused on achieving higher energy densities, lower maintenance, lighter weight,
longer energy retention and lower cost batteries. There can be no assurance that
one or more new, higher power battery technologies will not be introduced which
could be directly competitive with or superior to the iQ Technology.
The Company believes that its primary competitors are existing suppliers of
automotive and lead-acid batteries. The primary suppliers of automotive
batteries are Johnson Controls, Inc., Exide Corporation, GNB Inc. and Delphi.
Among the Company's competitors in Europe are VB Autobatterie GmbH), Hawker
Batteries, Fiamm, Delco Remy, Exide Corporation, Autosil, Hoppecke, Yuasa and
Matsushita. All of these companies are very large and have substantial resources
and market presence. Many are vertically integrated and produce the core
components for their batteries from raw or recycled materials, reducing the unit
cost of manufacturing. These companies have pursued and implemented aggressive
production and manufacturing strategies which have led to substantial
competitive advantages in the areas of production efficiencies and integrated
distribution and inventory management systems. The Company expects that it will
compete in certain targeted market segments on the basis of performance,
reliability, ease of recycling and increased battery life. There can be no
assurance that the Company will be able to compete successfully against these
companies in any of the targeted market segments.
The Company may also develop products to compete in market segments including
standby power, small batteries for engine starting and medical and electronics
applications. The Company expects that its primary competition in the market for
small lead acid batteries used in non-automotive applications are Yuasa, Exide
Corporation, Matsushita, Hawker, CSB Battery of America Corp., and GS Battery.
These companies are large and have
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<PAGE>
substantial resources and market presence. There can be no assurance that the
Company will be able to compete successfully against traditional lead acid
batteries in any of the targeted applications.
The market for batteries, and the evolution of battery technology, is very
dynamic. Other companies are devoting significant resources to improving
existing battery technologies and developing new battery technologies. There can
be no assurance that the Company's products will be able to compete effectively
in any of its targeted market segments.
Intellectual Property Rights
The Company's success is dependent on its ability to protect its intellectual
property rights. iQ Germany relies principally on a combination of copyright,
trademarks, trade secret and patent laws, non-disclosure agreements and other
contractual provisions to establish and maintain its proprietary rights. iQ
Germany holds two United States patents related to its technology and has also
applied for patents related to iQ Technology in other countries. iQ Germany
issued patents cover the battery temperature sensor and heating element design
and configuration.
In addition, iQ Germany has several German patents pending and one international
patent pending. As part of its confidentiality procedures, iQ Germany generally
enters into nondisclosure and confidentiality agreements with each of its key
employees, consultants, distributors and corporate partners and limits access to
and distribution of its technology, documentation and other proprietary
information. There can be no assurance that iQ Germany's efforts to protect its
intellectual property rights will be successful. Despite iQ Germany's efforts to
protect its intellectual property rights, unauthorized third parties, including
competitors, may from time to time copy or reverse engineer certain portions of
the iQ Technology and use such information to create competitive products.
Policing the unauthorized use of the iQ Technology is difficult, and, while the
Company is unable to determine the extent to which piracy of its technology
exists, such piracy can be expected to be a persistent problem. In addition, the
laws of certain countries in which the iQ Technology is or may be licensed do
not protect its products and intellectual property rights to the same extent as
do the laws of the United States. As a result, sales of products based on the iQ
Technology in such countries may increase the likelihood that iQ Technology
might be infringed upon by unauthorized third parties.
It is possible that the scope, validity and/or enforceability of intellectual
property rights of the Company could be challenged by competitors or other
parties. The Company is currently in the process of recording its interests in
the iQ Technology with relevant authorities in applicable jurisdictions. The
results of such challenges before administrative bodies or courts depend on many
factors which cannot be accurately assessed at this time. Unfavorable decisions
by such administrative bodies or courts could have a negative impact on the
intellectual property rights of the Company. Any such challenges, whether with
or without merit, could be time consuming, result in costly litigation and
diversion of resources, cause product shipment delays or require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the Company
or at all. In the event of a claim of product infringement against the Company
and failure or inability of the Company to license the infringed or similar
technology, the Company's business, operating results and financial condition
could be materially adversely affected.
iQ Germany has registered the trademark "iQ" in Germany. iQ Germany has not
registered any trademarks in the United States.
Employees
As of December 1, 1998, iQ Germany had 12 employees engaged in product research
and development on a part- and full-time basis and 8 employees engaged in
general and administrative and marketing functions on a part- and full-time
basis. The Company's and iQ Germany's success will depend in large part on their
ability to attract and retain skilled and experienced employees. None of the
Company's or iQ Germany's employees are covered by a collective bargaining
agreement, and the Company believes iQ Germany's relations with its employees
are good.
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<PAGE>
Facilities
iQ Germany occupies approximately 228 square meters of leased office space at
its headquarters in Unterhaching, Germany for its product development,
marketing, support and administration operations. iQ Germany also occupies
approximately 165 square meters of leased office space in Floha, Germany. The
Unterhaching lease terminates on February 28, 2001 and the Floha lease can be
terminated on the giving of three months' notice. The Company maintains a
license for its executive offices in Vancouver, British Columbia, Canada on a
month-to-month basis.
Legal Proceedings
As of the date hereof, there is no material litigation pending against the
Company or iQ Germany. On January 3, 1994, a civil lawsuit was filed by Hans
Engelhorn against Peter E. Braun and Horst Dieter Braun (the "Brauns") in the
District Court of Berlin (Case No. 3 O 40/94). Mr. Engelhorn seeks to compel
transfer of certain intellectual property rights or, alternatively, money
damages of approximately DM 500,000 (US$310,000). Certain of the intellectual
property rights at issue are now held by the Company. Mr. Engelhorn alleges that
the Brauns had a contractual obligation to transfer the intellectual property to
a partnership which has since been dissolved. The Company has been advised by
the Brauns that the prosecution of this lawsuit has not been pursued. The
Company believes that the lawsuit is without merit and will not materially
affect the Company's rights in the intellectual property at issue.
From time to time, the Company and/or iQ Germany may be a party to litigation
and claims incident to the ordinary course of business. While the results of
litigation and claims cannot be predicted with certainty, the Company believes
that the final outcome of such matters will not have a material adverse effect
on the Company's business, financial condition and operating results.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company are qualified
in their entirety by reference to and should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this Prospectus and the audited consolidated financial
statements and notes thereto included in this Prospectus. The consolidated
statements of operations data for the six month period ended June, 1998, the
years ended December 31, 1997 and1996 and the consolidated balance sheet data at
June 30, 1998 and at December 31, 1997 and 1996, are derived from and are
qualified by reference to the Company's audited consolidated financial
statements which appear in this Prospectus These financial statements were
prepared in accordance with Canadian GAAP. The pro forma financial data are
provided for comparative purposes only and are not necessarily indicative of
results that would have been achieved if the transactions reflected therein had
been effected at the beginning of the period for which pro forma information is
presented or of the results expected for any subsequent period.
<TABLE>
Fiscal
Years ended Period Ended
Six-Months Ended June 30, December December 31,
31,
--------------------------------------------- -------------------------- --------------
1998 1997
Pro Forma 1998 1997 Pro Forma 1997 1996
(unaudited) (unaudited) (seven
months)
--------------- -------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue..................... $ -- $ -- $ -- $ 27,000 $ -- $ --
Operating Expenses.......... 457,000 101,211 42,471 760,000 135,236 10,504
Net income (loss) for the
period...................... (463,000) (101,211) (42,471) (779,000) (135,236) (10,504)
Earnings (loss) per
Common Share............... (0.03) (0.04) (0.08) (0.06) (0.14) N/A
Weighted average shares
outstanding(1)............. 15,086,461 2,286,461 547,271 13,750,291 950,294 --
</TABLE>
<TABLE>
As at June 30, As At December 31,
------------------------------------------------------------------------------------------
1998
Pro Forma (unaudited)
1998 1997 1996
---------------------- -------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents. $ 4,335,000 $ 78,731 $ 43,525 $ --
Working capital 3,826,000 388,855 346,695 (10,503)
(deficiency)..............
Total assets.............. 4,797,000 553,588 419,261 147,977
Non-current liabilities... 307,000 -- -- --
Stockholders' equity...... $ 3,725,000 $ 388,855 $ 346,695 $ (10,503)
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains "forward-looking statements." In particular,
certain statements in "Overview" and "Acquisition of iQ Germany" and the
sections entitled "Results of Operations of the Company," "Results of Operations
of iQ Germany" and "Liquidity and Capital Resources" contain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of the Company's ability to achieve the
objectives of its business strategy, accelerate or defer operating expenses,
achieve revenue, hire new personnel and other factors set forth under "Risk
Factors" in this Prospectus. In particular, the reader should note the Risk
Factors entitled "Limited Operating History," "Competition," "Expectations of
Continuing Losses; Negative Cash Flow; Need for Additional Financing," "Reliance
on Unproven Applications of Technology; Dependence on Single Product,"
"Uncertainty of Market Acceptance" and "No Marketing, Manufacturing or
Distribution Experience."
The following discussion is qualified by the more complete financial information
contained in the audited financial statements of the Company and the related
notes and the financial statements of iQ Germany and the related notes included
in this Prospectus. The financial statements of the Company included herein have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). Management believes that there is no material
difference between Canadian GAAP and United States generally accepted accounting
principles ("US GAAP") as applied to the financial results of the Company. The
financial statements of iQ Germany included herein have been prepared in
accordance with US GAAP.
The following discussion of the results of operations of the Company should be
read in conjunction with the Company's audited financial statements and the
notes thereto, the discussion of Results of Operations of iQ Germany discussed
below and the audited financial statements of iQ Germany and the notes thereto
included in this Prospectus. The results of operations of iQ Germany are not
included in the Company's financial statements included herein.
Overview
The Company was organized in December 1994 and commenced operations in June
1996. The Company is engaged in the development and commercialization of
electrical power system components for the automotive industry. The Company's
primary product is a "smart" automotive starter battery which combines several
proprietary features designed to optimize automotive starter battery efficiency.
The Company is in the development stage and its principal activity to date has
been the acquisition of all the issued and outstanding shares of iQ Germany.
Neither the Company nor iQ Germany have derived revenues from operations, and
the Company does not anticipate having material revenues from operations until
2000, if at all. The Company and iQ Germany have incurred substantial losses to
date, and there can be no assurance that the Company will attain any particular
level of revenues or that the Company will achieve profitability.
The Company believes that the historic spending levels of the Company and iQ
Germany are not indicative of future spending levels because the Company is
entering a period in which it will increase spending on product research and
development, marketing, staffing and other general operating expenses. For these
reasons, the Company believes its expenses, losses, and deficit accumulated
during the development state will increase significantly before it generates
material revenues.
Acquisition of iQ Germany
On August 25, 1998, the Company acquired all the issued and outstanding stock of
iQ Germany in exchange for 10,000,000 common shares of the Company at a deemed
price of US$0.25 per common share for a total purchase price of US$2,500,000. As
a result of the business combination, the shareholders of iQ Germany have
control of iQ Canada. Due to this acquisition, iQ Germany will be identified as
the acquiror (reverse acquisition), and the business combination will be
accounted for under the purchase method. Pursuant to the terms of the Share
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<PAGE>
Exchange Agreement, the former shareholders of iQ Germany, as a group, have a
limited right to require iQ Canada to repurchase all, but not less than all, of
the iQ Canada Common Shares received by such shareholders (the "Put Option").
The Put Option is exercisable at and after the four month anniversary of the
initial filing of this Prospectus if (i) iQ Canada has failed to complete an
equity offering with gross proceeds of at least US$3 million and (ii) such
shareholders have repaid to iQ Canada the full amount of all funds iQ Canada has
advanced or invested in iQ Germany. The Put Option will terminate at the close
of this Offering.
Pursuant to the terms of Atypical Share Exchange Agreements, the Company has
also issued into escrow an additional 2,800,000 Common Shares against the
deposit into escrow of "atypical shares" of iQ Germany held by all Atypical
Shareholders. The Common Shares and the "atypical shares" will be released from
escrow to the Atypical Shareholders and the Company, respectively, at the close
of this Offering. In the event the Put Option is exercised, the Common Shares
and the "atypical shares" will be released from escrow and returned to the
Company and the Atypical Shareholders, respectively.
Results of Operations of the Company
The Company was organized in December 1994 and commenced operations in June
1996. The Company's principal activity to-date has been the acquisition of all
the issued and outstanding shares of iQ Germany.
No revenues were recorded in either the seven month period ended December 31,
1996, the year-ended December 31, 1997 or the six month period ended June 30,
1998.
As of June 30, 1998, the Company had an accumulated deficit of US$246,951. The
Company incurred a net loss of US$101,211 for the six-month period ended June
30, 1998, compared to a net loss of US$42,471 for the comparable period of the
prior year and a net loss of US$10,504 for the seven-month period ended December
31, 1996, and US$135,236 for the year ended December 31, 1997.
The Company anticipates that the level of spending will increase significantly
in future periods as the Company undertakes research and development activities
related to the commercialization of the iQ Technology. In addition, the Company
anticipates that its general and administrative expenses will also significantly
increase as a result of the growth in the Company's research, development,
testing and business development programs. The actual levels of research and
development, administrative and general corporate expenditures are dependent on
the cash resources available to the Company.
Results of Operations of iQ Germany
iQ Germany was organized in 1991 to engage in the development and
commercialization of electrical power system components for the automotive
industry. Since that date iQ Germany has been engaged primarily in
organizational, research and product development efforts.
As of June 30, 1998, iQ Germany had an accumulated deficit of DM 1,790,000
(US$993,000). iQ Germany incurred a net loss of DM 793,000 (US$437,000) for the
six month period ending June 30, 1998, DM1,073,000 (US$644,000) for the year
ending December 31, 1997 and DM831,000 (US$551,000) for the year ending December
31, 1996.
iQ Germany had no revenues for the six month period ending June 30, 1998,
revenues of DM45,000 (US$27,000) for the year ending December 31, 1997, and no
revenues for the year ending December 31, 1996. All of iQ Germany's revenues
were derived primarily from licensing fees.
For the six month period ended June 30, 1998, iQ Germany incurred research and
development expenses of DM643,000 (US$355,000), DM881,000 (US$506,000) for the
year ending December 31, 1997 and DM695,000 (US$461,000) for the year ending
December 31, 1996. The increase in research and development expenses in each
period reflects the cost of supporting a higher level of activity, principally
research, product development, building prototypes and product testing.
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<PAGE>
iQ Germany incurred general and administrative expenses of DM110,000 (US$61,000)
for the six month period ended June 30, 1998, DM162,000 (US$93,000) for the year
ending December 31, 1997 and DM127,000 (US$84,000) for the year ending December
31, 1996. The increases in administrative and general corporate expenses from
period to period were due primarily to the increase in expenses related to the
growth of iQ Germany's operations, the leasing of a new office facility in 1997,
and other administrative and corporate expenses related to the share exchange
with the Company.
Following completion of the offering, iQ Germany's expenditures are expected to
materially increase as the Company pursues its research, development, testing
and commercialization programs and expands its finance and administrative staff
and financial and management system.
Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through sales
of its equity securities. As of June 30, 1998, the Company had cash and cash
equivalents of approximately $78,731. As of June 30, 1998, the Company had
raised approximately $635,806 (net of issuance costs) from the sale of such
securities. Subsequent to June 30, 1998, the Company received gross proceeds of
$75,000 by issuing 300,000 Common Shares at a price of US$0.25 per share in July
1988. In December 1998, the Company received gross proceeds of $709,050 by
issuing 536,200 Common Shares and Special Warrants to purchase 2,300,000 Common
Shares at a price of US$0.25 per share and US$0.25 per Special Warrant.
iQ Germany is obligated to pay to Horst Dieter Braun and Peter Braun, the
Company's Vice President, Research and Development and President, respectively,
DM400,000 in connection with the Company's acquisition of the iQ Technology and
certain other intellectual property rights. The amount is payable only out of
and only to the extent of the gross profits of iQ Germany.
The Company plans to finance its capital needs principally from the net proceeds
of this Offering and interest thereon and, to the extent available, lines of
credit. The Company currently has no commitment for any credit facilities such
as revolving credit agreements or lines of credit that could provide additional
working capital. The Company believes that the net proceeds from this Offering,
together with interest thereon and the Company's existing capital resources,
will be sufficient to fund its operations through 1999. The Company's capital
requirements depend on several factors, including the success and progress of
its product development programs, the resources it devotes to developing its
products, the extent to which its products achieve market acceptance, and other
factors. The Company expects to devote substantial capital resources for
research and development. The amount and timing of the Company's future capital
requirements cannot be accurately predicted. The Company will consider
collaborative research and development arrangements with strategic partners and
additional public or private financing (including the issuance of additional
equity securities) to fund all or a part of a particular program in the future.
There can be no assurance that additional funding will be available or, if
available, that it will be available on acceptable terms. If adequate funds are
not available, the Company may have to reduce substantially or eliminate
expenditures for research and development, testing, production and marketing of
its proposed products, or obtain funds through arrangements with strategic
partners that require the Company to relinquish rights to certain of its
technologies or products. There can be no assurance that the Company will be
able to raise additional capital if its capital resources are exhausted. The
ability of the Company to arrange such financing in the future will depend in
part upon the prevailing capital market conditions as well as the business
performance of the Company.
Year 2000 Issue
The Company has conducted a review of its computer systems to identify the
systems that could be incompatible with dates beyond December 31, 1999, and is
developing an implementation plan to resolve issues that may arise. The Company
has also requested all its strategic partners, consultants, contractors and
significant suppliers to conduct similar assessments of their respective
computer programs, systems, procedures and operations to determine the extent to
which the Company is exposed to possible computer system failure. The Company
places minimal reliance on data sensitive software and believes that the
expected cost and availability of resources, to
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<PAGE>
recover information not properly processed after December 31, 1999, would not
result in a material effect on the Company's results of operations.
The Year 2000 issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were programmed with a
two-digit century (i.e. December 31, 1999 would appears as 12/31/99) assuming
that all years would be part of the 20th century. On January 1, 2000, systems
with this programming will default to 01/01/1900 instead of 01/01/2000, and
calculations using or reporting the date will not be correct and errors will
arise. To prevent this from occurring, information systems need to be updated to
ensure they recognize the Year 2000.
The Company and iQ Germany began their respective Year 2000 strategies by
compiling a list of all computerized equipment and making a determination of
how, if at all, the software will be affected by Year 2000. Although the effect
is so far unquantified, all of the Company's and iQ Germany's software is
recent, and therefore the Company and iQ Germany anticipate that they will have
sufficient time to test any new systems that need to be installed. All of the
Company's and iQ Germany's financial and business records will be backed up to
ensure that no loss of information can occur. Management does not anticipate
incurring significant costs in this regard.
Foreign Currency Translation Risk
To date, exposure to foreign currency fluctuations has not had a material effect
on the Company's operations. The Company believes its risk of foreign currency
translation is limited, as its operations are based in Germany with resulting
transactions primarily denominated in United States dollars. The Company does
not currently engage in hedging or other activities to control the risk of
foreign currency translation, but may do so in the future, if
conditions warrant.
Recent Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activities.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS 133 is effective for fiscal
years beginning after June 15, 1999 and must be applied to instruments issued,
acquired, or substantively modified after December 31, 1997. The Company does
not expect the adoption of the accounting pronouncement to have a material
effect on its financial position or results of operations.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers and key employees of iQ Canada are as follows:
Name Age Position
---- --- --------
Peter E. Braun 35 President and Chief Executive Officer,
Director
Dr. Gunther C. Bauer 48 Vice President, Research and Development,
Director
Gerhard K. Trenz 57 Vice President, Finance and Chief Financial
Officer
Russell French 51 Director
Eckehard Endler 55 Development Engineer
Rolf Kohler 53 Development Engineer
Freidrich-Wilhelm Schutz 57 Director, Material Management, Electronic
Production and Quality Control
Steffen Tschirsch 37 Director of Research and Development
Gregory A. Sasges 38 Secretary
- -----------------------------
Directors and Executive Officers
Peter E. Braun has served as a director and as the Company's President and Chief
Executive Officer since September 1998. From 1994 to the present, Mr. Braun has
also served as Managing Director of iQ Germany. From 1992 to 1994, Mr. Braun
worked for Daimler Benz as an in-house consultant to Deutsche Aerospace. Mr.
Braun received a Masters of Science degree in Aeronautic Engineering and Space
Technology from the Technical University of Berlin in 1992.
Dr. Gunther C. Bauer has served as a director and as Vice President, Research
and Development of the Company since September 1998. From 1994 to the present,
Dr. Bauer has also served as Vice President, Engineering of iQ Germany. From
1993 to 1994, Dr. Bauer was responsible for creating a Profit Center within the
Daimler Benz Group, an German automobile manufacturer, and from 1992 to 1993, he
was responsible for business strategy with the TEMIC Group, a wholly-owned
subsidiary of Daimler-Benz Aerospace A.G. From 1987 to 1992, Dr. Bauer served in
positions with German Aerospace, including Head of Staff of Innovations Field
Logic and Director of Corporate Development for Business Aeronautics. Since
1980, Dr. Bauer has been a Lecturer at the University of the Bundeswehr German
Forces in Munich, Germany. Dr. Bauer received his Master of Science in
Electronics from the Technical University of Munich and his doctorate in
Mechanical Engineering from the University of Dortmund in Dortmund, Germany.
Gerhard K. Trenz has served as Vice President, Finance and Chief Financial
Officer of the Company since September 1998. From 1996 to the present, Mr. Trenz
has also served as Vice President, Finance at iQ Germany. From 1988 to 1996, Mr.
Trenz headed Semicustom, a business unit of the Siemens Group, as Vice
President, Finance and Business Administration of Siemens Semiconductor
Division. From 1970 to 1988, Mr. Trenz held various positions in the Siemens
Group including Controller of Technology Development for ICs, in-house
consultant for the Corporate Strategic Planning Group of Siemens and Vice
President, Finance and Business Administration of Lormont / Bordeaux, a
production site of Siemens in France. Mr. Trenz received his Master of Science
degree in Telecommunications and Business Administration at the Technical
University of Munich.
Russell French has served as a director of the Company since 1994. From December
1994 to August 1998, Mr. French served as the President of the Company. From
1993 to the present, Mr. French has been a principal of Mayon Management Corp.,
a company organized to manage, organize and find new business ventures. Mr.
French currently serves as a director and President of AlPaka Resources Corp., a
publicly-traded company. Mr. French is a
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<PAGE>
past director and President of Pacific Falkon Resources Corp. and a past
director of International Precious Metals Corporation.
Gregory A. Sasges has served as Secretary of the Company since December 1, 1998.
Mr. Sasges is a partner in a Vancouver law firm through his personal corporation
and has practiced law continually for the past 12 years with a preferred area of
practice in corporate and securities law. Mr. Sasges also currently serves as
the corporate secretary and is a former director of High Desert Mineral
Resources, Inc., a mineral resource company. Mr. Sasges is a past director of
Alpaka Resources Corp. and a past corporate secretary of GHK Resources Ltd.,
both of which were mineral resource companies. Mr. Sasges received his Bachelor
of Commerce and Bachelor of Law degrees from the University of British Colombia,
Canada, in 1984 and 1985 respectively.
KEY EMPLOYEES:
The Key Employees of iQ Canada are:
Eckehard Endler has served as Development Engineer of the Company since 1998.
From 1994 to the present, Mr. Endler has also served as manager, Measurement and
Laboratories of iQ Germany. From 1978 to 1994, Mr. Endler worked as a
Development Engineer for a textile company. He received a degree in Electrical
Engineering from The Senior Technical College in Dresden, Germany in 1973.
Rolf Kohler has served as Development Engineer of the Company since 1998. From
1973 to 1997, he served as a Development and Test Engineer at Foron, a white
goods producer, in Chemnitz, Germany. Mr. Koehler received a degree in
Electronic Device Construction from The Senior Technical College in Midweida /
Chemnitz in 1973.
Friedrich-Wilhelm Schutz has served as the Director, Material Management,
Electronic Production and Quality Control of the Company since 1998. In 1997,
Mr. Schutz held the same position in iQ Germany. From 1967 to 1996, Mr. Schutz
worked in the field of production and project development at Deutsche Aerospace,
Bosch and Rhode & Schwarz. Mr. Schutz received his Master of Science degree in
Telecommunications from the Senior Technical College in Cologne, Germany and in
Microelectronics from the Technical University in Aachen, Germany in 1967.
Steffen Tschirch has served as the Director of Research and Development of the
Company since 1998. From 1994 to the present, Mr. Tschirch held the same
position at iQ Germany. From 1989 to 1993, Mr. Tschirch worked as a Scientific
Assistant at the Technical University of Chemnitz, Germany. Prior to that
period, Mr. Tschirch studied at the Technical University of Chemnitz with a
focus on Physics and Electronic Components and received his Master of Science
degree in 1989.
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<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the compensation paid to directors and officers
of the Company during the fiscal year ended December 31, 1997.
<TABLE>
Summary Compensation Table
(in Canadian Dollars)
Annual Compensation Long Term Compensation
---------------------------------------------- -----------------------------------------
Awards Payouts
------------------------------- -------
Securities Restricted
Fiscal Other Annual under Shares or
Name and Principal Year Compensation Options/SARs Restricted LTIP All Other
Position Ended Salary ($) Bonus ($) ($) Granted (#) Share Units($) Payouts ($) Compensation
- ------------------- ------ ---------- --------- ----------- ------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gunther C. Bauer 1997 45,600(1)(2) - - - - - -
Peter E. Braun 1997 45,600(1)(2) - - - - - -
Russell French 1997 60,000(3) - - - - - -
Gerhard K. Trenz 1997 28,745(1)(2) - - - - - -
</TABLE>
- ------------------------------
(1) Reflects salary paid to the officer or director by iQ Germany during the
fiscal year ended December 31, 1997.
(2) For your convenience, we have converted Deutschmark salary amounts into
U.S. dollars using the average noon buying rate in New York City for cable
transfers payable in Deutschmarks as certified for customs purposes by the
Federal Reserve Bank of New York for the relevant period, as set forth in
"Exchange Rate Information."
(3) Represents consulting fees paid to Mayon Management Corp., a corporation
controlled by Russell French.
The Company does not have a long-term incentive plan pursuant to which cash or
non-cash compensation intended to serve as an incentive for performance (whereby
performance is measured by reference to financial performance or the price of
the Company's securities) was paid or distributed to the Named Executive
Officers during the most recently completed financial year.
During the most recently completed financial year ended December 31, 1997, the
Company did not have a pension plan for its Directors, officers or employees.
Director Compensation
Other than compensation paid to Peter Braun, Gunther Bauer and Russell French,
as disclosed above under the sub-heading "Remuneration of Directors and
Officers," none of the Directors of the Company have received any cash
compensation, directly or indirectly, for their services rendered during the
most recently completed financial year of the Company. The Company does not have
any non-cash compensation plans for its Directors and it does not propose to pay
or distribute any non-cash compensation during the current financial year, other
than pursuant to the granting of stock options.
Options to Purchase Securities
During the Company's most recently completed financial year ended December 31,
1997, the Company has not granted Directors and Officers any stock options, and
no Directors or Officers of the Company have exercised any stock options. In
addition, during the Company's most recently completed financial year ended
December 31, 1997, there were no SAR or stock option repricings. Since the
completion of its fiscal year ended December 31, 1997, the Company granted the
stock options described below under "Principal Shareholders."
Employment Agreements
Effective September 1, 1998, Peter E. Braun, Dr. Gunther C. Bauer and Gerhard
Trenz have entered into employment agreements with the Company, providing for
annual salaries of US$102,000, US$96,000 and
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<PAGE>
US$84,000, respectively. Mr. Braun's and Dr. Bauer's employment agreements are
for a term of five (5) years. Mr. Trenz's employment agreement is for a term of
three (3) years. The employment agreements are governed by the laws of Germany.
1998 Stock Option Plan
In November 1998, the Board of Directors of the Company adopted the 1998 Stock
Option Plan (the "Stock Option Plan"). The Stock Option Plan will terminate on
the earlier of June 30, 2008 or such other date as the Board of Directors may
determine. The Stock Option Plan is administered by the Board of Directors (or a
committee thereof) and provides that options may be granted to the Company's
officers, directors, employees and other persons, including consultants, based
on the eligibility criteria set out in the Stock Option Plan.
The options issued pursuant to the Stock Option Plan are exercisable at a price
fixed by the Plan Administrator, in its sole discretion; provided that options
granted in substitution for outstanding options of another corporation in
connection with a merger, consolidation, acquisition of property or stock or
other reorganization involving such corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject to
adjustment. Subject to certain exceptions in the Stock Option Plan relating to
death, divorce and certain estate planning techniques, options granted under the
Stock Option Plan are non-assignable and non-transferable.
The maximum number of the Common Shares reserved for issuance under the Stock
Option Plan including options currently outstanding is 3,000,000 Common Shares.
As of December 1, 1998 a total of 2,875,000 options are issued and unexercised.
Indebtedness Of Directors And Senior Officers
None of the Directors or Senior Officers of the Company or any associates or
affiliates of the Company, are or have been indebted to the Company at any time
since the beginning of the last completed financial year of the Company.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of December 1, 1998 information concerning the
beneficial ownership of the Company's Common Shares, and as adjusted to reflect
the issuance of the maximum Common Shares issuable pursuant to this Offering
(5,000,000) by persons who are known by the Company to own beneficially more
than 10% of Common Shares, by each of the persons named in the table under the
caption "Remuneration of Directors and Officers" and by all directors and
executive officers of the Company as a group.
<TABLE>
As Adjusted
-------------------------------------
Name and Address Number of Percentage of Number of Common Percentage of
of Beneficial Owner(1)(9) Common Shares Class(2) Shares Class(3)
--------------------------------------- -------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Gunther Bauer(4)....................... 2,954,000 15.6% 2,954,000 12.4%
Horst Dieter Braun..................... 2,500,000 13.5% 2,500,000 10.6%
Peter E. Braun(5)...................... 2,500,000 13.2% 2,500,000 10.5%
Karin Wittkewitz....................... 1,900,000 10.3% 1,900,000 8.1%
Schrenckweg 1,
85658 Egmating, Germany
Gerhard Trenz(6)....................... 96,297 1.0% 96,297 *
Russell French(7)...................... 636,214 3.4% 636,214 2.7%
Suite 708-A
1111 West Hastings Street
Vancouver, B.C. V6E 2J3
All Directors and Officers as a
Group(8)............................... 10,661,511 54.0% 10,661,511 43.0%
</TABLE>
* Represents less than 1% of outstanding shares.
(1) Unless otherwise noted all addresses are Erlenhof Park, Inselkammer Strasse
4, D-82008 Unterhaching, Germany.
(2) Based on an aggregate of 18,479,425 Common Shares outstanding as of
December 1, 1998 and includes 2,300,000 common shares issuable upon the
exercise of outstanding special warrants.
(3) Based on an assumed offering of an aggregate of 5,000,000 common shares.
(4) Includes options to purchase 400,000 Common Shares within 60 days of
December 1, 1998 and 54,000 Common Shares held by Mr. Bauer's spouse,
Christiane Bauer.
(5) Includes options to purchase 400,000 Common Shares within 60 days of
December 1, 1998.
(6) Includes options to purchase 66,667 Common Shares within 60 days of
December 1, 1998.
(7) Includes 236,213 Common Shares held by Mayon Management Corp., a
corporation controlled by Mr. French, also includes options to purchase
400,000 Common Shares within 60 days of December 1, 1998.
(8) Includes options to purchase 1,266,667 Common Shares within 60 days
of December 1, 1998.
(9) The Company has been advised that Gunther Bauer, Horst Dieter Braun, Peter
E. Braun, Karin Wittkewitz and Gerhard Trenz and all other former
shareholders of iQ Germany have entered into a Shareholders Agreement
pursuant to which they have agreed to act jointly with respect to the
voting of their shares in iQ Canada.
As of December 1, 1998, the following options to purchase shares of the Company
are outstanding.
<TABLE>
Optionee Number of Shares Exercise Price Expiration Date
-------- ---------------- -------------- ---------------
<S> <C> <C> <C>
Alain Marchand 50,000 US$1.00 12/01/08
Gregory A. Sasges 50,000 1.00 12/01/08
Joachim Schweizer 50,000 1.00 12/01/08
Steffen Tschirch 50,000 1.00 12/01/08
Joanne Gaska 25,000 1.00 12/01/08
Eckehard Endler 20,000 1.00 12/01/08
Friedrich-Wilhelm Schutz 20,000 1.00 12/01/08
Rolf Kohler 10,000 1.00 12/01/08
Russell French 800,000 1.00 12/01/08
Peter E. Braun 800,000 1.00 12/01/08
Gunther Bauer 800,000 1.00 12/01/08
Gerhard K. Trenz 200,000 1.00 12/01/98
-------
TOTAL: 2,875,000
</TABLE>
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<PAGE>
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In March 1995, iQ Germany entered into an Industrial Property Rights and
Know-How Agreement with Horst Dieter Braun and Peter Braun (the "Industrial
Property Rights Agreement"). Under the Industrial Property Rights Agreement,
Horst Dieter Braun, a principal shareholder of the Company, and Peter Braun, a
principal shareholder, director and officer of the Company, transferred to iQ
Germany all their right, title and interest to certain patents and other
intellectual property rights related to starter batteries technologies, and the
German registered national trademark "iQ" (the "Braun IP Rights") in
consideration for payment of a one time payment of DM400,000 and royalties equal
to 40% of revenues from license fees and 20% of the gross revenues of the
Company (excluding license fees) until the Year 2000. In August 1996, iQ Germany
entered into a supplemental contract with Messrs. Braun, which supplements the
obligations of Messrs. Braun under the Industrial Property Rights Agreement,
requires them to undertake all necessary actions to convey the Braun IP Rights
and acknowledges a civil dispute in District Court Berlin (Case No. 3 0 40/94)
regarding a partnership in which Messrs. Braun were involved. In September 1996,
iQ Germany entered into an extension of the Industrial Property Rights Agreement
with Messrs. Braun. Under the extension, the one time payment of DM400,000 is
allocated DM300,000 to Horst Dieter Braun and DM100,000 to Peter Braun, and iQ
Germany's obligations to Messrs. Braun are offset by payments on certain bank
loans made by iQ Germany on behalf of Horst Dieter Braun in the cumulative
amount of DM275,000 and on behalf of Peter Braun in the cumulative amount of
DM120,000, respectively. In December 1996, the Industrial Property Rights
Agreement was amended to provide that, under certain circumstances, the one time
payment of DM400,000 due under the Industrial Property Rights Agreement, may be
delayed. In October 1998, Messrs. Braun waived their right under the Industrial
Property Rights Agreement to receive royalties equal to 40% of the revenues from
license fees and 20% of the gross revenues of the Company (excluding license
fees) until the Year 2000.
In December 1998, iQ Germany, Horst Dieter Braun and Peter Braun entered into an
Agreement Re Rights and Interests amending and supplementing the payment terms
of the Industrial Property Rights Agreement previously entered into among the
parties to provide that the one time payment of DM400,000 due under the
Industrial Property Rights Agreement is payable only out of and only to the
extent of the gross profits of iQ Germany. In December 1998, iQ Germany, Horst
Dieter Braun and Peter Braun entered into a Trademark Assignment Agreement
amending and supplementing the Industrial Property Rights Agreement to restate
the assignment of all rights and interest in German Trademark No. 2,061,981 for
the "iQ" trademark and design. In December 1998, iQ Germany, Horst Dieter Braun
and Peter Braun entered into a Patent Assignment Agreement amending and
supplementing the Industrial Property Rights Agreement to restate the assignment
of all rights and interest in German Patent No. 41 42 628 and other patents and
patent applications related to the iQ Technology.
In October 1996, iQ Germany entered into a consulting contract with Dr. Gunther
Bauer, a director and officer of the Company. The consulting contract is
terminable by either party with three month's notice and provides for a base fee
of DM6,100 per month plus statutory sales tax and related expenses. This
contract has been superseded by an employment agreement and a confidentiality
agreement discussed below.
In December 1996, iQ Germany entered into a loan contract with Karin Wittkewitz.
Pursuant to the terms of the loan contract, Ms. Wittkewitz agreed to loan iQ
Germany DM60,000 at an annual interest rate of 3% above the bank rate of the
German Bundesbank. The loan contract is terminable within six months after the
end of any calendar quarter in which written notice is given, but in any event,
not earlier than December 31, 1998.
In December 1996, iQ Germany entered into an agreement with Dr. Bauer pursuant
to which Dr. Bauer agreed, under certain circumstances, not to enforce his claim
to the payment of DM95,000 owed to Dr. Bauer under an agreement dated July 15,
1994 with the Company unless iQ Germany has the ability to redeem the obligation
or unless a surplus exists after any liquidation of iQ Germany.
The Company has entered into employment and confidentiality agreements,
effective September 1998, with Peter Braun, Dr. Bauer, and Gerhard Trenz, the
Company's Vice-President, Finance and Chief Financial Officer. See "Remuneration
of Directors and Officers -- Employment Agreements." The Company has also
entered into a confidentiality agreement with Russell French, a director of the
Company. The confidentiality agreements restrict competition with the Company
for a period of five years, and require that the Company's confidential
information be kept confidential and that all work product, copyrights,
inventions and patents produced during the employment relationship will be the
property of the Company.
In August 1998, the Company entered into a consulting agreement with Mayon
Management Corp. ("Mayon"), a corporation controlled by Mr. French. The
agreement is for an initial term of three (3) years and provides for a base
annual fee of US$72,000 and for the reimbursement of reasonable expenses. The
agreement superseded a management agreement between the Company and Mayon dated
January 1997.
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In August 1998, the Company entered into a Share Exchange Agreement with iQ
Germany and the shareholders of iQ Germany including Dr. Bauer and Peter E.
Braun and Horst Dieter Braun and Ms. Wittkewitz pursuant to which the Company
acquired all the issued and outstanding shares in iQ Germany in exchange for the
issuance of 10,000,000 Common Shares at a deemed price of US$0.25 per Common
Share. Pursuant to the terms of the Share Exchange Agreement, the former
shareholders of iQ Germany, as a group, have been granted a limited right to
require iQ Canada to repurchase all, but not less than all, of the iQ Canada
Common Shares received by such shareholders (the "Put Option"). The Put Option
is exercisable at and after the four month anniversary of the initial filing of
this Prospectus if (i) iQ Canada has failed to complete an equity offering with
gross proceeds of at least US$3 million; and (ii) such shareholders have repaid
to iQ Canada the full amount of all funds iQ Canada has advanced or invested in
iQ Germany. The Put Option will terminate at the close of this Offering.
In August and September of 1998, the Company entered into Atypical Share
Exchange Agreements with each of the Atypical Shareholders of iQ Germany,
including Mr. Trenz, pursuant to which the Company, on December 1, 1998, issued
into escrow an additional 2,800,000 Common Shares against the deposit into
escrow of "atypical shares" of iQ Germany held by the Atypical Shareholders. The
Common Shares and the "atypical shares" will be released from escrow to the
Atypical Shareholders and the Company, respectively, at the close of this
Offering. In the event the Put Option is exercised, the Common Shares and the
"atypical shares" will be released from escrow and returned to the Company and
the Atypical Shareholders, respectively.
In connection with the Share Exchange transaction, certain shareholders of iQ
Canada and the former shareholders and Atypical Shareholders of iQ Germany,
including Mr. French, Peter Braun, Dr. Bauer, Horst Dieter Braun, Mr. Trenz and
Ms. Wittkewitz, entered into a pooling agreement pursuant to which such persons'
shares of iQ Canada are held in escrow subject to certain conditions governing
their release. See "Description of Capital Stock -- Pooling and Escrow
Agreements."
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DESCRIPTION OF CAPITAL STOCK
Common Shares
As of December 1, 1998, 18,479,425 Common Shares of the Company are issued and
outstanding (assuming the exercise of the Special Warrants). All Common Shares
of the Company rank equally as to dividends, voting powers and participation in
assets and as to all other benefits which might accrue to holders of the Common
Shares. No shares have been issued subject to call or assessment. There are no
pre-emptive or conversion rights, and no provision for redemption, purchase for
cancellation, surrender or sinking funds attached to any of the Company's Common
Shares. Provisions as to the modification, amendment or variation of such rights
or provisions are contained in the Canadian Business Corporations Act (the
"CBCA"). Each Common Share carries one vote at shareholder meetings of the
Company.
Special Warrants
As of December 1, 1998, the Company had 2,300,000 Special Warrants outstanding.
All of the 2,300,000 Special Warrants were issued to persons resident outside
the United States and none of the Special Warrants have been exercised to date.
Each Special Warrant entitles the holder, upon surrender, without payment of
further consideration, to one Common Share of the Company. The Special Warrant
holders have the right to require the Company to repurchase all Special Warrants
not yet exchanged into Common Shares of the Company for the initial subscription
price at any time prior to December 31, 1998.
Certain Rights of Shareholders
In accordance with the provisions of the CBCA, the amendment of certain rights
of holders of a class of shares, including Common Shares, requires the approval
of not less than two-thirds of the votes cast by the holders of such shares
voting at a special meeting of such holders. Pursuant to the Company's Bylaws, a
quorum for a special meeting of the holders of Common Shares occurs when at
least two persons entitled to vote at such a meeting are present. In
circumstances where the rights of Common Shares may be amended, however, holders
of Common Shares have the right under the CBCA to dissent from such amendment
and require that the Company pay them the then fair value of the Common Shares.
Exchange Controls and Other Limitations Affecting Holders of Common Shares
Canada has no system of exchange controls. There is no law, government decree or
regulation in Canada restricting the export or import of capital or affecting
the remittance of dividends, interest or other payments to a non-resident holder
of Common Shares, other than withholding tax requirements. See "Certain Tax
Considerations - Certain Canadian Federal Income Tax Considerations."
There are no limitations on the right of holders of common shares not resident
in Canada to hold or vote the Common Shares imposed by any governmental laws,
decrees or regulations in Canada or by the charter or other constituent document
of the Company other than (i) the CBCA which generally requires a majority of
the board of directors of a company incorporated under such Act to be resident
Canadians in order for that board of directors to conduct business and
accordingly has the effect of limiting the rights of all holders of Common
Shares with respect to the election of directors and (ii) as provided by the
Investment Canada Act (the "Investment Act").
Under the Investment Act, an investment by an individual, a government or an
agency thereof or an entity that is not a "Canadian" (as defined in the
Investment Act and herein referred to as a "non-Canadian") may be subject to
certain notification requirements or review by the Minister (the "Minister")
responsible for the administration of the Investment Act. Except as set forth
below, an investment in Common Shares by a non-Canadian would be reviewable
under the Investment Act if (i) such investment constitutes an acquisition of
direct control of iQ Canada where the value of the assets of iQ Canada is at
least $5 million, or an acquisition of indirect control of iQ Canada where the
value of the assets of iQ Canada is at least $50 million, or (ii) the investment
is related to Canada's
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cultural heritage or national identity. All investments subject to review may
not be implemented unless the Minister is satisfied that the investment is
likely to be of net benefit to Canada.
Generally, however, an investment made by a "WTO Investor" (as defined in the
Investment Act and which includes American or American controlled entities) in
Common Shares is reviewable under the Investment Act only if such investment
constitutes an acquisition of direct control of the Company and the value of the
assets of the Company is at least $179 million (in 1998). An indirect
acquisition of control by a WTO Investor (including an American) is generally no
longer subject to review. The lower thresholds of $5 million for direct
acquisitions and $50 million for indirect acquisitions are still applicable for
WTO Investors investing in uranium production, financial services, cultural
services and transportation services.
The Investment Act states that a non-Canadian shall acquire control or shall be
deemed to acquire control if such person or entity acquires a majority of the
voting shares. An acquisition of less than a majority but more than one-third of
the voting shares will be presumed to be an acquisition of control unless it can
be established that, upon acquisition, iQ Canada is not controlled in fact by
the acquirer through the ownership of voting shares.
The notification requirements which would be applicable in the event of a
proposed acquisition of control not otherwise subject to review require the
potential investor to supply certain information concerning the proposed
investment prior to, or within thirty days following, the consummation thereof.
However, the Federal Cabinet retains the right to review any such proposed
investment that is related to cultural heritage or national identity if, within
a specific period, the Federal Cabinet considers it in the public interest on
the recommendations of the Minister to issue an order for the review of the
investment.
In certain limited circumstances, transactions in relation to voting shares
would be exempt from the Investment Act, including: (i) an acquisition of voting
shares if the acquisition were made in connection with the person's business as
a trader or dealer in securities; (ii) an acquisition of control of iQ Canada in
connection with the realization of a security interest granted for a loan or
other financial assistance and not for any purpose related to the provisions of
the Investment Act; and (iii) an acquisition of control of iQ Canada by reason
of an amalgamation, merger, consolidation or corporate reorganization, following
which the ultimate direct or indirect control in fact of iQ Canada, through the
ownership of voting interests, remains unchanged.
Pooling and Escrow Agreements
An aggregate of 13,514,844 Common Shares of iQ Canada are held in escrow
pursuant to the terms of a pooling agreement dated August 25, 1998 between iQ
Canada, Montreal Trust Company of Canada ("Montreal Trust") and certain
shareholders of iQ Canada (the "Pooling Agreement"). Under the terms of the
Pooling Agreement, 3,378,711 Common Shares will be released from escrow on April
1, 2000 and an additional 25% of the Common Shares will be released from escrow
every three months thereafter until all Common Shares are released. Any
shareholder who holds less than or equal to 50,000 shares at a release date
shall have all such shares released at such release date.
In addition, 2,800,000 shares subject to the Pooling Agreement have been issued
into escrow against the deposit into escrow of all the outstanding "atypical
shares" of iQ Germany held by iQ Germany's Atypical Shareholders. The Common
Shares and the "atypical shares" will be released from escrow to the Atypical
Shareholders and iQ Canada, respectively, at the close of this Offering. Upon
release from escrow the Common
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Shares issued to the Atypical Shareholders will be subject to the Pooling
Agreement pursuant to the terms of an amendment to the Pooling Agreement dated
August 25, 1998.
Transfer Agent and Registrar
Montreal Trust Company of Canada, Vancouver, British Columbia, acts as registrar
and transfer agent for the Company's Common Shares.
DIVIDEND POLICY
To date, the Company has not paid any dividends to holders of its Common Shares.
The payment of dividends, if any, to holders of the Common Shares is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, capital requirements, financial condition and other relevant factors.
The Company does not intend to declare any cash dividends to the holders of the
Common Shares in the foreseeable future, but instead intends to retain all
future earnings, if any, for further research and development, business
expansion and working capital.
CERTAIN TAX CONSIDERATIONS
The following discussion summarizes certain tax considerations relevant to a
purchase of Common Shares pursuant to this Offering by individuals and
corporations who, for the purposes of the Income Tax Act (Canada), as amended
(the "Tax Act") and the United States Internal Revenue Code of 1986, as amended
(the "Code"), as modified by the Canada-United States Income Tax Convention,
1980, as amended (the "Convention"), are resident in the United States and not
in Canada, hold Common Shares as capital assets for purposes of the Code and
capital property for purposes of the Tax Act, deal at arm's length with the
Company, do not use or hold the Common Shares in carrying on a business through
a permanent establishment or in connection with a fixed base in Canada and, in
the case of individual holders, are also U.S. citizens (collectively,
"Unconnected U.S. Shareholders"). The tax consequences of a purchase of Common
Shares by holders who are not Unconnected U.S. Shareholders may be expected to
differ substantially from the tax consequences discussed herein. The Tax Act
contains recently enacted rules (the "mark-to-market rules") relating to
securities held by certain financial institutions. This discussion does not take
into account these mark-to-market rules and holders that are "financial
institutions" for purposes of these rules should consult their own tax advisors.
The discussion is based upon the current provisions of the Tax Act and
regulations thereunder, the Code, the Convention, counsel's understanding of the
current administrative policies and practices published by Revenue Canada and
all specific proposals to amend the Tax Act and the regulations thereunder that
have been publicly announced by the Minister of Finance (Canada) prior to the
date hereof, the administrative policies published by the U.S. Internal Revenue
Service, and judicial decisions, all of which are subject to change. This
discussion does not consider the potential effects, both adverse and beneficial,
of any recently proposed legislation in the United States, which, if enacted,
could be applied, possibly on a retroactive basis, at any time. The discussion
does not take into account the tax laws of the various provinces or territories
of Canada or the tax laws of the various state and local jurisdictions of the
United States or foreign jurisdictions.
This discussion is intended to be a general description of the U.S. federal and
Canadian federal income tax considerations material to a purchase of Common
Shares and is not intended to be, nor should it be construed to be, legal or tax
advice to any prospective holder and no opinion or representation with respect
to the income tax consequences to any such prospective holder is made. This
discussion does not take into account the individual circumstances of any
particular holder and does not address consequences peculiar to any holder
subject to special provisions of U.S. or Canadian income tax law. Therefore, a
prospective holder should consult their own tax advisors with respect to the tax
consequences of a purchase of Common Shares pursuant to this Offering.
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Dividends paid or credited or deemed to have been paid or credited on the Common
Shares to Unconnected U.S. Shareholders will be subject to a Canadian
withholding tax at a rate of 25% under the Tax Act. Under the Convention, the
rate of withholding tax generally applicable to Unconnected U.S. Shareholders
who beneficially own the dividends is reduced to 15%. In the case of Unconnected
U.S. Shareholders who are companies which beneficially own at least 10% of the
voting stock of the Company, the rate of withholding tax is reduced to 5% for
dividends.
United States Federal Income Tax Considerations
Unconnected U.S. Shareholders generally will treat the gross amount of dividends
paid by the Company equal to the U.S. dollar value of such dividends on the date
of receipt (based on the exchange rate on such date), without reduction for the
Canadian withholding tax, as dividend income for United States federal income
tax purposes to the extent of the Company's current or accumulated earnings and
profits. However, the amount of Canadian tax withheld (and, with respect to the
foreign tax credit, in the case of certain U.S. shareholders that are
corporations owning 10% or more of the Common Shares, a portion of the Canadian
income tax paid by the Company) generally will give rise to a foreign tax
credit, or deduction for U.S. federal income tax purposes. Investors should be
aware that dividends paid by the Company generally will constitute "passive
income" for purposes of the foreign tax credit, which could reduce the amount of
foreign tax credit available to a U.S. shareholder. The Code applies various
limitations on the amount of foreign tax credit that may be available to a U.S.
taxpayer. Because of the complexity of those limitations, investors should
consult their own tax advisors with respect to the potential consequences of
those limitations. Dividends paid on the Common Shares will not generally be
eligible for the "dividends received" deductions. An investor which is a
corporation may, under certain circumstances, be entitled to a 70% deduction of
the U.S. source portion of dividends received from the Company if such investor
owns shares representing at least 10% of the voting power and value of the
Company. To the extent distributions exceed current or accumulated earnings and
profits of the Company, they will be treated first, as a return of capital up to
the investors' adjusted tax basis in the Common Shares, and thereafter as a gain
from the sale or exchange of the Common Shares.
In the case of foreign currency received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt, an Unconnected U.S.
Shareholder will have a tax basis in the foreign currency equal to its U.S.
dollar value on the date of receipt. Any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including an
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the transaction
that meet the requirement for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense
for the production of income.
The sale of Common Shares generally will result in the recognition of gain or
loss to the holder in an amount equal to the difference between the amount
realized and the holder's adjusted basis in the Common Shares. Gain or loss upon
the sale of the Common Shares held as capital assets will be long-term or
short-term capital gain or loss, depending on whether the shares have been held
for more than one year.
Under current temporary U.S. Regulations, dividends paid on the Common Shares,
if any, generally will not be subject to information reporting and generally
will not be subject to U.S. backup withholding tax. However, dividends paid, and
the proceeds of a sale of Common Shares, in the United States through a U.S. or
U.S.-related paying agent (including, a broker) will be subject to U.S.
information reporting requirements and may also be subject to the 31% U.S.
backup withholding tax, unless the paying agent is furnished with a duly
completed and signed Form W-9. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a refund or a credit against the
Unconnected U.S. Shareholder's U.S. federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
Personal Holding Companies
A non-U.S. corporation may be classified as a personal holding company (a "PHC")
for U.S. federal income tax purposes if both of the following tests are
satisfied: (i) if at any time during the last half of the Company's taxable
year, five or fewer individuals (without regard to their citizenship or
residency) own or are deemed to own (under
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certain attribution rules) more than 50% of the stock of the corporation by
value (the "PHC Ownership Test") and (ii) such non-U.S. corporation receives 60%
or more of its U.S. related gross income, as specifically adjusted, from certain
passive sources such as royalty payments (the "PHC Income Test"). Such a
corporation is taxed (currently at a rate of 39.6%) on certain of its
undistributed U.S. source income (including certain types of foreign source
income which are effectively connected with the conduct of a U.S. trade or
business) to an extent at least equal to which such income is not distributed to
shareholders. The Company can give no assurance that it will not qualify as a
PHC in the future.
Foreign Personal Holding Companies
A non-U.S. corporation will be classified as a foreign personal holding company
(an "FPHC") for U.S. federal income tax purposes if both of the following tests
are satisfied: (i) at any time during the Company's taxable year, five or fewer
individuals who are United States citizens or residents own or are deemed to own
(under certain attribution rules) more than 50% of all classes of the
corporation's stock measured by voting power or value (the "FPHC Ownership
Test") and (ii) the corporation receives at least 60% (50% in later years) of
its gross income (regardless of source), as specifically adjusted, from certain
passive sources (the "FPHC Income Test").
The Company does not believe that it satisfies either the FPHC Ownership Test or
the FPHC Income Test. If the Company is classified as an FPHC, a portion of its
"undistributed foreign personal holding company income" (as defined for U.S.
federal income tax purposes) would be imputed to all of its shareholders who are
U.S. holders of Common Shares on the last taxable day of the Company's taxable
year, or, if earlier, the last day on which it is classified as an FPHC. Such
income would be taxable as a dividend, even if no cash dividend is actually
paid. U.S. holders who dispose of their Common Shares prior to such date would
not be subject to tax under these rules. The Company can give no assurance that
it will not qualify as a FPHC in the future.
Passive Foreign Investment Companies
Certain United States income tax legislation contains rules governing "passive
foreign investment companies" ("PFIC") which can have significant tax effects on
Unconnected U.S. Shareholders of foreign corporations. These rules do not apply
to non-Unconnected U.S. Shareholders. Section 1297 of the Code defines a PFIC as
a corporation that is not formed in the United States and, for any taxable year,
either (i) 75% or more of its gross income is "passive income," which includes
interest, dividends and certain rents and royalties or (ii) the average
percentage, by fair market value (or, if the Company is a controlled foreign
corporation or makes an election, adjusted tax basis) of its assets that produce
or are held for the production of "passive income" is 50% or more. The Company
believes that it may qualify as a PFIC for the current fiscal year and may
qualify as a PFIC in subsequent years. The Company can give no assurances
regarding its current or future PFIC status or that it will be able to satisfy
record keeping requirements which will be imposed on qualified electing funds
("QEFs") as defined in Section 1293 of the Code. Each Unconnected U.S.
Shareholder of the Company is urged to consult a tax advisor with respect to how
the PFIC rules affect their tax situation.
An Unconnected U.S. Shareholder who holds stock in a foreign corporation during
any year in which such corporation qualifies as a PFIC is subject to United
States federal income taxation under one of two alternative tax regimes at the
election of each such Unconnected U.S. Shareholder. The following is a
discussion of such two alternative tax regimes applied to such Unconnected U.S.
Shareholders of the Company. In addition, special rules apply if a foreign
corporation qualifies as both a PFIC and a "controlled foreign corporation" (as
defined below) and a Unconnected U.S. Shareholder owns, directly or indirectly,
ten percent (10%) or more of the total combined voting power of classes of
shares of such foreign corporation (See more detailed discussion at "Controlled
Foreign Corporation" below).
An Unconnected U.S. Shareholder who elects in a timely manner to treat the
Company as a QEF (an "Electing Unconnected U.S. Shareholder") will be subject,
under Section 1293 of the Code, to current federal income tax for any taxable
year in which the Company qualifies as a PFIC on his pro rata share of the
Company's (i) "net capital gain" (the excess of net long-term capital gain over
net short-term capital loss), which will be taxed as long-term capital gain to
the Electing Unconnected U.S. Shareholder and (ii) "ordinary earnings" (the
excess of earnings and
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profits over net capital gain), which will be taxed as ordinary income to the
Electing Unconnected U.S. Shareholder, in each case, for the shareholder's
taxable year in which (or with which) the Company's taxable year ends,
regardless of whether such amounts are actually distributed.
The effective QEF election also allows the Electing Unconnected U.S. Shareholder
to (i) generally treat any gain realized on the disposition of his Company
Common Shares (or deemed to be realized on the pledge of his shares) as capital
gain; (ii) treat his share of the Company's net capital gain, if any, as
long-term capital gain instead of ordinary income; and (iii) either avoid
interest charges resulting from PFIC status altogether, or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his share of the Company's annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the Electing Unconnected
U.S. Shareholder is not a corporation, such an interest charge would be treated
as "personal interest" that is not deductible.
The procedure an Unconnected U.S. Shareholder must comply with in making an
effective QEF election will depend on whether the year of the election is the
first year in the Unconnected U.S. Shareholder's holding period in which the
Company is a PFIC. If the Unconnected U.S. Shareholder makes a QEF election in
such first year, i.e., a timely QEF election, then the Unconnected U.S.
Shareholder may make the QEF election by simply filing the appropriate documents
at the time the Unconnected U.S. Shareholder files his tax return for such first
year. If, however, the Company qualified as a PFIC in a prior year, then in
addition to filing documents, the Unconnected U.S. Shareholder must elect to
recognize (i) under the rules of Section 1291 of the Code (discussed below), any
gain that he would otherwise recognize if the Unconnected U.S. Shareholder sold
his stock on the qualification date or (ii) if the Company is a controlled
foreign corporation, the Unconnected U.S. Shareholder's pro rata share of the
Company's post-1986 earnings and profits as of the qualification date. The
qualification date is the first day of the Company's first tax year in which the
Company qualified as a "qualified electing fund" with respect to such
Unconnected U.S. Shareholder. The elections to recognize such gain or earnings
and profits can only be made if such Unconnected U.S. Shareholder's holding
period for the Common Shares of the Company includes the qualification date. By
electing to recognize such gain or earnings and profits, the Unconnected U.S.
Shareholder will be deemed to have made a timely QEF election. Unconnected U.S.
Shareholders are urged to consult a tax advisor regarding the availability of
and procedure for electing to recognize gain or earnings and profits under the
foregoing rules. In addition, special rules apply if a foreign corporation
qualifies as both a PFIC and a "controlled foreign corporation" (as defined
below) and a Unconnected U.S. Shareholder owns, directly or indirectly, ten
percent (10%) or more of the total combined voting power of classes of shares of
such foreign corporation.
When a timely QEF election is made, if the Company no longer qualifies as a PFIC
in a subsequent year, normal Code rules will apply. It is unclear whether a new
QEF election is necessary if the Company thereafter re-qualifies as a PFIC.
Unconnected U.S. Shareholders should seriously consider making a new QEF
election under those circumstances.
If an Unconnected U.S. Shareholder does not make a timely QEF election during a
year in which it holds (or is deemed to have held) the shares in question and
the Company is a PFIC (a "Non-electing Unconnected U.S. Shareholder"), then
special taxation rules under Section 1291 of the Code will apply to (i) gains
realized on the disposition (or deemed to be realized by reasons of a pledge) of
his Company Common Shares and (ii) certain "excess distributions," as
specifically defined, by the Company.
A Non-electing Unconnected U.S. Shareholder generally would be required to pro
rate all gains realized on the disposition of his Company Common Shares and all
excess distribution of his Company Common Shares and all excess distributions
over the entire holding period for the Company. All gains or excess
distributions allocated to prior years of the Unconnected U.S. Shareholder
(other than years prior to the first taxable year of the Company during such
Unconnected U.S. Shareholder's holding period and beginning after January 1,
1987 for which it was a PFIC) would be taxed at the highest tax rate for each
such prior year applicable to ordinary income. The Non-electing Unconnected U.S.
Shareholder also would be liable for interest on the foregoing tax liability for
each such prior year calculated as if such liability had been due with respect
to each such prior year. A Non-electing
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Unconnected U.S. Shareholder that is not a corporation must treat this interest
charge as "personal interest" which, as discussed above, is wholly
nondeductible. The balance of the gain of the excess distribution will be
treated as ordinary income in the year of the disposition or distribution, and
no interest charge will be incurred with respect to such balance.
If the Company is a PFIC for any taxable year during which a Non-electing
Unconnected U.S. Shareholder holds Company Common Shares, then the Company will
continue to be treated as a PFIC with respect to such Company Common Shares,
even if it is no longer definitionally a PFIC. A Non-electing Unconnected U.S.
Shareholder may terminate this deemed PFIC status by electing to recognize a
gain (which will be taxed under the rules discussed above for Non-electing
Unconnected U.S. Shareholders) as if such Company Common Shares had been sold on
the last day of the last taxable year for which it was a PFIC.
Unconnected U.S. Shareholders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC, may annually elect to
mark such stock to the market (a "mark-to-market election"). If such an election
is made, such Unconnected U.S. Shareholder will not be subject to the special
taxation rules of Section 1291 described below for the taxable year for which
the mark-to-market election is made. An Unconnected U.S. Shareholder who makes
such an election will include in income for the taxable year for which the
election was made in an amount equal to the excess, if any, of the fair market
value of the Common Shares of the Company as of the close of such tax year over
such Unconnected U.S. Shareholder's adjusted basis in such Common Shares. In
addition, the Unconnected U.S. Shareholder is allowed a deduction for the lesser
of (i) the excess, if any, of such Unconnected U.S. Shareholder's adjusted tax
basis in the Common Shares over the fair market value of such shares as of the
close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market
gains for the Common Shares in the Company included by such Unconnected U.S.
Shareholder for prior tax years, including any amount which would have been
included for any prior tax year but for Section 1291 interest on tax deferral
rules discussed below with respect to Non-electing Unconnected U.S.
Shareholders, over (B) the mark-to-market losses for shares that were allowed as
deductions for prior tax years. Unconnected U.S. Shareholder's adjusted tax
basis in the Common Shares of the Company will be increased to reflect the
amount included or deducted as a result of a mark-to-market election. A
mark-to-market election only applies to the taxable year in which the election
was made. A separate election must be made by a Unconnected U.S. Shareholder for
each subsequent taxable year. Because the Internal Revenue Service has not
established procedures for making a mark-to-market election, Unconnected U.S.
Shareholders should consult their tax advisor regarding the manner of making
such an election.
Under Section 1291(f) of the Code, the IRS has issued proposed regulations that,
subject to certain exceptions, would treat as taxable certain transfers of PFIC
stock by Non-Electing Unconnected U.S. Shareholders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. Generally, in such cases the basis of the Company Common
Shares in the hands of the transferee and the basis of any property received in
the exchange for those Common Shares would be increased by the amount of gain
recognized. An Electing Unconnected U.S. Shareholder would not be taxed on
certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. The transferee's basis in this case
will depend on the manner of the transfer. In a transfer at death, for example,
the transferee's basis is equal to (i) the fair market value of the Electing
Unconnected U.S. Shareholder's Common Shares, less (ii) the excess of the fair
market value of the Electing Unconnected U.S. Shareholder's Common Shares
reduced by the Unconnected U.S. Shareholder's adjusted basis in these Common
Shares at death. The specific tax effect to the Unconnected U.S. Shareholder and
the transferee may vary based on the manner in which the Common Shares are
transferred. Each Unconnected U.S. Shareholder of the Company is urged to
consult a tax advisor with respect to how the PFIC rules affect their tax
situation.
Certain special, generally adverse, rules will apply with respect to Company
Common Shares while the Company is a PFIC whether or not it is treated as a QEF.
For example under Section 1297(b)(6) of the Code, an Unconnected U.S.
Shareholder who uses PFIC stock as security for a loan (including a margin loan)
will, except as may be provided in regulations, be treated as having made a
taxable disposition of such shares.
-44-
<PAGE>
Controlled Foreign Corporation
If more than 50% of the voting power of all classes of stock or the total value
of the stock of the Company is owned, directly or indirectly, by citizens of the
United States, U.S. domestic partnerships and corporations or estates or trusts
other than foreign estates or trusts, each of whom own 10% or more of the total
combined voting power of all classes of stock of the Company ("United States
Shareholder"), the Company could be treated as a "controlled foreign
corporation" under Subpart F of the Code. This classification would effect many
complex results, including the required inclusion by such United States
Shareholders in income of their pro rata shares of "Subpart F Income" (as
specifically defined by the Code) of the Company. In addition, under Section
1248 of the Code, gain from the sale or exchange of stock by a holder of Common
Shares who is or was a United States Shareholder at any time during the
five-year period ending with the sale or exchange is treated as ordinary
dividend income to the extent of earnings and profits of the Company
attributable to the stock sold or exchanged.
The Company does not believe that it is a controlled foreign corporation and it
is not anticipated that the Company will become a controlled foreign corporation
as a result of the Offering. The Company can give no assurance that it will not
qualify as a controlled foreign corporation in the future.
Certain Canadian Federal Income Tax Considerations
The following discussion summarizes certain tax considerations relevant to an
acquisition of the Company's Common Shares pursuant to the Acquisition by
individuals and corporations who, for the purposes of the Income Tax Act
(Canada), as amended (the "Tax Act"), as modified by the Canada-United States
Income Tax Convention, 1980, as amended (the "Convention"), are resident in the
United States and not in Canada, hold Common Shares as capital property for
purposes of the Tax Act, deal at arm's length with the Company, do not use or
hold the Common Shares in carrying on a business through a permanent
establishment or in connection with a fixed base in Canada and, in the case of
individual holders, are also U.S. citizens (collectively, "Unconnected U.S.
Shareholders"). The tax consequences of a purchase of Common Shares by holders
who are not Unconnected U.S. Shareholders may be expected to differ
substantially from the tax consequences discussed herein. The Tax Act contains
recently enacted rules (the "market-to-market rules") relating to securities
held by certain financial institutions. This discussion does not take into
account these market-to-market rules and holders that are "financial
institutions" for purposes of these rules should consult their own tax advisors.
The discussion is based upon the current provisions of the Tax Act and
regulations thereunder, the Convention, counsel's understanding of the current
administrative policies and practices published by Revenue Canada and all
specific proposals to amend the Tax Act and the regulations thereunder that have
been publicly announced by the Minister of Finance (Canada) prior to the date
hereof, and judicial decisions, all of which are subject to change. This
discussion does not take into account the tax laws of the various provinces or
territories of Canada or the tax laws of the various state and local
jurisdictions of the United States or foreign jurisdictions.
This discussion is intended to be a general description of Canadian federal
income tax considerations material to an acquisition of Common Shares and is not
intended to be, nor should it be construed to be, legal or tax advice to any
prospective holder and no opinion or representation with respect to the income
tax consequences to any such prospective holder is made. This discussion does
not take into account the individual circumstances of any particular holder and
does not address consequences peculiar to any holder subject to special
provisions Canadian income tax law. Therefore, a prospective holder should
consult his, her or its own tax advisors with respect to the tax consequences of
an acquisition of Common Shares.
Dividends paid or credited or deemed to have been paid or credited on the Common
Shares to Unconnected U.S. Shareholders will be subject to a Canadian
withholding tax at a rate of 25% under the Tax Act. Under the Convention, the
rate of withholding tax generally applicable to Unconnected U.S. Shareholders
who beneficially own the dividends is reduced to 15%. In the case of Unconnected
U.S. Shareholders who are companies which beneficially own at least 10% of the
voting stock of the Company, the rate of withholding tax is 5% for dividends
paid or credited.
-45-
<PAGE>
If Common Shares are acquired by the Company from a holder who is an Unconnected
U.S. Shareholder, such holder will be deemed to have received a dividend to the
extent that the amount paid on the Acquisition exceeds the paid-up capital, as
defined in the Tax Act, of the Common Shares acquired. Furthermore, such holder
will be deemed to have disposed of the Common Shares for proceeds of disposition
equal to the amount paid on the acquisition less the amount deemed to have been
received as a dividend. Capital gains realized on the deemed disposition, if
any, will have the income tax consequences described below. The portion, if any,
of the proceeds of disposition that are deemed to be a dividend will be subject
to a Canadian withholding tax on dividends, as described above.
Capital gains realized on the disposition or deemed disposition of Common Shares
by a holder who is an Unconnected U.S. Shareholder will not be subject to
taxation under the Tax Act unless such Common Shares are "taxable Canadian
property," as defined in the Tax Act, to such holder. Common Shares will
generally not constitute taxable Canadian property to such a holder unless, at
any time during the five-year period immediately preceding the disposition or
deemed disposition of the Common Shares, the holder, persons with whom the
holder did not deal at arm's length, or any combination thereof owned, had an
interest in or an option in respect of, 25% or more of the issued shares of any
class or series of the capital stock of the Company. If the Common Shares
constitute taxable Canadian property to such a holder, the Convention will
generally exempt the holder from income tax under the Tax Act in respect of the
disposition or deemed disposition of the Common Shares, provided the value of
the Common Shares is not derived principally from real property situated in
Canada, as defined for purposes of the Convention.
Canada does not currently impose any estate taxes or succession duties, however,
where an Unconnected U.S. Shareholder dies, there is a deemed disposition of the
Common Shares held at that time for proceeds of disposition equal to the fair
market value of the Common Shares immediately before the death. Capital gains
realized on the deemed disposition, if any, will have the income tax
consequences described above.
SECURITIES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Company's Common Shares
in the United States. Upon the completion of this Offering, assuming the maximum
amount of shares offered hereby (5,000,000) are issued, there will be 23,479,425
of the Company's Common Shares outstanding, including 2,300,000 Common Shares
issuable upon the exercise of Special Warrants and excluding 2,875,000 shares
issuable upon exercise of presently outstanding options. Of these shares, the
5,000,000 shares being sold in this Offering will be freely tradable without
restriction or further registration under the Securities Act, except for any
such shares issued to persons who, as a result of positions with the Company
(such as directors and officers) or stock ownership, are or were "affiliates" of
the Company ("Affiliates"). Any person who is deemed to be such an Affiliate may
not resell in the United States the Company's Common Shares held by such person
in the absence of registration under the Securities Act unless an exemption from
registration is available, such as Rule 144 discussed below.
A total of 3,709,684 Common Shares (including 2,300,000 Common Shares issuable
upon exercise of the Special Warrants) were issued and sold by the Company in
reliance on an exemption from registration under the Securities Act provided by
Rule 504 thereunder. Such Common Shares are unrestricted and freely tradeable in
the United States.
Affiliates of the Company holding 9,290,844 Common Shares, 7,790,843 shares of
which are subject to the Pooling Agreement described below, are entitled to sell
in the United States within any three-month period, that number of shares that
does not exceed the greater of (i) one percent of the number of Common Shares
then outstanding (approximately 234,794 shares immediately after this Offering)
or (ii) the average weekly trading volume of the Common Shares during the four
calendar weeks preceding such sale.
A total of 14,769,741 Common Shares were issued by the Company in reliance upon
Regulation S under the Securities Act to persons whom the Company believes were
outside the United States at the time of sale and who
-46-
<PAGE>
are not Affiliates of the Company. Common Shares sold outside the United States
in reliance upon Regulation S may, under certain circumstances, be resold in the
United States by persons other than Affiliates of the Company without
registration under the Securities Act, subject to fulfillment of certain resale
conditions imposed by Rule 144 under the Securities Act described below.
Under Regulation S, any Common Shares held by persons other than the Company,
any underwriter, dealer or other person who participates, pursuant to a
contractual arrangement, in the distribution of the Common Shares sold in
reliance thereon, any of their respective Affiliates (other than directors or
officers who are Affiliates solely by virtue of holding such position) or any
person acting on behalf of any of the foregoing, may resell the Common Shares in
an "offshore transaction," as defined in Regulation S, provided that the sale is
not prearranged with a buyer in the United States and no directed selling
efforts (as such term is defined in Regulation S) are made in the United States
by the seller, any affiliate or any person acting on their behalf. Officers and
directors who are Affiliates solely by virtue of holding such position may also
resell Common Shares on the same basis, provided that no selling commission, fee
or other remuneration is paid in connection with such offers and sales other
than usual and customary brokers commissions. All other Affiliates of the
Company and such persons would be required to comply with Regulation S
restrictions applied to primary offerings by issuers which, in addition to the
offshore transaction and no directed selling efforts requirements, may include
certain other offering restrictions.
In general, under Rule 144, a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least one year (including the holding
period of any prior owner, except an Affiliate) is entitled to sell in "broker's
transactions" or to market makers, within any three-month period commencing 90
days after the date of this Prospectus, a number of shares that does not exceed
the greater of (i) one percent of the number of Common Shares then outstanding
(approximately 234,794 shares immediately after this Offering) or (ii) the
average weekly trading volume of the Common Shares during the four calendar
weeks preceding the required filing of a Form 144 with respect to such sale.
Sales under Rule 144 are generally subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
Affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without having to comply with the manner
of sale, public information, volume limitation or notice provisions of Rule 144.
Certain shareholders of iQ Canada and the former shareholders and Atypical
Shareholders of iQ Germany have agreed to place their shares into escrow subject
to the terms of the Pooling Agreement. An aggregate of 13,514,844 Common Shares
of iQ Canada are held in escrow pursuant to the Pooling Agreement. Under the
terms of the Pooling Agreement, 3,378,711 Common Shares will be released from
escrow on April 1, 2000 and an additional 25% of the Common Shares will be
released from escrow every three months thereafter until all Common Shares are
released, and any shareholder who holds less than or equal to 50,000 shares at a
release date shall have all such shares released at such release date. See
"Description of Capital Stock -- Pooling and Escrow Agreements."
-47-
<PAGE>
AVAILABLE INFORMATION
Our Company does not report under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We have filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form SB-1 covering the shares
we are offering. We have not included in this Prospectus certain information
contained in the registration statement and you should refer to the registration
statement and its exhibits for further information. For a fee, you may get a
copy of the registration statement from the public reference section of the SEC
at: Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549; and at the
SEC's Regional Office located at: 1400 Citicorp Center, 500 West Madison Street,
Chicago, IL 60661. In addition, the SEC maintains a web site on the Internet at
the address http://www.sec.gov that contains reports, proxy information
statements and other information regarding registrants that file electronically
with the SEC.
After completion of this Offering, we will be exempt from the rules under the
Exchange Act that require us to furnish proxy statements to our shareholders,
and our officers, directors and principal shareholders will be exempt from the
reporting and short swing profit recovery provisions of Section 16 under the
Exchange Act. However, we will be subject to the reporting requirements of the
Exchange Act that are applicable to foreign private issuers. We are not required
under the Exchange Act to publish financial statements as frequently or as
promptly as United States companies who are subject to the Exchange Act. We
intend, however, to continue to furnish our shareholders with annual reports
containing consolidated financial statements audited by independent accountants
and with quarterly reports containing unaudited summary financial information
for each of the first three fiscal quarters of each fiscal year, as well as any
other reports as our Board of Directors may authorize or that are required by
law.
LEGAL MATTERS
The legality of the Common Shares offered by this Prospectus will be passed upon
for the Company by Werbes Sasges & Company, Canadian Counsel to the Company.
Certain legal matters in connection with this offering will be passed upon for
the Company by Bogle & Gates P.L.L.C., Seattle, Washington special United States
counsel to the Company. Bogle & Gates P.L.L.C. will rely on the opinions of
Werbes Sasges & Company as to matters of Canadian law.
INTRODUCTION TO FINANCIAL STATEMENTS
The Financial Statements included in this Prospectus are those for iQ Canada and
iQ Germany. The iQ Canada and iQ Germany Financial Statements are set forth on
the pages that follow.
-48-
<PAGE>
iQ POWER TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
iQ Power Technology, Inc.......................................................1
Auditors'Report.............................................................2
Balance Sheets..............................................................3
Statements of Loss and Deficit..............................................4
Statements of Cash Flow.....................................................5
Notes to the Financial Statements...........................................6
IQ BATTERY Research & Development GmbH........................................11
Independent Auditor's Report...............................................11
Balance Sheets.............................................................12
Statements of Operations...................................................13
Statements of Cash Flows...................................................14
Notes to Financial Statements..............................................15
Selected Unaudited Pro Forma Financial Information............................22
Unaudited Pro Forma Consolidated Balance Sheet.............................23
Unaudited Pro Forma Consolidated Statement of Loss For the
Six Month Period ended June 30, 1998....................................24
Unaudited Pro Forma Consolidated Statement of Loss For the
Year Ended December 31, 1997............................................25
Notes to the Unaudited Pro Forma Consolidated Financial Information........26
F-1
<PAGE>
AUDITORS' REPORT
To the Directors of
IQ Power Technology Inc.
(a development stage company)
We have audited the balance sheets of IQ Power Technology Inc. (a development
stage company) as at December 31, 1997 and 1996 and the statements of loss and
deficit and cash flow for the year ended December 31, 1997, the seven month
period ended December 31, 1996, and the cumulative from date of inception of the
development stage, June 21, 1996, to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1997 and 1996
and the results of its operations and cash flows for the year ended December 31,
1997, the seven month period ended December 31, 1996 and cumulative from date of
inception of the development stage, June 21, 1996, to December 31, 1997 in
accordance with generally accepted accounting principles in Canada applied on a
consistent basis with that of the preceding year.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
October 15, 1998
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
- -- U.S. REPORTING CONFLICT
To the Directors of
IQ Power Technology Inc.
In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when the
auditor concludes that there is substantial doubt about the entities' ability to
continue as a going concern such as described in Note 2 of the financial
statements. Our report to the shareholders dated October 15, 1998 is expressed
in accordance with Canadian reporting standards, which do not permit a reference
to such an uncertainty in the auditors' report when the uncertainty is
adequately disclosed in the financial statements.
/s/ Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
October 15, 1998
F-2
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Balance Sheets
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
June 30 December 31
1998 1997 1996
--------- ---------- --------
(Unaudited)
ASSETS
CURRENT
Cash and cash equivalents $ 78,731 $ 43,525 $ -
Accounts receivable 6,001 3,060 -
Deposits 4,600 4,600 -
Promissory notes receivable (Note 4) 464,256 368,076 147,977
- --------------------------------------------------------------------------------
$553,588 $419,261 $147,977
- --------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable $ 84,733 $ 56,841 $ -
Accrued liabilities 5,000 15,725 -
Due to shareholders (Note 5) - - 5,877
Share subscription 75,000 - 152,603
- --------------------------------------------------------------------------------
164,733 72,566 158,480
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 6)
Authorized
An unlimited number of common shares
Issued
2,543,225 common shares
(1997 - 1,969,741; 1996 - 1) 635,806 492,435 1
Accumulated deficit, during
development stage (246,951) (145,740) (10,504)
- --------------------------------------------------------------------------------
388,855 346,695 (10,503)
- --------------------------------------------------------------------------------
$553,588 $419,261 $147,977
- --------------------------------------------------------------------------------
CONTINUANCE OF OPERATIONS (Note 2)
F-3
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Statements of Loss and Deficit
(Expressed in U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
Cumulative
Cumulative from date of Twelve months Seven months
from date of Six months Six months inception to period ended period ended
inception to ended ended December 31, December 31, December 31,
June, 30 1998 June 30,1998 June 30, 1997 1997 1997 1996
------------- ------------ ------------- ----------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Expenses
Advertising
and promotion $ 4,463 $ 4,463 $ - $ - $ - $ -
Loss on foreign
exchange 32,394 - - 32,394 32,394 -
Management fees 63,999 20,801 21,802 43,198 43,198 -
Office 5,845 5,634 29 211 211
Professional fees 82,296 56,030 1,085 26,266 21,640 4,626
Technical reports 5,878 - - 5,878 - 5,878
Travel 52,076 14,283 19,555 37,793 37,793 -
- -----------------------------------------------------------------------------------------------------------------
246,951 101,211 42,471 145,740 135,236 10,504
- -----------------------------------------------------------------------------------------------------------------
Net Loss (246,951) (101,211) (42,471) (145,740) (135,236) (10,504)
Accumulated
deficit during
development
stage, beginning
of period $ - $(145,740) $(10,504) $ - $(10,504) $ -
- -----------------------------------------------------------------------------------------------------------------
Accumulated
deficit during
development
stage, end of
period $(246,951) $(246,951) $(52,975) $(145,740) $(145,740) $(10,504)
- -----------------------------------------------------------------------------------------------------------------
Basic and diluted
loss per share $ - $ (0.04) $ (0.08) $ - $ (0.14) N/A
- -----------------------------------------------------------------------------------------------------------------
Weighted average
number of shares
outstanding 2,286,461 547,271 - 950,294 -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Statements of Cash Flow
(Expressed in U.S. Dollars)
<TABLE>
Cumulative Twelve months
Cumulative from date of period ended Seven months
from date of Six months Six months inception to December 31, period ended
inception to ended ended December 31, 1997 December 31,
June 30, 1998 June 30, 1998 June 30, 1997 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (246,951) $ (101,211) $ (42,471) $ (145,740) $ (135,236) $ (10,504)
Items not affecting
cash
Increase in
accounts receivable (6,001) (2,941) (1,562) (3,060) (3,060)
Increase in prepaid
and deposits (4,600) - - (4,600) (4,600) -
Increase in
accounts payable 84,733 27,892 40,265 56,841 56,841 -
(Decrease) increase
in accrued
liabilities 5,000 (10,725) - 15,725 15,725 -
- -----------------------------------------------------------------------------------------------------------------------
(167,819) (86,985) (3,768) (80,834) (70,330) (10,504)
- -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITY
Increase in notes
receivable
(464,256) (96,180) - (368,076) (220,099) (147,977)
- -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
(Decrease) increase
in due to
shareholder
Increase (decrease) - - (5,877) - (5,877) 5,877
in share
subscriptions
Issuance of common 227,603 75,000 36,199 152,603 - 152,603
shares
483,203 143,371 - 339,832 339,831 1
- -----------------------------------------------------------------------------------------------------------------------
710,806 218,371 30,322 492,435 333,954 158,481
- -----------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS
78,731 35,206 26,554 43,525 43,525 -
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD
43,525
- -----------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 78,731 $ 78,731 $ 26,554 $ 43,525 $ 43,525 $ -
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Financial Statements
December 31, 1997 and 1996
(Expressed in U.S. Dollars)
(Information as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 is unaudited)
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS
IQ Power Technology Inc. (the "Company") was incorporated under the Canada
Business Corporations Act on December 20, 1994. The Company commenced
operations on June 21, 1996. The Company's current business strategy is to
acquire 100% interest in IQ Battery Research and Development GmbH (IQ
Germany) which is legally domiciled in Floha, Germany. The Company's
strategic objectives include the commercial exploitation of a new
generation of computer optimized vehicle batteries researched and developed
by IQ Germany.
2. CONTINUANCE OF OPERATIONS
These financial statements have been prepared on a going concern basis. The
Company's ability to continue as a going concern is dependent upon the
ability of the Company to attain future profitable operations and/or to
obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due. The
Company plans to raise a maximum of $4,240,000 to a minimum of $2,440,000,
net of commissions and costs of issues, through the issuance of 5,000,000
or 3,000,000 shares of common stock pursuant to a Registration Statement on
Form SB-1. The Company intends to use the proceeds to fund research and
development of iQ Germany, expansion of the Company's marketing and sales
activities and general working capital.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada, which for these financial
statements conform with those in the United States except as outlined in
Note 10.
(a) Foreign currency translation
The Company is a Canadian corporation but considers the United States
dollar to be the appropriate functional currency for the Company's
operations and these financial statements. Accordingly, for the
purposes of preparing these financial statements, transactions in
Canadian dollars and German deutsche marks have been measured into
United States dollars so that monetary assets and liabilities are
translated at the rate in effect at the balance sheet date. Other
balance sheet items and revenues and expenses are translated at the
rates prevailing on the respective transaction dates. Exchange gains
and losses related to current monetary items are included in income.
Exchange gains and losses related to noncurrent monetary items are
deferred and amortized over the remaining lives of the monetary items.
(b) Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-6
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Financial Statements
December 31, 1997 and 1996
(Expressed in U.S. Dollars)
(Information as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 is unaudited)
- --------------------------------------------------------------------------------
(c) Cash and cash equivalents.
Cash and cash equivalents consist of cash on hand, deposits in banks,
deposits in trust, and highly liquid investments with an original
maturity of three months or less.
(d) Unaudited interim financial statements.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Article
10 of Regulation S-X of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements.
In the opinion of the Company, all adjustments (consisting of only
normal recurring accruals) considered necessary to present fairly the
consolidated financial position as of June 30, 1998 and the
consolidated statements of loss, shareholders' equity and cash flows
for the six-month periods ended June 30, 1998 and 1997 have been
included.
4. PROMISSORY NOTES RECEIVABLE
Promissory notes receivable are unsecured, do not bear interest and are
payable on demand.
5. DUE TO SHAREHOLDER
The amounts due to shareholder are unsecured, non-interest bearing and have
no specific terms of repayment.
6. SHARE CAPITAL
<TABLE>
June 30 December 31
-------------------------------- ---------------------------------------------------------------
1998 1997 1996
-------------------------------- ------------------------------- ------------------------------
Number of Common Number of Number of Common
shares Amount Common shares Amount shares Amount
---------------- ------ ------------- ------ ---------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning
of period 1,969,741 $ 492,435 1 $ 1 1 $ 1
Private Placement 573,484 143,371 1,969,740 $ 492,434 - -
- ------------------------------------------------------------------------------------------------------------------------
2,543,225 $ 635,806 1,969,741 $ 492,435 1 $ 1
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
On July 1, 1998, the Company issued 300,000 common shares for proceeds of
$75,000.
7. FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts receivable,
prepaids and deposits, travel advances, promissory notes receivable,
accounts payable and accrued liabilities, due to shareholder and share
subscriptions. The fair value of these financial instruments approximates
carrying values due to the
F-7
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Financial Statements
December 31, 1997 and 1996
(Expressed in U.S. Dollars)
(Information as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 is unaudited)
- --------------------------------------------------------------------------------
short-term to maturity of the financial instruments and similarity to
market rates. The Company is exposed to currency risk in respect of
financial instruments. Currency risk is the risk that the value of
financial instruments will fluctuate due to changes in foreign exchange
rates. The Company does not attempt to hedge currency risk.
8. RELATED PARTY TRANSACTIONS
Related party transactions and balances not disclosed elsewhere in the
financial statements include:
(a) management fees as of June 30, 1998 of $20,801 (June 30, 1997 -
$21,802; December 31, 1997 - 43,198; 1996 - nil) paid to a company
with a common director.
(b) a lawyer was appointed secretary of the Company effective December 1,
1998. The law firm of which this officer is a partner provided legal
services to the Company for fees of $16,445 during the year ended
December 31, 1997 and $16,630 during the six months ended June 30,
1998.
(c) accounts payable and accrued liabilities, June 30, 1998 of $56,947
(1996 - $Nil) due to a company with a common director; and
(d) issuance of 236,213 common shares at an price of $0.25 per share for
proceeds of $59,053 to a company with a common director.
9. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Company may experience the effects of the Year 2000 issue before, on,
or after January 1, 2000, and the impact on operations and financial
reporting, if not addressed, may range from minor errors to significant
systems failure which could affect the Company's ability to conduct normal
business operations. It is not possible to be certain that all aspects of
the Year 2000 issue affecting the Company, including those related to the
efforts of customers, suppliers, or other third parties, will be fully
resolved.
10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
(a) Accounting for income taxes
U.S. GAAP requires, pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 109, that a deferred tax asset amount be
recognized for loss carry-forwards. Although the Corporation has
Canadian non-capital tax loss carry-forwards, due to uncertainty as to
utilization prior to their expiry, the deferred tax asset amounts
would have been completely offset in these consolidated financial
statements by a valuation provision.
(b) Recent accounting pronouncements
(i) In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income", which requires
that an enterprise report, by major components and as a single
total, the change in its net assets during the period from
non-owner sources; and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" which establishes
annual and interim reporting standards for an
F-8
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Financial Statements
December 31, 1997 and 1996
(Expressed in U.S. Dollars)
(Information as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 is unaudited)
- --------------------------------------------------------------------------------
enterprise's business segments and related disclosures about its
products, services, geographic areas, and major customers.
Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash
flows.
(ii) In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which standardizes the accounting for derivative
instruments. SFAS No. 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999. The Company is
currently assessing the impact of SFAS No. 133 on the Company's
financial statements and has not yet determined what if any
changes will be necessary.
11. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company:
(a) (i) entered into a share exchange agreement dated August 25, 1998
with IQ Germany whereby the shareholders of IQ Germany shall sell
and transfer their IQ Germany shares to the Company for, in the
aggregate, 10,000,000 common shares to be issued by the Company
to the shareholders on execution and delivery of the agreement
for deemed proceeds of $2,500,000. The shareholders of IQ Germany
have the option to cancel the share exchange agreement if after
the four month anniversary of the initial filing by IQ Canada of
a registration statement on Form SB-1 with the United States
Securities and Exchange Commission: (a) IQ Canada has failed to
complete an equity offering with gross proceeds of at least $3
Million and (b) the shareholders of IQ Germany have repaid to IQ
Canada the full amount of all funds advanced to iQ Germany. (See
note 11(d)). The option shall terminate and shall not
be-exercisable as of such date that IQ Canada shall complete an
equity financing with gross proceeds of not less than $3,000,000;
(ii) entered into a share exchange agreement dated August 25, 1998 to
issue 2,800,000 common shares of the Company to the holders of
Atypical Shares of IQ Germany. Atypical Shares means certain
shares of IQ Germany which are not part of the ordinary capital
of IQ Germany and were issued pursuant to agreements between IQ
Germany and the holders of those shares under German tax
incentives. The Common Shares and Atypical Shares will be held in
escrow until the completion of the offering. (See Note 11(d)).
The share exchange will not be completed if the option in (i)
above is exercised;
(b) entered into a consulting agreement dated August 25, 1998 with a
company having a common director. Under the terms of the agreement the
Company is obligated to pay the consultant $6,000 per month for a term
of three years commencing August 25, 1998;
(c) entered into employment agreements with two directors of the Company
to occupy the positions of President and Chief Executive Officer and
Vice President, Research and Development and Technical Advisor. Under
the terms of these agreements the Company is obligated to pay these
employees $8,500 and $8,000 per month, respectively, for a term of
five years commencing August 31, 1998; and
F-9
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Financial Statements
December 31, 1997 and 1996
(Expressed in U.S. Dollars)
(Information as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 is unaudited)
- --------------------------------------------------------------------------------
(d) entered into an offering agreement with IPO Capital Corp. (the
"Agent") to raise seed financing of up to $5,000,000 for a fee of 10%
in cash of gross proceeds raised, plus Agent's Options in an amount
equal to 10% of the common shares sold.
(e) issued 2,300,000 Special Warrants for net proceeds of $575,000. Each
Special Warrant comprises one common share. The Special Warrant holder
has the right to require the Company to repurchase all Special
Warrants not yet exchanged into Common Shares of the Company for the
initial subscription price at any time prior to December 31, 1998.
(f) issued 536,200 common shares for $134,050 cash.
(g) adopted a Stock Option Plan. The maximum number of Common Shares
reserved for issuance under the Stock Option Plan, including options
currently outstanding, is 3,000,000 Common Shares. As at December 1,
1998, a total of 2,875,000 options are issued and unexercised at an
exercise price of $1.00 per share, expiring on December 1, 2008.
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
We have audited the accompanying balance sheets of iQ BATTERY Research &
Development GmbH as of December 31, 1997 and December 31, 1996, and the related
statements of operations and of cash flows for each of the years in the three
year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in Germany and the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, an a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation, We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iQ BATTERY Research &
Development GmbH as of December 31, 1997 and December 31, 1996, and the results
of its operations and its cash flows for each of the years in the three year
period ended December 31, 1997 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's recurring losses, negative operating cash
flows and shareholders' capital deficiency raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Deloitte & Touche GmbH
Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
Munich, October 15, 1998
F-11
<PAGE>
IQ BATTERY Research & Development GmbH
Balance Sheets as of June 30, 1998, December 31, 1997 and December 31, 1996
(DM in thousands)
June 30, December 31,
--------------------------------
1998 1997 1996
DM DM DM
------------ -------------- --------------
(unaudited)
Assets
Current Assets
Cash and cash equivalents 31 31 31
Receivable from shareholders 109 36 64
Other receivables, primarily
refundable value added taxes 334 241 135
Prepaid expenses 0 3 0
----------- -------------- --------------
Total current assets 474 311 230
Non-current assets
Equipment-net 97 75 17
Patents and other intangibles,
net of amortization 260 280 320
------------ -------------- --------------
Total assets 831 666 567
============ ============== ==============
Liabilities and Shareholders'
Deficit
Current liabilities
Short-term bank debt 235 88 82
Trade accounts payable 635 387 272
Due to shareholders 103 66 70
Accrued payroll 132 138 116
Advances 838 663 223
Other accrued liabilities 177 158 113
------------ -------------- --------------
Total current liabilities 2.120 1.500 876
Long-term bank debt 6 8 0
Non-Current liabilities due to
shareholders 495 555 555
------------ -------------- --------------
Total liabilities 2.621 2.063 1.431
Commitments and Contingencies
Shareholders' deficit
Registered Capital 100 100 100
Atypical paid in capital 1.842 1.442 902
Accumulated deficit
Allocation to Atypical
capital -1.842 -1.442 -902
Allocation to voting
shareholders -1.890 -1.497 -964
------------ -------------- --------------
Total deficit -1.790 -1.397 -864
------------ -------------- --------------
Total liabilities and
shareholders' deficit 831 666 567
============ ============== ==============
F-12
<PAGE>
IQ BATTERY Research & Development GmbH
Statements of operations for the six month period ended June 30, 1998 and for
the years ended December 31, 1997, 1996 and 1995 (DM in thousands)
June 30, December 31,
-------------------------------------
1998 1997 1996 1995
DM DM DM DM
----------- ----------- ----------- -----------
(unaudited)
Revenues
Sales 0 45 0 0
Grants received 0 0 0 160
----------- ----------- ----------- -----------
0 45 0 160
----------- ----------- ----------- -----------
Operating Expenses
Research and development
expenses -643 -881 -695 -622
General administrative
and other expenses -110 -162 -127 -91
----------- ----------- ----------- -----------
Operating loss -753 -998 -822 -553
Interest Income 0 1 3 0
Interest and other
financial expense -40 -76 -12 -28
----------- ----------- ----------- -----------
Loss before taxes -793 -1,073 -831 -581
Income taxes 0 0 0 0
=========== =========== =========== ===========
Net loss -793 -1.073 -831 -581
=========== =========== =========== ===========
F-13
<PAGE>
IQ BATTERY Research & Development GmbH
Statements of Cash Flows for the six month period ended June 30, 1998 and for
the years ended December 31, 1997, 1996 and 1995 (DM in thousands)
June 30 December 31,
-------------------------------------
1998 1997 1996 1995
DM DM DM DM
----------- ----------- ----------- -----------
(unaudited)
Operating activities:
Net loss -793 -1.073 -831 -581
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and
amortization 36 61 50 49
Loss on disposal of
equipment 0 10
Changes in assets and
liabilities:
Other receivables and
prepaid expenses -163 -81 -54 -98
Accounts payable and
other current
liabilities 262 181 272 -30
----------- ----------- ----------- -----------
Net cash used in operating
activities -658 -912 -553 -660
----------- ----------- ----------- -----------
Investing Activities:
Proceeds from sales of
equipment 0 0 3 0
Additions to property, plant
and equipment -38 -80 -13 -24
----------- ----------- - --------- -----------
Net cash used in investing
activities -38 -80 -10 -24
----------- ----------- ----------- -----------
Financing Activities:
Atypical capital increases 400 540 215 587
Increase (decrease) in
short-term debt 146 6 28 -1
Increase (decrease) in debt
due to shareholders -23 -4 107 118
Advances received from
external parties 175 440 223 0
Increase (decrease) in
other long-term debt -2 10 0 0
----------- ----------- ----------- -----------
Net cash used in financing
activities 696 992 573 704
----------- ----------- ----------- -----------
Increase in Cash and cash
equivalents 0 0 10 20
Cash and cash equivalents,
beginning of period 31 31 21 1
=========== =========== =========== ===========
Cash and cash equivalents,
end of period 31 31 31 21
=========== =========== =========== ===========
F-14
<PAGE>
Notes to Financial Statements of
IQ BATTERY Research & Development GmbH
June 30, 1998, December 31, 1997 and 1995
(DM in thousands)
1 Description of Business
iQ BATTERY Research & Development GmbH ("iQ BATTERY"), established in 1991,
is developing a chargeable battery which allows an improved current output
at low outside temperatures. The process engineering for this chargeable
battery and the know-how is based an a patent acquired from the founding
shareholders of iQ BATTERY Research and Development GmbH.
Patents have been granted for Germany, thirteen other European countries
and for the United States of America. International patents applications
have been filed in nine additional countries.
The Company's legal domicile is Floha, Germany, and it maintains a branch
near Munich, where management has its offices.
The Company intends to grant licenses for this process to the automotive
and related industries in the future.
2 Summary of Significant Accounting Policies
a) Basis of accounting
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended December 31, 1997, 1996 and 1995, the
Company incurred net losses of DM 1.703, DM 831, and DM 581 and had
negative operating cash flows of DM 912, DM 553 and DM 1.059, respectively.
The shareholders capital deficit of December 31, 1997 exceeded DM 1
million. These factors among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts
and classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to obtain
additional financing.
Management is continuing its efforts to obtain additional financing as
follows:
Offering activities
On April 29, 1998, iQ BATTERY and its prospective parent company iQ Power
Technology Inc. entered into an agreement with a lead agent in Vancouver,
Canada to attempt to raise seed financing of at least US$500,000 and,
subsequently, to conduct an offering of US$3,000,000. Of these proceeds,
US$500,000 will be placed in trust and advanced to iQ BATTERY periodically
pursuant to a mutually agreed upon budget and achievement of certain
milestones, among them a share exchange of iQ Power Technology Inc. common
shares to the existing shareholders of iQ BATTERY. The net proceeds
remaining from the offering will be placed in trust and released to iQ
Power Technology Inc. at such time that iQ Power Technology Inc.'s common
shares are eligible for quotation on the NASDAQ OTC system. The share
exchange has not yet been completed. (See Note 14).
F-15
<PAGE>
Additional financing activities
In February 1998, iQ BATTERY filed an application with
"Technologia-Beteiligungs-Geselischaft mbH der Deutschen Ausgleichsbank" in
Bonn for a participation of DM 3 million. A similar application was filed
in July 1997 with Sachsische Aufbaubank GmbH in Dresden aiming at an
investment grant of DM 1.7 million.
Management believes that iQ BATTERY will obtain sufficient funds from the
offering and special financing activities during the next twelve months to
continue its operations. Furthermore, management believes that it would be
possible to enter in the short run into agreements with other parties if
the offering with iQ Power Technology Inc. cannot be completed.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
these estimates.
c) Equipment
Equipment is stated at cost. Depreciation is recorded using the
straight-line method based upon the useful lives of the assets, generally
estimated at 3-5 years. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any gain or loss
is included in income.
d) Patent and Intangibles
Patent and intangibles are recorded at cost. Amortization is recorded using
the straight-line method based upon the shorter of the legal life or the
useful lives of the assets, estimated at 10 years. Management regularly
reviews the carrying value of patent and intangible based upon future
anticipated cash flows. To date no impairment has been indicated.
e) Long-term Liabilities to shareholders
Liabilities due to shareholders including interest only in case the Company
has generated sufficient net assets or liquidation proceeds are shown under
non-current liabilities.
f) Research and Development
Research and development costs are expensed as incurred.
g) Earnings per share
Earnings per share are not presented because the Company is privately held.
h) Income taxes
Income taxes have been provided for in accordance with the asset and
liability method. Deferred tax assets, net of valuation allowances, and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss
carry forwards.
F-16
<PAGE>
i) Supplemental cash flow information
Cash paid for interest and income taxes for the years ended
December 31 was as follows:
--------------------------------------------------------------------
December 31,
1997 1996 1995
--------------------------------------------------------------------
Interest 55.480 7.266 6.461
Income taxes 0 0 0
---------------------------------------------------------------------
j) Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the Company, all adjustments (consisting of only normal
recurring accruals) considered necessary to present fairly the consolidated
financial position as of June 30, 1998 and the consolidated statements of
income, stockholders' equity and cash flows for the six-month period ended
June 30, 1998 have been included.
3 Equipment
Equipment at December 31 was as follows:
---------------------------------------------------------------------
December 31,
1997 1996
---------------------------------------------------------------------
Equipment-at cost 112 37
Less accumulated
depreciation 37 20
------------------------ ------------------------
Equipment-net 75 17
======================== ========================
---------------------------------------------------------------------
Depreciation expense was DM 22 for the year ended December 31, 1997 (1996:
DM 10; 1995: DM 9).
4 Patent and Other Intangibles
During the year ended December 31, 1995, the Company purchased intangible
assets, comprising a patent and registered design from shareholders of the
Company.
June 30 December 31
1998
(Unaudited) 1997 1996
Cost 400 400 400
Accumulated Amortization -140 -120 -80
========== ======= =======
260 280 320
========== ======= =======
F-17
<PAGE>
5 Shareholders' Equity
The registered capital of the Company is DM 100, which has been fully paid
in by the Company's shareholders. Such ownership shares are not negotiable.
In addition, the Company has also received a total of DM 1.442 of capital
from Atypical share agreements. The Atypical shareholders have certain
information rights, but no voting powers. Losses are debited to the
Atypical shareholders' capital account and in the profits of the Company as
stipulated in the individual capital agreements. The Atypical shareholders
are entitled to terminate the agreements at the end of 1999 or 2002
depending on their entrance dates; iQ BATTERY can terminate in 2001 or
2002. Generally the compensation to be paid upon termination is based on
the applicable fair value of the company under exclusion of created
goodwill.
The following table presents the changes in shareholders deficit for the
period from January 1, 1995 to December 31, 1997.
<TABLE>
Accumulated deficit
Registered Atypical Voting
capital capital Atypical shareholders Total
------- ------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
January 1, 1995 100 100 -80 -374 -254
Capital contributions 587 587
Net loss -601 20 -581
December 31, 1995 100 687 -681 -354 -248
Capital contributions 215 215
Net loss -221 -610 -831
December 31, 1996 100 902 -902 -964 -864
Capital contributions 540 540
Net loss -540 -533 -1.073
</TABLE>
<TABLE>
Accumulated deficit
Registered Atypical Voting
capital capital Atypical shareholders Total
------- ------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
December 31, 1997 100 1.442 -1.442 -1.497 -1.397
Capital Contributions 400 - - 400
Net Loss -400 -393 -793
June 30, 1998 (unaudited) 100 1.842 -1.842 -1.890 -1.790
</TABLE>
6 Short-term Bank Debt
Short-term bank debt is summarized as follows (amounts in DM):
---------------------------------------------------------------------
December 31,
1997 1996
---------------------------------------------------------------------
Commerzbank AG, Ottobrunn 65 58
Dresdner Bank Attorney General,
Dresden 21 24
Current portion of Behncke Bank
GmbH, Hamburg 2 0
------------- ------------
Total short-term bank debt 88 82
============= ============
---------------------------------------------------------------------
The Commerzbank debt is personally guaranteed by four shareholders up to a
maximum total of DM 320; any cash and deposits maintained with Commerzbank
have been pledged. The Dresdner Bank debt is personally guaranteed by a
shareholder up to a maximum total of DM 50. Interest expense for the
short-term bank debt amounts to DM 22 for the year ended December 31, 1997
(1996: DM 5; 1995: DM 6). The weighted average interest rates were 11%.
F-18
<PAGE>
7 Long-term bank debt
Long-term bank debt is determined as follows (amounts in DM):
---------------------------------------------------------------------
December 31,
1997 1996
---------------------------------------------------------------------
Behncke Bank GmbH, Hamburg 10 0
Dresdner Bank Attorney General,
Dresden 2 2
------------- -----------
Long-term debt, excluding
current portion 8 0
============= ===========
---------------------------------------------------------------------
The Behncke Bank debt is a financing loan for the telephone equipment in
the Munich office. The loan was contracted in 1997 and the term is over
five years. Current portion of the long term debt is DM 2 (1996: DM 0).
Payments to be made for the years ending December 31 (amounts in DM):
1998 2
1999 2
2000 2
2001 2
2002 2
8 Non-current Liabilities due to Shareholders
Non-current liabilities due to shareholders are summarized as follows
(amounts in DM):
---------------------------------------------------------------------
December 31,
1997 1996
---------------------------------------------------------------------
Due to other shareholders 400 400
Due to founding shareholders 155 155
------------- -----------
Total, all non current 555 555
============= ===========
---------------------------------------------------------------------
Interest, which has to be repaid only in case the company has generated
sufficient net assets or liquidation proceeds, has been accrued for 1997
(DM 31). For 1996 and prior years the shareholders have ultimately waived
their interest claims on long-term debt.
Payments are expected for the years ending December 31 (amounts in DM):
1999 95
2000 60
2001 0
2002 0
2003 400
9 Leases
The Company has operating leases for certain equipment and facilities.
Rental expense was DM 29 for the year ended December 31, 1997 (1996: DM 12;
1995: DM 9). As of December 31, 1997 obligations to make future minimum
lease payments were as follows:
F-19
<PAGE>
Payments to be made in the years ending December 31 (DM):
1998 50
1999 43
2000 30
2001 4
2002 3
Thereafter 0
10 Income Taxes
The provision for income taxes differed from the federal corporation income
tax rate of 45% because no benefit was realized for the operating losses
incurred in 1995, 1996 and 1997.
As of December 31, 1997 and 1996, the Company had a total deferred tax
asset relating to loss carryforwards of DM 736.241 and DM 363.385,
respectively, which were reduced to zero by valuation allowances. The
valuation allowance represents the amount of deferred tax assets that may
not be realized based upon expectations of taxable income that are
consistent with the Company's operating history.
As of December 31, 1997, the Company had net operating loss carry forwards
of approximately DM 1.193.804 for corporation income taxes and DM 2.615.528
for municipal trade taxes. Such loss carry forwards have no set expiry
dates.
11 Fair Value of Financial Instruments
Management has determined that the carrying values of cash, accounts
receivable, accounts payable and short-term bank debt approximate fair
value at December 31, 1997 and 1996 because of immediate or short-term
maturities, The carrying amount reported for noncurrent liabilities due to
shareholders approximates fair value because the interest rate of 5.5%
provided for the accrued interest in 1997 approximates the market rate.
12 Related Party Transactions
The Company paid management fees of DM 132 for the year ended December 31,
1997 (1996: DM 132; 1995: DM 132) to the company's two founding
shareholders based on contracts dated October 11, 1991, March 28, 1992 and
August 28, 1994.
iQ BATTERY acquired patents and know-how improving the current output of a
chargeable battery at low outside temperatures and the registered design
"iQ" based on a contract dated March 15, 1995 from two shareholders and
managing directors of iQ BATTERY. The intangibles purchased relate to a
German patent, an international patent application as well as the
registered design "iQ". The purchase price consists of a one time payment
of DM 400. The DM 400 has not been paid and is not payable as long as the
Company is in a deficit position. No other amounts are due as the Company
has not realized any applicable revenues or royalties.
13 Commitments and Contingencies
The Company is not currently involved in any legal proceedings in the
ordinary course of business.
14 Letter of Intent
On June 11, 1996 iQ BATTERY entered into a letter of intent with Mayon
Management Corporation, Vancouver, Canada, pursuant to which Mayon will,
subject to the terms of the letter, cause a company to
F-20
<PAGE>
be incorporated for the purpose of acquiring from iQ BATTERY the right to
exploit in North America the patents and know how of iQ BATTERY against
issuance of shares of the company to be incorporated.
The name of the Company incorporated is iQ Power Technology Inc. (iQ
Canada) having its registered office in Vancouver, British Columbia.
On August 25, 1998, iQ Canada acquired all the issued and outstanding stock
of iQ Battery in exchange for 10,000,000 common shares of iQ Canada.
Pursuant to the terms of the Share Exchange Agreement, the former
shareholders of iQ Battery, as a group, have a limited right to require iQ
Canada to repurchase all of the iQ Canada common shares received by such
shareholders (the "Put Option"). The Put Option is exercisable at and after
the four month anniversary of the initial filing of a prospectus with the
Securities and Exchange Commission if (i) iQ Canada has failed to complete
an equity offering with gross proceeds of at least US$3 Million and (ii)
such shareholders have repaid to iQ Canada the full amount of all funds iQ
Canada has advanced or invested in iQ Battery. As a result of the business
combination, the shareholders of iQ Battery will acquire control of the
combined entity. Due to this acquisition of control, iQ Battery is
identified as the acquiror (reverse acquisition) and the business
combination will be accounted for under the purchase method.
Pursuant to the terms of the Atypical Share Exchange Agreements, iQ Canada
has also issued into escrow an additional 2,800,000 Common Shares against
the deposit into escrow of the Atypical shares of iQ Battery held by
twenty-one Atypical shareholders. The Common Shares and the Atypical Shares
will be released from escrow to the Atypical shareholders and iQ Canada,
respectively, on the completion of a minimum equity financing of US$3
Million. In the event the Put Option is exercised, the common shares and
the Atypical shares will be released from escrow and returned to iQ Canada
and the Atypical shareholders, respectively.
F-21
<PAGE>
Selected Unaudited Pro Forma
Consolidated Financial Information
The selected unaudited pro forma consolidated financial information for the
Company set forth below gives effect to the acquisition of the shares of IQ
Power Technology Inc. (IQ Canada) and IQ Battery Research and Development GmbH
(IQ Germany). The historical financial information set forth below has been
derived from and is qualified by reference to, the financial statements of the
Company and IQ Germany and should be read in conjunction with those financial
statements and the notes thereto included elsewhere herein.
The June 30, 1998 pro forma balance sheet has been prepared as if the
transactions described in Notes 1 and 2 had occurred on June 30, 1998, and
represents the consolidation of the June 30, 1998 balance sheet of IQ Germany
with the June 30, 1998 balance sheet of the Company.
The pro forma statement of net loss for the six month period ended June 30, 1998
and the year ended December 31, 1997 has been prepared as if the transactions
described in Notes 1 and 2 had occurred at the commencement of the relevant
period. They represent the consolidation of the IQ Germany statements of loss
for the six months ended June 30, 1998 and the year ended December 31, 1997 with
the statement of loss of the Company for the six months ended June 30, 1998 and
the year ended December 31, 1997.
The pro forma consolidated financial statements are not intended to reflect the
results of operations or the financial position of the Company which would have
actually resulted had the proposed transactions described in Notes 1 and 2 been
effected on the dates indicated. Further, the pro forma financial information is
not necessarily indicative of the results of operations or the financial
position that may be obtained in the future.
F-22
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Unaudited Pro Forma Consolidated Balance Sheet
As at June 30, 1998
(Expressed in Thousands of United States Dollars)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
Business Combination
Pro forma after iQ Germany
Capital capital June 30, Pro forma
IQ Canada transaction transaction 1998 Acquisition Consolidated
--------- ----------- ----------- ---- ----------- ------------
(Note 1) (Note 2) (Note 2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT
Cash $ 78 $ 5,000 $ 4,318 $ 17 $ 4,335
(760)
Accounts receivable 6 6 215 221
Prepaids and deposits 5 5 8 13
Receivable from
shareholders - - 22 22
Promissory notes
receivable 464 464 - $ (464) -
- ------------------------------------------------------------------------------------------------------------------------
553 4,240 4,793 262 (464) 4,591
EQUIPMENT, net - 56 56
Patent and intangibles,
net - - - 150 - 150
========================================================================================================================
$ 553 $ 4,240 $ 4,793 $ 468 $ (464) $ 4,797
========================================================================================================================
LIABILITIES
CURRENT
Accounts payable $ 84 $ - $ 84 $ 294 $ - $ 378
Accrued liabilities 5 - 5 139 - 144
Share subscriptions 75 - 75 - - 75
Current portion of
bank debt - - 132 - 132
Due to shareholders - - 36 - 36
Advances - - 458 (458) -
- ------------------------------------------------------------------------------------------------------------------------
164 - 164 1,059 (458) 765
BANK DEBT NON-CURRENT
- - - 4 - 4
LIABILITIES DUE TO
SHAREHOLDERS - - - 303 - 303
- ------------------------------------------------------------------------------------------------------------------------
164 - 164 1,366 (458) 1,072
- ------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS EQUITY
Capital stock 636 5,000 5,636 62 1,150 6,600
(248)
Atypical paid in capital - - - 1,150 (1,150) -
Cumulative foreign
exchange adjustment - - - 153 - 153
Deficit (247) (760) (1,007) (2,263) 242 (3,028)
- ------------------------------------------------------------------------------------------------------------------------
389 4,240 4,629 (898) (6) 3,725
========================================================================================================================
$ 553 $ 4,240 $ 4,793 $ 468 $ (464) $ 4,797
========================================================================================================================
</TABLE>
F-23
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Unaudited Pro Forma Consolidated Statement of Loss
For the Six Month Period ended June 30, 1998
(Expressed in Thousands of United States Dollars)
Business Combination - IQ Germany
----------------------------------------
Pro forma
IQ Canada June 30, 1998 Acquisition Consolidated
--------- ------------- ------------ ------------
(Note 2)
OPERATING EXPENSES
Research and development
grants $ - $ 283 $ 294
General administrative
and other expenses 101 62 163
- --------------------------------------------------------------------------------
(101) (356) (457)
INTEREST INCOME - 1 1
INTEREST AND OTHER
FINANCE EXPENSE - (7) (7)
- --------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (101) $ (362) $ (463)
- --------------------------------------------------------------------------------
Loss per share $ (0.04) $ (0.03)
- --------------------------------------------------------------------------------
Weighted average common
shares outstanding 2,286,461 15,086,461
- --------------------------------------------------------------------------------
F-24
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Unaudited Pro Forma Consolidated Statement of Loss
For the Year Ended December 31, 1997
(Expressed in Thousands of United States Dollars)
Acquisition of IQ Germany
--------------------------------------
December 31, Pro forma
IQ Canada 1997 Acquisition Consolidated
--------- (Note 2) ----------- ------------
REVENUE $ - $ 27 $ 27
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development
grants - 528 528
General administrative 135 97 232
- --------------------------------------------------------------------------------
135 625 760
- --------------------------------------------------------------------------------
INTEREST AND OTHER
FINANCE EXPENSE - 46 46
- --------------------------------------------------------------------------------
135 671 806
- --------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (135) $ (644) $ (779)
- --------------------------------------------------------------------------------
Loss per share $ (0.14) $ (0.06)
- --------------------------------------------------------------------------------
Weighted average common
shares outstanding 950,294 13,750,294
- --------------------------------------------------------------------------------
F-25
<PAGE>
IQ POWER TECHNOLOGY INC.
Notes to the Unaudited Pro Forma Consolidated
Financial Information
(U.S. Dollars)
- --------------------------------------------------------------------------------
1. CAPITAL TRANSACTION
The pro forma balance sheet reflects the public offering of 5,000,000
shares of common stock for net proceeds, estimated at a minimum of
$4,240,000.
The pro forma financial statements reflect the following adjustments
related to the public offering and related transactions:
Balance sheet - Cash
Gross proceeds from offering $ 5,000,000
10% Agents' financing fee (500,000)
-----------------------------------------------------------------------
Expenses of Offering (260,000)
-----------------------------------------------------------------------
Increase in cash $ 4,240,000
-----------------------------------------------------------------------
Increase in shareholders' equity
Share capital $ 5,000,000
Deficit (760,000)
-----------------------------------------------------------------------
$ 4,240,000
-----------------------------------------------------------------------
2. BUSINESS COMBINATION
On August 25, 1998, the Company exchanged 10,000,000 common shares for 100%
of the issued and outstanding voting stock of IQ Germany, The Company also
issued 2,800,000 common shares in exchange for 100% of the Atypical shares
of IQ Germany. As a result of these exchanges, IQ Canada will hold all the
equity securities of IQ Germany.
The acquisition has been accounted for using the purchase method. The
acquiror involved in the business combination has been identified as IQ
Germany, as it is the shareholders of IQ Germany who, as a group, has the
ability to control the combined enterprise. The shares of the Company's
common stock that were issued have been recorded at a fair value of
$389,000 based on the fair market value of the Company's net assets
acquired.
Intercompany advances have been eliminated.
F-26
<PAGE>
IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Unaudited Pro Forma Consolidated Financial Information
(Expressed in Thousands of United States Dollars)
2. BUSINESS COMBINATION (Continued)
The effect of the business combination on the unaudited pro forma
consolidated balance sheet at June 30, 1998 is summarized below:
Purchase price
Common stock held by IQ Power Technology Inc. shareholders $ 389
-----------------------------------------------------------------------
Allocation of purchase price
Current assets 553
Current liabilities 164
-----------------------------------------------------------------------
$ 389
=======================================================================
Elimination of IQ Power Technology Inc.
Share capital $ 636
Deficit (242)
-----------------------------------------------------------------------
The effect of the business combination of the unaudited pro forma
consolidated statements of loss is summarized below:
Historical results of IQ Germany are summarized as follows:
-----------------------------------------------------------------------
Period Ended
-------------------------------------------
June 30 December
1998 1997
-------------------- ------------------
Revenue $ - $ 27
Operating expenses (356) (760)
Interest income 1 -
Interest expense (7) (46)
$ (362) $ (779)
-----------------------------------------------------------------------
F-27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers
The By-laws of the Company provide that, subject to the Canada Business
Corporations Act (the "CBCA"), the Company shall indemnify a director or officer
of the Company, a former director or officer of the Company or a person who acts
or acted at the Company's request as a director or officer of a body corporate
of which the Company is or was a shareholder or creditor, and his heirs and
legal representatives, against all costs, charges and expenses reasonably
incurred by him in respect of certain actions or proceedings to which he is made
a party by reason of his office, if he met certain specified standards of
conduct and shall also indemnify any such person in such other circumstances as
the CBCA or law permits or requires.
Under the CBCA, except in respect of an action by or on behalf of the Company to
procure a judgment in its favor, the Company may indemnify a present or former
director or officer or a person who acts or acted at the Company's request as a
director or officer of another corporation of which the Company is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
his position with the Company and provided that the director or officer acted
honestly and in good faith with a view to the best interests of the Company,
and, in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, had reasonable grounds for believing that his
conduct was lawful. Such indemnification may be made in connection with a
derivative action only with court approval. A director or officer is entitled to
indemnification from the Company as a matter of right if he was substantially
successful on the merits and fulfilled the conditions set forth above.
The Company is considering obtaining Director's and Officer's Liability
Insurance for its directors, but it does not currently maintain Director's and
Officer's Liability Insurance.
Reference is made to Item 3 for the undertakings of the Company with respect to
indemnification for liabilities under the Securities Act of 1933, as amended.
Item 2. Other Expenses of Issuance and Distribution
Amount(1)
SEC Registration Fee.................................. $ 1,390
NASD Filing Fee....................................... 1,000
Accounting Fees and Expenses.......................... 50,000
Legal Fees and Expenses............................... 75,000
Blue Sky Qualification Fees and Expenses.............. 15,000
Transfer and Custody Agent Fees....................... 10,000
Printing Expenses..................................... 4,000
Miscellaneous......................................... 103,610
Total............................................ 260,000
(1) All the amounts have been estimated except for the SEC and NASD fees. All
of the above expenses will payable by the Company.
II-1
<PAGE>
Item 3. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant will: (1) for determining any liability under the
Securities Act, treat the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant under Rule 424(b)(1) , or (4) or
497(h) under the Securities Act as part of this Registration Statement as of the
time the SEC declared it effective; and (2) for determining any liability under
the Securities Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
Registration Statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
Item 4. Unregistered Securities Issued or Sold within One Year
On December 1, 1998, the Company issued 536,200 Common Shares at a price of
US$0.25 per share for an aggregate purchase price of $134,050. The Common Shares
were issued to the following persons: Noble Larsen, Ronald Nichols, Erin French,
Jeff French, Victor French, Margo French, Gregory A. Sasges, Dawn B. Sasges,
Helga Fisher, Terry Fields, Bill Mairs, Christiane Bauer, Alexa Schluren and
Janice Irving. The Common Shares were issued pursuant to an exemption from
registration under Rule 504 of Regulation D under the Securities Act.
On December 1, 1998, the Company issued Special Warrants to purchase 2,300,000
Common Shares without payment of additional consideration at US$0.25 per Special
Warrant. The aggregate purchase price of the Special Warrants was $575,000. The
names and identities of the persons or entities to whom the Common Shares and
Special Warrants were issued are Haliun Hongorzul, Nuni Wee, Che Wia Ho, Majorie
Polland and Highland Resources Ltd. The special warrants were issued pursuant to
an exemption from registration under Rule 504 of Regulation D under the
Securities Act.
On August 25, 1998, the Company agreed to issue 12,800,000 common shares
pursuant to the terms of a Share Exchange Agreement between iQ Canada, iQ
Germany and all of the shareholders of iQ Germany, including holders of atypical
shares of iQ Germany (the "Atypical Shareholders"). For purposes of the share
exchange, each common share of iQ Canada was issued at a deemed price of US$0.25
per share based on the agreed upon value of the iQ Germany shares received by iQ
Canada. The names of the shareholders of iQ Germany were Gunther Bauer, Peter E.
Braun, Horst Dieter Braun, Karin Wittkewitz and Rainer Welke. The names and
identities of persons who are Atypical Shareholders of iQ Germany were Eckehard
Endler, Falk Von Craushaar, Thea and Constantin Von Walthausen, Steffen
Tschirch, Rainer Welke, Manfred Plesker, Karl Schneider, Dr. Ellen Riep, Annett
Heyde, Klaus Suhl, Herbert Rachny, Lidia Bartkowiek-Rachny, Dr. Monika Gottwald,
Herman Dickschat, Thomas Peine, Christine Staedecke/Peine, Barbara
Bergschmidt/Wolfgang Schmitt, Eduard Gabriel, Magnus Olsson, Johanna Wolff,
Gerhard Trenz and Setrak Tokpinar. The Company issued the Common Shares pursuant
to an exemption from registration available under Regulation S under the
Securities Act.
On July 1, 1998, the Company issued 300,000 Common Shares at a price of US$0.25
per share for an aggregate purchase price of US$75,000. The Common Shares were
issued to Abu B. Khan and Gary O. Khan pursuant to an exemption from
registration under Rule 504 of Regulation D under the Securities Act.
II-2
<PAGE>
On May 29, 1998, the Company issued 573,484 Common Shares at a price of US$0.25
per share for an aggregate purchase price of US$143,371. The Common Shares were
issued to Mercator Profits Ltd. and Dunkirk Investments Ltd. pursuant to an
exemption from registration under Rule 504 of Regulation D under the Securities
Act.
On December 31, 1997, the Company issued 1,969,740 Common Shares at a price of
US$0.25 per share for an aggregate purchase price of US$492,435. The Common
Shares were issued to Helmut Krack, Mayon Management Corp. and Mercator Profits
Ltd. pursuant to an exemption from registration under Regulation S under the
Securities Act.
II-3
<PAGE>
Item 5. Index to Exhibits
Exhibit Number Exhibit Description
- -------------- -------------------
1.1* Form of Agency Agreement between iQ Power Technology Inc.
and IPO Capital Corp.
2.1 Certificate of Incorporation dated December 20, 1994, for
3099458 Canada Inc.
2.2 Articles of Incorporation dated December 21, 1994, for
3099458 Canada Inc.
2.3 Certificate of Amendment dated May 9, 1997, together with
Form 4, Articles of Amendment for iQ Power Technology Inc.
2.4 Certificate of Amendment dated March 31, 1998, for iQ Power
Technology Inc.
2.5 By-law Number One General By-Law of iQ Power Technology Inc.
dated December 31, 1997, as confirmed on June 30, 1998
3.1* Form of Common Stock Certificate
3.2 Form of Special Warrant
4.1* Form of Subscription Agreement to be used in connection with
the offering
6.1 Form of Atypical Share Exchange Agreement
6.2 Share Exchange Agreement dated August 25, 1998, between iQ
Power Technology Inc., iQ Battery Research and Development
GmbH and the Shareholders of iQ Battery Research and
Development GmbH
6.3 Pooling Agreement No. 1 dated August 25, 1998, between iQ
Power Technology Inc., Montreal Trust Company of Canada and
the Shareholders of iQ Power Technology Inc.
6.4 Form of Pooling Amendment Agreement dated August 15, 1998,
between iQ Power Technology Inc., Montreal Trust Company of
Canada and the Shareholders of iQ Power Technology Inc.
6.5 Management Agreement dated January 1, 1997, between 3099458
Canada Inc. and Mayon Management Corp.
6.6 Consulting Agreement dated August 25, 1998, between iQ Power
Technology Inc. and Mayon Management Corp.
6.7 Employment Agreement dated August 31, 1998 with Dr. Gunther
C. Bauer
6.8 Employment Agreement dated August 31, 1998 with Peter E.
Braun
6.9 Employment Agreement dated September 1, 1998 with Gerhard K.
Trenz
6.10 Form of Confidentiality Agreement between iQ Power
Technology Inc. and certain Officers of the Company
II-4
<PAGE>
6.11 Lease Agreement by and between iQ Battery Research and
Development GmbH and Spima Spitzenmanufaktur GmbH dated
December 9, 1997 (Translated to English)
6.12 Commercial Lease Agreement by and between iQ Battery
Research and Development GmbH and Josef Landthaler, GmbH
dated May 9, 1996, as amended (Translated to English)
6.13 Form of iQ Germany Confidentiality Agreement (Translated to
English)
6.14 Form of iQ Germany Employee Confidentiality and
Nondisclosure Agreement (Translated to English)
6.15 Cooperation Agreement by and between iQ Battery Research and
Development GmbH and BASF Aktiengesellschaft (Translated to
English)
6.16 Confidentiality Agreement by and between iQ Battery Research
and Development GmbH and Bayerische Motoren Werke dated July
29, 1997 (Translated to English)
6.17 Mutual Confidentiality Agreement among iQ Battery Research
and Development GmbH, Akkumulatorenfabrik Moll GmbH & Co.
KG, and Audi dated May 26, 1998 (Translated to English)
6.18 Confidentiality Agreement between iQ Battery Research and
Development GmbH and Mercedes Benz Aktiengessellschaft dated
March 21, 1997 (Translated to English)
6.19 Letter Agreement between iQ Battery Research and Development
GmbH and Manufacturer of Batteries Moll Ltd. dated August
3, 1998 (Translated to English)
6.20 Mutual Confidentiality Agreement between iQ Battery Research
and Development GmbH and Manufacturer of Batteries Moll
dated September 8, 1997 (Translated to English)
6.21 Loan Contract by and between Karin Wittkewitz and iQ Battery
Research and Development GmbH dated December 28, 1996
(Translated to English)
6.22 Contract Concerning Industrial Property Rights and Know How
by and between Dieter Braun and Peter E. Braun and iQ
Battery Research and Development GmbH dated March 15, 1995
(Translated to English)
6.23 Supplementary Contract to the Contract concerning Industrial
Property Rights and Know How by and between H. Deiter Braun
and Peter E. Braun and iQ Battery Research and Development
GmbH dated August 16, 1996 (Translated to English)
6.24 Extension of Contract regarding Industrial Property Rights
and Know How by and between Deiter Braun and Peter Braun and
iQ Battery Research and Development GmbH dated September 20,
1996 (Translated to English)
6.25 Consulting Contract by and between iQ Battery Research and
Development GmbH and Peter Braun dated August 28, 1994
(Translated to English)
6.26 Consulting Contract by and between iQ Battery Research and
Development GmbH and Dr. Gunther Bauer dated October 30,
1996 (Translated to English)
6.27 Agreement (Debt Deferral) by and between iQ Battery Research
and Development GmbH and Dieter Braun and Peter Braun dated
December 27, 1996 (Translated to English)
II-5
<PAGE>
6.28 Agreement (Debt Deferral) by and between iQ Battery Research
and Development GmbH and Gunther Bauer dated December 27,
1996 (Translated to English)
6.29 Waiver among H. Dieter Braun, Peter E. Braun, Gunther Bauer,
Karin Wittkewitz and iQ Battery Research and Development
GmbH dated December 19, 1997 (Translated to English)
6.30 Agreement by and between iQ Battery Research and Development
GmbH and Dieter Braun and Peter Braun dated October 9, 1998
(Translated to English)
6.31 1998 Stock Option Plan
6.32 Form of Stock Option Agreement
6.33 License Agreement dated September 1, 1998 between iQ Power
Technology Inc. and Mattalex Management Ltd.
6.34 Agreement Re Rights and Interests dated December 9, 1998 by
and among the Company, H. Dieter Braun and Peter E. Braun
6.35 Trademark Assignment dated December 9, 1998 by and between
the Company and H. Dieter Braun
6.36 Patent Assignment dated December 9, 1998 by and between the
Company and H. Dieter Braun and Peter E. Braun
7.1 List of Material Foreign Patents
10.1 Consent of Deloitte & Touche, LLP, Chartered Accountants
10.2 Consent of Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
10.3* Consent of Werbes Sasges & Company (included in Exhibit
11.1)
11.1* Legal Opinion of Werbes Sasges & Company
13.1 Form F-X Consent
* To be filed by amendment
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Unterhaching, Germany on December 7, 1998.
iQ POWER TECHNOLOGY INC.
By /s/ Peter E. Braun
---------------------------------
Peter E. Braun, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears in this
Registration Statement in any capacity hereby constitutes and appoints Peter E.
Braun and Russell French, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that the attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Peter E. Braun
- ------------------------ President, Chief Executive December 7, 1998
Peter E. Braun Officer, and Director (Principal
Executive Officer)
/s/ Gerhard K. Trenz
- ------------------------ Vice-President, Finance December 7, 1998
Gerhard K. Trenz (Principal Financial and
Accounting Officer)
/s/ Dr. Gunther C. Bauer
- ------------------------ Vice-President, Research & December 7, 1998
Dr. Gunther C. Bauer Development and Director
/s/ Russell French
- ------------------------ Director December 8, 1998
Russell French
II-7
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Description Page
-------------- ------------------- ----
1.1* Form of Agency Agreement between iQ Power Technology Inc.
and IPO Capital Corp.
2.1 Certificate of Incorporation dated December 20, 1994, for
3099458 Canada Inc.
2.2 Articles of Incorporation dated December 21, 1994, for
3099458 Canada Inc.
2.3 Certificate of Amendment dated May 9, 1997, together with
Form 4, Articles of Amendment for iQ Power Technology Inc.
2.4 Certificate of Amendment dated March 31, 1998, for iQ Power
Technology Inc.
2.5 By-law Number One General By-Law of iQ Power Technology Inc.
dated December 31, 1997, as confirmed on June 30, 1998
3.1* Form of Common Stock Certificate
3.2 Form of Special Warrant
4.1* Form of Subscription Agreement to be used in connection with
the offering
6.1 Form of Atypical Share Exchange Agreement
6.2 Share Exchange Agreement dated August 25, 1998, between iQ
Power Technology Inc., iQ Battery Research and Development
GmbH and the Shareholders of iQ Battery Research and
Development GmbH
6.3 Pooling Agreement No. 1 dated August 25, 1998, between iQ
Power Technology Inc., Montreal Trust Company of Canada and
the Shareholders of iQ Power Technology Inc.
6.4 Form of Pooling Amendment Agreement dated August 15, 1998,
between iQ Power Technology Inc., Montreal Trust Company of
Canada and the Shareholders of iQ Power Technology Inc.
6.5 Management Agreement dated January 1, 1997, between 3099458
Canada Inc. and Mayon Management Corp.
6.6 Consulting Agreement dated August 25, 1998, between iQ Power
Technology Inc. and Mayon Management Corp.
6.7 Employment Agreement dated August 31, 1998 with Dr. Gunther
C. Bauer
6.8 Employment Agreement dated August 31, 1998 with Peter E.
Braun
6.9 Employment Agreement dated September 1, 1998 with Gerhard K.
Trenz
<PAGE>
6.10 Form of Confidentiality Agreement between iQ Power
Technology Inc. and certain Officers of the Company
6.11 Lease Agreement by and between iQ Battery Research and
Development GmbH and Spima Spitzenmanufaktur GmbH dated
December 9, 1997 (Translated to English)
6.12 Commercial Lease Agreement by and between iQ Battery
Research and Development GmbH and Josef Landthaler, GmbH
dated May 9, 1996, as amended (Translated to English)
6.13 Form of iQ Germany Confidentiality Agreement (Translated to
English)
6.14 Form of iQ Germany Employee Confidentiality and
Nondisclosure Agreement (Translated to English)
6.15 Cooperation Agreement by and between iQ Battery Research and
Development GmbH and BASF Aktiengesellschaft (Translated to
English)
6.16 Confidentiality Agreement by and between iQ Battery Research
and Development GmbH and Bayerische Motoren Werke dated July
29, 1997 (Translated to English)
6.17 Mutual Confidentiality Agreement among iQ Battery Research
and Development GmbH, Akkumulatorenfabrik Moll GmbH & Co.
KG, and Audi dated May 26, 1998 (Translated to English)
6.18 Confidentiality Agreement between iQ Battery Research and
Development GmbH and Mercedes Benz Aktiengessellschaft dated
March 21, 1997 (Translated to English)
6.19 Letter Agreement between iQ Battery Research and Development
GmbH and Manufacturer of Batteries Moll Ltd. dated August
3, 1998 (Translated to English)
6.20 Mutual Confidentiality Agreement between iQ Battery Research
and Development GmbH and Manufacturer of Batteries Moll
dated September 8, 1997 (Translated to English)
6.21 Loan Contract by and between Karin Wittkewitz and iQ Battery
Research and Development GmbH dated December 28, 1996
(Translated to English)
6.22 Contract Concerning Industrial Property Rights and Know How
by and between Dieter Braun and Peter E. Braun and iQ
Battery Research and Development GmbH dated March 15, 1995
(Translated to English)
6.23 Supplementary Contract to the Contract concerning Industrial
Property Rights and Know How by and between H. Deiter Braun
and Peter E. Braun and iQ Battery Research and Development
GmbH dated August 16, 1996 (Translated to English)
<PAGE>
6.24 Extension of Contract regarding Industrial Property Rights
and Know How by and between Deiter Braun and Peter Braun and
iQ Battery Research and Development GmbH dated September 20,
1996 (Translated to English)
6.25 Consulting Contract by and between iQ Battery Research and
Development GmbH and Peter Braun dated August 28, 1994
(Translated to English)
6.26 Consulting Contract by and between iQ Battery Research and
Development GmbH and Dr. Gunther Bauer dated October 30,
1996 (Translated to English)
6.27 Agreement (Debt Deferral) by and between iQ Battery Research
and Development GmbH and Dieter Braun and Peter Braun dated
December 27, 1996 (Translated to English)
6.28 Agreement (Debt Deferral) by and between iQ Battery Research
and Development GmbH and Gunther Bauer dated December 27,
1996 (Translated to English)
6.29 Waiver among H. Dieter Braun, Peter E. Braun, Gunther Bauer,
Karin Wittkewitz and iQ Battery Research and Development
GmbH dated December 19, 1997 (Translated to English)
6.30 Agreement by and between iQ Battery Research and Development
GmbH and Dieter Braun and Peter Braun dated October 9, 1998
(Translated to English)
6.31 1998 Stock Option Plan
6.32 Form of Stock Option Agreement
6.33 License Agreement dated September 1, 1998 between iQ Power
Technology Inc. and Mattalex Management Ltd.
7.1 List of Material Foreign Patents
10.1 Consent of Deloitte & Touche, LLP, Chartered Accountants
10.2 Consent of Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
10.3* Consent of Werbes Sasges & Company (included in Exhibit
11.1)
11.1* Legal Opinion of Werbes Sasges & Company
13.1 Form F-X Consent
* To be filed by amendment
Exhibit 2.1
CERTIFICATE OF INCORPORATION
CANADA BUSINESS CORPORATIONS ACT
3099458 CANADA INC.
__________________________
Name of corporation
I hereby certify that the above-named corporation, the articles of incorporation
of which are attached, was incorporated under the Canada Business Corporations
Act.
December 20, 1994
Date of Incorporation
(Signed) Director
<PAGE>
December 21, 1994
MCCARTHY TETRAULT
ATTN: ANGELINE C. DUNCAN
275 SPARKS
SUITE 1000
OTTAWA, ONT
K1R 7X9
Re - 3099458 CANADA INC.
Enclosed herewith is the document issued in the above matter.
A notice of issuance of CBCA documents will be published in the Canada
Corporations Bulletin. A notice of issuance of CCA documents will be published
in the Canada Corporations Bulletin and the Canada Gazette.
IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE
OBSERVED:
This name is available for use as a corporate name subject to and
conditional upon the applicants assuming full responsibility for any
risk of confusion with existing business names and trade marks
(including those set out in the relevant NUANS search report(s)).
Acceptance of such responsibility will comprise an obligation to change
the name to a dissimilar one in the event that representations are made
and established that confusion is likely to occur. The use of any name
granted is subject to the laws of the jurisdiction where the company
carries on business.
For the Director General, Corporations Directorate
Exhibit 2.2
Consumer and Corporate Affairs Canada
Canada Business Corporations Act
FORM 1
ARTICLES OF INCORPORATION
(SECTION 6)
1. Name of corporation: 3099458 CANADA, INC.
2. The place in Canada where the registered office is to be situated: The
Municipality of Metropolitan Toronto in the Province of Ontario.
3. The classes and any maximum number of shares that the corporation is
authorized to issue: The Corporation is authorized to issue an unlimited
number of common shares, the rights, privileges, restrictions and
conditions of which are set out in the annexed Schedule 1 which is
incorporated in this form.
4. Restrictions, if any, on share transfers: The annexed Schedule 2 is
incorporated in this form.
5. Number (or minimum and maximum number) of directors: Minimum of 1 and
maximum of 10.
6. Restrictions, if any, on business the corporation may carry on: There are
no restrictions.
7. Other provisions, if any: The annexed Schedule 3 is incorporated in this
form.
8. Incorporators:
Name: CARTAN LIMITED
Address: Suite 4700,
Toronto Dominion Bank Tower,
Toronto-Dominion Centre,
Toronto, Ontario M5K 1E6
Signature: CARTAN LIMITED
Per _______________________
Vice-President
-----------------------
Vice-President
For Departmental Use Only - Corporation No.: 309945-8
Filed: December 21, 1994
-1-
<PAGE>
SCHEDULE 1
ARTICLES OF INCORPORATION
(1) The rights, privileges, restrictions and conditions attaching to the common
shares are as follows:
(a) Payment of Dividends: The holders of the common shares shall be
entitled to receive dividends if, as and when declared by the board of
directors of the Corporation out of the assets of the Corporation
properly applicable to the payment of dividends in such amounts and
payable in such manner as the board of directors may from time to time
determine. Subject to the rights of the holders of any other class of
shares of the Corporation entitled to receive dividends in priority to
or rateably with the holders of the common shares, the board of
directors may in their sole discretion declare dividends on the common
shares to the exclusion of any other class of shares of the
Corporation.
(b) Participation upon Liquidation, Dissolution or Winding-up: In the
event of the liquidation, dissolution or winding-up of the Corporation
or other distribution of assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, the holders of
the common shares shall, subject to the rights of the holders of any
other class of shares of the Corporation entitled to receive the
assets of the Corporation upon such a distribution in priority to or
rateably with the holders of the common shares, be entitled to
participate rateably in any distribution of the assets of the
Corporation.
(c) Voting Rights: The holders of the common shares shall be entitled to
receive notice of and to attend all annual and special meetings of the
shareholders of the Corporation and to 1 vote in respect of each
common share held at all such meetings.
-2-
<PAGE>
SCHEDULE 2
ARTICLES OF INCORPORATION
No share in the capital of the Corporation shall be transferred without the
consent of the directors expressed by the votes of a majority of the directors
present at a meeting of the directors or by an instrument or instruments in
writing signed by a majority of the directors.
-3-
<PAGE>
SCHEDULE 3
ARTICLES OF INCORPORATION
(1) The number of shareholders of the Corporation, exclusive of persons who are
in its employment and exclusive of persons who, having been formerly in the
employment of the Corporation, were, while in that employment and have continued
after the termination of that employment to be, shareholders of the Corporation,
is limited to not more than 50, 2 or more persons who are the joint owners of 1
or more shares being counted as 1 shareholder.
(2) Any invitation to the public to subscribe for securities of the Corporation
is prohibited.
(3) The actual number of directors within the minimum and maximum number set out
in paragraph 5 may be determined from time to time by resolution of the
directors. Any vacancy among the directors resulting from an increase in the
number of directors as so determined may be filled by resolution of the
directors.
-4-
Exhibit 2.3
CERTIFICATE OF AMENDMENT
CANADA BUSINESS CORPORATIONS ACT
IQ Power Technology Inc. 309945-8
-------------------------
Name of corporation
I hereby certify that the articles of the above-named corporation were amended
(a) under section 13 of the Canada Business Corporations Act in accordance with
the attached notice;
(b) under section 27 of the Canada Business Corporations Act as set out in the
attached articles of amendment designating a series of shares;
(c) under section 179 of the Canada Business Corporations Act as set out in the
attached articles of amendment;
(d) under section 191 of the Canada Business Corporations Act as set out in the
attached articles or reorganization.
(Signed) Director
FORM 4
ARTICLES OF AMENDMENT
(SECTION 27 OR 177)
1. 3099458 Canada Inc.
2. Corporation No. 309945-8
3. The articles of the above-named corporation are amended as follows:
1. The name of the Company be changed from 3099458 Canada Inc. to IQ
Power Technology Inc.
2. The place in Canada where the registered office is situated be
changed from Toronto, Ontario to Vancouver, British Columbia.
<PAGE>
3. The rights, privileges, restrictions and conditions attached to
the Common Shares set forth in Schedule 1 attached to the
Articles of Incorporation be repealed.
4. The restrictions on the transfer of shares set forth in Schedule
2 attached to the Articles of Incorporation be repealed.
5. The provisions set forth in Schedule 3 attached to the Articles
of Incorporation be repealed.
Exhibit 2.4
Industry Canada
Certificate
of Amendment
Canada Business
Corporations Act
IQ Power Technology Inc.
- ---------------------------------------------------
Name of corporation-Denomination de la societe
I hereby certify that the articles of the above-named corporation were amended
(a) under section 13 of the Canada Business Corporations Act in accordance with
the attached notice;
(b) under section 27 of the Canada Business Corporations Act as set out in the
attached articles of amendment designating a series of shares;
(c) under section 179 of the Canada Business Corporations Act as set out in the
attached articles of amendment;
(d) under section 191 of the Canada Business Corporations Act as set out in the
attached articles of reorganization.
March 31, 1998
Director
Date of Amendment
<PAGE>
CANADA BUSINESS
CORPORATIONS ACT
FORM 4
ARTICLES OF AMENDMENT
(SECTION 27 OR 171)
1 - Name of Corporation - Denomination de la societe
IQ POWER TECHNOLOGY INC.
3 - The articles of the above-named corporation are amended as follows:
Pursuant to section 173(1)(o) of the Canada Business Corporations Act, Article 7
is amended to provide that the Directors may appoint one or more directors who
shall hold office for a term expiring not later than the close of the next
annual meeting of shareholders provided further that the total number of
directors so appointed may not exceed one-third of the number of directors
elected at the previous annual meeting of shareholders.
Date Description of Office
March 27, 1998 President
Exhibit 2.5
BY-LAW NUMBER ONE
GENERAL BY-LAW OF
IQ POWER TECHNOLOGY INC.
_________________
TABLE OF CONTENTS
PART SECTION SUBJECT
1 INTERPRETATION
1.01 Definitions
2 BUSINESS OF THE CORPORATION
2.01 Registered Office
2.02 Corporate Seal
2.03 Financial Year
2.04 Execution of Instruments
2.05 Banking Arrangements
2.06 Voting Rights In Other Bodies Corporate
3 BORROWING AND SECURITIES
3.01 Borrowing Power
3.02 Delegation
4 DIRECTORS
4.01 Number of Directors and Quorum
4.02 Qualification
4.03 Election And Term
4.04 Removal of Directors
4.05 Vacation of Office
4.06 Vacancies
4.07 Action By The Board
4.08 Canadian Majority
4.09 Meeting By Telephone
4.10 Place of Meetings
4.11 Calling of Meetings
4.12 Notice of Meeting
4.13 First Meeting Of New Board
4.14 Adjourned Meeting
<PAGE>
4.15 Regular Meetings
4.16 Chairman
4.17 Votes To Govern
4.18 Conflict of Interest
4.19 Remuneration And Expenses
5 COMMITTEES
5.01 Committee Of Directors
5.02 Transaction Of Business
5.03 Advisory Committees
5.04 Procedures
6 OFFICERS
6.01 Appointment
6.02 Chairman Of The Board
6.03 Managing Director
6.04 President
6.05 Vice-President
6.06 Secretary
6.07 Treasurer
6.08 Powers and Duties Of Other Officers
6.09 Variation Of Powers And Duties
6.10 Term Of Office
6.11 Terms Of Employment And Remuneration
6.12 Conflict of Interest
6.13 Agents and Attorneys
6.14 Fidelity Bonds
7 PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 Limitation Of Liability
7.02 Indemnity
7.03 Insurance
8 SHARES
8.01 Allotment
8.02 Commissions
8.03 Registration Of Transfer
8.04 Transfer Agents And Registrars
8.05 Lien For Indebtedness
8.06 Non-Recognition Of Trusts
8.07 Share Certificates
8.08 Replacement Of Share Certificates
8.09 Joint Shareholders
8.10 Deceased Shareholders
9 DIVIDENDS AND RIGHTS
<PAGE>
9.01 Dividends
9.02 Dividend Cheques
9.03 Non-Receipt Of Cheques
9.04 Record Date For Dividends And Rights
9.05 Unclaimed Dividends
save as aforesaid, words and expressions defined in the Act have the same
meanings when used herein; and
words importing the singular number include the plural and vice versa; words
importing gender include the masculine, feminine and neuter genders, and words
importing persons include individuals, bodies corporate, partnerships, trusts
and unincorporated organizations.
PART 2
BUSINESS OF THE CORPORATION
---------------------------
2.01 Registered Office - The registered office of the Corporation shall be at
------------------
the place within Canada from time to time specified in the Articles and at such
location therein as the Board may from time to time determine.
2.02 Corporate Seal - Until changed by the Board, the corporate seal of the
---------------
Corporation shall be in the form impressed hereon.
2.03 Financial Year - Until changed by the Board, the financial year of the
---------------
Corporation shall end on the last day of December of each and every year.
2.04 Execution Of Instruments - The corporate seal of the Corporation shall not
------------------------
be affixed to any instrument except in the presence of the following persons;
and deeds, transfers, assignments, contracts, obligations, certificates and
other instruments may be signed on behalf of the Corporation by the following
persons:
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President, the managing
Director, a Director and a Vice-President together with one of the
Secretary, the Treasurer, the Secretary-Treasurer, an Assistant
Secretary, an Assistant Treasurer and an Assistant
Secretary-Treasurer; or
(iii) such person or persons as the Directors may from time to time by
resolution appoint, and the said Directors, Officers, person or
persons in whose presence the seal is so affixed to an instrument,
shall sign such instrument. For the purpose of
<PAGE>
certifying under seal true copies of any document or resolution, the seal may be
affixed in the presence of any one of the foregoing persons.
2.05 Banking Agreements - The banking business of the Corporation including,
-------------------
without limitation, the borrowing of money and the giving of security therefor,
shall be transacted with such banks, trust companies or other bodies corporate
or organizations as may from time to time be designated by or under the
authority of the Board. Such banking business or any part thereof will be
transacted under such agreements, instructions and delegations of powers as the
Board may from time to time prescribe and authorize.
2.06 Voting Rights In Other Bodies Corporate - The signing Officers of the
------------------------------------------
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the Officers executing such proxies or arranging for the
issuance of voting certificates or such other evidence of the right to exercise
such voting rights. In addition, the Board may from time to time direct the
manner in which and the person or persons by whom any particular voting rights
or class of voting rights may or shall be exercised.
PART 3
BORROWING AND SECURITTES
------------------------
3.01 Borrowing Power - Without limiting the borrowing powers of the Corporation
---------------
as set forth in the Act, the Board may from time to time:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured;
(c) charge, mortgage, hypothecate, pledge or otherwise create a security
interest in all or any currently owned or subsequently acquired real
or personal, movable or immovable property of the Corporation,
including book debts, rights, powers, franchises and undertakings, to
secure any such bonds, debentures notes or other evidences of
indebtedness or guarantee or any other present or future indebtedness
or liability of the Corporation: and
(d) to the extent permitted by the AM give a guarantee on behalf of the
Corporation to secure performance of any present or future
indebtedness, liabilities, or obligation of any person.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
<PAGE>
3.02 Delegation - The Board may from time to time delegate to such one or more
----------
of the Directors and Officers of the Corporation as may be designated by the
Board all or any of the powers conferred on the Board by section 3.01 or by the
Act to such extent and in such manner as the Board shall determine at the time
of each such delegation
PART 4
DIRECTORS
---------
4.01 Number Of Directors And Quorum - Until changed in accordance with the Act,
------------------------------
the Board shall consist of not fewer than one (1) and not more than ten (10)
Directors. Subject to section 4.08 and the provisions contained in this section,
the quorum for the transaction of business at any meeting of the Board shall
consist of a majority of Directors or such greater or lesser number of Directors
as the Board may from time to time determine. If, within half an hour from the
time appointed for the meeting of the Board, a quorum is not present, the
meeting will stand adjourned to the same day in the next week, at the same time
and place, and, if at the adjourned meeting a quorum is not present within 30
minutes from the time appointed for the meeting, the Director or Directors
present will be a quorum.
4.02 Qualification - No person will be qualified for election as a Director if
-------------
he is less than 18 years of age; if he is of unsound mind and has been so found
by a court in Canada or elsewhere; if he is not an individual; or if he has the
status of a bankrupt. A Director need not be a Shareholder. A majority of the
Directors shall be resident Canadians unless the Corporation is a holding
Corporation as defined in the Act.
4.03 Election And Term - The election of Directors shall take place at the first
-----------------
meeting of Shareholders and at each annual meeting of Shareholders and all the
Directors then in office shall retire but, if qualified, shall be eligible for
re-election. The number of Directors to be elected at any such meeting shall if
a maximum and a minimum number of Directors is authorized, be the number of
Directors then in office unless the Directors or the Shareholders otherwise
determine or shall, if a fixed number of Directors is authorized, be such fixed
number. The election shall be by resolution. If an election of Directors is not
held at the proper time, the incumbent Directors shall continue in office until
their successors are elected.
4.04 Removal Of Directors - Subject to the provisions of the Act, the
----------------------
Shareholders may by resolution passed at a meeting specifically called for such
purpose, remove any Director from office and the vacancy created by such removal
may be filled at the same meeting, failing which, it may be filled by the
Directors.
4.05 Vacation Of Office - A Director ceases to hold office when he dies; he is
------------------
removed from office by the Shareholders; he ceases to be qualified for election
as a Director-, or his written resignation is sent or delivered to the
Corporation, or, if a time is specified in such resignation, at the time so
specified, whichever
is later.
<PAGE>
4.06 Vacancies - Subject to the Act, a quorum of the Board may fill a vacancy in
---------
the Board, except a vacancy resulting from an increase in the minimum number of
Directors or from a failure of the Shareholders to elect the minimum number of
Directors. In the absence of a quorum of the Board, or if the vacancy has arisen
from a failure of the Shareholders to elect the minimum number of Directors, the
Board shall forthwith call a special meeting of Shareholders to fill the
vacancy. If the Board fails to call such meeting or if there are no Directors
then in office, any Shareholder may call the meeting.
4.07 Action By The Board - Subject to any unanimous Shareholder agreement, the
-------------------
Board shall manage the business and affairs of the Corporation. Subject to
sections 4.08 and 4.09, the powers of the Board may be exercised by resolution
passed at a meeting at which a quorum is present or by resolution in writing
signed by all the Directors entitled to vote on that resolution at a meeting of
the Board. Where there is a vacancy in the Board, the remaining Directors may
exercise all the powers of the Board, so long as a quorum remains in office.
Where the Corporation has only one Director, that Director may constitute a
meeting.
4.08 Canadian Majority - If the Corporation is not a holding corporation as
------------------
defined in the Act, the Board shall not transact business at a meeting, other
than filling a vacancy in the Board, unless a majority of the Directors present
are resident Canadians, except where:
(a) a resident Canadian Director who is unable to be present approves in
writing or by telephone or other communication facilities the business
transacted at the meeting; and
(b) a majority of resident Canadians would have been present had that
Director been present at the meeting.
4.09 Meeting By Telephone - Except in the case of an emergency meeting referred
--------------------
to in section 4.12 hereto, if all the Directors of the Corporation consent, a
Director may participate in a meeting of the Board or of a committee of the
Board by means of such telephone or other communications facilities as permit
all persons participating in the meeting to hear each other, and a Director
participating in such a meeting by such means is deemed to be present at that
meeting. Any such consent shall be effective whether given before or after the
meeting to which it relates and may be given with respect to all meetings of the
Board and of committees of the Board. In the event of an emergency meeting
referred to in section 4.12 hereto, a Director may, without the unanimous
consent of the Directors, participate in a meeting of the Board or of a
committee of the Board by means of such telephone or other communications
facilities as permit all persons participating in the meeting to hear each
other, and a Director participating in such a meeting by such means is deemed to
be present at that meeting.
4.10 Place Of Meetings - Meetings of the Board may be held at any place in or
------------------
outside Canada.
<PAGE>
4.11 Calling of Meetings - Meetings of the Board shall be held from time to time
-------------------
at such time and at such place as the Board, the Chairman of the Board, the
managing Director, the President or any two Directors may
determine.
4.12 Notice Of Meetings - Notice of the time and place of each meeting of the
-------------------
Board shall be given in the manner provided in section 12.01 to each Director
not less than one week before the time when the meeting is to be held save and
except for when an emergency meeting of the Board is required, in which case
notice of the time and place of such emergency meeting of the Board shall be
given to each Director not less am forty-eight (48) hours before the time when
the emergency meeting is to be held. A notice of a meeting of Directors need not
specify the purpose of or the business to be transacted at the meeting except
where the Act requires such purpose or business to be specified, including, if
required by the Act, any proposal to:
(a) submit to the Shareholders any question or matter requiring approval
of the Shareholders,
(b) fill a vacancy among the Directors or in the office of Auditor',
(c) issue securities:
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the
Corporation;
(f) pay a commission for the sale of shares of the Corporation;
(g) approve a management proxy circular,
(h) approve a take-over bid circular or Directors' circular-,
(i) approve annual financial statements; or
(j) adopt amend or repeal by-laws.
4.13 First Meeting Of New Board - Provided a quorum of Directors is present,
---------------------------
each newly elected Board may without notice hold its first meeting immediately
following the meeting of Shareholders at which such Board is elected.
4.14 Adjourned Meeting - Notice of an adjourned meeting of the Board is not
------------------
required if the time and place of the adjourned meeting is announced at the
original meeting.
4.15 Regular Meetings - The Board may appoint a day or days in any month or
-----------------
months for regular meetings of the Board at a place and hour to be named. A copy
of any resolution of the Board fixing the place and time of such regular
meetings shall be sent to each Director forthwith
<PAGE>
after being passed, but no other notice shall be required for any such regular
meeting except where the Act requires the purpose thereof or the business to be
transacted thereat to be specified.
4.16 Chairman - The Chairman of any meeting of the Board shall be the first
--------
mentioned of such of the following Officers as have been appointed and who is a
Director and is present at the meeting: Chairman of the Board, Managing
Director, President or a Vice-President. If no such Officer is present, the
Directors present shall choose one of their number to be Chairman.
4.17 Votes To Govern - At all meetings of the Board every question shall be
---------------
decided by the majority of the votes cast on the question. In case of an
equality of votes the Chairman of the meeting shall be entitled to a second or
casting vote.
4.18 Conflict Of Interest - A Director or Officer who is a party to, or who is a
--------------------
Director or Officer of or has a material interest in a person who is a party to,
a material contract or proposed material contract with the Corporation shall
disclose the nature and extent of his interest at the time and in the manner
provided by the Act. Any such contract or proposed contract shall be referred to
the Board or Shareholders for approval even if such contract is one that in the
ordinary course of the Corporation's business would not require approval by the
Board or Shareholders, and a Director interested in a contract so referred to
the Board shall not vote on any resolution to approve the same except as
provided by the Act.
4.19 Remuneration And Expenses - Subject to an unanimous Shareholder agreement,
-------------------------
the Directors shall be paid such remuneration for their services as the Board
may from time to time determine. The Directors shall also be entitled to be
reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the Board or a committee thereof. Nothing contained herein
shall preclude any Director from serving the Corporation in any other capacity
and receiving remuneration therefor.
PART 5
COMMITTEES
----------
5.01 Committee Of Directors - The Board may appoint a committee of Directors,
-----------------------
however designated, and delegate to such committee any of the powers of the
Board except those which pertain to items which, under the Act, a committee of
Directors has no authority to exercise. A majority of the members of such
committee shall be resident Canadians.
5.02 Transaction Of Business - Subject to the provisions of section 4.09, the
------------------------
powers of a committee of Directors may be exercised by a meeting of the
committee at which a quorum is present or by resolution in writing signed by all
members of such committee who would have been entitled to vote on that
resolution at a meeting of the committee. Meetings of such committee may be held
at any place in or outside of Canada.
<PAGE>
5.03 Advisory Committees - The Board may from time to time appoint such other
--------------------
committees as it may deem advisable, but the functions of any such other
committees shall be advisory only.
5.04 Procedure - Unless otherwise determined by the Board, each committee shall
---------
have power to fix its quorum at not less than a majority of its members, to
elect its Chairman and to regulate its procedure.
PART 6
OFFICERS
--------
6.01 Appointment - Subject to any unanimous Shareholder agreement, the Board may
-----------
from time to time appoint a President, one or more Vice-President(s) (to which
title may be added words indicating seniority or function), a Secretary, a
Treasurer and such other Officers as the Board may determine, including one or
more Assistants to any of the Officers so appointed. The Board may specify the
duties of and, in accordance with this by-law and subject to the provisions of
the Act, delegate to such Officers powers to manage the business and affairs of
the Corporation. Subject to sections 6.02 and 6.03, an Officer may, but need not
be, a Director and one person may hold more than one office.
6.02 Chairman Of The Board - The Board may from time to time also appoint a
----------------------
Chairman of the Board who shall be a Director. If appointed, the Board may
assign to him any of the powers and duties that are by any provisions of this
by-law assigned to the Managing Director or to the President; and he shall,
subject to the provisions of the Act, have such other powers and duties as the
Board may specify. During the absence or disability of the Chairman of the
Board, his duties shall be performed and his powers exercised firstly by the
Managing Director, if any, or secondly by the President.
6.03 Managing Director - The Board may from time to time also appoint a Managing
-----------------
Director who shall be a resident Canadian and a Director. If appointed, he shall
have general supervision of the business and affairs of the Corporation; and he
shall, subject to the provisions of the AM have such other powers and duties as
the Board may specify. During the absence or disability of the President, or if
no President has been appointed, the Managing Director shall also have the
powers and duties of that office.
6.04 President - If appointed, the President shall have general supervision of
---------
the business of the corporation; and he shall have such other powers and duties
as the Board may specify. During the absence or disability of the Managing
Director, or if no Managing Director has been appointed, the President shall
also have the powers and duties of that office.
6.05 Vice-President - A Vice-President shall have such powers and duties as the
--------------
Board may specify.
<PAGE>
6.06 Secretary - The Secretary shall attend and be the Secretary of all meetings
---------
of the Board, Shareholders and committees of the Board and shall enter or cause
to be entered in records kept for that purpose minutes of all proceedings
thereat; he shall give or cause to be given, as and when instructed, all notices
to Shareholders, Directors, Officers, Auditors and members of committees of the
Board; he shall be the custodian of the stamp or mechanical device generally
used for affixing the corporate seal of the Corporation and of all books,
papers, records, documents and instruments belonging to the Corporation, except
w ' hen some other Officer or agent has been appointed for that purpose; and he
shall have such other powers and duties as the Board may specify.
6.07 Treasurer - The Treasurer shall keep proper accounting records in
---------
compliance with the Act and shall be responsible for the deposit of money, the
safekeeping of securities and the disbursement of the funds of the Corporation;
he shall render to the Board whenever required an account of all his
transactions as Treasurer and of the financial position of the Corporation; and
he shall have such other powers and duties as the Board may specify.
6.08 Powers and Duties Of Other Officers - The powers and duties of all other
-------------------------------------
Officers shall be such as the terms of their engagement call for or as the Board
may specify. Any of the powers and duties of an Officer to whom an Assistant has
been appointed may be exercised and performed by such an Assistant, unless the
Board otherwise directs.
6.09 Variation Of Powers And Duties - The Board may from time to time and
----------------------------------
subject to the provisions of the AM vary, add to or limit the powers and duties
of any Officer.
6.10 Term Of Office - The Board, in its discretion, may remove any Officer of
--------------
the Corporation, without prejudice to such Officer's rights under any employment
contract. Otherwise each Officer appointed by the Board shall hold office until
his successor is appointed, or until his earlier termination.
6.11 Terms Of Employment and Remuneration - The terms of employment and the
--------------------------------------
remuneration of an Officer appointed by the Board shall be settled by it from
time to time.
6.12 Conflict Of Interest - An Officer shall disclose his interest in any
----------------------
material contract or proposed material contract with the Corporation in
accordance with section 4.18.
6.13 Agents And Attorneys - The Board shall have power from time to time to
----------------------
appoint agents or attorneys for the Corporation in or outside Canada with such
powers of management or otherwise (including the powers to sub-delegate) as may
be thought fit.
6.14 Fidelity Bonds - The Board may require such Officers, employees and agents
--------------
of the Corporation as the Board deems advisable to furnish bonds for the
faithful discharge of their powers and duties, in the form and with the surety
as the Board may from time to time determine.
<PAGE>
PART 7
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
--------------------------------------------
7.01 Limitation Of Liability - Every Director or Officer of the Corporation in
-----------------------
exercising his powers and discharging his duties shall act honestly and in good
faith with a view to the best interests of the Corporation and exercise care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. Subject to the foregoing, no Director or Officer will
be liable for the acts, receipts, neglects or defaults of any other Director,
Officer or employee, or for joining in any receipt or other act for conformity,
or for any loss, damage or expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired for or on behalf
of the Corporation, or for the insufficiency or deficiency of any security in or
upon which any of the monies of the Corporation shall be invested, or for loss
or damage arising from the bankruptcy, insolvency or tortious acts of any person
with whom any of the monies, securities or effects of the Corporation shall be
deposited, or for any loss occasioned by any error of judgment or oversight on
his part, or for any other loss, damage or misfortune whatever which shall
happen in the execution of his duties of his office or in relation thereto;
provided that nothing herein shall relieve any Director or Officer from the duty
to act in accordance with the provisions of the Act and the regulations
thereunder or from liability for ant breach thereof.
7.02 Indemnity - Subject to the limitations contained in the Act, the
---------
Corporation shall indemnify a Director or Officer, a former Director or Officer,
or a person who acts or acted at the Corporation's request as a Director or
Officer of a body corporate of which the Corporation is or was a Shareholder or
creditor, and his heirs and legal representatives, against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a Director or Officer of the Corporation or such body
corporate, if:
(a) he acted honestly and in good faith and with a view to the best
interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he has reasonable grounds for
believing that his conduct was lawful.
The Corporation shall also indemnify such person in such other circumstances as
the Act permits or requires.
7.03 Insurance - The Corporation may purchase and maintain insurance for the
---------
benefit of any person referred to in section 7.02 against such liabilities and
in such amounts as the Board may from time to time determine.
<PAGE>
PART 8
SHARES
------
8.01 Allotment - The Board may from time to time allot or grant options to
---------
purchase the whole or any part of the authorized and unissued shares of the
Corporation at such times and to such persons and for such consideration as the
Board shall determine, provided that no share shall be issued until it is fully
paid as provided by the Act.
8.02 Commissions - The Board may from time to time authorize the Corporation to
-----------
pay a commission to any person in consideration of his purchasing or agreeing to
purchase shares of the Corporation, whether from the Corporation or from any
other person, or procuring or agreeing to procure purchasers for any such
shares.
8.03 Registration Of Transfers - Subject to the provisions of the Act, no
---------------------------
transfer of shares shall be registered in a securities register except upon
presentation of the certificate representing such shares with an endorsement
which complied with the Act, made thereon or delivered therewith duly executed
by an appropriate person as provided by the Act, together with such reasonable
assurance that the endorsement is genuine and effective as the Board may from
time to time prescribe, upon payment of all applicable taxes and any fees
prescribed by the Board, upon compliance with such restrictions on transfer, if
any, as are authorized by the articles and upon satisfaction of any lien
referred to in section 8.05.
8.04 Transfer Agents And Registrars - The Board may from time to time appoint
--------------------------------
one or more agents to maintain, in respect of each class of securities of the
Corporation issued by it in a registered form, a central securities register and
one or more branch securities registers. Such a person may be designated as
Transfer Agent or registrar according to his functions and one person may be
designated both registrar and Transfer Agent. The Board may at any time
terminate such appointment
8.05 Lien For Indebtedness - If the articles provide that the Corporation shall
---------------------
have a lien on shares registered in the name of a Shareholder indebted to the
Corporation, such lien may be enforced, subject to any other provision of the
articles and to any unanimous Shareholder agreement, by the sale of the shares
thereby affected or by any other action, suit, remedy or proceeding authorized
or permitted by law or by equity and, pending such enforcement, the Corporation
may refuse to register a transfer of the whole or any part of such shares.
8.06 Non-recognition Of Trusts - Subject to the provisions of the Act, the
--------------------------
Corporation may treat as absolute owner of any share the person in whose name
the share is registered in the securities register as if that person had full
legal capacity and authority to exercise all rights of ownership, irrespective
of any indication to the contrary through knowledge or notice or description in
the Corporation's records or on the share certificate.
8.07 Share Certificates - Every holder of one or more shares of the Corporation
-------------------
shall be entitled, at his option, to a share certificate, or to a
nontransferable written acknowledgment of
<PAGE>
his right to obtain a share certificate, stating the number and class or series
of shares held by him as shown on the securities register. Share certificates
and acknowledgments of a Shareholder's right to a share certificate,
respectively, shall be in such form as the Board shall from time to time
approve. Any share certificate shall be signed in accordance with section 2.04
and need not be under the corporate seal; provided that, unless the Board
otherwise determines, certificates representing shares in respect of which a
transfer agent and/or registrar has been appointed shall not be valid unless
countersigned by or on behalf of such transfer agent and/or registrar. The
signature of one of the signing Officers or, in the case of share certificates
which are not valid unless countersigned by or on behalf of a transfer agent
and/or registrar, the signatures of both signing Officers, may be printed or
mechanically reproduced in facsimile upon share certificates any every such
facsimile signature shall for all purposes be deemed to be the signature of the
Officer whose signature it reproduces and shall be binding upon the Corporation.
A share certificate executed as aforesaid shall be valid notwithstanding that
one or both of the Officers whose facsimile signature appears thereon no longer
holds office at the date of issue of the certificate.
8.08 Replacement Of Share Certificates - The Board or any Officer or agent
-----------------------------------
designated by the Board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that
has been mutilated or in substitution for a share certificate claimed to have
been lost, destroyed or wrongfully taken upon payment of such fee, not exceeding
Three Dollars ($3.00), and on such terms as to indemnity, reimbursement of
expenses and evidence of loss and of title as the Board may from time to time
prescribe, whether generally or in any particular case.
8.09 Joint Shareholders - If two or more persons are registered as joint holders
------------------
of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons may
give effectual receipts for the certificate issued in respect thereof or for any
dividend, bonus, return of capital or other money payable or warrant issuable in
respect of such share.
8.10 Deceased Shareholders - In the event of the death of a holder, or of one of
---------------------
the joint holders, of any share, the Corporation shall not be required to make
any entry in the securities register in respect thereof or to make payment of
any dividends thereon except upon production of all such documents as may be
required by law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.
PART 9
DIVIDENDS AND RIGHTS
--------------------
9.01 Dividends - Subject to the provisions of the Act, the Board may from time
---------
to time declare dividends payable to the Shareholders according to their
respective rights and interest in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation.
<PAGE>
9.02 Dividend Cheques - A dividend payable in cash shall be paid by cheque drawn
----------------
on the Corporation's bankers or one of them to the order of each registered
holder of shares of the class or series in respect of which it has been declared
and mailed by prepaid ordinary mail to such registered holder at his recorded
address, unless such holder otherwise directs. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct, be made payable to the
order of all of such joint holders and mailed to them at their recorded address.
The mailing of such cheque as aforesaid, unless the same is not paid on due
presentation, shall satisfy and discharge the liability for the dividend to the
extent of the sum represented thereby plus the amount of any tax which the
Corporation is required to and does withhold.
9.03 Non-Receipt Of Cheques - In the event of non-receipt of any dividend cheque
----------------------
by the person to whom it was sent as aforesaid, the Corporation shall issue to
such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of non-receipt and of title as
the Board may from time to time prescribe, whether generally or in any
particular case.
9.04 Record Date For Dividends And Rights - The Board may fix in advance a date,
------------------------------------
preceding by not more than Fifty (50) days, the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of the right
to subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities, and notice of any record
date shall be given not less than Fourteen (14) days before such record date, in
the manner provided by the Act. If no record date is so fixed, the record date
for the determination of the persons entitled to receive payment of any dividend
or to exercise the right to subscribe for securities of the Corporation will be
at the close of business on the day on which the resolution relating to such
dividend or right to subscribe is passed by the Board.
9.05 Unclaimed Dividends - Any dividend unclaimed after a period of Six (6)
--------------------
years from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
PART 10
MEETINGS OF SHAREHOLDERS
------------------------
10.01 Annual Meetings - The Annual Meeting of Shareholders shall be held at such
---------------
time in each year and, subject to section 10.03, at such place as the Board, the
Chairman of the Board, the Managing Director or the President may from time to
time determine, for the purpose of considering the financial statements and
reports required by the Act to be placed before the annual meeting, electing
Directors, appointing an Auditor and for the transaction of such other business
as may properly be brought before the meeting.
10.02 Special Meetings - The Board, the Chairman of the Board, the Managing
-----------------
Director or the President shall have power to call a special meeting of
Shareholders at any time.
<PAGE>
10.03 Place Of Meetings - Meetings of Shareholders shall be at the registered
-----------------
office of the Corporation or elsewhere in the municipality in which the
registered office is situated or, if the Board shall so determine, at some other
place in Canada or, if all the Shareholders entitled to vote at the meeting so
agree, at some place outside Canada.
10.04 Notice Of Meeting - Notice of the time and place of each meeting of
-------------------
Shareholders shall be given in the manner provided in section 12.01 not less
than Twenty-one (21) nor more than Fifty (50) days before the date of the
meeting to each Director, to the Auditor and to each Shareholder who, at the
close of the business on the record date for notice, if any, is entered in the
securities register as the holder of one or more shares carrying the right to
vote at the meeting. Notice of a meeting of Shareholders called for any purpose
other than consideration of the financial statements and Auditor's report,
election of Directors and reappointment of the incumbent Auditor shall state the
nature of such business in sufficient detail to permit the Shareholder to form a
reasoned judgment thereon and shall state the text of any special resolution to
be submitted to the meeting. A Shareholder may in any manner waive notice of or
otherwise consent to a meeting of Shareholders.
10.05 List Of Shareholders Entitled To Notice - For every meeting of
---------------------------------------------
Shareholders, the Corporation shall prepare a list of Shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each Shareholder entitled to vote at the meeting. If a
record date for the meeting is fixed pursuant to section 10.06, the Shareholders
listed shall be those registered at the close of business on such record date.
If no record date is fixed, the Shareholders listed shall be those registered at
the close of business on the day immediately preceding the day on which notice
of the meeting is given, or where no such notice is given, the day on which the
meeting is held. The list shall be available for examination by any Shareholder
during usual business hours at the registered office of the Corporation or at
the place where the central securities register is maintained and at the meeting
for which the list was prepared.
10.06 Record Date For Notice - The Board may fix in advance a date, preceding
-----------------------
the date of any meeting of Shareholders by not more than Fifty (50) days and not
less than Twenty-one (21) days, as a record date for the determination of the
Shareholders entitled to notice of the meeting, and notice of any such record
date shall be given not less than Fourteen (14) days before such record date by
newspaper advertisement in the manner provided in the Act. If no record date is
so fixed, the record date for the determination of Shareholders entitled to
notice of the meeting shall be at the close of business on the day immediately
preceding the day on which the notice is. given, or if no notice is given, the
day on which the meeting is held.
10.07 Meetings Without Notice - A meeting of Shareholders may be held without
------------------------
notice at any time and place permitted by the Act (a) if all the Shareholders
entitled to vote thereat are present in person or represented by proxy or if
those not present or represented by proxy waive notice of or otherwise consent
to such meeting being held, and (b) if the Auditors and the Directors are
present or waive notice of or otherwise consent to such meeting being held; so
long as such Shareholders, Auditors or Directors are not attending for the
express purpose of objecting to the
<PAGE>
transaction of any business on the grounds that the meeting is not lawfully
called. At such a meeting any business may be transacted which the Corporation
at a meeting of Shareholders may transact If the meeting is held at a place
outside Canada, Shareholders not present or represented by proxy, but who have
waived notice of or otherwise consented to such meeting, shall also be deemed to
have consented to the meeting being held at such place.
10.08 Chairman, Secretary And Scrutineers - The Chairman of any meeting of
--------------------------------------
Shareholders shall be the first mentioned of such of the following Officers as
have been appointed and who is present at the meeting: President, Managing
Director, Chairman of the Board, or a Vice-President who is a Shareholder. If no
such Officer is present and willing to act as Chairman at the time fixed for
holding the meeting, the persons present and entitled to vote shall choose one
of their number or some other person present to be Chairman. If the Secretary of
the Corporation is absent, the Chairman shall appoint some other person, who
need not be a Shareholder, to act as Secretary of the meeting. If desired, one
or more scrutineers, who need not be Shareholders, may be appointed by a
resolution or by the Chairman with the consent of the meeting.
10.09 Persons Entitled To Be Present - The only persons entitled to be present
-------------------------------
at a meeting of Shareholders shall be those entitled to vote thereat, the
Directors and Auditors of the Corporation and others who, although not entitled
to vote, are entitled or required under any provision of the Act or the articles
or by4aws to be present at the meeting. Any other person may be admitted only on
the invitation of the Chairman of the meeting or with the consent of the
meeting.
10.10 Quorum - A quorum for the transaction of business at any meeting of
------
Shareholders shall be two persons present in person, each being a Shareholder
entitled to vote thereat or a duly appointed Proxyholder for an absent
Shareholder so entitled. If a quorum is present at the opening of any meeting of
Shareholders, the Shareholders present or represented by proxy may proceed with
the business of the meeting notwithstanding that a quorum is not present
throughout the meeting. If a quorum. is not present at the opening of any
meeting of Shareholders, the Shareholders present or represented by proxy may
adjourn the meeting to a fixed time and place but may not transact any other
business.
10.11 Right To Vote - Subject to the provisions of the Act as to authorized
-------------
representatives of any other body corporate or association, at any meeting of
Shareholders for which the Corporation has prepared the list referred to in
section 10.05, every person who is named in such list shall be entitled to vote
the shares shown opposite his name except to the extent that, where the
Corporation has fixed a record date in respect of such meeting pursuant to
section 10.06, such person has transferred any of his shares after such record
date and the transferee, having produced properly endorsed certificates
evidencing such shares or having otherwise established that he owns such shares,
has demand not later than Ten (10) days before the meeting that his name be
included in such list. In any such case, the transferee shall be entitled to
vote the transferred shares at the meeting. At any meeting of Shareholders for
which the Corporation has not prepared the list referred to in section 10.05,
every person shall be entitled to vote at the meeting who at the time is entered
in the securities register as the holder of one or more shares carrying the
right to vote at such meeting.
<PAGE>
10.12 Proxies - Every Shareholder entitled to vote at a meeting of Shareholders
-------
may appoint a proxyholder, or one or more alternate proxyholders, who need not
be Shareholders, to attend and act at the meeting in the manner and to the
extent authorized and with the authority conferred by the proxy. A proxy shall
be in writing executed by the Shareholder or his attorney and shall conform to
the requirements of the Act. In the case of a corporate Shareholder or an
association, such Shareholders may authorized by resolution of its Directors or
governing bodies, an individual to represent it at a meeting of Shareholder and
such individual may exercise on the Shareholder's behalf, all the powers it
could exercise if it were an individual Shareholder. The authority of such an
individual shall be established by depositing with the Corporation, a certified
copy of such resolution, or in such other manner as may be satisfactory to the
Secretary of the Corporation or the Chairman of the Meeting. Any such
proxyholder or representation need not be a Shareholder.
10.13 Time For Deposit Of Proxies - The Board may specify in a notice calling a
---------------------------
meeting of Shareholders a time, preceding the time of such meeting by not more
than Forty-eight (48) hours exclusive of nonbusiness days, before which time
proxies to be used at such meeting must be deposited. A proxy shall be acted
upon only if, prior to the time so specified, it shall have been deposited with
the Corporation or an agent thereof specified in such notice or, if no such time
is specified in such notice, unless it has been received by the Secretary of the
Corporation or by the Chairman of the meeting or any adjournment thereof prior
to the time of voting.
10.14 Joint Shareholders - If two or more persons hold shares jointly, any one
-------------------
of them present in person or represented by proxy at a meeting of Shareholders
may, in the absence of the other or others, vote the shares; but if two or more
of those persons are present in person or represented by proxy and vote, they
shall vote as one the shares jointly held by them.
10.15 Votes To Govern - At a meeting of Shareholders every question shall,
---------------
unless otherwise required by the articles or by-laws or by law, be determined by
a majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a poll, the Chairman of the meeting shall be
entitled to a second or casting vote.
10.16 Show Of Hands - Subject to the provisions of the Act, any question at a
-------------
meeting of Shareholders shall be decided by a show of hands unless a ballot
thereon is required or demanded as hereinafter provided. Upon a show of hands
every person who is present and entitled to vote shall have one vote. Whenever a
vote by show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the Chairman of the meeting
that the vote upon the question has been carried or carried by a particular
majority or not carried and an entry to that effect in the minutes of the
meeting shall be prima facie evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against any resolution or other
proceeding in respect of the said question, and the result of the vote so taken
shall be the decision of the Shareholders upon the question.
10.17 Ballots - On any question proposed for consideration at a meeting of
-------
Shareholders, and whether or not a show of hands has been taken thereon, any
Shareholder or proxyholder entitled to vote at the meeting may require or demand
a ballot. A ballot so required or demanded shall be
<PAGE>
taken in such manner as the Chairman shall direct. A requirement or demand for a
ballot may be withdrawn at any time prior to the taking of the ballot. If a
ballot is taken each person present shall be entitled, in respect of the shares
which he is entitled to vote at the meeting upon the question, to that number of
votes provided by the Act or the articles, and the result of the ballot so taken
shall be the decision of the Shareholders upon the said question.
10.18 Adjournment - If a meeting of Shareholders is adjourned for less than
-----------
Thirty (30) days, it shall not be necessary to give notice of the adjourned
meeting, other than by announcement at the earliest meeting that it is
adjourned. If a meeting of Shareholders is adjourned by one or more adjournments
for an aggregate of Thirty (30) days or more, notice of the adjourned meeting
shall be given as for an original meeting.
10.19 Resolution In Writing - A resolution in writing signed by all the
-----------------------
Shareholders entitled to vote on that resolution at a meeting of Shareholders is
as valid as if it had been passed at a meeting of the Shareholders unless a
written statement with respect to the subject matter of the resolution is
submitted by a Director or the Auditors in accordance with the Act.
10.20 Only One Shareholder - Where the Corporation has only one Shareholder or
---------------------
only one holder of any class or series of shares, the Shareholder present in
person or by proxy constitutes a meeting.
PART 11
DIVISIONS AND DEPARTMENTS
-------------------------
11.01 Creation And Consolidation Of Divisions - The Board may cause the business
---------------------------------------
and operations of the Corporation or any part thereof, to be divided or to be
segregated into one or more divisions upon such basis, including without
limitation, character or type of operation, geographical territory, product
manufactured or service rendered, as the Board may consider appropriate in each
case. The Board may also cause the business and operations of any such division
to be further divided into sub-units and the business and operations of any such
divisions or sub-units to be consolidated upon such basis as the Board may
consider appropriate in each case.
11.02 Name Of Division - Any division or its sub-units may be designated by such
----------------
name as the Board may from time to time determine and may transact business
under such name, provided that the Corporation shall set out its name in legible
characters in all contracts, invoices, negotiable instruments and orders for
goods and services issued or made by or on behalf of the Corporation.
11.03 Officers Of Divisions - From time to time the Board, or if authorized by
---------------------
the Board, the President, may appoint one or more Officers for any division,
prescribe their powers and duties and settle their terms of employment and
remuneration. The Board or, if authorized by the Board, the President, may
remove at its or his pleasure any Officer so appointed, without
<PAGE>
prejudice to such Officer's rights under any employment contract. Officers of
divisions of their sub-units shall not, as such, be Officers of the Corporation.
PART 12
NOTICES
-------
12.01 Method Of Giving Notices - Any notice (which term includes any
----------------------------
communication or document) to be given (which term includes sent delivered or
served) pursuant to the Act, the regulations thereunder, the articles, the
by-laws or otherwise to a Shareholder, Director, Officer, Auditor or member of a
committee of the Board shall be sufficiently given if delivered personally to
the person to whom it is to be given or if delivered to his recorded address or
if mailed to him at his recorded address by prepaid ordinary or air mail or it
sent to him at his recorded address by any means of prepaid transmitted or
recorded communication. A notice so delivered shall be deemed to have been given
when it is delivered personally or to the recorded address as aforesaid; a
notice so mailed shall be deemed to have been given when deposited in a post
office or public letter box; and a notice so sent by any means of transmitted or
recorded communication shall be deemed to have been given when dispatched or
delivered to the appropriate communication company or agency or its
representative for dispatch. The Secretary may change or cause to be changed the
recorded address of any Shareholder, Director, Officer, Auditor or member of a
committee of the Board in accordance with any information believed by him to be
reliable.
12.02 Notice To Joint Shareholders - If two or more persons are registered as
-----------------------------
joint holders of any share, any notice shall be addressed to all of such joint
holders but notice to one of such persons shall be sufficient notice to all of
them.
12.03 Computation Of Time - In computing the date when notice must be given
--------------------
under any provision requiring a specified number of days' notice of any meeting
or other event, the date of giving the notice will be excluded and the date of
the meeting or other event shall be included.
12.04 Undelivered Notices - If a notices given to a Shareholder pursuant to
--------------------
section 12.01 is returned on three consecutive occasions because he cannot be
found, the Corporation shall not required to give any further notices to such
Shareholder until he informs the Corporation in writing of his new address.
12.05 Omissions And Errors - The accidental omission to give any notice to any
--------------------
Shareholder, Director, Officer, Auditor or member of a committee of the Board or
the non-receipt of any notice by such person or any error in any notice not
affecting the substance thereof shall not invalidate an action taken at any
meeting held pursuant to such notice or otherwise founded thereon.
12.06 Persons Entitled By Death Or Operation Of Law - Every person who, by
-------------------------------------------------
operation of law, transfer, death of a Shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given
<PAGE>
to the Shareholder from whom he derives his title to such share prior to his
name and address being entered on the securities register (whether such notice
was given before or after the happening of the event upon which he became so
entitled) and prior to his furnishing to the Corporation the proof of authority
or evidence of his entitlement prescribed by the Act.
12.07 Waiver Of Notice - Any Shareholder (or his duly appointed proxyholder),
----------------
Director, Officer, Auditor or member of a committee of the Board may at any time
waive any notice, or waive or abridge the time for any notice, required to be
given to him under any provision of the Act, the regulations thereunder, the
articles, the by-laws or otherwise and such waiver or abridgement, whether given
before or after the meeting or other event of which notice is required to be
given, shall cure any default in the giving or in the time of such notice, as
the case may be. Any such waiver or abridgement shall be in writing except a
waiver of notice of a meeting of Shareholders or of the Board or of a committee
which may be given in arty manner.
PART 13
EFFECTIVE DATE
--------------
13.01 Effective Date - This by-law shall come into force when confirmed by the
---------------
Shareholders in accordance with the Act.
13.02 Repeal - All previous by-laws of the Corporation, except such by-laws of
------
the Corporation as have been confirmed by the issue of supplementary letters
patent, are repealed as of the coming into force of this by-law provided such
repeal shall not affect the previous operation of any by-law so repealed or
affect the validity of any act done or right, privilege, obligation or liability
acquired or incurred under or the validity of any contract or agreement made
pursuant to any such by-law prior to its repeal. All Officers and persons acting
under any by-law so repealed shall continue to act as if appointed under the
provisions of this by-law and all resolutions of the Shareholders or Board with
continuing effect passed under any repealed by-law shall continue good and valid
except to the extent inconsistent with this by-law and until amended or
repealed.
The foregoing by-law was amended by the directors of the Corporation on the
31st day of December, 1997, and was confirmed without variation by the
shareholders of the Corporation on the 30th day of June, 1998.
(Signed) Secretary
Exhibit 3.2
FORM OF SPECIAL WARRANT
iQ POWER TECHNOLOGY INC.
(Incorporated under the Canada Business Corporations Act)
NUMBER OF SPECIAL WARRANTS: RIGHT TO ACQUIRE:
___________ ______ Common Shares
VOID AFTER 4:30 P.M., PACIFIC TIME, DECEMBER 31, 1998
SPECIAL WARRANTS AT A PRICE OF US$0.25 TO ACQUIRE COMMON SHARES OF
IQ POWER TECHNOLOGY INC.
EACH SPECIAL WARRANT SHALL BE EXCHANGEABLE, FOR NO ADDITIONAL CONSIDERATION
ON OR BEFORE 4:30 P.M., PACIFIC TIME, DECEMBER 31, 1998.
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO TRANSFER RESTRICTIONS
This is to certify that, for value received
is entitled, without payment of any additional consideration, to be issued at
any time before 4:30 p.m., Pacific time, December 31, 1998, the number of common
shares of iQ Power Technology Inc. (the "Corporation") set out above, by
surrendering to iQ Power Technology Inc. at Suite 708-A, 1111 West Hastings
Street, Vancouver, British Columbia, V6E 2J3, this Warrant Certificate with a
Notice of Exercise in the form set out on the reverse side hereof duly completed
and executed. Each Special Warrant entitles the holder to receive one Common
shares.
The Special Warrants represented by this Certificate are subject to the terms
and conditions referred to on the reverse hereof. The Special Warrants may be
transferred by the Holder only in accordance with the terms and conditions of
the Special Warrants. The Special Warrants may be exercised only at the offices
iQ Power Technology Inc. at Suite 708-A, 1111 West Hastings Street, Vancouver,
British Columbia, V6E 2J3.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be
executed.
DATED at Vancouver, British Columbia as of the ____ day of
_______________________, 199__.
iQ POWER TECHNOLOGY INC.
Per:
- ----------------------------------------------------------
RUSSELL FRENCH, DIRECTOR
<PAGE>
TERMS AND CONDITIONS ATTACHED TO THE 1998 SPECIAL WARRANTS ISSUED BY IQ POWER
TECHNOLOGY INC.
ARTICLE ONE - INTERPRETATION
- ----------------------------
Section 1.01 - Definitions
Unless the subject matter or context is inconsistent herewith the terms and
conditions herein referred to shall bear the following meanings:
(a) "Company" means iQ Power Technology Inc. until a successor corporation is
established in the manner prescribed in Article Seven, and thereafter
"Company" shall mean such successor corporation.
(b) "Company's Auditors" means an independent firm of accountants duly
appointed as Auditors of the Company.
(c) "Director" means a Director of the Company for the time being, and
reference, without more, to action by the Directors means action by the
Directors of the Company as a Board, or whenever duly empowered, action by
an executive committee of the Board.
(d) "herein", "hereby" and similar expressions refer to these Terms and
Conditions; and the expression "Article" and "Section" followed by a number
refer to the specified Article or Section of these Terms and Conditions.
(e) "person" means an individual, corporation, partnership, trustee or any
unincorporated organization and words importing persons having a similar
meaning.
(f) "shares" means the common shares in the capital of the Company as
constituted at the date hereof and any shares resulting from any
subdivision or consolidation of the shares;
(g) "Warrants" means the Special Warrants of the Company issued and presently
authorized, as set out in Section 2.01 hereof and for the time being
outstanding.
(h) "Warrant Holders" or "Holders" means the bearers of the Warrants for the
time being.
Words importing the singular number include the plural and vice versa and words
importing the masculine gender include the feminine and neuter genders.
Section 1.02 - Interpretation Not Affected by Headings
The division of these Terms and Conditions into Articles and Sections, and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation thereof.
Section 1.03 - Applicable Law
The rights and restrictions attached to the Warrants shall be construed in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable thereto and shall be treated in all respects as British
Columbia contracts.
ARTICLE TWO - ISSUE OF WARRANTS
- -------------------------------
Section 2.01 - Issue of 2,300,000 Special Warrants
2,300,000 Special Warrants are authorized to be issued by the Company entitling
the holders thereof to acquire, without any further payment, an aggregate of
2,300,000 common shares of the Company (the "Shares").
Section 2.02 - Additional Warrants
The Company may at any time and from time to time do further equity or debt
financing and may issue additional shares, warrants or grant options or similar
rights to purchase shares of its capital stock.
<PAGE>
Section 2.03 - Replacement of Lost Warrants
(l) In case a Warrant shall become mutilated, lost, destroyed or stolen, the
Company in its discretion may issue and deliver a new Warrant of like date
and tenure as the one mutilated, lost, destroyed or stolen, in exchange for
and in place of and upon cancellation of such mutilated Warrant, or in lieu
of, and in substitution for such lost, destroyed or stolen Warrant and the
substituted Warrant shall be entitled to all benefits hereunder and rank
equally in accordance with its terms with all other Warrants issued or to
be issued by the Company.
(2) The applicant for the issue of a new Warrant pursuant hereto shall bear the
cost of the issue thereof and in case of loss, destruction or theft shall
furnish to the Company such evidence of ownership and of loss, destruction
or theft of the Warrant so lost, destroyed or stolen as shall be
satisfactory to the Company in its discretion and such applicant may also
be required to furnish indemnity in amount and form satisfactory to the
Company in its discretion and shall pay the reasonable charges of the
Company in connection therewith.
Section 2.04 - Warrant Holder Not a Shareholder
The holding of a Warrant shall not constitute the holder thereof a shareholder
of the Company, nor entitle him to any right or interest in respect thereof
except as in the Warrant expressly provided.
ARTICLE THREE - OWNERSHIP AND TRANSFER
- --------------------------------------
Section 3.01 - Exchange of Warrants
(l) Warrants in any authorized denomination may, upon compliance with the
reasonable requirements of the Company, be exchanged for Warrants in any
other authorized denomination, of the same Sub-series and date of expiry
entitling the holder thereof to acquire an equal aggregate number of Shares
on the same terms as the Warrants so exchanged.
(2) Warrants may be exchanged at the office of the Company. Any Warrants
tendered for exchange shall be surrendered to the Company and canceled.
Section 3.02 - Charges for Exchange
On exchange of Warrants, the Company, except as otherwise herein provided, may
charge a sum not exceeding $1.00 for each new Warrant issued; and payment of
such charges and of any transfer taxes or governmental or other charges required
to be paid shall be made by the party requesting such exchange. Section 3.03 -
Ownership of Warrants
The Company may deem and treat the bearer of any Warrant as the absolute owner
of such Warrant for all purposes, and shall not be affected by any notice or
knowledge to the contrary. The bearer of any Warrant shall be entitled to the
rights evidenced by such Warrant free from all equities or rights of set-off or
counterclaim between the Company and the original or any intermediate holder
thereof and all persons may act accordingly and the receipt of any such bearer
for the Shares issuable upon exercise thereof shall be a good discharge to the
Company for the same and neither the Company shall be bound to inquire into the
title of any such bearer.
Section 3.04 - Transfer of Warrants
Provided that all applicable securities laws and stock exchange rules are
complied with, any Warrant holder may transfer its Warrants in accordance with
such reasonable regulations as the Company shall prescribe.
Section 3.05 - Notice to Warrant Holders
Unless herein otherwise expressly provided, any notice to be given hereunder to
Warrant holders shall be deemed to be validly given if such notice is published
once in the City of Vancouver, such publication to be made in a daily newspaper
of general circulation in such City in the English language. Any notice so given
shall be deemed to have been given on the date on which it had been published.
<PAGE>
ARTICLE FOUR - EXERCISE OF WARRANTS
- -----------------------------------
Section 4.01 - Method of Exercise of Warrants
The right to acquire Shares conferred by a Warrant may be exercised by the
holder of such Warrant surrendering it, with a duly completed and executed
subscription in the form attached thereto, to the Company at its principal
office in the City of Vancouver.
Each Special Warrant shall be exchangeable, without additional payment, into one
fully paid and non-assessable common share of the Company on the following
basis:
1. Upon the voluntary exchange of the Special Warrants into common shares as
evidenced by the delivery of written notice thereof to the Company and the
Trustee by the Special Warrant holder; or
2. Upon the deemed exchange of the Special Warrants into common shares in
accordance with the following provisions:
a. The first 40% of the Special Warrants shall be deemed exchanged into common
shares upon the later of:
i. August 15, 1998,
ii. Closing of the issue of the Special Warrants, and
iii. the acquisition of the issued and outstanding shares of iQ Battery
Research & Development GmbH;
b. The next 30% of the Special Warrants shall be deemed exchanged into common
shares upon the later of:
i. August 30, 1998,
ii. the deemed exchange of the first 40% of the Special Warrants into
common shares, and
iii. the submission of a Form 1A or Form SB 1 to the United States
Securities and Exchange Commission by the Company;
c. The final 30% of the Special Warrants shall be deemed exchanged into common
shares upon the later of:
i. September 15, 1998,
ii. the deemed exchange of the first 70% of the Special Warrants into
common shares, and
iii. the filing of a Form 20-F or Form 8A with the United States Securities
and Exchange Commission by the Company; and
d. All Special Warrants outstanding at the Expiry Time (as defined below)
shall be deemed to have been exchanged into common shares immediately prior
to such time.
The holders of the Special Warrants shall have the right to require the Company
to repurchase all and not less than all of the Special Warrants not yet
exchanged into common shares of the Company (the "Repurchase Rights") for their
initial Subscription Price at any time prior to the earlier of the exchange or
deemed exchange of the Special Warrants into common shares of the Company and
4:30 p.m. (Pacific Standard Time) December 31, 1998 (the "Expiry Time") by
providing written notice to the Company and the Special Warrant Trustee (IPO
Capital Corp.) of the exercise of these rights and the number of Special
Warrants to be repurchased.
For the purpose of any deemed exchange of Special Warrants, written notice by a
duly authorized officer of the Company confirming the condition precedents to
exchange have occurred shall be sufficient evidence for the Trustee of the
happening of that condition precedent.
Special Warrant holders are entitled to receive the shares which have been
issued in the name of the registered holder upon the surrender of the Special
Warrant Certificate(s) together with the Exercise Form attached thereto duly
completed and executed to the Company. For the purpose of the rights of exchange
and repurchase granted hereunder, the certificates for the Special Warrants
shall be retained by the Trustee who shall surrender them to the Company upon
either the exchange of the Special Warrants thereby represented into common
shares of the Company or the exercise of the Repurchase Rights in respect of any
given Special Warrants.
<PAGE>
Special Warrants may also be offered in the United States in accordance with the
available exemptions from the registration and prospectus requirements under the
United States federal and state securities legislation and, in addition, may be
offered to other "off-shore purchasers".
Section 4.02 - Effect of Exercise of Warrants
(l) Upon exercise or deemed exercise of the Warrants as aforesaid, the Shares
so subscribed for shall be deemed to have been issued and such person or
persons shall be deemed to have become the holder or holders of record of
such Shares on the date of such exercise or deemed exercise.
(2) Within ten business days after surrender and payment as aforesaid, the
Company shall forthwith cause to be delivered to the person or persons in
whose name or names the Shares so subscribed for are to be issued as
specified in such subscription or mailed to him or them at his or their
respective addresses specified in such subscription, certificates for the
appropriate numbers of common shares and Series "C" Warrants and not
exceeding those which the Warrant holder is entitled to acquire pursuant to
the Warrant surrendered.
Section 4.03 - Exercise of Less than Entitlement
The holder of any Warrants may exercise Warrants for a number of Shares less
than the number which he is entitled to pursuant to the surrendered Warrants. In
the event of any exercise for a number of Shares less than the number which can
be purchased pursuant to a Warrants, the holder thereof upon exercise thereof
shall in addition be entitled to receive a new Warrant Certificate in respect of
the balance of the Shares which he was entitled to receive pursuant to the
surrendered Warrants and which were not then issued.
Section 4.04 - Warrants for Fractions of Shares
To the extent that the holder of any Warrant is entitled to receive on the
exercise or partial exercise thereof a fraction of a Unit, such right may be
exercised in respect of such fraction only in combination with another Warrant
or other Warrants which in the aggregate entitle the holder to receive a whole
number of such Shares.
Section 4.05 - Expiration of Warrants
After the expiration of the period within which a Warrant is exercisable, all
rights thereunder shall wholly cease and terminate and such Warrants shall be
void and of no further force and effect.
Section 4.06 - Exercise Price
Each Warrant will entitle the holder to receive on the exercise of the Special
Warrant, for no additional consideration, one Unit.
Section 4.07 - Adjustment of Exercise Rights
The number of shares within the Shares deliverable upon the exercise of the
Warrants shall be subject to adjustment in the event and in the manner
following:
(1) If and whenever the common shares at any time outstanding shall be
subdivided into a greater or consolidated into a lesser number of common
shares, the number of common shares deliverable as part of the Shares
deliverable upon the exercise of the Warrants shall be increased or
decreased proportionately as the case may be.
<PAGE>
(2) In case of any capital reorganization or of any reclassification of the
capital of the Company or in case of the consolidation, merger or
amalgamation of the Company with or into any other company or of the sale
of the property with assets of the Company as or substantially as an
entirety or of any other company each Warrant shall, after such capital
reorganization, reclassification of capital, consolidation, merger,
amalgamation or sale, confer the right to acquire that number of shares or
other securities or property of the Company or of the Company resulting
from such capital reorganization, reclassification, consolidation, merger,
amalgamation or to which such sale shall be made, as the case may be, to
which the holder of the shares deliverable at the time of such capital
reorganization, reclassification of capital, consolidation, merger,
amalgamation or sale had the Warrants been exercised, would have been
entitled on such capital reorganization, reclassification,
<PAGE>
consolidation, merger, amalgamation or sale and in any such case, if
necessary, appropriate adjustments shall be made in the application of the
provisions set forth in this Article Four with respect to the rights and
interest thereafter of the holders of the Warrants to the end that the
provisions set forth in this Article Four shall thereafter correspondingly
be made applicable as nearly as may reasonably be expected in relation to
any shares or other securities or property thereafter deliverable on the
exercise of the Warrants. The subdivision or consolidation of common shares
at any time outstanding into a greater or lesser number of common shares
(whether with or without par value) shall not be deemed to be a capital
reorganization or a reclassification of the capital of the Company for the
purposes of this paragraph (2).
(3) The adjustments provided for in this Section are to be cumulative and shall
apply to successive adjustment events as provided for in this Article Four.
Section 4.08 - Determination of Adjustments
If any questions shall at any time arise with respect to the exercise of the
Warrants, such questions shall be conclusively determined by the Company's
Auditors or, if they decline to so act, any other independent firm of chartered
accountants in Vancouver, British Columbia that the Company may designate and
who shall have access to all appropriate records and such determination shall,
absent manifest error, be binding upon the Company and the holders of the
Warrants.
ARTICLE FIVE - COVENANTS BY THE COMPANY
- ---------------------------------------
Section 5.01
(1) The Company will reserve and there will remain unissued out of its
authorized capital a sufficient number of common shares to satisfy the
rights of purchase provided for herein and in the Warrants should the
holders of all the Warrants from time to time outstanding determine to
exercise such rights in respect of all Shares which they are or may be
entitled to purchase pursuant thereto.
(2) The Company will at all times maintain its existence, will carry on and
conduct its business in a prudent manner in accordance with industry
standards and good business practice, and will keep or cause to be kept
proper books of account in accordance with applicable law.
ARTICLE SIX - WAIVER OF CERTAIN RIGHTS
- --------------------------------------
Section 6.01 - Immunity of Warrant Agent, Shareholders, etc.
The obligations hereunder are not personally binding upon, nor shall resort
hereunder be had to, the private property of any of the past, present or future
directors or shareholders of the Company or any of the past, present or future
officers, employees, or agents of the Company, but only the property of the
Company (or a successor corporation) shall be bound in respect hereof.
ARTICLE SEVEN - MODIFICATION OF TERMS, MERGER, SUCCESSORS
- ---------------------------------------------------------
Section 7.01 - Modification of Terms and Conditions for Certain Purposes
From time to time the Company may, subject to the provisions of these presents,
and they shall, when so directed by these presents, modify the terms and
conditions hereof, for any one or more of any of the following purposes:
(1) Adding to the provisions hereof such additional covenants and enforcement
provisions as, in the opinion of Counsel for the Company, are necessary or
advisable under the circumstances.
(2) Making such provisions not inconsistent herewith as may be necessary or
desirable with respect to matters or questions arising hereunder or for the
purpose of obtaining a listing or quotation of the Warrants on any Stock
Exchange or House.
(3) Adding to or altering the provisions hereof in respect of the registration
and transfer of Warrants making provision for the exchange of Warrants of
different denominations; and making any modification in the form of the
Warrants which does not affect the substance thereof.
<PAGE>
(4) For any other purpose not inconsistent with the terms hereof, including the
correction or rectification of any ambiguities, defective provisions,
errors or omissions herein.
(5) To evidence any succession of any corporation and the assumption of any
successor of the covenants of the Company herein and in the Warrants
contained as provided hereafter in this Article.
Provided however no such modification of terms and conditions shall extend the
period within which the Warrants may be exercised.
Section 7.02 - Company May Consolidate, etc. on Certain Terms
Nothing herein contained shall prevent any consolidation, amalgamation or merger
of the Company with or into any other corporation or corporations, or a
conveyance or transfer of all or substantially all the properties and estates of
the Company as an entirety to any corporation lawfully entitled to acquire and
operate the same; PROVIDED HOWEVER, that the corporation formed by such
consolidation or into which such merger shall have been made or which acquired
by conveyance or transfer all or substantially all the properties and estates of
the Company as an entirety shall be a corporation organized and existing under
the law of Canada or of the laws of the United States of America, or any
Province, State, District or Territory thereof, and shall, simultaneously with
such consolidation, amalgamation, merger, conveyance or transfer, assume the due
and punctual performance and observance of all the covenants and conditions
hereof to be performed or observed by the Company.
Section 7.03 - Successor Corporation Substituted
In case the Company, pursuant to Section 7.02 shall be consolidated, amalgamated
or merged with or into any other corporation or corporations, or shall convey or
transfer all or substantially all of the properties and estates of the Company
as an entirety to any other corporation, the successor corporation formed by
such consolidation or amalgamation, or into which the Company shall have been
merged or which shall have received a conveyance or transfer as aforesaid, shall
succeed to and be substituted for the Company hereunder. Such changes in
phraseology and form (but not in substance) may be made in the Warrants as may
be appropriate in view of such consolidation, amalgamation, merger or transfer.
<PAGE>
NOTICE OF EXERCISE
TO: iQ Power Technology Inc.
#708-A - 1111 West Hastings Street
Vancouver, BC V6E 2J3
The undersigned holder of the Special Warrants evidenced by the within Special
Warrant Certificate hereby exercises his right to be issued the common shares
(or other securities or property to which such exercise entitles him in lieu
thereof or in addition thereto under the provisions of the Special Warrant Terms
and Conditions mentioned in such Special Warrant Certificate) that are issuable
pursuant to such Special Warrants on the terms specified in such Special Warrant
Certificate and Special Warrant Terms and Conditions.
The undersigned hereby irrevocably directs that the said common shares be issued
and delivered (by mail) as follows:
Name(s) in full Address(es) Number of Shares
- -------------------------- ----------------------------- -----------------
- -------------------------- ----------------------------- -----------------
- -------------------------- ----------------------------- -----------------
(Please print full name in which share certificate is to be issued. If any
shares are to be issued to a Person or Persons other than the holder, the holder
must pay to the Warrant Agent all applicable transfer taxes or other government
charges.)
DATED this _______ day of ______________________, 19___.
- ---------------------------- -------------------------------------
Witness Signature
Please print below your name and address in full.
Mr.
Mrs. _______________________ Address __________________________________
Miss __________________________________
Ms. __________________________________
FThe Subscriber acknowledges that: CHECK ONE
i. it is not a U.S. Person and that these Special Warrants -----
are not being exercised within the United States or on behalf
of, or for the account or benefit of, a U.S. Person or a person
in the United States;
ii. it has attached a written opinion of counsel or other -----
evidence satisfactory to the Corporation to the effect that
the Securities have been registered under the U.S. Securities
Act and applicable state securities laws or are exempt from
registration thereunder; or
iii. it was an original subscriber for Special Warrants who was a -----
U.S. Person at the time of acquisition of such Special
Warrants and the representations and warranties made by such
person in connection with the acquisition of such Special Warrants
remain true and correct on the date of exercise.
TERMS AND CONDITIONS
The Special Warrants are issued subject to the Terms and Conditions for the time
being governing the holding of the 1998 Special Warrants in the Corporation.
Exhibit 6.1
CONTRACT
THIS AGREEMENT made effective __________, 19___ (the "Effective Date").
BETWEEN:
iQ POWER TECHNOLOGY INC., of Suite 708, 1111 West Hastings
Street, Vancouver, British Columbia, Canada, V6E 2J3,
Telecopier (604) 689-4626
(hereinafter called "iQ Canada")
AND:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
(hereinafter called the "Shareholder")
RECITALS:
The Shareholder is an atypical silent shareholder in iQ Battery Research &
Development GmbH (hereinafter refered to as "iQ Deutschland"), incorporated
under German law, with a share in the amount of DM __________________in
accordance with that certain contract dated __________ (the "iQ Deutschland
Agreement"). iQ Canada intends to acquire all the issued and outstanding shares
(Geschaftsanteile) in iQ Deutschland. With regard thereto the parties now enter
into the following contract which is subject to the condition precedent that iQ
Canada acquires all the issued and outstanding shares of iQ Deutschland:
1
In consideration for the issuance to the Shareholder of ______________ common
shares of iQ Canada (the "Shares"), the Shareholder hereby agrees to convey,
assign and transfer to iQ Canada all rights of the Shareholder under the iQ
Deutschland Agreement. Upon execution of this Agreement, the Shareholder shall
deliver his originally signed iQ Deutschland Agreement, an executed assignment
document in the form attached hereto as Exhibit A and a signed copy of this
contract (collectively, the "Assigned Documents") to ___________________ (the
"Escrow Agent"), and iQ Canada shall issue a certificate (the "Certificate")
representing the Shares in the name of the Shareholder and deliver such
Certificate to the Escrow Agent. The Escrow Agent shall hold the Assigned
Documents and the Certificate in Escrow until the conditions set forth in
Section 2 of this Agreement have been satisfied.
The parties have agreed upon the ratio for the exchange of Shares in iQ on the
one hand and the value of the atypical silent partnership on the other hand in
free negotiations. In that context they have assumed that the value of the
Shares amounts to _______ DM per Share.
<PAGE>
2
In the event that the current shareholders of iQ Deutschland exercise their put
option pursuant to Section 8 of the Share Exchange Agreement dated August 24,
1998 (the "Share Exchange Agreement"), iQ Canada will immediately provide notice
of such exercise to the Escrow Agent (the "Exercise Notice"), and the Escrow
Agent shall deliver the Assigned Documents to the Shareholder and the
Certificate to iQ Canada.
In the event that the put option set forth in Section 8 of the Share Exchange
Agreement has not previously been exercised, upon Closing of an equity financing
by iQ Canada with gross proceeds of not less than US$3,000,000, iQ Canada will
immediately provide notice of the Closing to the Escrow Agent, and the Escrow
Agent shall deliver the Certificate to the Shareholder and the Assigned
Documents to iQ Canada. For purposes of this Agreement, "Closing" shall mean the
date on which equity securities of the Company are delivered against payment
into escrow of the purchase price therefor.
3
1. This contract is governed by German law to the exclusion of conflict of
laws rules and international treaties.
2. Amendments and supplements to this Contract, including this clause
requiring the written form, must be made in writing and refer specifically
to this Contract unless notarial certification or any other form is
required by law.
3. In the event that any one of the provisions of this Contract should be or
become invalid or impracticable, this shall not affect the validity of the
remaining provisions. The invalid or impracticable provision shall be
deemed replaced by a provision which most closely approximates the form,
content, time, extent and scope of the invalid or impracticable provision
without the necessity of the parties having to take additional action.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement
effective as of the day and year first above written.
THE CORPORATE SEAL of )
iQ POWER TECHNOLOGY INC. was )
hereunto affixed in the presence of: )
) (c/s)
_____________________________________ )
)
_____________________________________ )
)
SIGNED, SEALED and DELIVERED )
by __________________________________ )
in the presence of )
)
_____________________________________ ) _________________________________
Witness ) Print Name:____________________
)
_____________________________________ )
<PAGE>
Address )
______________________________________ )
Postal Code )
<PAGE>
ASSIGNMENT
In consideration of the issuance of ______________common shares of iQ Power
Technology Inc. ("iQ Canada"), ______________ (the "Shareholder") does hereby
convey, assign and transfer to iQ Canada all his rights under that certain
contract dated ________ attached hereto as Exhibit A (the "iQ Deutschland
Agreement").
This assignment is made pursuant to the terms of that Contract dated August
__, 1998 between the Shareholder and iQ Canada.
DATED: August ___, 1998.
-----------------------------------
[name of shareholder]
Address: -----------------------------------
In presence of:
- -----------------------------
Exhibit 6.2
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT made effective August 25, 1998 (the "Effective Date").
AMONG:
iQ POWER TECHNOLOGY INC., of Suite 708, 1111 West Hastings
Street, Vancouver, British Columbia, Canada, V6E 2J3,
Telecopier (604) 689-4626
(hereinafter called "iQ Canada")
AND:
iQ BATTERY RESEARCH AND DEVELOPMENT GmbH, of Erlenhof Park,
Inselkammer Strasse 4, D-82008 Unterhaching, Germany,
Telecopier 4989-614483-40
(hereinafter called "iQ Germany")
AND:
THE SHAREHOLDERS OF iQ BATTERY RESEARCH AND DEVELOPMENT GmbH,
whose names and addresses for service are set out in the
Schedule of Shareholders to this Agreement
(hereinafter collectively called the "Shareholders" and individually
referred to as a "Shareholder")
WHEREAS:
A. The Shareholders named herein are the registered and beneficial owners of
all of the issued and outstanding Ordinary Shares of iQ Germany (the "iQ
Germany Shares");
B. iQ Canada has agreed to purchase the iQ Germany Shares from the
Shareholders; and
C. iQ Germany has been joined as a party to this Agreement to ensure delivery
of the iQ Germany Shares to iQ Canada;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the
premises, the mutual covenants and agreements to be kept and performed by each
of the parties hereto, the parties hereto hereby agree as follows:
<PAGE>
1.0 INTERPRETATION
- --------------------
1.1 Interpretation
In and for the purposes of this Agreement, unless there is something in the
subject matter or context inconsistent therewith or unless otherwise
specifically provided, the interpretation provisions set forth in the Schedule
of Interpretation shall apply and each of the words, phrases and expressions
described in the Schedule of Interpretation attached hereto shall have the
meanings ascribed thereto.
1.2 Schedules
The following are the Schedules attached to and incorporated in this Agreement
by this reference and deemed to form a part hereof:
Schedule of Shareholders
Schedule of Interpretation
Schedule of iQ Canada Financial Statements
Schedule of iQ Germany Financial Statements
Schedule of iQ Germany Assets (including Intellectual Property)
Schedule of iQ Germany Material Contracts
Schedule of iQ Germany Employees of Business Schedule of iQ Germany
Representations Schedule of iQ Canada Representations Schedule of Pooling
Agreement Schedule of Employment Agreements Schedule of Confidentiality
Agreements Schedule of Consulting Agreements Schedule of Insider Agreements
Schedule of Financing Arrangements Schedule of Atypical Share Exchange Agreement
Schedule of Atypical Shareholder Consents
Schedule of Legal Opinion of Counsel for iQ Germany - Intellectual Property
Schedule of Legal Opinion of Counsel for iQ Germany - iQ Germany Schedule of
Legal Opinion of Counsel for iQ Canada
2.0 SALE OF IQ GERMANY SHARES
- -------------------------------
2.1 Share Exchange Between the Shareholders and iQ Canada
On the terms and subject to the conditions of this Agreement, on execution and
delivery of this Agreement the Shareholders shall sell and transfer their iQ
Germany Shares to iQ Canada for, in the aggregate, 10,000,000 iQ Canada Shares
to be issued by iQ Canada to the Shareholders on execution and delivery of this
Agreement at a deemed price of US$0.25 per share in the numbers set out opposite
their respective names in the Schedule of Shareholders attached hereto. This
<PAGE>
Agreement, once executed by all parties, shall act without more as evidence of
the transfer of the iQ Germany Shares to iQ Canada.
2.2 Share Exchange Between the Atypical Shareholders and iQ Canada
iQ Canada agrees to reserve an aggregate of 2,800,000 common shares of iQ Canada
for issuance to the holders of Atypical Shares of iQ Germany pursuant to the
terms of the Atypical Share Exchange Agreement the form of which is set forth in
the Schedule of Atypical Share Exchange Agreement hereto.
2.3 Form of Payments
All payments required to be made under or pursuant to this Agreement shall be
made by telegraphic transfer to, or certified cheque or bank cashier's cheque or
solicitor's trust cheque drawn on, a Canadian or US chartered bank or trust
company, payable in lawful money of the United States of America at par in
immediately available funds in Vancouver, Canada.
2.4 Stock Not Registered in Canada or USA
Each of the Shareholders represent and warrant to iQ Canada that:
a. the Shareholders are acquiring the iQ Canada Shares for their own account
for investment purposes only and not with a view to the distribution or
public offering thereof, in the United States of America or Canada, nor
with any present intention of reselling or distributing the same in the
United States of America except pursuant to registration under the United
States Securities Act of 1933, as amended (the "U.S. Securities Act"), or
pursuant to an exemption from such registration requirements;
b. the Shareholders are not "U.S. Persons", as such term is defined by
Regulation S under the U.S. Securities Act; were not offered by the iQ
Canada Shares while in the United States; and were not in the United States
at the time of execution and delivery of this Agreement.
c. the Shareholders have such knowledge and experience in business and
financial matters generally as to be capable of evaluating the merits and
risks of their investment in iQ Canada contemplated to be made by each of
them hereunder;
d. the Shareholders have sufficient financial strength to hold the iQ Canada
Shares as an investment and to bear the economic risks of such an
investment (including possible total loss of investment) for an indefinite
period of time, and that the Shareholders have been provided full and free
access to the corporate books, financial statements, records, contracts,
documents and other information concerning iQ Canada, and to their offices
<PAGE>
and facilities and have been afforded the opportunity to ask such questions
and obtain such other relevant information as each deem necessary or
desirable and to be given all such information as had been requested in
order to evaluate the merits and risks of the prospective investment
contemplated hereunder; and
e. the iQ Canada Shares will be issued pursuant to exemptions contained in the
Securities Act (British Columbia) (the "B.C. Securities Act"), and that the
iQ Canada Shares may only be sold in a jurisdiction in accordance with the
restrictions on resale prescribed under the laws of the jurisdiction in
which such shares are sold, all of which may vary depending on the
jurisdiction.
3.0 CLOSING
- -------------
3.1 Closing Date, Time and Place
Subject to subsection 3.2, the Closing of the transactions contemplated by
Section 2.0 hereof shall take place at the offices of the solicitors for iQ
Germany on execution, notarization and delivery of this Agreement.
3.2 Deliveries by the Shareholders
At the Closing, the Shareholders and iQ Germany shall deliver to iQ Canada:
a. a legal opinion of counsel for iQ Germany in a form attached in the
Schedule of Legal Opinion of Counsel for iQ Germany - iQ Germany;
b. a legal opinion of counsel for iQ Germany in a form attached in the
Schedule of Legal Opinion of Counsel for iQ Germany - Intellectual Property
hereto;
c. written consent to this Share Exchange Agreement from Messrs. von
Waldthausen and von Craushaar in the form attached in the Schedule of
Atypical Shareholder Consents hereto;
d. a Pooling Agreement duly executed by each of the Shareholders in respect of
all of the shares of iQ Canada issuable hereunder [other than the 1,500,000
iQ Canada Shares indicated as being exempt from pooling in the Schedule of
Shareholders attached hereto] in the form attached as the Schedule of
Pooling Agreement hereto;
e. duly executed Employment Agreements in the form attached in the Schedule of
Employment Agreements hereto from each of Dr. Gunther Bauer, Peter Braun
and Gerhard Trenz;
<PAGE>
f. duly executed Confidentiality Agreement in the form attached in the
Schedule of Confidentiality Agreements hereto from Horst Dieter Braun,
Karin Wittkewitz and Rainer Welke;
g. such other documents and instruments as counsel for iQ Canada may
reasonably require to effectuate or evidence the transactions contemplated
hereby.
3.3 Deliveries by iQ Canada
At the Closing, iQ Canada shall deliver to the Shareholders the following:
a. satisfactory proof that the iQ Canada Shares have been duly issued and
registered in the name of the Shareholders in the amounts provided in the
Schedule of Shareholders and confirmation that the certificates therefor
[other than the 1,500,000 shares indicated as being exempt from pooling in
the Schedule of Shareholders attached hereto] have been pooled under the
Pooling Agreement, the form of which is attached in the Schedule of Pooling
Agreement hereto;
b. legal opinion of counsel for iQ Canada in a form attached in the Schedule
of Legal Opinion of Counsel for iQ Canada.
c. satisfactory evidence that Mr. Peter Braun, Dr. Gunther Bauer, and Mr.
Russell French have been appointed directors of iQ Canada and that any
additional directors have been consented to by the majority of those 3
directors;
d. a Pooling Agreement duly executed by all Shareholders of iQ Canada who
acquired their shares prior to 1998 in the form attached as the Schedule of
Pooling Agreement hereto;
e. a duly executed Consulting Agreement between iQ Canada and Mayon Management
Corp. in the form attached in the Schedule of Consulting Agreements hereto
which shall be nontransferable and shall contain usual and customary
non-competition and confidentiality agreements;
f. satisfactory proof that iQ Canada has established a reserve of not less
than 2,800,000 common shares to be issued to the holders of the Atypical
Shares who have agreed to the cancellation of their agreements and Atypical
Shares; and
g. such other documents and instruments as counsel for iQ Germany may
reasonably require to effectuate or evidence the transactions contemplated
hereby.
<PAGE>
4.0 REPRESENTATIONS AND WARRANTIES OF iQ GERMANY AND THE ORDINARY
-------------------------------------------------------------
SHAREHOLDERS
------------
4.1 Representations and Warranties
To induce iQ Canada to enter into and complete the transaction contemplated by
this Agreement, iQ Germany and the Shareholders, to the best of the
Shareholders' knowledge, jointly and severally represent and warrant to iQ
Canada that the representations and warranties contained in the Schedule of iQ
Germany Representations hereto are true and correct as at the date hereof and
will be true and correct on the Closing Date as if such representations and
warranties were made on the Closing Date (except insofar as such representations
and warranties are stated to be given as of a particular date or for a
particular period and relate solely to such date or period).
4.2 Representations and Warranties in Closing Documents
All statements contained in any certificate or other instruments delivered by or
on behalf of the Shareholders and iQ Germany pursuant hereto or in connection
with the transactions contemplated hereby shall be deemed to be representations
and warranties by the Shareholders and iQ Germany hereunder.
4.3 Reliance
The Shareholders and iQ Germany acknowledge and agree that iQ Canada has entered
into this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement notwithstanding any independent searches
or investigations that may be undertaken by or on behalf of iQ Canada and that
no information which is now known or should be known or which may hereafter
become known to iQ Canada or its officers, directors or professional advisers
shall limit or extinguish the right to indemnity hereunder.
5.0 REPRESENTATIONS AND WARRANTIES OF iQ CANADA
- -------------------------------------------------
5.1 Representations and Warranties
To induce the Shareholders and iQ Germany to enter into and complete the
transactions contemplated by this Agreement, iQ Canada hereby represents and
warrants to the Shareholders and iQ Germany that the representations and
warranties contained in the Schedule of iQ Canada Representations hereto are
true and correct as at the date hereof and will be true and correct on the
Closing Date as if such representations and warranties were made on the Closing
Date (except insofar as such representations and warranties are stated to be
given as of a particular date or for a particular period and relate solely to
such date or period).
<PAGE>
5.2 Representations and Warranties in Closing Documents
All statements contained in any certificate or other instruments delivered by or
on behalf of iQ Canada pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by iQ
Canada hereunder.
5.3 Reliance
iQ Canada acknowledges and agrees that the Shareholders and iQ Germany have
entered into this Agreement relying on the warranties and representations and
other terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of the
Shareholders and iQ Germany and that no information which is now known or should
be known or which may hereafter become known to the Shareholders and iQ Germany
or its officers, directors or professional advisers shall limit or extinguish
the right to indemnity hereunder.
6.0 COVENANTS
- ---------------
6.1 The Shareholders, iQ Germany and iQ Canada covenant and agree that each of
such parties will take all such actions deemed necessary or desirable to cause
the cancellation of or repurchase of all outstanding Atypical Share agreements.
6.2 The Shareholders, iQ Germany and iQ Canada covenant and agree that each of
such parties will take all such actions deemed necessary or desirable to obtain
the financing for iQ Canada contemplated in the Letter Agreement dated August
14, 1998, attached hereto in the Schedule of Financing Arrangements.
7.0 INDEMNIFICATION
- ---------------------
7.1 Survival of Representations, Warranties and Indemnification
All representations, warranties, covenants and agreements herein contained on
the part of each of the Shareholders, iQ Germany and iQ Canada shall survive the
Closing provided that such representations and warranties except with respect to
tax matters (which shall continue until the expiry of the applicable statute of
limitations, and claims based on fraud which shall not expire) shall only
survive until the day that is two years from the Closing Date after which time,
if no claims shall have been made hereunder against the party hereto with
respect to any incorrectness in or breach of any representation or warranty made
herein by such party, such party shall have no further liability hereunder with
respect to such representation and warranty.
7.2 Indemnification by iQ Germany and the Shareholders
iQ Germany and the Shareholders agree, subject to subsection 7.4, to indemnify
and hold harmless iQ Canada and any person claiming by or through its respective
<PAGE>
successors and assigns from, against, and in respect of, any and all costs,
losses, claims, liabilities, fines, penalties, damages and expenses (including,
without limitation, court costs, reasonable fees and disbursements of counsel)
incurred by iQ Canada in respect of the breach of any representation or warranty
made by iQ Germany and the Shareholders herein.
7.3 Indemnification by iQ Canada
iQ Canada agrees to indemnify and hold harmless the Shareholders and iQ Germany
from and against any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including, without limitation, court costs,
reasonable fees and disbursements of counsel) incurred by the Shareholders or iQ
Germany in respect of the breach of any representation or warranty made by iQ
Canada herein.
7.4 Limitation on Amount of Indemnification
No breach of any representation or warranty shall give rise to a claim by either
the Shareholders and iQ Germany on one hand, or iQ Canada on the other, against
the other unless the amount determined to be owing by either of them to the
other as a result thereof would exceed US$5,000 for any single breach or if the
amount at issue when added to the sum of all prior amounts in respect of which a
claim would otherwise be made, total in excess of US$10,000 in which case all of
the amounts then at issue shall be recoverable.
8.0 SHAREHOLDER PUT OPTION
- ----------------------------
The Shareholders and iQ Canada agree that the Shareholders shall collectively
have the right to require iQ Canada to repurchase all, but not less than all, of
the iQ Canada Shares received by the Shareholders at the Closing (the "Put
Option") upon repayment by such Shareholders to iQ Canada the full amount of all
funds that iQ Canada shall have advanced or loaned to, or invested in, iQ
Germany. The purchase price for the iQ Canada Shares repurchased by iQ Canada
shall be all of the issued and outstanding ordinary shares of iQ Germany. The
Put Option shall be exercisable by the Shareholders on the four month
anniversary of the date of filing by iQ Canada of an offering statement on Form
1-A with the United States Securities and Exchange Commission, provided that
prior to such four month anniversary iQ Canada shall have failed to complete a
financing substantially on the terms set forth in the Schedule of Financing
Arrangements attached hereto with gross proceeds of not less than US$3,000,000.
In the event that the Put Option is exercised, the Closing of the Put Option
shall occur within two months of the date of receipt of written notice by each
of the Shareholders of their election to exercise the Put Option.
The Shareholders and iQ Canada agree that the Put Option shall terminate and
shall not be exercisable as of such date that iQ Canada shall complete an equity
financing with gross proceeds of not less than US$3,000,000.
<PAGE>
9.0 GENERAL
- -------------
9.1 Expenses, Etc.
Except as otherwise provided for herein, whether or not the transactions
contemplated by this Agreement are consummated, each party hereto shall pay his
or its own expenses and the fees and expenses of their respective counsel,
accountants and other experts.
9.2 Waiver
No action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action or compliance with any representation, warranty, covenant or
agreement contained herein, and the waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
9.3 Binding Effect, Benefits
This Agreement shall enure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns.
9.4 Notices
All notices, requests, demands and other communications which are required to be
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or transmitted by telex or other
telecommunication facility or on receipt after dispatch by certified or
registered first class mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made at the address or number for that
party given or referenced on first page of this Agreement or to such other
address as any party may designate by giving notice to the other parties hereto.
9.5 Further Assurances
Each party shall, from time to time at or after the Closing, at the request of
another party, and without further consideration, execute and deliver such other
instruments and take such other actions as may be required to confer to the
benefits contemplated by this Agreement.
9.6 Entire Agreement, Amendment
This Agreement, including all Schedules attached hereto, constitutes the entire
agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof
and may not be amended, modified or terminated unless in a written instrument
executed by the party or parties sought to be bound.
<PAGE>
9.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which when
executed, shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument and a facsimile copy of this Agreement
executed by a party hereto in counterpart or otherwise will be deemed to be a
valid and binding Agreement and accepted as an original of the Agreement until
such time as each of the parties has an originally executed Agreement in its
possession.
9.8 Third Parties
Nothing in this Agreement, whether expressed or implied, is intended to confer
any rights or remedies on any person other than the parties to this Agreement,
nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third party, nor shall any provision give any
person other than the parties any right of subrogation or action against any
party to this Agreement.
9.9 Time of Essence
Time is of the essence of this Agreement.
9.10 Independent Counsel
Each of the parties acknowledges having obtained independent legal advice from
its own solicitor with respect to this Agreement prior to its execution and
further acknowledges that it understands the terms, and its rights and
obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement
effective as of the day and year first above written.
SIGNED, SEALED AND DELIVERED by ) iQ BATTERY RESEARCH AND
iQ BATTERY RESEARCH AND ) DEVELOPMENT GmbH
DEVELOPMENT GmbH in the presence of: )
_____________________________________ )
)
)
_____________________________________ ) Per: _____________________________
Witness ) Signature
_____________________________________ )
Address )
______________________________________ )
Postal Code )
<PAGE>
SIGNED, SEALED AND DELIVERED by ) iQ POWER TECHNOLOGY, INC.
iQ POWER TECHNOLOGY INC. )
in the presence of: )
_____________________________________ )
)
)
_____________________________________ ) Per: _____________________________
Witness ) Signature
_____________________________________ )
Address )
______________________________________ )
Postal Code )
SIGNED, SEALED AND DELIVERED by )
DR. GUNTHER BAUER )
in the presence of: )
_____________________________________ ) _____________________________
) DR. GUNTHER BAUER
)
_____________________________________ )
Witness )
_____________________________________ )
Address )
______________________________________ )
Postal Code )
SIGNED, SEALED AND DELIVERED by )
PETER BRAUN in the presence of: )
_____________________________________ ) _____________________________
) PETER BRAUN
)
_____________________________________ )
Witness )
_____________________________________ )
Address )
______________________________________ )
Postal Code )
SIGNED, SEALED AND DELIVERED by )
HORST DIETER BRAUN in the presence of: )
_____________________________________ ) _____________________________
) HORST DIETER BRAUN
)
_____________________________________ )
Witness )
_____________________________________ )
Address )
______________________________________ )
Postal Code )
<PAGE>
SIGNED, SEALED AND DELIVERED by )
KARIN WITTKEWITZ in the presence of: )
_____________________________________ ) _____________________________
) KARIN WITTKEWITZ
)
_____________________________________ )
Witness )
_____________________________________ )
Address )
______________________________________ )
Postal Code )
SIGNED, SEALED AND DELIVERED by )
RAINER WELKE in the presence of: )
_____________________________________ ) _____________________________
) RAINER WELKE
)
_____________________________________ )
Witness )
_____________________________________ )
Address )
______________________________________ )
Postal Code )
<PAGE>
SCHEDULE OF INTERPRETATION
PART 1.00 INTERPRETATIONS
- --------------------------
1.1 Definitions
In and for the purposes of this Agreement, unless there is something in the
subject matter or context inconsistent therewith or unless otherwise
specifically provided, each of the words, phrases and expressions described in
Part 2.00 of this Schedule shall have the meanings ascribed thereto. 1.2 Words
Defined in Canada Business Corporations Act
Unless there is something in the subject matter or context inconsistent
therewith, any words, phrases or expressions defined in the Canada Business
Corporations Act and used herein shall have the meanings ascribed therein.
1.3 Governing Law and Forum
This Agreement and all matters arising hereunder will be governed by and
construed in accordance with the laws of the Province of British Columbia, and
the laws of Canada applicable therein, and all disputes and claims, whether for
specific performance, injunction, declaration or otherwise howsoever both at law
and in equity, arising out of or in any way connected with this Agreement will
be referred to the courts of the Province of British Columbia exclusively, and
to the Supreme Court of Canada if need be, and, by execution and delivery of
this Agreement, each party hereby irrevocably submits and attorns to such
jurisdiction.
1.4 Severability
If any one or more of the provisions contained in this Agreement should be
invalid, illegal, or unenforceable in any respect in any jurisdiction, the
validity, legality and enforceability of such provision or provisions shall not
in any way be affected or impaired thereby in any other jurisdiction and the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless in either
case as a result of such determination this Agreement would fail in its
essential purpose.
1.5 Included Words
The singular of any term includes the plural, and vice versa, the use of any
term is generally applicable to any gender and, where applicable, to a
corporation, the word "or" is not exclusive and the word "including" is not
limiting whether or not non-limiting language (such as "without limitation", or
"but not limited to" or words of similar import) is used with reference thereto.
1.6 Headings
The headings to the sections and subsections of this Agreement are inserted for
convenience only and do not form a part of this Agreement and are not intended
<PAGE>
to interpret, define or limit the scope, extent or intent of this Agreement or
any provision hereof.
1.7 Cross-Reference
Unless otherwise stated, all references in this Agreement to a designated
"section", "subsection" or other subdivision or to a schedule is to the
designated section, subsection or other subdivision of, or schedule to, this
Agreement.
1.8 Referenced to Whole Agreement
Unless otherwise stated, the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular section, subsection or other subdivision or schedule.
1.9 Statutes
Unless otherwise stated, any reference to a statute includes and is a reference
to such statute and to the regulations made pursuant thereto, with all
amendments made thereto and in force from time to time, and to any statute or
regulations that may be passed which supplement or supersede such statute or
such regulations.
1.10 References to Successors Included
Any reference to a corporate entity includes and is also a reference to any
corporate entity that is a successor to such entity.
1.11 No Contra Proferentum
The language in all parts of this Agreement shall in all cases be construed as a
whole and neither strictly for nor strictly against any of the parties.
1.12 No Merger
The representations, warranties, covenant and agreements contained in this
Agreement shall not merge in the Closing and shall continue in full force and
effect from and after the Closing Date.
1.13 Joint and Several
Each and every covenant, representation or warranty of a party hereto contained
herein shall be a joint and several covenant, representation or warranty of each
entity composing that party.
1.14 Accounting Terminology
All accounting terms not expressly defined in this Agreement shall have the
respective meanings usually ascribed to them in accordance with generally
accepted accounting principles in Canada, applied on a basis consistent with
prior years.
1.15 Currency
Unless otherwise specifically stated, all references to money in this Agreement
are or shall be to money in lawful money of the United States of America. If it
is necessary to convert money from another currency to lawful money of United
States of America, such money shall be converted as at the Effective Date.
<PAGE>
Part 2.00 DEFINITIONS
a. "Act" means the German Securities Act.
b. "Audited iQ Canada Financial Statements" means the audited financial
statements of iQ Canada as at and for the years ended December 31, 1996 and
1997, copies of which are contained in the Schedule of iQ Canada Financial
Statements attached hereto.
c. "Audited Statements Date" means December 31, 1997.
d. "B.C. Securities Act" means the Securities Act, S.B.C. 1997, c. 418.
e. "Business" means the business carried on by iQ Germany.
f. "By-Laws" means the By-Laws of iQ Canada, as amended.
g. "Closing" means the closing of the transactions contemplated by section 2
hereof.
h. "Closing Date" means ________________, 1998, or such other time or place as
the parties shall mutually agree in writing.
i. "iQ Canada Financial Statements" means Audited iQ Canada Financial
Statements and the Interim iQ Canada Financial Statements.
j. "Interim iQ Canada Financial Statements" means the unaudited consolidated
financial statements of iQ Canada as at and for the 3 month period ended
March 31, 1998, copies of which are contained in the Schedule of iQ Canada
Financial Statements attached hereto.
k. "Interim Period" means the period from and including the date of this
Agreement to and including the Closing Date.
l. "iQ Canada" means iQ Power Technology Inc.
m. "iQ Canada Shares" means fully paid and non-assessable shares of iQ Canada.
n. "iQ Germany" means iQ Battery Research and Development GmbH.
o. "iQ Germany Shareholders" means the shareholders of iQ Germany.
p. "iQ Share Exchange" means the exchange of iQ Germany Shares and iQ Canada
Shares between the iQ Germany Shareholders and iQ Canada respectively
pursuant to the Share Exchange Agreement.
q. "iQ Share Exchange Closing" means the date of closing of the Share Exchange
Agreement.
<PAGE>
r. "Partners" means those individuals who have entered into atypical silent
partnership agreements with iQ Germany and whose names and addresses for
service are set out in the Schedule of Atypical Silent Partners hereto.
s. "Partnership Agreements" means the atypical silent partnership agreements
entered into between the Partners and iQ Germany.
t. "Second Closing" means the closing of a financing by iQ Canada to raise not
less than US$3,000,000 occurring on or before December 31, 1998.
u. "Share Exchange Agreement" means an agreement dated August ____, 1998,
among iQ Canada, iQ Germany and the iQ Germany Shareholders.
v. "Shareholders" means the shareholders of ordinary common shares of iQ
Germany.
<PAGE>
SCHEDULE OF MATERIAL CONTRACTS
- --------------------------------------------------------------------------------
Type of Agreement Contracting With Date
- --------------------------------------------------------------------------------
Share Exchange Agreement iQ Germany and the August ____, 1998
Shareholders
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE OF PARTNERS' REPRESENTATIONS
The Partners hereby jointly and severally represent and warrant that:
1.1 Authorizations and Enforceability
1.1.1 the Partners have all requisite power, authority and capacity to
enter into, deliver and perform this Agreement and to consummate the
transactions contemplated hereby without first obtaining the consent
of any other person or body corporate;
1.1.2 the Partners have taken all necessary or desirable actions, steps and
corporate and other proceedings to approve or authorize, validly and
effectively, the entering into of, and the execution, delivery or
performance of, this Agreement and the cancellation of their
Partnership Agreements at Closing;
1.1.3 this Agreement is a legal, valid and binding obligation of the
Shareholders enforceable against each of them in accordance with its
terms subject to:
a. bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally; and
b. the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in the
discretion of a court;
1.3 Restrictions, Burdensome Agreements
the Partners are not party to any agreement, debt instrument, commitment or
agreement and the Partners nor any of their respective properties and
assets are subject to or bound or affected by any charter, by-law or other
corporate restriction, or any order, judgment, decree, law, statute,
ordinance, rule, regulation or other restriction of any kind or character
which would prevent the Partners from entering into this Agreement or from
consummating the transactions contemplated hereby;
1.4 Government and Other Consents
no consent, authorization or approval of or exemption by or filing with any
governmental, public or self-regulatory body or authority is required in
connection with the execution, delivery and performance by the Shareholders
of this Agreement or any of the instruments or agreements herein referred
to or the taking of any action herein contemplated;
1.5 Schedule Information
all information set out in the Schedules to this Agreement is accurate and
correct in every material respect;
<PAGE>
SCHEDULE OF iQ CANADA REPRESENTATIONS
iQ Canada hereby represents and warrants that:
1.1 Authorized Capitalization, Outstanding Shares and Title
1.1.1 immediately prior to Closing:
a. the authorized capital of iQ Canada shall consist of an unlimited
number of common shares without par value, of which not more than
15,000,000 shall have been issued and allotted as fully paid and
non-assessable shares; and
b. the issued common shares of iQ Canada represent 100% of the
outstanding voting shares of iQ Canada;
1.2 Organization, Good Standing, Power, etc.
1.2.1 iQ Canada is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, is
extra-provincially registered to do business in the province of British
Columbia, and is not required at the date hereof to be authorized or
licensed to do business as an extra-territorial or foreign corporation
in any other jurisdiction by reason of the nature of the business
conducted by it and has the requisite power and authority to own, lease
and operate its properties and assets and to carry on its business as
currently conducted;
1.3 Agreements Relating to Stock, Options, Warrants, Restrictions on
Shares, Etc.
iQ Canada is not party to any written or oral agreement, understanding,
arrangement or commitment or bound by any certificate of incorporation,
by-law or instrument (including options, warrants or convertible
securities) which creates any rights in a person with respect to shares
of the capital stock or any other securities of iQ Canada or which
relates to the voting of, restricts the transfer of, requires iQ Canada
to issue or sell, or create rights in any person with respect to the
capital stock or other securities of iQ Canada (or warrants or rights
with respect thereto) other than as may be issued pursuant to the Share
Exchange Agreement, and there exists no option or other right to
purchase, or right to convert any securities or obligations into any
shares of the capital stock or other securities of iQ Canada other than
as may be reserved or granted under the 1998 Stock Option Plan of iQ
Canada (to a maximum of 3,000,000 shares) or the 1998 Incentive Plan of
iQ Canada (to a maximum of 4,000,000 shares), none of which shall be
granted prior to Closing;
1.4 Authorizations and Enforceability
1.4.1 iQ Canada has all requisite power, authority and capacity to enter
into, deliver and perform this Agreement and to consummate the
transactions contemplated hereby without first obtaining the consent of
any other person or body corporate;
1.4.2 each of iQ Canada, and its Board of Directors have taken all necessary
or desirable actions, steps and corporate and other proceedings to
approve or authorize, validly and effectively, the entering into of,
and the execution, delivery or performance of, this Agreement and the
issue of the iQ Canada Shares by iQ Canada to the Partners;
<PAGE>
1.4.3 this Agreement is a legal, valid and binding obligation of iQ Canada
enforceable against it in accordance with its terms subject to:
a. bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally; and
b. the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in the
discretion of a court;
1.5 Effect of Agreement, Etc.
the execution, delivery and performance of this Agreement and each of
the other agreements contemplated or referred to herein by iQ Canada,
and the completion of the transactions contemplated hereby, will not
constitute or result in a violation of breach of or default under, or
cause the acceleration of any obligations of iQ Canada under:
a. any term or provision of any of the Articles of Incorporation,
By-Laws or other constating documents of iQ Canada; or
b. the terms of any agreement (written or oral), indenture,
instrument or understanding or other obligation or restriction to
which iQ Canada is party or by which it is bound.
1.6 Restrictions, Burdensome Agreements
iQ Canada is not party to any agreement, debt instrument, commitment or
agreement and neither iQ Canada nor any of its respective properties
and assets are subject to or bound or affected by any charter, by-law
or other corporate restriction, or any order, judgment, decree, law,
statute, ordinance, rule, regulation or other restriction of any kind
or character which would:
a. prevent iQ Canada from entering into this Agreement or from
consummating the transactions contemplated hereby; or
b. adversely affect, or in the future adversely affect the Business,
properties, prospects or the conditions, financial or otherwise,
of iQ Canada or accelerate the due date for payment of any
liabilities of iQ Canada;
1.7 Shareholders' Agreement
there are no shareholders' agreements, pooling agreements, voting trust
or other similar agreements with respect to the ownership or voting of
any of the shares of iQ Canada other than the proposed Pooling
Agreement to be entered into in connection with the Share Exchange
Agreement;
1.8 Government and Other Consents
no consent, authorization or approval of or exemption by or filing with
any governmental, public or self-regulatory body or authority is
required in connection with the execution, delivery and performance by
iQ Canada of this Agreement or any of the instruments or agreements
herein referred to or the taking of any action herein contemplated;
<PAGE>
1.9 Permits, Licenses, Compliance with Applicable Laws and Court Orders
iQ Canada has all requisite corporate power and authority, and all
permits, licenses, orders and approvals of governmental and
administrative authorities to own, lease and operate its properties and
to carry on its business as presently conducted and its business as
conducted does not violate or infringe any domestic or foreign law,
statute, ordinance or regulation currently in effect, scheduled to come
into effect or, to the knowledge of the iQ Canada, proposed to be
adopted, the enforcement of which would adversely affect the financial
condition, results of operations, properties or business of iQ Canada,
and iQ Canada is not aware of any default in any respect under any
executive, legislative, administrative or private (such as arbitration)
ruling, order, writ, injunction or decree;
1.10 Financial Statements of iQ Canada and Absence of Undisclosed Liabilities
the following statements concerning the financial information presented
to iQ Canada by iQ Canada are true and accurate:
a. the iQ Canada Financial Statements are true and correct in every
material respect and present fairly the financial position of iQ
Canada as of the dates of the respective statements, and the
results of its operations for the periods then ended and are
prepared in accordance with generally accepted accounting
principles applied on a consistent basis with that of the
previous year except as specifically noted therein;
b. except to the extent reflected or reserved against or otherwise
disclosed in the balance sheet which forms part of the iQ Canada
Financial Statements and except for debts, liabilities or
obligations incurred in the ordinary course of business, iQ
Canada has no liabilities, debts or obligations of any nature,
whether absolute, accrued, contingent or otherwise or whether due
or to become due including, without limitation, liabilities for
any taxes which would not have been provided for in the iQ Canada
Financial Statements;
c. all accounts receivable of iQ Canada as at the date of the most
recent iQ Canada Financial Statements referred to in most recent
iQ Canada Financial Statements as recorded in the books of iQ
Canada are genuine and at that date were owing without set-off or
counterclaim, and adequate provision has been made in the most
recent iQ Canada Financial Statements for doubtful accounts
receivable as at the date of the most recent iQ Canada Financial
Statements;
d. since the Audited Statements Date;
i. no payments of any kind have been made or authorized to be
made by or on behalf of iQ Canada to any of its officers,
directors or shareholders, or under any management
agreements with iQ Canada, save and except in the ordinary
course of business and at the regular rates of salary,
management or consulting fees and regular staff bonuses
payable to them;
ii. iQ Canada has not made a distribution of retained earnings
or made a payment out of iQ Canada's capital dividend
account;
<PAGE>
iii. save and except for in connection with the Share Exchange
Agreement, iQ Canada has not acquired or had the use of any
property from a person with whom it was not dealing at arm's
length;
iv. iQ Canada has not disposed of anything to a person with whom
iQ Canada was not dealing at arm's length for proceeds less
than the fair market value thereof;
v. iQ Canada has not made any capital expenditures in excess of
US$5,000;
vi. the business, affairs and assets of iQ Canada have only been
dealt with in the ordinary course of business and iQ Canada
has not incurred any liability to any person with whom iQ
Canada does not deal at arm's length, except for any
liability of iQ Canada to the Shareholders for unpaid salary
(not exceeding US$10,000) and for monies actually loaned to
iQ Canada (not exceeding US$20,000);
vii. iQ Canada has not incurred any obligation or liability
(fixed or contingent), except normal trade or business
obligations incurred in the ordinary course of its business,
none of which is materially adverse to iQ Canada;
viii.iQ Canada has not paid or satisfied any obligational
liability (fixed or contingent), except:
A. current liabilities included in the Audited iQ Canada
Financial Statements;
B. current liabilities incurred since the Audited
Statements Date in the ordinary course of its business;
and
C. scheduled payments pursuant to the obligations under
loan agreements or other contract or commitments
described in the Share Purchase Agreement or in the
Schedules attached thereto;
ix. iQ Canada has not:
A. created any encumbrance upon any of its properties or
assets, except as described in the Share Exchange
Agreement or in the Schedules thereto;
B. sold, assigned, transferred, leased or otherwise
disposed of any of its properties or assets, except in
the ordinary course of its business;
C. purchased, leased or otherwise acquired any properties
or assets, except in the ordinary course of its
business;
D. waived, canceled, surrendered or written off any
rights, claims, accounts receivable or any amounts
payable to iQ Canada, except in the ordinary course of
its business;
<PAGE>
E. entered into any transaction, contract, agreement, or
commitment, except in the ordinary course of its
business and except the Share Purchase Agreement and
any agreements entered into in connection thereto;
F. terminated, discontinued, closed or disposed of any
plant, facility or business operations;
G. made any material change with respect to any method of
management, operation, or accounting in respect of its
business;
H. suffered any damage, destruction or loss (whether or
not covered by insurance) which has materially
adversely affected or could materially adversely affect
the business or the condition of iQ Canada;
I. increased any form of compensation or other benefits
payable or to become payable to any of the employees of
iQ Canada, except increases made in the ordinary course
of its business which do not exceed 5%, in the
aggregate, of the amount of the aggregate salary
compensation payable to all of iQ Canada's employees
prior to such increase;
J. suffered any extraordinary loss relating to its
business;
K. made or incurred any material change in or become aware
of any event or condition with is likely to result in
the material change in, the business or condition of iQ
Canada save and except for in connection with the Share
Exchange Agreement; and
L. authorized, or agreed or otherwise become committed to
do any of the foregoing;
1.11 Title to Properties, Absence of Liens and Encumbrances, Etc.
1.11.1 iQ Canada owns and has good and marketable title to its properties,
assets and leases used in its business (including, without limitation,
the assets reflected in the balance sheet contained in the iQ Canada
Financial Statements), free and clear of all mortgages, security
interests, claims, liens, charges, encumbrances, restrictions on use
or transfer or other defects in title; no default or event of default
exists and no event which, with notice or lapse of time or both, would
constitute a default, has occurred and is continuing under the terms
or provisions, express or implied, of any agreement to which any of
the properties of iQ Canada is subject, nor has iQ Canada received
notice of any claim of such default, nor has iQ Canada failed to
comply in any respect with any provision or condition of any such
agreement; and iQ Canada has not received a notice of violation of any
applicable law, ordinance, regulation, order or requirement relating
to its operations or its owned or leased properties;
1.11.2 all of the assets of iQ Canada are used in its business;
<PAGE>
1.12 Accounts Receivable
the accounts receivable of iQ Canada reflected in the most recent iQ
Canada Financial Statements and all accounts receivable of iQ Canada
arising since the date of the most recent iQ Canada Financial
Statements arose from bona fide transactions in the ordinary course of
its business and are valid, enforceable and fully collectable accounts
(subject to a reasonable allowance, consistent with past practice, for
doubtful accounts as reflected in the iQ Canada Financial Statements
or as previously disclosed in writing to iQ Canada). Such accounts
receivable are not subject to any set-off or counterclaim;
1.13 Deposit Accounts and Safe Deposit Boxes of iQ Canada
iQ Canada currently maintains one bank account at The Canada Trust
Company in British Columbia on which Russell French is the sole person
authorized to draw thereon or to have access thereto;
1.14 No Insolvency Proceedings
no proceedings are pending for, and iQ Canada is unaware of any basis
for the institution of any proceedings which could lead to the placing
of iQ Canada in bankruptcy or subject iQ Canada to any other laws
governing the affairs of insolvent persons;
1.15 Real Properties
1.15.1 iQ Canada holds no real property and is not a party to any
agreements, options, contracts or commitments to purchase, sell, or
otherwise transfer Real Property;
1.16 Leased Premises
iQ Canada is not party to any lease agreements, options to lease or
other lease arrangements for leased premises;
1.17 Intellectual Property
iQ Canada has no proprietary interests in any intellectual property
other than the proprietary interests held or to be held through iQ
Germany;
1.18 Leased Equipment
iQ Canada is not party to any lease agreements, options to lease or
other lease arrangements for equipment
1.19 Royalty Payments
iQ Canada is not obligated to pay any royalty or similar payments to
any person, firm or corporation;
1.20 Non-Arm's Length Matters
iQ Canada is not a party to or bound by any agreement with, is not
indebted to, and no amount is owing to iQ Canada by any officers,
former officers, directors, former directors, shareholders, former
shareholders, employees (except for oral employment agreements with
employees) or former employees of iQ Canada or any person not dealing
in arm's length with any of the foregoing. Since the Audited
Statements Date, iQ Canada has not made any or authorized any payments
to any
<PAGE>
officers, former officers, directors, former directors, shareholders,
former shareholders, employees or former employees of iQ Canada or to
any person not dealing at arm's length with any of the foregoing,
except for management fees, salaries and other employment compensation
payable to employees or managers of iQ Canada in the ordinary course
of the routine daily affairs of its business and at the regular rates
payable to them;
1.21 Tax Filings, Employee Deductions
1.21.1 iQ Canada has filed with the appropriate governmental agencies
all tax returns and there are no unpaid assessments nor proposed
assessments of income taxes pending against iQ Canada and all
liability for taxes shown on tax returns filed have been paid or the
liability therefor has been provided for in the iQ Canada Financial
Statements, and all income taxes, employee withholding taxes or
deductions, or other taxes for periods subsequent to the period
covered by such tax returns have been paid or adequately accrued in
the books and records of iQ Canada;
1.21.2 adequate provision has been made for taxes payable by iQ Canada for
which tax returns are not yet required to be filed and there are no
agreements, waivers or other arrangements providing for an extension
of time with respect to the filing of any tax return by or payment of
any tax, governmental charge or deficiency by iQ Canada, and to the
knowledge of iQ Canada, there are no contingent tax liabilities or any
grounds which would prompt a re-assessment;
1.22 Agreements, Plans, Arrangements, Etc.
iq canada is not a party to, nor is iq canada or any of the properties
and assets of iq canada bound or affected by, any oral or written
agreement of any sort, including without limitation:
a. lease agreements (whether as lessor or lessee) relating to real
or personal property except as disclosed to iQ Canada and
summarized in the iQ Canada Financial Statements;
b. license agreements, assignments or other contracts (whether as
licensor or licensee, assignor or assignee) relating to
trademarks, trade names, patents, copyrights (or applications
therefor), unpatented designs or styles, know-how or technical
assistance;
c. employment or consulting agreements, other than a management
agreement with Mayon Management Corp.;
d. agreements for the purchase or sale of goods, materials,
supplies, machinery, capital assets or services;
e. agreements with any labour union;
f. agreements with any supplier, distributor, franchisor, dealer,
sales agent or representative;
g. agreements with any manufacturer, supplier or customer with
respect to discounts or allowances;
<PAGE>
h. joint venture or partnership agreements with any other person;
i. agreements for the borrowing or lending of money or guaranteeing,
indemnifying or otherwise becoming liable for the obligations or
liabilities of another;
j. agreements with any bank, factor, financing company or similar
organization regarding the financing of accounts receivable or
other extensions or credit;
k. agreements granting any lien, security interest or mortgage on
any property or asset of iQ Canada including, without limitation,
any factoring agreement for the assignment of accounts
receivable;
l. agreements for the construction or modification of any building
or structure or for the incurrence of any other capital
expenditure;
m. advertising agreements of any kind;
n. agreements which restrict it from doing business anywhere in the
world;
o. agreements, statutes or regulations giving any party the right to
re-negotiate or require a reduction in prices or the repayment of
any amount previously paid;
p. any agreements to defend, indemnify or hold harmless any person;
q. agreements, pension plans, profit sharing plans, bonus plans,
undertakings or arrangements, whether oral, written or implied,
with the employees, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers or directors or others
which cannot be terminated on not more than one month's notice;
or
r. agreements to pay severance pay for separation allowances, except
for any requirement which may be applicable at law;
1.23 Guarantees and Indemnities
iQ Canada is not a party to or bound by any agreement of guarantee,
indemnification, assumption or endorsement or any other like
commitment of the obligations, liabilities (contingent or otherwise)
or indebtedness of any persons;
1.24 Litigation
there is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending or threatened against, relating to or
affecting iQ Canada or any of the assets, properties or businesses of
iQ Canada or the transactions contemplated by this Agreement, nor is
there any basis for any such claim, action, suit, proceeding,
arbitration, investigation or inquiry which may have any adverse
effect upon the assets, properties or business of iQ Canada or the
transactions contemplated by this Agreement; none of iQ Canada or any
officer, director, partner, agent or employee of iQ Canada have been
enjoined or barred by order, judgment or decree of any court or other
tribunal or
<PAGE>
any agency or self-regulatory body from engaging in or continuing any
conduct or practice in connection with its business; and there is not
in existence at the date hereof any order, judgment or decree of any
court or other tribunal or any agency or self-regulatory body to which
iQ Canada or the business, properties or assets of iQ Canada are
subject or by which they are bound;
1.25 Books and Records
the minute books of iQ Canada contain complete and accurate records of
all meetings and accurately reflect all other corporate action of iQ
Canada and the directors (and committees thereof) of iQ Canada as of
the date hereof and all material transactions are properly recorded
and filed;
1.26 Insurance
iQ Canada currently maintains no insurance policies;
1.27 Terms of Employment
iQ Canada is not a party to any collective agreement relating to its
business with any labour union or other association of employees; iQ
Canada is not aware of any attempt to organize any labour union or
other association of employees in connection with its business; no
part of its business has been certified as a unit appropriate for
collective bargaining; and, additionally, every employee may be
dismissed on one month's notice or less, without further liability;
1.28 Employment Information
iQ Canada has no employees;
1.29 Employment Benefits
iQ Canada has no accrued employment benefits;
1.30 Subsidiaries and Other Interests
prior to the closing of the Share Exchange Agreement, iQ Canada has no
subsidiaries and does own any securities issued by, or any equity or
ownership interest in, any other person. After the closing of the
Share Exchange Agreement, iQ Germany shall be a wholly-owned
subsidiary of iQ Canada. iQ Canada is not subject to any obligation to
make any investment in or to provide funds by way of loan, capital
contribution or otherwise to any person;
1.31 Material Facts
this Agreement does not contain any untrue statement by iQ Canada of a
material fact nor has iQ Canada omitted to state in this Agreement a
material fact necessary in order to make the statements contained
herein not misleading;
1.32 Schedule Information
all information concerning iQ Canada set out in the Schedules to this
Agreement is accurate and correct in every material respect;
<PAGE>
1.33 No Defaults
except as otherwise expressly disclosed herein or in any Schedule
hereto there has not been any default in any obligation to be
performed under any material contract to which iQ Canada is party,
each of which is in good standing and in full force and effect,
unamended; and
1.34 Finder's Fee
except in relation to the Finder's Fee, there is no firm, corporation,
agency or other person that is entitled to a consultant's or finder's
fee or any type of brokerage commission in relation to or in
connection with the transactions contemplated by this Agreement as a
result of any agreement with iQ Canada.
Exhibit 6.3
POOLING AGREEMENT
THIS AGREEMENT dated for reference the 25th day of August, 1998.
AMONG:
iQ Power Technology Inc.
(hereinafter called the "Issuer")
OF THE FIRST PART
AND:
MONTREAL TRUST COMPANY OF CANADA
(hereinafter called the "Pooling Agent")
OF THE SECOND PART
AND:
The undersigned shareholders of
iQ Power Technology Inc.
(hereinafter called the "Shareholders")
OF THE THIRD PART
WHEREAS:
A. The Shareholders are the holders of, have subscribed for, or have agreed to
purchase shares (the "Shares") of iQ Power Technology Inc. (the "Issuer") as
described in Schedule "A" hereto;
B. The Shareholders have agreed to place the Shares in pool with the Pooling
Agent on the terms and conditions herein contained.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of TEN
DOLLARS ($10.00) now paid by the parties hereto, each to the other (the receipt
whereof is hereby acknowledged) and in further consideration of the mutual
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. In this Agreement, "Effective Date" shall mean the day all of the issued and
outstanding shares of iQ Battery Research and Development GmbH are acquired by
the Issuer.
2. The Shareholders hereby agrees with the Issuer and the Pooling Agent that
they will respectively deliver or cause to be delivered to the Pooling Agent
certificates for their Shares in the Issuer as set out in Schedule "A" hereto to
be held by the Pooling Agent and released, subject as hereinafter provided, as
provided in Schedule "A".
3. The Shareholders shall be entitled to a letter or receipt from the Pooling
Agent stating the number of Shares represented by certificates held for them by
the Pooling Agent subject to the terms of this Agreement, but such letter or
receipt shall not be assignable.
4. The Shareholders shall not sell, deal in, assign, transfer in any manner
whatsoever or agree to sell, deal in, assign or transfer in any manner
whatsoever any of the said Shares or beneficial ownership of or any interest in
them; and the Pooling Agent shall not accept or acknowledge any transfer,
assignment, declaration of trust or any other document evidencing a change in
legal or beneficial ownership of or interest in the said Shares, except as may
be required by reason of the death or bankruptcy of any one or more of the
Shareholders, in which case the Pooling Agent shall hold the said certificates
for Shares subject to this Agreement for whatever person or persons, firm or
corporation that may thus become legally entitled thereto.
5. The Parties agree that the Shares are being pooled in the best interests of
the Issuer and its shareholders and have not been pooled due to duress or undue
influence.
6. This Agreement shall enure to the benefit of and be binding upon the parties
hereto, their and each of their heirs, executors, administrators, successors and
permitted assigns.
<PAGE>
Pooling Agreement
Page 2
7. This Agreement may be executed in several parts in the same form and such
parts so executed shall together constitute one original Agreement and such
parts, if more than one, shall be read together and construed as if all the
signing parties hereto had executed one copy of this Agreement.
8. Each of the signatories hereby agree that new shareholders of the Issuer may
agree to be bound as parties to this Agreement from time to time and pool their
shareholdings in the Issuer from time to time by amendments hereto which need
only be signed by the Issuer, the Pooling Agent and the shareholders joining the
Agreement from time to time.
9. The parties hereto agree that in consideration of the Pooling Agent agreeing
to act as Pooling Agent as aforesaid, the Issuer and the Shareholders do hereby
covenant and agree from time to time and at all times hereafter, well and truly
to save, defend and keep harmless and fully indemnify the Pooling Agent, its
successors and assigns, from and against all loss, costs, charges, damages and
expenses which the said Pooling Agent, its successors and assigns may at any
time or times hereafter bear, sustain, suffer or be put to for or by reason or
on account of its acting as Pooling Agent pursuant to this Agreement.
10. It is further agreed by and between the parties hereto and, without
restricting the foregoing indemnity, that in case proceedings should hereafter
be taken in any Court respecting the Shares hereby pooled, the Pooling Agent
shall not be obliged to defend any such action or submit its rights to the Court
until it shall have been indemnified by other good and sufficient security in
addition to the indemnity hereinbefore given against its costs of such
proceedings.
IN WITNESS WHEREOF the Issuer, the Pooling Agent, and the Shareholders, have
executed these presents as of the day and year first above written.
SIGNED, SEALED AND DELIVERED ) iQ Power Technology Inc.
by the Issuer in the presence of: ) Name of Issuer
)
____________________________________ ) Per:______________________________
Witness ) signature
___________________________________ ) Suite 708, 1111 West Hastings Street
Address ) Vancouver, British Columbia, Canada
___________________________________ ) V6E 2J3
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Montreal Trust Company of Canada
by the Pooling Agent in the ) Name of Pooling Agent
presence of: )
)
____________________________________ ) Per:______________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
<PAGE>
Pooling Agreement
Page 3
SIGNED, SEALED AND DELIVERED ) Mercator Profits Limited
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Helmut Krack
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Mayon Management Corp.
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Horst Dieter Braun
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Dr. Gunther Bauer
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
<PAGE>
Pooling Agreement
Page 4
SIGNED, SEALED AND DELIVERED ) Karin Wittkewitz
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Rainer Welke
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Peter E. Braun
by a Shareholder in the presence of: ) Name of Shareholder
)
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
<PAGE>
SCHEDULE "A"
The Shares shall be released as to:
a. 1/4 of the Shares on April 1, 2000 (the "First Release Date");
b. 1/4 of the Shares three months following the First Release Date;
c. 1/4 of the Shares six months following the First Release Date; and
d. 1/4 of the Shares nine months following the First Release Date
except that where the number of pooled shares of any Shareholder as at a Release
Date are less than or equal to 50,000, then all such shares of that Shareholder
shall be released.
- ---------------------------------------- --------------------------------------
Shareholder Shares Pooled
- ---------------------------------------- --------------------------------------
Mayon Management Corp. 236,213
Mercator Profits Limited 1,014,742
Helmut Krack 963,889
Horst Dieter Braun 1,750,000
Dr. Gunther Bauer 2,500,000
Peter E. Braun 2,100,000
Karin Wittkewitz 1,150,000
Rainer Welke 1,000,000
- ---------------------------------------- --------------------------------------
Exhibit 6.4
FORM OF
POOLING AMENDMENT AGREEMENT
THIS AGREEMENT dated for reference the _____ day of ____________________,
199___.
AMONG:
iQ Power Technology Inc.
(hereinafter called the "Issuer")
OF THE FIRST PART
AND:
MONTREAL TRUST COMPANY OF CANADA
(hereinafter called the "Pooling Agent")
OF THE SECOND PART
AND:
The undersigned shareholders of
iQ Power Technology Inc.
(hereinafter called the "Shareholders")
OF THE THIRD PART
WHEREAS:
A. The Shareholder is a former atypical shareholder of iQ Battery Research and
Development GmbH, who is the holder of, has subscribed for, or has agreed to
purchase _________ shares (the "Shares") of the Issuer;
B. The Issuer together with the Pooling Agent have entered into a Pooling
Agreement dated August 25, 1998, with certain shareholders of the Issuer (the
"Pooling Agreement") providing for the pooling of the shares of the Issuer owned
by those shareholders and their subsequent release in accordance with the
following release provisions:
a. 1/4 of the Shares on April 1, 2000 (the "First Release Date");
b. 1/4 of the Shares three months following the First Release Date;
c. 1/4 of the Shares six months following the First Release Date; and
d. 1/4 of the Shares nine months following the First Release Date
except that where the number of pooled shares of any Shareholder as at a Release
Date are less than or equal to 50,000, then all such shares of that Shareholder
shall be released; and
C. The Shareholder desires to place the Shares in pool with the Pooling Agent on
the terms and conditions of Pooling Agreement which provides that new
shareholders of the Issuer may agree to be bound as parties to the Pooling
Agreement from time to time and pool their shareholdings in the Issuer from time
to time by amendments to the Pooling Agreement which need only be signed by the
Issuer, the Pooling Agent and the shareholders joining the Pooling Agreement
from time to time;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of TEN
DOLLARS ($10.00) now paid by the parties hereto, each to the other (the receipt
whereof is hereby acknowledged) and in further consideration of the mutual
covenants and conditions hereinafter contained, the parties hereto agree as
follows:
1. The Shareholder hereby agrees with the Issuer and the Pooling Agent to be
bound as a party to the Pooling Agreement and to pool the Shares thereunder and
for this purpose to deliver or cause to be delivered to the Pooling Agent
certificates for his or her Shares in the Issuer to be held by the Pooling Agent
and released as provided in the Pooling Agreement.
2. This Agreement shall enure to the benefit of and be binding upon the parties
hereto, their and each of their heirs, executors, administrators, successors and
permitted assigns.
3. This Agreement may be executed in several parts in the same form and such
parts so executed shall together constitute one original Agreement and such
parts, if more than one, shall be read together and construed as if all the
signing parties hereto had executed one copy of this Agreement.
4. The parties hereto agree that in consideration of the Pooling Agent agreeing
to act as Pooling Agent as aforesaid, the Issuer and the Shareholder do hereby
covenant and agree from time to time and at all times hereafter, well and truly
<PAGE>
Pooling Amendment Agreement
Page 2
to save, defend and keep harmless and fully indemnify the Pooling Agent, its
successors and assigns, from and against all loss, costs, charges, damages and
expenses which the said Pooling Agent, its successors and assigns may at any
time or times hereafter bear, sustain, suffer or be put to for or by reason or
on account of its acting as Pooling Agent pursuant to this Agreement and the
Pooling Agreement.
IN WITNESS WHEREOF the Issuer, the Pooling Agent, and the Shareholder, have
executed these presents as of the day and year first above written.
SIGNED, SEALED AND DELIVERED ) iQ Power Technology Inc.
by the Issuer in the presence of: ) Name of Issuer
)
____________________________________ ) Per:______________________________
Witness ) signature
___________________________________ ) Suite 708, 1111 West Hastings Street
Address ) Vancouver, British Columbia, Canada
___________________________________ ) V6E 2J3
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) Montreal Trust Company of Canada
by the Pooling Agent in the ) Name of Pooling Agent
presence of: )
)
____________________________________ ) Per:______________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
SIGNED, SEALED AND DELIVERED ) ___________________________________
by a Shareholder in the presence of: ) Name of Shareholder
)
____________________________________ ) __________________________________
Witness ) signature
___________________________________ ) ___________________________________
Address ) ___________________________________
___________________________________ ) ___________________________________
City and Postal Code ) Address for service
Exhibit 6.5
MANAGEMENT AGREEMENT
THIS AGREEMENT made effective January 1, 1997.
BETWEEN:
3099458 CANADA INC., a body corporate, duly incorporated under
the Canada Business Corporations Act, having its head office
situate at 304 - 850 Burrard Street, Vancouver, British
Columbia, V6Z 2J1;
(hereinafter called the "Corporation")
OF THE FIRST PART
AND:
MAYON MANAGEMENT CORP., a body corporate, duly incorporated
under the laws of the Province of British Columbia, having its
head office Suite 304, 850 Burrard Street, Vancouver, British
Columbia, V6Z 2J1;
(hereinafter called the "Manager")
OF THE SECOND PART
WHEREAS:
A. The Corporation is engaged in the natural resource industry and requires the
services of a manager to fulfill the day-to-day responsibilities imposed on the
Corporation; and
B. The Manager has agreed to act as Manager of the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the
premises, the mutual covenants and agreements herein contained the parties
hereto hereby agree as follows:
1. The Corporation hereby agrees to retain the services of the Manager.
2. The retention of the Manager shall be for a period of one (1) year commencing
January 1, 1997, and continuing thereafter from year to year unless and until
terminated as hereinafter provided.
3. The Manager shall serve the Corporation and any subsidiaries from time to
time owned by the Corporation in such capacity or capacities and shall perform
such duties and exercise such powers as may from time to time be determined by
Resolution of the Board of Directors of Corporation.
<PAGE>
Page 2
4. Notwithstanding the control vested in the Board of Directors with respect to
the activities of the Manager, the Manager shall have from the date of
commencement of this Agreement, the authority and responsibility to deal with
the following subject matters:
a. maintaining the services of professionals for the purpose of reviewing all
prospects introduced to the Corporation for investment or participation;
b. selecting on the basis of evaluations provided by professionals after
consideration of the risk factors involved, suitable properties for
acquisition and participation;
c. negotiating contracts with potential participants in ventures to be
participated in by the Corporation;
d. negotiating for and obtaining the services of operators for the
Corporation's prospects, or if the Corporation is the operator, negotiating
for and obtaining the services of drilling contractors;
e. conducting on-site inspections of all projects undertaken by the
Corporation;
f. arranging for an securing financings for the Corporation as may be
permitted by regulatory bodies;
g. arranging for timely disclosure of all material facts in the affairs of the
Corporation;
h. arranging for the collection of all receivables and production revenue to
be obtained by the Corporation;
i. negotiating for and concluding all oil and gas or other natural resource
products sales contracts;
j. establishing and maintaining suitable banking relations;
k. ensuring the maintenance of proper accounting records and compiling monthly
statements of the source and application of funds;
l. arranging for payment of all payables of the Corporation and/or any
subsidiaries;
m. perusing and replying to all corporate inquiries and correspondence;
n. securing and obtaining for the benefit of the Corporation competent tax
advice, legal advice and services and accounting services; and
o. and all such other duties as may be imposed upon the Manager from time to
time due to the nature of the Corporation's business.
5. The remuneration of the Manager for his services hereunder shall be at the
rate of SIXTY THOUSAND DOLLARS ($60,000) DOLLARS per year (together with any
such increments thereto as the Board of Directors of the Corporation may from
time to time) payable in equal
<PAGE>
Page 3
monthly installments in advance on the first business day of each calendar
month, the first such installment to be payable on the first day of January,
1997.
6. The Manager shall be reimbursed for all traveling and out-of-pocket expenses
actually and properly incurred by it in connection with its duties hereunder. In
respect of expenses, the Manager shall provide statements and vouchers to the
Corporation as and when required by it.
7. The terms "subsidiary" and "subsidiaries" as used herein mean any corporation
or Corporation of which more than 50% of the outstanding shares carrying voting
rights at all times are for the time being owned by or held for the benefit of
the Corporation and any other corporation or company in like relation to the
Corporation and include any corporation or company in like relation to a
subsidiary.
8. Any notice required or permitted to be given hereunder to the Manager or to
the Corporation shall be given by registered mail, postage prepaid, addressed to
the Manager or the Corporation at their respective registered offices from time
to time in existence. Any notice mailed as aforesaid shall be deemed to have
been received by the Addressee on the second business day following the date of
mailing.
9. This Agreement may be terminated:
a. by the Manager on ninety (90) days written notice to the Corporation; or
b. by the Corporation on thirty (30) days written notice to the Manager.
10. The provisions of this Agreement shall be governed by and interpreted in
accordance with the laws of the Province of British Columbia.
IN WITNESS WHEREOF, the parties hereto have hereunto caused these presents to be
executed, as of the day and year first above written.
THE CORPORATE SEAL of )
3099458 CANADA INC. )
was hereunto affixed in the )
presence of: )
) (c/s)
__________________________________ )
)
__________________________________ )
THE CORPORATE SEAL of )
MAYON MANAGEMENT CORP. )
was hereunto affixed in the )
presence of: )
)
) (c/s)
__________________________________ )
)
__________________________________ )
Exhibit 6.6
CONSULTING AGREEMENT
Date: 8/25/98
From: iQ Power Technology Inc.
(the "Company")
At: Suite 708, 1111 West Hastings Street
Vancouver, BC, Canada V6E 2J3
To: MAYON MANAGEMENT CORP.
(the "Consultant")
At: Suite 304, 850 Burrard Street
Vancouver, British Columbia, V6Z 2J1
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions set out in Sections 1 through 9 attached, the Company hereby offers
and the Consultant hereby accepts engagement with the Company upon the terms and
conditions set forth herein:
Position: Manager
Responsibilities: Those described in Schedule A.
Term of Agreement: This Agreement shall have a term of 3 years commencing
immediately.
Compensation: The Company shall pay the Consultant US$6,000 per
month as consideration for the services of the
Consultant hereunder, payable on the first business
day of each month during the term of this Agreement.
Governing Jurisdiction: British Columbia.
Executed and delivered by and on behalf of the Company at ________________,
effective the date and year first above written.
iQ Power Technology Inc.
Per:_________________________________
===============================================================================
Accepted, and signed, sealed and delivered by the Consultant at
_____________________________________________, effective the date and year first
above written.
MAYON MANAGEMENT CORP.
Per:_________________________________
<PAGE>
Consulting Agreement
Page 2
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions contained in this Agreement, the Company hereby offers and the
Consultant hereby accepts engagement with the Company upon the terms and
conditions set forth herein.
1.00 Position
- --------------
1.01 The Consultant shall hold the position indicated in on the first page
hereof and in such capacity, shall carry out the duties and responsibilities
commensurate with that position as such duties are more specifically defined
from time to time during the term of this Agreement by the Board of Directors of
the Company. The Consultant shall provide the services of Russell French as an
employee and, at the election of the Board of Directors of the Company, an
officer of the Company. For the purpose of this Agreement, any reference to the
Consultant shall include reference to Russell French.
2.00 Terms; Termination of Consulting
- --------------------------------------
2.01 The term of engagement pursuant to this Agreement shall be for the term
stated on the first page hereof and thereafter engagement shall continue on an
annual basis until terminated by the Company or the Consultant.
Either party may terminate the Consultant's engagement as follows:
a. the Consultant may terminate his services at any time and for any reason
upon thirty days' written notice to the Company;
b. the Company may terminate the Consultant's services at will. If the Company
terminates the Consultant's engagement without cause, the Consultant's
salary and benefits shall continue for at least the current term of this
Agreement;
c. the Company may terminate the Consultant's services for cause after
reasonable notice of any non-performance has been given by the Company to
the Consultant and a reasonable opportunity has been afforded to the
Consultant to remedy any instance of non-performance. For purposes of the
preceding sentence, "cause" shall include:
i. fraud,
ii. conviction or confession of an indictable offense,
iii. destruction or theft of the Company's property,
iv. misconduct materially injurious to the Company, or
v. any breach or threatened breach of this Agreement; and
d. the Company may terminate the Consultant's services should the Consultant
no longer provide the services of Russ French as provided for in this
agreement, and the Consultant's salary and benefits will be terminated on
the date of such termination.
2.02 If the Consultant's engagement is terminated, he shall continue to be bound
by the terms of Sections 5.00 and 6.00 of this Agreement.
3.00 Compensation
- ------------------
3.01 During the term of this Agreement, the Consultant shall be paid in
accordance with the payment provisions on the first page hereof. The Company
shall remit to all government and regulatory authorities all engagement,
workers' compensation, and other statutory deductions as may be required by the
law of the Governing Jurisdiction. The compensation may be increased from time
to time subject to the approval of the Board of Directors of the Company.
4.00 Benefits
- --------------
4.01 The Consultant shall be entitled to on approval by the Board of Directors
of the Company participate fully in all other benefits provided by the Company
to employees in his category of engagement.
<PAGE>
Consulting Agreement
Page 3
4.02 For the duration of Consultant's engagement hereunder, Consultant will be
provided such holidays, sick leave and vacation as Company makes available to
its management level employees generally or as specifically stated on the first
page hereof. Company will reimburse Consultant in accordance with company
policies and procedures for reasonable expenses necessarily incurred in the
performance of duties hereunder against appropriate receipts and vouchers
indicating the specific business purpose for each such expenditure.
5.00 Covenant Not to Compete
- -----------------------------
5.01 In consideration for the engagement granted to him under this Agreement,
the Consultant agrees that he will not directly or indirectly compete with the
Company during the term of his engagement with the Company and for a period of
two years from the date on which his engagement with the Company terminates. The
said covenant not to compete shall include all geographical areas in which the
Company is actively marketing or developing products or operates directly or
indirectly through a subsidiary or associated company having common control or
ownership during the term of engagement or as of the engagement termination date
and shall prohibit the following activities:
a. the design, development, manufacture, production, sale, marketing,
solicitation or acceptance of orders with regard to any product, concept,
or business line which is directly competitive with any aspect of the
business of the Company as conducted as of the termination date, whether or
not using any confidential information; and
b. having anywhere in the world where the Company is actively marketing
products or services as of the date of termination of engagement, any
business dealings or contacts except those which demonstrably do not relate
to or compete with the business or interest of the Company; and
c. being an employee, employer, Consultant, officer, director, partner,
consultant, trustee or shareholder of more than five percent of the
outstanding common stock of any person or entity that does any of the
activities referred to in the preceding paragraphs (a) and (b).
For the purpose of this section, the business of the Company includes, but is
not limited to, the design, development, manufacture and distribution of
lead-acid batteries and related technologies and products.
6.00 Ownership of Technology; Confidentiality
- ----------------------------------------------
6.01 Confidential Information
The Consultant recognizes and acknowledges that during the course of his
engagement, he will have access to certain information not generally known to
the public, relating to the products, sales or business of the Company which may
include, without limitation, software, literature, data, programs, customer
contact lists, sources of supply, prospects or projections, manufacturing
techniques, processes, formulas, research or experimental work, work in process,
trade secrets or any other proprietary or confidential matter (collectively, the
"Confidential Information"). The Consultant recognizes and acknowledges that
this Confidential Information constitutes a valuable, special and unique asset
of the Company, access to and knowledge of which are essential to the
performance of the Consultant's duties. The Consultant acknowledges and agrees
that all such Confidential Information, including without limitation that which
the Consultant conceives or develops, either alone or with others, at any time
during his engagement by the Company, is and shall remain the exclusive property
of the Company. The Consultant further recognizes, acknowledges and agrees that,
to enable the Company to perform services for its customers or its clients, such
customers or clients may furnish to the Company or the Consultant Confidential
Information concerning their business affairs, property, methods of operation or
other data, that the goodwill afforded to the Company depends on the Company and
its employees preserving the confidentiality of such information, and that such
information shall be treated as Confidential Information of the Company for all
purposes under this Agreement.
6.02 Non-Disclosure
The Consultant agrees that, except as directed by the Company, the Consultant
will not at any time, whether during or after his engagement with the Company,
use or disclose to any person for any purpose other than for the benefit of the
Company any Confidential Information, or permit any person to use, examine
and/or make copies of any documents, files, data or other information sources
which contain or are derived from Confidential Information, whether prepared by
<PAGE>
Consulting Agreement
Page 4
the Consultant or otherwise coming into the Company's possession or control
without the prior written permission of the Company. Consultant's obligations
under subsections 6.01 and 6.02 are indefinite in term and shall survive the
termination of this Agreement.
6.03 Work Product and Copyrights.
Consultant agrees that all right, title and interest in and to the materials
resulting from the performance of Consultant's duties at Company and all copies
thereof, including works in progress, in whatever media, (the "Work"), will be
and remain in Company upon their creation. Consultant will mark all Work with
Company's copyright or other proprietary notice as directed by Company.
Consultant further agrees:
a. To the extent that any portion of the Work constitutes a work protectable
under the copyright laws of the United States, Canada or the Federal
Republic of Germany (the "Copyright Law"), that all such Work will be
considered a "work made for hire" as such term is used and defined in the
Copyright Law and that Company will be considered the "author" of such
portion of the Work and the sole and exclusive owner throughout the world
of copyright therein; and
b. If any portion of the Work does not qualify as a "work made for hire" as
such term is used and defined in the Copyright Law, that Consultant hereby
assigns and agrees to assign to Company, without further consideration, all
right, title and interest in and to such Work or in any such portion
thereof and any copyright therein and further agrees to execute and deliver
to Company, upon request, appropriate assignments of such Work and
copyright therein and such other documents and instruments as Company may
request to fully and completely assign such Work and copyright therein to
Company, its successors or nominees, and that Consultant hereby appoints
Company as attorney-in-fact to execute and deliver any such documents on
Consultant's behalf in the event Consultant should fail or refuse to do so
within a reasonable period following Company's request.
6.04 Inventions and Patents
For purposes of this Agreement, "Inventions" includes, without limitation,
information, inventions, contributions, improvements, ideas, or discoveries,
whether patentable or not, and whether or not conceived or made during work
hours. Consultant agrees that all Inventions conceived or made by Consultant
during the period of engagement with Company belong to Company, provided they
grow out of Consultant's work with Company or are related in some manner to the
Company's business, including, without limitation, research and product
development, and projected business of Company or its affiliated companies.
Accordingly, Consultant will:
a. Make adequate written records of such Inventions, which records will be
Company's property;
b. Assign to Company, at its request, any rights Consultant may have to such
Inventions for the Federal Republic of Germany, the U.S., Canada, and all
other countries;
c. Waive and agree not to assert any moral rights Consultant may have or
acquire in any Inventions and agree to provide written waivers from time to
time as requested by Company; and
d. Assist Company (at Company's expense) in obtaining and maintaining patents
or copyright registrations with respect to such Inventions.
Consultant understands and agrees that Company or its designee will determine,
in its sole and absolute discretion, whether an application for patent will be
filed on any Invention that is the exclusive property of Company, as set forth
above, and whether such an application will be abandoned prior to issuance of a
patent. Company will pay to Consultant, either during or after the term of this
Agreement, the following amounts if Consultant is sole inventor, or Consultant's
proportionate share if Consultant is joint inventor: $750 upon filing of the
initial application for patent on such Invention; and $1,500 upon issuance of a
patent resulting from such initial patent application, provided Consultant is
named as an inventor in the patent.
Consultant further agrees that Consultant will promptly disclose in writing to
Company during the term of Consultant's engagement and for one (1) year
thereafter, all Inventions whether developed during the time of such engagement
or thereafter (whether or not Company has rights in such
<PAGE>
Consulting Agreement
Page 5
Inventions) so that Consultant's rights and Company's rights in such Inventions
can be determined. Consultant represents and warrants that Consultant has no
Inventions, software, writings or other works of authorship useful to Company in
the normal course of the Company's business, which were conceived, made or
written prior to the date of this Agreement and which are excluded from the
operation of this Agreement
6.05 Possession
The Consultant agrees that upon request by the Company and in any event upon
termination of engagement, the Consultant shall turn over to the Company all
Confidential Information in the Consultant's possession or under his control
which was created pursuant to, is connected with or derived from the
Consultant's services to the Company, or which is related in any manner to the
Company's business activities or research and development efforts, whether or
not such materials are in the Consultant's possession as of the date of this
Agreement.
7.00 Saving Provision
- ----------------------
7.01 The Company and the Consultant agree and stipulate that the agreements and
covenants contained in the preceding Sections 5.00 and 6.00, including the scope
of the restricted activities described therein and the duration and geographic
extent of such restrictions, are fair and reasonably necessary for the
protection of Confidential Information, goodwill and other protectable
interests, in light of all of the facts and circumstances of the relationship
between the Consultant and the Company. In the event a court of competent
jurisdiction should decline to enforce any provision of the preceding
paragraphs, such paragraphs shall be deemed to be modified to restrict the
Consultant's competition with the Company to the maximum extent, in both time
and geography, which the court shall find enforceable.
8.00 Injunctive Relief
- -----------------------
8.01 The Consultant acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the non-competition and non-disclosure
covenants or other agreements contained herein would give rise to irreparable
injury to the Company or clients of the Company which injury would be
inadequately compensable in money damages. Accordingly, the Company or where
appropriate, a client of the Company, may seek and obtain an injunctive relief
from the breach or threatened breach of any provision, requirement or covenant
of this Agreement, in addition to and not in limitation of any other legal
remedies which may be available. The Consultant further acknowledges, agrees and
stipulates that, in the event of the termination of engagement with the Company,
the Consultant's experience and capabilities are such that the Consultant can
obtain engagement in business activities which are of a different and
non-competing nature with his activities as an Consultant of the Company and
that the enforcement of a remedy hereunder by way of injunction shall not
prevent the Consultant from earning a reasonable livelihood. The Consultant
further acknowledges and agrees that the covenants contained herein are
necessary for the protection of the Company's legitimate business interests and
are reasonable in scope and content.
9.00 General
- -------------
9.01 This Agreement is made under and subject to the laws of the Governing
Jurisdiction stated on the first page hereof.
9.02 Consultant authorizes Company, at its election, to reveal the terms of this
Agreement to any future employer or potential employer of Consultant or as may
otherwise be required under any disclosure laws applicable to the Company.
9.03 Consultant represents and warrants to Company that Consultant is free to
enter into this Agreement and has no commitment, arrangement or understanding to
or with any party that restrains or is in conflict with Consultant's performance
of the covenants, services and duties provided for in this Agreement.
9.04 During Consultant's engagement, this Agreement may not be assigned by
either party without the written consent of the other; provided, however, that
Company may assign its rights and obligations under this Agreement without
Consultant's consent to a successor by sale, merger or liquidation, if such
successor carries on the business of the Company substantially in the form in
which it is being conducted by the Company at the time of the sale, merger or
liquidation.
<PAGE>
Consulting Agreement
Page 6
9.05 This Agreement is binding upon Consultant, Consultant's heirs, personal
representatives and permitted assigns and on Company, its successors and
assigns.
9.06 Any notice required or permitted to be given hereunder are sufficient if in
writing and delivered by hand, by facsimile or by registered or certified mail,
to a party at its address noted on the first page hereof
9.07 If any provision of this Agreement or compliance by any of the parties with
any provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law. If such modification is not possible, said provision, to the extent that it
is in violation of law, unenforceable or void, shall be deemed severable from
the remaining provisions of this Agreement, which provisions will remain binding
on the parties.
9.08 No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this Agreement
operate or be construe as a waiver of any subsequent breach; nor will any single
or partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by law.
9.09 This instrument contains the entire agreement of the parties with respect
to the relationship between Consultant and Company and supersedes all prior
agreements and understandings, and there are no other representations or
agreements other than as stated in this Agreement related to the terms and
conditions of Consultant's engagement. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
9.10 In the event it becomes necessary to enforce this Agreement through legal
action, whether or not a suit is actually commenced, the party which obtains
substantial success in a legal action shall be entitled to his or actual
reasonable solicitor's fees and disbursements.
9.11 Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural and vice versa, as
appropriate.
9.12 All references to money in this Agreement are or shall be to money in
lawful money of the Governing Jurisdiction stated on the first page hereof.
<PAGE>
SCHEDULE A
Duties shall include:
a. retaining the services of professionals for the purpose of reviewing all
prospects introduced to the Corporation for investment or participation;
b. selecting on the basis of evaluations provided by professionals, after
consideration of the risk factors involved, suitable business opportunities
for acquisition and participation;
c. negotiating contracts with potential participants in ventures to be
participated in by the Corporation;
d. negotiating for and obtaining the services of operators for the
Corporation's prospects, or if the Corporation is the operator or manager,
negotiating for and obtaining the services of independent contractors;
e. conducting on-site inspections of all projects undertaken by the
Corporation;
f. arranging for and securing financings for the Corporation as may be
permitted by regulatory bodies;
g. arranging for timely disclosure of all material facts in the affairs of the
Corporation;
h. arranging for the collection of all receivables to be obtained by the
Corporation;
i. negotiating for and concluding all sales and other contracts;
j. establishing and maintaining suitable banking relations;
k. ensuring the maintenance of proper accounting records and compiling monthly
statements of source and application of funds;
l. arranging for payment of all payables of the Corporation and/or any
subsidiaries;
m. perusing and replying to all corporate enquiries and correspondence;
n. securing and obtaining for the benefit of the Corporation competent tax
advice, legal advice and services and accounting services; and
o. and all such other duties as may be imposed upon the Manager from time to
time due to the nature of the Corporation's business.
All duties shall be performed in cooperation with the President of the Company.
For greater certainty, the Consultant may not enter into any contracts on the
Company's behalf without the prior written consent of the Company's Board of
Directors.
Exhibit 6.7
EMPLOYMENT AGREEMENT
Date: August 31, 1998
From: iQ Power Technology Inc.
(the "Employer")
At: Suite 708, 1111 West Hastings Street
Vancouver, BC, Canada V6E 2J3
To: Dr. Gunther C. Bauer
(the "Employee")
At: Oderweg, No. 7
Ottobrunn, Germany 85521
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions set out in Sections 1 through 9 attached, the Employer hereby offers
and the Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein:
Position: Vice-President, Research & Development and
Technical Advisor
Responsibilities: Those described in Schedule A.
Term of Agreement: This Agreement shall have a term of five (5) years
commencing immediately.
Compensation: The Employer shall pay the Employee US$8,000 per
month as consideration for the services of the
Employee hereunder, payable on the first business
day of each month during the term of this
Agreement.
Governing Jurisdiction: Germany
Jurisdiction: The Court at the domicile of the Employee is
exclusively competent to hear any disputes
resulting from or in the context of this contract.
Executed and delivered by and on behalf of the Employer at Vancouver,
- --------------------- BC effective the date and year first above written.
iQ POWER TECHNOLOGY INC.
/s/ Russ French
- ----------------------------------------
===============================================================================
===============================================================================
Accepted, and signed, sealed and delivered by the Employee at August 31,
- ------------------- 1998 effective the date and year first above written.
/s/ Gunther Bauer
- ---------------------------------
DR. GUNTHER C. BAUER
<PAGE>
SCHEDULE A
Duties shall include:
a. responsibility for overall management of research and development,
including day to day planning, organizing, and allocation of resources;
b. conceiving and developing commercially viable products; and
c. negotiating joint venture and other development agreements.
<PAGE>
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions contained in this Agreement, the Employer hereby offers and the
Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein.
1.00 Position
- -----------------
1.01 The Employee shall hold the position indicated in on the first page hereof
and in such capacity, shall carry out the duties and responsibilities
commensurate with that position as such duties are more specifically defined
from time to time during the term of this Agreement by the Board of Directors of
the Employer.
2.00 Terms; Termination of Employment
- -----------------------------------------
2.01 The term of employment pursuant to this Agreement shall be for the term
stated on the first page hereof. The employment shall continue on an annual
basis until terminated by the Employer or the Employee. This termination is to
be made latest six months before the end of the relevant year. The Employee may
terminate his services at any time and for any reason upon 30 days written
notice to the Employer. The Employer may terminate the Employee's services for
any legitimate reasons in accordance with the German Labour Law and in
accordance with the proceedings intended for such termination by the German
Labour Law.
2.02 If the Employee's employment is terminated, he shall continue to be bound
by the terms of Sections 5.00 and 6.00 of this Agreement.
3.00 Compensation
- ---------------------
3.01 During the term of this Agreement, the Employee shall be paid in accordance
with the payment provisions on the first page hereof. The Employer shall remit
to all government and regulatory authorities all employment, workers'
compensation, and other statutory deductions as may be required by the law of
the Governing Jurisdiction. The compensation may be increased from time to time
subject to the approval of the Board of Directors of the Employer.
4.00 Benefits
- -----------------
4.01 The Employee shall be entitled to on approval by the Board of Directors of
the Employer participate fully in all other benefits provided by the Employer to
employees in his category of employment.
4.02 For the duration of Employee's employment hereunder, Employee will be
provided such holidays, sick leave and vacation as Employer makes available to
its management level employees generally or as specifically stated on the first
page hereof. Employer will reimburse Employee in accordance with company
policies and procedures for reasonable expenses necessarily incurred in the
performance of duties hereunder against appropriate receipts and vouchers
indicating the specific business purpose for each such expenditure.
4.03 Upon execution of this Agreement, Employer will grant to Employee and
employee will accept incentive stock options to purchase the number of shares of
the Employer's Common Stock at the purchase price per share described on the
first page hereof, if any, subject to the Employer's 1998 Stock Option Plan
("the Plan").
5.00 Covenant Not to Compete
- --------------------------------
5.01 In consideration for the employment granted to him under this Agreement,
the Employee agrees that he will not directly or indirectly compete with the
Employer during the term of his employment with the Employer and for a period of
two years from the date on which his employment with the Employer terminates.
The said covenant not to compete shall include all geographical areas in which
the Employer is actively marketing or developing products or operates directly
or indirectly through a subsidiary or associated company having common control
or ownership during the term of employment or as of the employment termination
date and shall prohibit the following activities:
a. the design, development, manufacture, production, sale, marketing,
solicitation or acceptance of orders with regard to any product, concept,
or business line which is directly competitive with any aspect of the
business of the Employer as conducted as of the termination date, whether
or not using any confidential information; and
<PAGE>
b. having anywhere in the world where the Employer is actively marketing
products or services as of the date of termination of employment, any
business dealings or contacts except those which demonstrably do not relate
to or compete with the business or interest of the Employer; and
c. being an employee, employer, Employee, officer, director, partner,
consultant, trustee or shareholder of more than five percent of the
outstanding common stock of any person or entity that does any of the
activities referred to in the preceding paragraphs (a) and (b).
For the purpose of this section, the business of the Employer includes, but is
not limited to, the design, development, manufacture and distribution of
lead-acid batteries and related technologies and products.
6.00 Ownership of Technology; Confidentiality
- -------------------------------------------------
6.01 Confidential Information
The Employee recognizes and acknowledges that during the course of his
employment, he will have access to certain information not generally known to
the public, relating to the products, sales or business of the Employer which
may include, without limitation, software, literature, data, programs, customer
contact lists, sources of supply, prospects or projections, manufacturing
techniques, processes, formulas, research or experimental work, work in process,
trade secrets or any other proprietary or confidential matter (collectively, the
"Confidential Information"). The Employee recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of the
Employer, access to and knowledge of which are essential to the performance of
the Employee's duties. The Employee acknowledges and agrees that all such
Confidential Information, including without limitation that which the Employee
conceives or develops, either alone or with others, at any time during his
employment by the Employer, is and shall remain the exclusive property of the
Employer. The Employee further recognizes, acknowledges and agrees that, to
enable the Employer to perform services for its customers or its clients, such
customers or clients may furnish to the Employer or the Employee Confidential
Information concerning their business affairs, property, methods of operation or
other data, that the goodwill afforded to the Employer depends on the Employer
and its employees preserving the confidentiality of such information, and that
such information shall be treated as Confidential Information of the Employer
for all purposes under this Agreement.
6.02 Non-Disclosure
The Employee agrees that, except as directed by the Employer, the Employee will
not at any time, whether during or after his employment with the Employer, use
or disclose to any person for any purpose other than for the benefit of the
Employer any Confidential Information, or permit any person to use, examine
and/or make copies of any documents, files, data or other information sources
which contain or are derived from Confidential Information, whether prepared by
the Employee or otherwise coming into the Employer's possession or control
without the prior written permission of the Employer. Employee's obligations
under subsections 6.01 and 6.02 are indefinite in term and shall survive the
termination of this Agreement.
6.03 Work Product and Copyrights
Employee agrees that all right, title and interest in and to the materials
resulting from the performance of Employee's duties at Employer and all copies
thereof, including works in progress, in whatever media, (the "Work"), will be
and remain in Employer upon their creation. Employee will mark all Work with
Employer's copyright or other proprietary notice as directed by Employer.
Employee further agrees:
a. To the extent that any portion of the Work constitutes a work protectable
under the copyright laws of the United States, Canada or the Federal
Republic of Germany (the "Copyright Law"), that all such Work will be
considered a "work made for hire" as such term is used and defined in the
Copyright Law and that Employer will be considered the "author" of such
portion of the Work and the sole and exclusive owner throughout the world
of copyright therein; and
b. If any portion of the Work does not qualify as a "work made for hire" as
such term is used and defined in the Copyright Law, that Employee hereby
assigns and agrees to assign to Employer, without further consideration,
all right, title and interest in and to such Work or in any such portion
thereof and any copyright therein and
<PAGE>
further agrees to execute and deliver to Employer, upon request, appropriate
assignments of such Work and copyright therein and such other documents and
instruments as Employer may request to fully and completely assign such Work and
copyright therein to Employer, its successors or nominees, and that Employee
hereby appoints Employer as attorney-in-fact to execute and deliver any such
documents on Employee's behalf in the event Employee should fail or refuse to do
so within a reasonable period following Employer's request.
6.04 Inventions and Patents
For purposes of this Agreement, "Inventions" includes, without limitation,
information, inventions, contributions, improvements, ideas, or discoveries,
whether patentable or not, and whether or not conceived or made during work
hours. Employee agrees that all Inventions conceived or made by Employee during
the period of employment with Employer belong to Employer, provided they grow
out of Employee's work with Employer or are related in some manner to the
Employer's business, including, without limitation, research and product
development, and projected business of Employer or its affiliated companies.
Accordingly, Employee will:
a. Make adequate written records of such Inventions, which records will be
Employer's property;
b. Assign to Employer, at its request, any rights Employee may have to such
Inventions for the Federal Republic of Germany, the U.S., Canada, and all
other countries;
c. Waive and agree not to assert any moral rights Employee may have or acquire
in any Inventions and agree to provide written waivers from time to time as
requested by Employer; and
d. Assist Employer (at Employer's expense) in obtaining and maintaining
patents or copyright registrations with respect to such Inventions.
Employee understands and agrees that Employer or its designee will determine, in
its sole and absolute discretion, whether an application for patent will be
filed on any Invention that is the exclusive property of Employer, as set forth
above, and whether such an application will be abandoned prior to issuance of a
patent. Employer will pay to Employee, either during or after the term of this
Agreement, the following amounts if Employee is sole inventor, or Employee's
proportionate share if Employee is joint inventor: $750 upon filing of the
initial application for patent on such Invention; and $1,500 upon issuance of a
patent resulting from such initial patent application, provided Employee is
named as an inventor in the patent.
Employee further agrees that Employee will promptly disclose in writing to
Employer during the term of Employee's employment and for one (1) year
thereafter, all Inventions whether developed during the time of such employment
or thereafter (whether or not Employer has rights in such Inventions) so that
Employee's rights and Employer's rights in such Inventions can be determined.
Employee represents and warrants that Employee has no Inventions, software,
writings or other works of authorship useful to Employer in the normal course of
the Employer's business, which were conceived, made or written prior to the date
of this Agreement and which are excluded from the operation of this Agreement.
Notwithstanding the foregoing, where the subject matter of this subsection 6.04
is subject to German Labour Law, Inventions, patents and other inventions,
suggestions for technical improvement and other made by the Employee are to be
governed in accordance with the regulations of the German Gesetz uber
Arbeitnehmererfindungen (Law on inventions made by employees) in its version in
force.
6.05 Possession
The Employee agrees that upon request by the Employer and in any event upon
termination of employment, the Employee shall turn over to the Employer all
Confidential Information in the Employee's possession or under his control which
was created pursuant to, is connected with or derived from the Employee's
services to the Employer, or which is related in any manner to the Employer's
business activities or research and development efforts, whether or not such
materials are in the Employee's possession as of the date of this Agreement.
7.00 Saving Provision
- -------------------------
7.01 The Employer and the Employee agree and stipulate that the agreements and
covenants contained in the preceding Sections 5.00 and 6.00, including the scope
of the restricted activities described therein and the duration and geographic
extent of such restrictions, are fair and reasonably necessary for the
protection of Confidential Information,
<PAGE>
goodwill and other protectable interests, in light of all of the facts and
circumstances of the relationship between the Employee and the Employer. In the
event a court of competent jurisdiction should decline to enforce any provision
of the preceding paragraphs, such paragraphs shall be deemed to be modified to
restrict the Employee's competition with the Employer to the maximum extent, in
both time and geography, which the court shall find enforceable.
8.00 Injunctive Relief
- --------------------------
8.01 The Employee acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the non-competition and non-disclosure
covenants or other agreements contained herein would give rise to irreparable
injury to the Employer or clients of the Employer which injury would be
inadequately compensable in money damages. Accordingly, the Employer or where
appropriate, a client of the Employer, may seek and obtain an injunctive relief
from the breach or threatened breach of any provision, requirement or covenant
of this Agreement, in addition to and not in limitation of any other legal
remedies which may be available. The Employee further acknowledges, agrees and
stipulates that, in the event of the termination of employment with the
Employer, the Employee's experience and capabilities are such that the Employee
can obtain employment in business activities which are of a different and
non-competing nature with his activities as an Employee of the Employer and that
the enforcement of a remedy hereunder by way of injunction shall not prevent the
Employee from earning a reasonable livelihood. The Employee further acknowledges
and agrees that the covenants contained herein are necessary for the protection
of the Employer's legitimate business interests and are reasonable in scope and
content.
9.00 General
- ----------------
9.01 This Agreement is made under and subject to the laws of the Governing
Jurisdiction stated on the first page hereof.
9.02 The Employee authorizes the Employer to reveal the terms of this Agreement
if it is required so under any governmental laws applicable to the Employer.
9.03 Employee represents and warrants to Employer that Employee is free to enter
into this Agreement and has no commitment, arrangement or understanding to or
with any party that restrains or is in conflict with Employee's performance of
the covenants, services and duties provided for in this Agreement.
9.04 During the Employee's employment or the duration of mutual duties between
the Employee and the Employer under this Agreement, this Agreement and the
mutual duties between the Employee and the Employer under this Agreement may not
be assigned by either party without the written consent of the other. 613 a
Burgerliches Gesetzbuch (Civil Code) is applicable.
9.05 This Agreement is binding upon the Employee and permitted assigns and on
Employer, its successors and assigns.
9.06 Any notice required or permitted to be given hereunder are sufficient if in
writing and delivered by hand, by facsimile or by registered or certified mail,
to a party at its address noted on the first page hereof
9.07 If any provision of this Agreement or compliance by any of the parties with
any provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law. If such modification is not possible, said provision, to the extent that it
is in violation of law, unenforceable or void, shall be deemed severable from
the remaining provisions of this Agreement, which provisions will remain binding
on the parties.
9.08 No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this Agreement
operate or be construe as a waiver of any subsequent breach; nor will any single
or partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by law.
9.09 This instrument contains the entire agreement of the parties with respect
to the relationship between Employee and Employer and supersedes all prior
agreements and understandings, and there are no other representations or
<PAGE>
agreements other than as stated in this Agreement related to the terms and
conditions of Employee's employment. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
9.10 In the event it becomes necessary to enforce this Agreement through legal
action, whether or not a suit is actually commenced, the party which obtains
substantial success in a legal action shall be entitled to his or actual
reasonable solicitor's fees and disbursements.
9.11 Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural and vice versa, as
appropriate.
9.12 All references to money in this Agreement are or shall be to money in
lawful money of the Governing Jurisdiction stated on the first page hereof.
Exhibit 6.8
EMPLOYMENT AGREEMENT
Date: August 31, 1998
From: iQ Power Technology Inc.
(the "Employer")
At: Suite 708, 1111 West Hastings Street
Vancouver, BC, Canada V6E 2J3
To: Peter E. Braun
(the "Employee")
At: Schopenhauer Street, No. 23
Neubiberg, Germany 85579
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions set out in Sections 1 through 9 attached, the Employer hereby offers
and the Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein:
Position: President and Chief Executive Officer
Responsibilities: Those described in Schedule A.
Term of Agreement: This Agreement shall have a term of five (5) years
commencing immediately.
Compensation: The Employer shall pay the Employee US$8,500 per
month as consideration for the services of the
Employee hereunder, payable on the first business
day of each month during the term of this
Agreement.
Governing Jurisdiction: Germany
Jurisdiction: The Court at the domicile of the Employee is
exclusively competent to hear any disputes
resulting from or in the context of this contract.
Executed and delivered by and on behalf of the Employer at Vancouver,
- ---------------- BC effective the date and year first above written.
iQ power technology inc.
/s/ Russ French
- -----------------------
================================================================================
================================================================================
Accepted, and signed, sealed and delivered by the Employee at August 31,
1998, effective the date and year first above written.
/s/ Peter E. Braun
- -----------------------------
PETER E. BRAUN
<PAGE>
SCHEDULE A
Duties shall include:
a. responsibility for overall management of the Employer, including day to day
planning, organizing, and allocation of resources;
b. negotiating sales and marketing agreements;
c. negotiating financing for product development; and
d. negotiating joint venture and other development agreements.
<PAGE>
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions contained in this Agreement, the Employer hereby offers and the
Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein.
1.00 Position
- -----------------
1.01 The Employee shall hold the position indicated in on the first page hereof
and in such capacity, shall carry out the duties and responsibilities
commensurate with that position as such duties are more specifically defined
from time to time during the term of this Agreement by the Board of Directors of
the Employer.
2.00 Terms; Termination of Employment
- -----------------------------------------
2.01 The term of employment pursuant to this Agreement shall be for the term
stated on the first page hereof. The employment shall continue on an annual
basis until terminated by the Employer or the Employee. This termination is to
be made latest six months before the end of the relevant year. The Employee may
terminate his services at any time and for any reason upon 30 days written
notice to the Employer. The Employer may terminate the Employee's services for
any legitimate reasons in accordance with the German Labour Law and in
accordance with the proceedings intended for such termination by the German
Labour Law.
2.02 If the Employee's employment is terminated, he shall continue to be bound
by the terms of Sections 5.00 and 6.00 of this Agreement.
3.00 Compensation
- ---------------------
3.01 During the term of this Agreement, the Employee shall be paid in accordance
with the payment provisions on the first page hereof. The Employer shall remit
to all government and regulatory authorities all employment, workers'
compensation, and other statutory deductions as may be required by the law of
the Governing Jurisdiction. The compensation may be increased from time to time
subject to the approval of the Board of Directors of the Employer.
4.00 Benefits
- -----------------
4.01 The Employee shall be entitled to on approval by the Board of Directors of
the Employer participate fully in all other benefits provided by the Employer to
employees in his category of employment.
4.02 For the duration of Employee's employment hereunder, Employee will be
provided such holidays, sick leave and vacation as Employer makes available to
its management level employees generally or as specifically stated on the first
page hereof. Employer will reimburse Employee in accordance with company
policies and procedures for reasonable expenses necessarily incurred in the
performance of duties hereunder against appropriate receipts and vouchers
indicating the specific business purpose for each such expenditure.
4.03 Upon execution of this Agreement, Employer will grant to Employee and
employee will accept incentive stock options to purchase the number of shares of
the Employer's Common Stock at the purchase price per share described on the
first page hereof, if any, subject to the Employer's 1998 Stock Option Plan
("the Plan").
5.00 Covenant Not to Compete
- --------------------------------
5.01 In consideration for the employment granted to him under this Agreement,
the Employee agrees that he will not directly or indirectly compete with the
Employer during the term of his employment with the Employer and for a period of
two years from the date on which his employment with the Employer terminates.
The said covenant not to compete shall include all geographical areas in which
the Employer is actively marketing or developing products or operates directly
or indirectly through a subsidiary or associated company having common control
or ownership during the term of employment or as of the employment termination
date and shall prohibit the following activities:
a. the design, development, manufacture, production, sale, marketing,
solicitation or acceptance of orders with regard to any product, concept,
or business line which is directly competitive with any aspect of the
business of the Employer as conducted as of the termination date, whether
or not using any confidential information; and
<PAGE>
b. having anywhere in the world where the Employer is actively marketing
products or services as of the date of termination of employment, any
business dealings or contacts except those which demonstrably do not relate
to or compete with the business or interest of the Employer; and
c. being an employee, employer, Employee, officer, director, partner,
consultant, trustee or shareholder of more than five percent of the
outstanding common stock of any person or entity that does any of the
activities referred to in the preceding paragraphs (a) and (b).
For the purpose of this section, the business of the Employer includes, but is
not limited to, the design, development, manufacture and distribution of
lead-acid batteries and related technologies and products.
6.00 Ownership of Technology; Confidentiality
- -------------------------------------------------
6.01 Confidential Information
The Employee recognizes and acknowledges that during the course of his
employment, he will have access to certain information not generally known to
the public, relating to the products, sales or business of the Employer which
may include, without limitation, software, literature, data, programs, customer
contact lists, sources of supply, prospects or projections, manufacturing
techniques, processes, formulas, research or experimental work, work in process,
trade secrets or any other proprietary or confidential matter (collectively, the
"Confidential Information"). The Employee recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of the
Employer, access to and knowledge of which are essential to the performance of
the Employee's duties. The Employee acknowledges and agrees that all such
Confidential Information, including without limitation that which the Employee
conceives or develops, either alone or with others, at any time during his
employment by the Employer, is and shall remain the exclusive property of the
Employer. The Employee further recognizes, acknowledges and agrees that, to
enable the Employer to perform services for its customers or its clients, such
customers or clients may furnish to the Employer or the Employee Confidential
Information concerning their business affairs, property, methods of operation or
other data, that the goodwill afforded to the Employer depends on the Employer
and its employees preserving the confidentiality of such information, and that
such information shall be treated as Confidential Information of the Employer
for all purposes under this Agreement.
6.02 Non-Disclosure
The Employee agrees that, except as directed by the Employer, the Employee will
not at any time, whether during or after his employment with the Employer, use
or disclose to any person for any purpose other than for the benefit of the
Employer any Confidential Information, or permit any person to use, examine
and/or make copies of any documents, files, data or other information sources
which contain or are derived from Confidential Information, whether prepared by
the Employee or otherwise coming into the Employer's possession or control
without the prior written permission of the Employer. Employee's obligations
under subsections 6.01 and 6.02 are indefinite in term and shall survive the
termination of this Agreement.
6.03 Work Product and Copyrights
Employee agrees that all right, title and interest in and to the materials
resulting from the performance of Employee's duties at Employer and all copies
thereof, including works in progress, in whatever media, (the "Work"), will be
and remain in Employer upon their creation. Employee will mark all Work with
Employer's copyright or other proprietary notice as directed by Employer.
Employee further agrees:
a. To the extent that any portion of the Work constitutes a work protectable
under the copyright laws of the United States, Canada or the Federal
Republic of Germany (the "Copyright Law"), that all such Work will be
considered a "work made for hire" as such term is used and defined in the
Copyright Law and that Employer will be considered the "author" of such
portion of the Work and the sole and exclusive owner throughout the world
of copyright therein; and
b. If any portion of the Work does not qualify as a "work made for hire" as
such term is used and defined in the Copyright Law, that Employee hereby
assigns and agrees to assign to Employer, without further consideration,
all right, title and interest in and to such Work or in any such portion
thereof and any copyright therein and
<PAGE>
further agrees to execute and deliver to Employer, upon request,
appropriate assignments of such Work and copyright therein and such other
documents and instruments as Employer may request to fully and completely
assign such Work and copyright therein to Employer, its successors or
nominees, and that Employee hereby appoints Employer as attorney-in-fact to
execute and deliver any such documents on Employee's behalf in the event
Employee should fail or refuse to do so within a reasonable period
following Employer's request.
6.04 Inventions and Patents
For purposes of this Agreement, "Inventions" includes, without limitation,
information, inventions, contributions, improvements, ideas, or discoveries,
whether patentable or not, and whether or not conceived or made during work
hours. Employee agrees that all Inventions conceived or made by Employee during
the period of employment with Employer belong to Employer, provided they grow
out of Employee's work with Employer or are related in some manner to the
Employer's business, including, without limitation, research and product
development, and projected business of Employer or its affiliated companies.
Accordingly, Employee will:
a. Make adequate written records of such Inventions, which records will be
Employer's property;
b. Assign to Employer, at its request, any rights Employee may have to such
Inventions for the Federal Republic of Germany, the U.S., Canada, and all
other countries;
c. Waive and agree not to assert any moral rights Employee may have or acquire
in any Inventions and agree to provide written waivers from time to time as
requested by Employer; and
d. Assist Employer (at Employer's expense) in obtaining and maintaining
patents or copyright registrations with respect to such Inventions.
Employee understands and agrees that Employer or its designee will determine, in
its sole and absolute discretion, whether an application for patent will be
filed on any Invention that is the exclusive property of Employer, as set forth
above, and whether such an application will be abandoned prior to issuance of a
patent. Employer will pay to Employee, either during or after the term of this
Agreement, the following amounts if Employee is sole inventor, or Employee's
proportionate share if Employee is joint inventor: $750 upon filing of the
initial application for patent on such Invention; and $1,500 upon issuance of a
patent resulting from such initial patent application, provided Employee is
named as an inventor in the patent.
Employee further agrees that Employee will promptly disclose in writing to
Employer during the term of Employee's employment and for one (1) year
thereafter, all Inventions whether developed during the time of such employment
or thereafter (whether or not Employer has rights in such Inventions) so that
Employee's rights and Employer's rights in such Inventions can be determined.
Employee represents and warrants that Employee has no Inventions, software,
writings or other works of authorship useful to Employer in the normal course of
the Employer's business, which were conceived, made or written prior to the date
of this Agreement and which are excluded from the operation of this Agreement.
Notwithstanding the foregoing, where the subject matter of this subsection 6.04
is subject to German Labour Law, Inventions, patents and other inventions,
suggestions for technical improvement and other made by the Employee are to be
governed in accordance with the regulations of the German Gesetz uber
Arbeitnehmererfindungen (Law on inventions made by employees) in its version in
force.
6.05 Possession
The Employee agrees that upon request by the Employer and in any event upon
termination of employment, the Employee shall turn over to the Employer all
Confidential Information in the Employee's possession or under his control which
was created pursuant to, is connected with or derived from the Employee's
services to the Employer, or which is related in any manner to the Employer's
business activities or research and development efforts, whether or not such
materials are in the Employee's possession as of the date of this Agreement.
7.00 Saving Provision
7.01 The Employer and the Employee agree and stipulate that the agreements and
covenants contained in the preceding Sections 5.00 and 6.00, including the scope
of the restricted activities described therein and the duration and geographic
extent of such restrictions, are fair and reasonably necessary for the
protection of Confidential Information,
<PAGE>
goodwill and other protectable interests, in light of all of the facts and
circumstances of the relationship between the Employee and the Employer. In the
event a court of competent jurisdiction should decline to enforce any provision
of the preceding paragraphs, such paragraphs shall be deemed to be modified to
restrict the Employee's competition with the Employer to the maximum extent, in
both time and geography, which the court shall find enforceable.
8.00 Injunctive Relief
- --------------------------
8.01 The Employee acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the non-competition and non-disclosure
covenants or other agreements contained herein would give rise to irreparable
injury to the Employer or clients of the Employer which injury would be
inadequately compensable in money damages. Accordingly, the Employer or where
appropriate, a client of the Employer, may seek and obtain an injunctive relief
from the breach or threatened breach of any provision, requirement or covenant
of this Agreement, in addition to and not in limitation of any other legal
remedies which may be available. The Employee further acknowledges, agrees and
stipulates that, in the event of the termination of employment with the
Employer, the Employee's experience and capabilities are such that the Employee
can obtain employment in business activities which are of a different and
non-competing nature with his activities as an Employee of the Employer and that
the enforcement of a remedy hereunder by way of injunction shall not prevent the
Employee from earning a reasonable livelihood. The Employee further acknowledges
and agrees that the covenants contained herein are necessary for the protection
of the Employer's legitimate business interests and are reasonable in scope and
content.
9.00 General
- ----------------
9.01 This Agreement is made under and subject to the laws of the Governing
Jurisdiction stated on the first page hereof.
9.02 The Employee authorizes the Employer to reveal the terms of this Agreement
if it is required so under any governmental laws applicable to the Employer.
9.03 Employee represents and warrants to Employer that Employee is free to enter
into this Agreement and has no commitment, arrangement or understanding to or
with any party that restrains or is in conflict with Employee's performance of
the covenants, services and duties provided for in this Agreement.
9.04 During the Employee's employment or the duration of mutual duties between
the Employee and the Employer under this Agreement, this Agreement and the
mutual duties between the Employee and the Employer under this Agreement may not
be assigned by either party without the written consent of the other. 613 a
Burgerliches Gesetzbuch (Civil Code) is applicable.
9.05 This Agreement is binding upon the Employee and permitted assigns and on
Employer, its successors and assigns.
9.06 Any notice required or permitted to be given hereunder are sufficient if in
writing and delivered by hand, by facsimile or by registered or certified mail,
to a party at its address noted on the first page hereof
9.07 If any provision of this Agreement or compliance by any of the parties with
any provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law. If such modification is not possible, said provision, to the extent that it
is in violation of law, unenforceable or void, shall be deemed severable from
the remaining provisions of this Agreement, which provisions will remain binding
on the parties.
9.08 No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this Agreement
operate or be construe as a waiver of any subsequent breach; nor will any single
or partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by law.
9.09 This instrument contains the entire agreement of the parties with respect
to the relationship between Employee and Employer and supersedes all prior
agreements and understandings, and there are no other representations or
<PAGE>
agreements other than as stated in this Agreement related to the terms and
conditions of Employee's employment. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
9.10 In the event it becomes necessary to enforce this Agreement through legal
action, whether or not a suit is actually commenced, the party which obtains
substantial success in a legal action shall be entitled to his or actual
reasonable solicitor's fees and disbursements.
9.11 Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural and vice versa, as
appropriate.
9.12 All references to money in this Agreement are or shall be to money in
lawful money of the Governing Jurisdiction stated on the first page hereof.
Exhibit 6.9
EMPLOYMENT AGREEMENT
Date: September 1, 1998
From: iQ Power Technology Inc.
(the "Employer")
At: Suite 708, 1111 West Hastings Street
Vancouver, BC, Canada V6E 2J3
To: Gerhard K. Trenz
(the "Employee")
At: Heimstettener Street, No. 56
Kirchheim bei Munchen, Germany
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions set out in Sections 1 through 9 attached, the Employer hereby offers
and the Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein:
Position: Vice-President, Finance
Responsibilities: Those described in Schedule A.
Term of Agreement: This Agreement shall have a term of three (3) years
commencing immediately.
Compensation: The Employer shall pay the Employee US$7,000 per month as
consideration for the services of the Employee hereunder,
payable on the first business day of each month during the
term of this Agreement.
Governing
Jurisdiction: Germany
Jurisdiction: The Court at the domicile of the Employee is exclusively
competent to hear any disputes resulting from or in the
context of this contract.
Stock Options: to purchaser 100,000 shares of the Empoyer at US$1 each,
Vesting as to 1/3 in each of the first 3 years of this
Agreement
Executed and delivered on _______________________________________ by and on
behalf of the Employer at _______________________________________________, but
effective the date and year first above written.
iQ POWER TECHNOLOGY INC.
/s/ Peter Braun
- ---------------------------------
President
================================================================================
================================================================================
Accepted, and signed, sealed and delivered on ____________________ by the
Employee at _________________________________________, but effective the date
and year first above written.
/s/ Gerhard K. Trenz
- ---------------------------------
GERHARD K. TRENZ
<PAGE>
SCHEDULE A
Duties shall include:
a. responsibility for overall financial management of the Employer, and its
subsidiaries, including day to day planning, organizing, and allocation of
resources;
b. negotiating financing for product development; and
c. negotiating joint venture and other development agreements.
<PAGE>
IN CONSIDERATION for the mutual promises and covenants and the terms and
conditions contained in this Agreement, the Employer hereby offers and the
Employee hereby accepts employment with the Employer upon the terms and
conditions set forth herein.
1.00 Position
1.01 The Employee shall hold the position indicated in on the first page hereof
and in such capacity, shall carry out the duties and responsibilities
commensurate with that position as such duties are more specifically defined
from time to time during the term of this Agreement by the Board of Directors of
the Employer.
2.00 Terms; Termination of Employment
2.01 The term of employment pursuant to this Agreement shall be for the term
stated on the first page hereof. The employment shall continue on an annual
basis until terminated by the Employer or the Employee. The Employee or the
Employer may terminate the services of the Employee at any time and for any
reason upon 30 days written notice to the other. The Employer may terminate the
Employee's services for any legitimate reasons in accordance with the German
Labour Law and in accordance with the proceedings intended for such termination
by the German Labour Law.
2.02 If the Employee's employment is terminated, he shall continue to be bound
by the terms of Sections 5.00 and 6.00 of this Agreement.
3.00 Compensation
3.01 During the term of this Agreement, the Employee shall be paid in accordance
with the payment provisions on the first page hereof. The Employer shall remit
to all government and regulatory authorities all employment, workers'
compensation, and other statutory deductions as may be required by the law of
the Governing Jurisdiction. The compensation may be increased from time to time
subject to the approval of the Board of Directors of the Employer.
4.00 Benefits
4.01 The Employee shall be entitled to on approval by the Board of Directors of
the Employer participate fully in all other benefits provided by the Employer to
employees in his category of employment.
4.02 For the duration of Employee's employment hereunder, Employee will be
provided such holidays, sick leave and vacation as Employer makes available to
its management level employees generally or as specifically stated on the first
page hereof. Employer will reimburse Employee in accordance with company
policies and procedures for reasonable expenses necessarily incurred in the
performance of duties hereunder against appropriate receipts and vouchers
indicating the specific business purpose for each such expenditure.
4.03 Upon execution of this Agreement, Employer will grant to Employee and
employee will accept incentive stock options to purchase the number of shares of
the Employer's Common Stock at the purchase price per share described on the
first page hereof, if any, subject to the Employer's 1998 Stock Option Plan
("the Plan").
5.00 Covenant Not to Compete
5.01 In consideration for the employment granted to him under this Agreement,
the Employee agrees that he will not directly or indirectly compete with the
Employer during the term of his employment with the Employer and for a period of
two years from the date on which his employment with the Employer terminates.
The said covenant not to compete shall include all geographical areas in which
the Employer is actively marketing or developing products or operates directly
or indirectly through a subsidiary or associated company having common control
or ownership during the term of employment or as of the employment termination
date and shall prohibit the following activities:
a. the design, development, manufacture, production, sale, marketing,
solicitation or acceptance of orders with regard to any product, concept,
or business line which is directly competitive with any aspect of the
business of the Employer as conducted as of the termination date, whether
or not using any confidential information; and
<PAGE>
b. having anywhere in the world where the Employer is actively marketing
products or services as of the date of termination of employment, any
business dealings or contacts except those which demonstrably do not relate
to or compete with the business or interest of the Employer; and
c. being an employee, employer, Employee, officer, director, partner,
consultant, trustee or shareholder of more than five percent of the
outstanding common stock of any person or entity that does any of the
activities referred to in the preceding paragraphs (a) and (b).
For the purpose of this section, the business of the Employer includes, but is
not limited to, the design, development, manufacture and distribution of
lead-acid batteries and related technologies and products.
6.00 Ownership of Technology; Confidentiality
6.01 Confidential Information
The Employee recognizes and acknowledges that during the course of his
employment, he will have access to certain information not generally known to
the public, relating to the products, sales or business of the Employer which
may include, without limitation, software, literature, data, programs, customer
contact lists, sources of supply, prospects or projections, manufacturing
techniques, processes, formulas, research or experimental work, work in process,
trade secrets or any other proprietary or confidential matter (collectively, the
"Confidential Information"). The Employee recognizes and acknowledges that this
Confidential Information constitutes a valuable, special and unique asset of the
Employer, access to and knowledge of which are essential to the performance of
the Employee's duties. The Employee acknowledges and agrees that all such
Confidential Information, including without limitation that which the Employee
conceives or develops, either alone or with others, at any time during his
employment by the Employer, is and shall remain the exclusive property of the
Employer. The Employee further recognizes, acknowledges and agrees that, to
enable the Employer to perform services for its customers or its clients, such
customers or clients may furnish to the Employer or the Employee Confidential
Information concerning their business affairs, property, methods of operation or
other data, that the goodwill afforded to the Employer depends on the Employer
and its employees preserving the confidentiality of such information, and that
such information shall be treated as Confidential Information of the Employer
for all purposes under this Agreement.
6.02 Non-Disclosure
The Employee agrees that, except as directed by the Employer, the Employee will
not at any time, whether during or after his employment with the Employer, use
or disclose to any person for any purpose other than for the benefit of the
Employer any Confidential Information, or permit any person to use, examine
and/or make copies of any documents, files, data or other information sources
which contain or are derived from Confidential Information, whether prepared by
the Employee or otherwise coming into the Employer's possession or control
without the prior written permission of the Employer. Employee's obligations
under subsections 6.01 and 6.02 are indefinite in term and shall survive the
termination of this Agreement.
6.03 Work Product and Copyrights
Employee agrees that all right, title and interest in and to the materials
resulting from the performance of Employee's duties at Employer and all copies
thereof, including works in progress, in whatever media, (the "Work"), will be
and remain in Employer upon their creation. Employee will mark all Work with
Employer's copyright or other proprietary notice as directed by Employer.
Employee further agrees:
a. To the extent that any portion of the Work constitutes a work protectable
under the copyright laws of the United States, Canada or the Federal
Republic of Germany (the "Copyright Law"), that all such Work will be
considered a "work made for hire" as such term is used and defined in the
Copyright Law and that Employer will be considered the "author" of such
portion of the Work and the sole and exclusive owner throughout the world
of copyright therein; and
b. If any portion of the Work does not qualify as a "work made for hire" as
such term is used and defined in the Copyright Law, that Employee hereby
assigns and agrees to assign to Employer, without further consideration,
<PAGE>
all right, title and interest in and to such Work or in any such portion
thereof and any copyright therein and further agrees to execute and deliver
to Employer, upon request, appropriate assignments of such Work and
copyright therein and such other documents and instruments as Employer may
request to fully and completely assign such Work and copyright therein to
Employer, its successors or nominees, and that Employee hereby appoints
Employer as attorney-in-fact to execute and deliver any such documents on
Employee's behalf in the event Employee should fail or refuse to do so
within a reasonable period following Employer's request.
6.04 Inventions and Patents
For purposes of this Agreement, "Inventions" includes, without limitation,
information, inventions, contributions, improvements, ideas, or discoveries,
whether patentable or not, and whether or not conceived or made during work
hours. Employee agrees that all Inventions conceived or made by Employee during
the period of employment with Employer belong to Employer, provided they grow
out of Employee's work with Employer or are related in some manner to the
Employer's business, including, without limitation, research and product
development, and projected business of Employer or its affiliated companies.
Accordingly, Employee will:
a. Make adequate written records of such Inventions, which records will be
Employer's property;
b. Assign to Employer, at its request, any rights Employee may have to such
Inventions for the Federal Republic of Germany, the U.S., Canada, and all
other countries;
c. Waive and agree not to assert any moral rights Employee may have or acquire
in any Inventions and agree to provide written waivers from time to time as
requested by Employer; and
d. Assist Employer (at Employer's expense) in obtaining and maintaining
patents or copyright registrations with respect to such Inventions.
Employee understands and agrees that Employer or its designee will determine, in
its sole and absolute discretion, whether an application for patent will be
filed on any Invention that is the exclusive property of Employer, as set forth
above, and whether such an application will be abandoned prior to issuance of a
patent. Employer will pay to Employee, either during or after the term of this
Agreement, the following amounts if Employee is sole inventor, or Employee's
proportionate share if Employee is joint inventor: $750 upon filing of the
initial application for patent on such Invention; and $1,500 upon issuance of a
patent resulting from such initial patent application, provided Employee is
named as an inventor in the patent.
Employee further agrees that Employee will promptly disclose in writing to
Employer during the term of Employee's employment and for one (1) year
thereafter, all Inventions whether developed during the time of such employment
or thereafter (whether or not Employer has rights in such Inventions) so that
Employee's rights and Employer's rights in such Inventions can be determined.
Employee represents and warrants that Employee has no Inventions, software,
writings or other works of authorship useful to Employer in the normal course of
the Employer's business, which were conceived, made or written prior to the date
of this Agreement and which are excluded from the operation of this Agreement.
Notwithstanding the foregoing, where the subject matter of this subsection 6.04
is subject to German Labour Law, Inventions, patents and other inventions,
suggestions for technical improvement and other made by the Employee are to be
governed in accordance with the regulations of the German Gesetz uber
Arbeitnehmererfindungen (Law on inventions made by employees) in its version in
force.
6.05 Possession
The Employee agrees that upon request by the Employer and in any event upon
termination of employment, the Employee shall turn over to the Employer all
Confidential Information in the Employee's possession or under his control which
was created pursuant to, is connected with or derived from the Employee's
services to the Employer, or which is related in any manner to the Employer's
business activities or research and development efforts, whether or not such
materials are in the Employee's possession as of the date of this Agreement.
<PAGE>
7.00 Saving Provision
7.01 The Employer and the Employee agree and stipulate that the agreements and
covenants contained in the preceding Sections 5.00 and 6.00, including the scope
of the restricted activities described therein and the duration and geographic
extent of such restrictions, are fair and reasonably necessary for the
protection of Confidential Information, goodwill and other protectable
interests, in light of all of the facts and circumstances of the relationship
between the Employee and the Employer. In the event a court of competent
jurisdiction should decline to enforce any provision of the preceding
paragraphs, such paragraphs shall be deemed to be modified to restrict the
Employee's competition with the Employer to the maximum extent, in both time and
geography, which the court shall find enforceable.
8.00 Injunctive Relief
8.01 The Employee acknowledges that disclosure of any Confidential Information
or breach or threatened breach of any of the non-competition and non-disclosure
covenants or other agreements contained herein would give rise to irreparable
injury to the Employer or clients of the Employer which injury would be
inadequately compensable in money damages. Accordingly, the Employer or where
appropriate, a client of the Employer, may seek and obtain an injunctive relief
from the breach or threatened breach of any provision, requirement or covenant
of this Agreement, in addition to and not in limitation of any other legal
remedies which may be available. The Employee further acknowledges, agrees and
stipulates that, in the event of the termination of employment with the
Employer, the Employee's experience and capabilities are such that the Employee
can obtain employment in business activities which are of a different and
non-competing nature with his activities as an Employee of the Employer and that
the enforcement of a remedy hereunder by way of injunction shall not prevent the
Employee from earning a reasonable livelihood. The Employee further acknowledges
and agrees that the covenants contained herein are necessary for the protection
of the Employer's legitimate business interests and are reasonable in scope and
content.
9.00 General
9.01 This Agreement is made under and subject to the laws of the Governing
Jurisdiction stated on the first page hereof.
9.02 The Employee authorizes the Employer to reveal the terms of this Agreement
if it is required so under any governmental laws applicable to the Employer.
9.03 Employee represents and warrants to Employer that Employee is free to enter
into this Agreement and has no commitment, arrangement or understanding to or
with any party that restrains or is in conflict with Employee's performance of
the covenants, services and duties provided for in this Agreement.
9.04 During the Employee's employment or the duration of mutual duties between
the Employee and the Employer under this Agreement, this Agreement and the
mutual duties between the Employee and the Employer under this Agreement may not
be assigned by either party without the written consent of the other. 613 a
Burgerliches Gesetzbuch (Civil Code) is applicable.
9.05 This Agreement is binding upon the Employee and permitted assigns and on
Employer, its successors and assigns.
9.06 Any notice required or permitted to be given hereunder are sufficient if in
writing and delivered by hand, by facsimile or by registered or certified mail,
to a party at its address noted on the first page hereof
9.07 If any provision of this Agreement or compliance by any of the parties with
any provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law. If such modification is not possible, said provision, to the extent that it
is in violation of law, unenforceable or void, shall be deemed severable from
the remaining provisions of this Agreement, which provisions will remain binding
on the parties.
<PAGE>
9.08 No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this Agreement
operate or be construe as a waiver of any subsequent breach; nor will any single
or partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by law.
9.09 This instrument contains the entire agreement of the parties with respect
to the relationship between Employee and Employer and supersedes all prior
agreements and understandings, and there are no other representations or
agreements other than as stated in this Agreement related to the terms and
conditions of Employee's employment. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
9.10 In the event it becomes necessary to enforce this Agreement through legal
action, whether or not a suit is actually commenced, the party which obtains
substantial success in a legal action shall be entitled to his or actual
reasonable solicitor's fees and disbursements.
9.11 Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural and vice versa, as
appropriate.
9.12 All references to money in this Agreement are or shall be to money in
lawful money of the Governing Jurisdiction stated on the first page hereof.
Exhibit 6.10
FORM OF
CONFIDENTIALITY AGREEMENT
To: iQ Power Technology Inc. ("iQ Canada") ("iQ")
Dear Sirs:
Re: Confidential Information
- -----------------------------
WHEREAS:
A. The Undersigned is privy to the Confidential Information (as defined herein)
and has knowledge about the Confidential Information;
B. The Undersigned has acquired shares of iQ Canada (the "Shares") pursuant to a
share exchange agreement dated August 25, 1998 (the "Share Exchange Agreement")
between the Undersigned, iQ Canada, iQ Battery Research and Development GmbH
("iQ Germany") (collectively, iQ Canada and iQ Germany are defined herein as
"iQ") and other shareholders of iQ Germany pursuant to which iQ Canada obtained
ownership of the Confidential Information; and
C. The Undersigned has agreed with iQ Canada to enter into an agreement to
protect the confidentiality of the Confidential Information;
NOW THEREFORE in consideration of the Shares and the payment of $1 by iQ Canada
to the Undersigned, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1.00 COVENANT NOT TO COMPETE
- -----------------------------
1.01 For the purpose of this agreement, "iQ's Business" shall mean the design,
development, manufacture, distribution and marketing of batteries and related
technologies and products in connection with the transportation industry.
1.02 In consideration for the Shares issued to him under the Share Exchange
Agreement, the Undersigned agrees that he will not directly or indirectly
compete with iQ for a period of five (5) years from the date hereof. The said
covenant not to compete shall include all geographical areas in which iQ is
actively marketing or developing products or operates directly or indirectly
through a subsidiary or associated company having common control or ownership
during the term of this Agreement and shall prohibit the following activities:
a. the design, development, manufacture, production, sale, marketing,
solicitation or acceptance of orders with regard to any product, concept,
or business line which is directly competitive with any aspect of iQ's
Business as conducted as of the termination date, whether or not using any
confidential information; and
<PAGE>
Page 2
b. having anywhere in the world where iQ is actively marketing products or
services during the term of this agreement, any business dealings or
contacts except those which demonstrably do not relate to or compete with
the business or interest of iQ; and
c. being an employee, employer, officer, director, partner, consultant,
trustee or shareholder of more than five percent of the outstanding common
stock of any person or entity that does any of the activities referred to
in the preceding paragraphs (a) and (b).
The Undersigned may, on a case-by-case basis, provide iQ with a written proposal
for an Invention which the Undersigned desires to develop and potentially
commercialize in contravention of this Section. In each instance, upon receiving
the Undersigned's written proposal, iQ shall have no more than 180 days to
evaluate and decide whether it desires to grant or deny the Undersigned an
exception to the non-compete contained herein. Any failure by iQ to respond in
writing to the Undersigned's proposal within such 180-day period shall be deemed
to be a consent to allow the Undersigned to proceed to develop and/or
commercialize the Invention described in such proposal without the involvement
of iQ. Otherwise, iQ shall indicate in writing to the Undersigned within such
180-day period whether it shall consent to such proposal, such consent not to be
unreasonably withheld. Should iQ withhold its consent, it may elect at its sole
discretion to enter into negotiations with the Undersigned with respect to the
development and/or potential commercialization of the subject Invention. Such
negotiations shall be in good faith but are not subject to being completed
during the 180-day evaluation period. Any failure by the parties to complete
such good faith negotiations shall be deemed a withholding of iQ's consent
hereunder. The Undersigned shall submit a copy of all proposals hereunder to a
patent attorney designated by iQ.
2.00 OWNERSHIP OF TECHNOLOGY; CONFIDENTIALITY
- ----------------------------------------------
2.01 Confidential Information
- ------------------------------
The Undersigned recognizes and acknowledges that prior to or during the term of
this agreement, he might have or have had access to certain information not
generally known to the public, relating to the products, sales or business of iQ
which may include, without limitation, software, literature, data, programs,
customer contact lists, sources of supply, prospects or projections,
manufacturing techniques, processes, formulas, research or experimental work,
work in process, trade secrets or any other proprietary or confidential matter
(collectively, the "Confidential Information"). The Undersigned recognizes and
acknowledges that this Confidential Information constitutes a valuable, special
and unique asset of iQ. The Undersigned acknowledges and agrees that all such
Confidential Information is and shall remain the exclusive property of iQ. The
Undersigned further recognizes, acknowledges and agrees that, to enable iQ to
perform services for its customers or its clients, such customers or clients may
furnish or have furnished to iQ Confidential Information concerning their
business affairs, property, methods of operation or other data, that the
goodwill afforded to iQ depends on the iQ and its employees preserving the
<PAGE>
Page 3
confidentiality of such information, and that such information shall be treated
as Confidential Information of iQ for all purposes under this Agreement.
2.02 Non-Disclosure
- --------------------
The Undersigned agrees that, except with the prior consent of iQ, the
Undersigned will not at any time during the term of this agreement, use or
disclose to any person for any purpose any Confidential Information, or permit
any person to use, examine and/or make copies of any documents, files, data or
other information sources which contain or are derived from Confidential
Information, whether prepared by the Undersigned or otherwise coming into the
Undersigned's possession or control without the prior written permission of iQ.
The Undersigned's obligations under subsections 2.01 and 2.02 are indefinite in
term and shall survive the termination of this Agreement.
2.03 Work Product and Copyrights
- ---------------------------------
The Undersigned agrees that all right, title and interest in and to the
materials resulting from past, current or future work performed for iQ and all
copies thereof, including works in progress, in whatever media, (the "Work"),
will be and remain in iQ upon their creation. The Undersigned will mark all Work
with iQ's copyright or other proprietary notice as directed by iQ. The
Undersigned further agrees:
a. To the extent that any portion of the Work constitutes a work protectable
under the copyright laws of the United States, Canada or the Federal
Republic of Germany (the "Copyright Law"), that all such Work will be
considered a "work made for hire" as such term is used and defined in the
Copyright Law and that iQ will be considered the "author" of such portion
of the Work and the sole and exclusive owner throughout the world of
copyright therein; and
b. If any portion of the Work does not qualify as a "work made for hire" as
such term is used and defined in the Copyright Law, that the Undersigned
hereby assigns and agrees to assign to iQ, without further consideration,
all right, title and interest in and to such Work or in any such portion
thereof and any copyright therein and further agrees to execute and deliver
to iQ, upon request, appropriate assignments of such Work and copyright
therein and such other documents and instruments as iQ may request to fully
and completely assign such Work and copyright therein to iQ, its successors
or nominees, and that the Undersigned hereby appoints iQ as
attorney-in-fact to execute and deliver any such documents on the
Undersigned's behalf in the event the Undersigned should fail or refuse to
do so within a reasonable period following iQ's request.
2.04 Inventions and Patents
- ----------------------------
For purposes of this Agreement, "Inventions" includes, without limitation,
information, inventions, contributions, improvements, ideas,discoveries, or
works, whether patentable or not, and whether or not conceived or made during
work hours. The Undersigned agrees that all Inventions conceived or made by the
Undersigned belong to iQ, provided they grow out of the Undersigned's work with
iQ or are related in some manner to iQ's Business, including, without
<PAGE>
Page 4
limitation, research and product development, and projected business of iQ or
its affiliated companies. Accordingly, the Undersigned will:
a. Make adequate written records of such Inventions, which records will be
iQ's property;
b. Assign to iQ, at its request, any rights the Undersigned may have to such
Inventions for the Federal Republic of Germany, the U.S., Canada, and all
other countries;
c. Waive and agree not to assert any moral rights the Undersigned may have or
acquire in any Inventions and agree to provide written waivers from time to
time as requested by iQ; and
d. Assist iQ (at iQ's expense) in obtaining and maintaining patents or
copyright registrations with respect to such Inventions.
The Undersigned understands and agrees that iQ or its designee will determine,
in its sole and absolute discretion, whether an application for patent will be
filed on any Invention that is the exclusive property of iQ, as set forth above,
and whether such an application will be abandoned prior to issuance of a patent.
The Undersigned further agrees that the Undersigned will promptly disclose in
writing to iQ during the term of this agreement and for one (1) year thereafter,
all Inventions whether developed during the term of this agreement or thereafter
(whether or not iQ has rights in such Inventions) so that the Undersigned's
rights and iQ's rights in such Inventions can be determined. The Undersigned
represents and warrants that the Undersigned has no Inventions, software,
writings or other works of authorship useful to iQ in the normal course of iQ's
Business, which were conceived, made or written prior to the date of this
Agreement and which are excluded from the operation of this Agreement.
2.05 Possession
- ----------------
The Undersigned agrees that upon request by iQ, the Undersigned shall turn over
to iQ all Confidential Information in the Undersigned's possession or under his
control, or which is related in any manner to the iQ's Business activities or
research and development efforts, whether or not such materials are in the
Undersigned's possession as of the date of this Agreement.
3.00 SAVING PROVISION
- ----------------------
3.01 iQ and the Undersigned agree and stipulate that the agreements and
covenants contained in the preceding Sections 1.00 and 2.00, including the scope
of the restricted activities described therein and the duration and geographic
extent of such restrictions, are fair and reasonably necessary for the
protection of Confidential Information, goodwill and other protectable
interests, in light of all of the facts and circumstances of the relationship
between the Undersigned and iQ. In the event a court of competent jurisdiction
should decline to enforce any provision of the preceding paragraphs, such
<PAGE>
Page 5
paragraphs shall be deemed to be modified to restrict the Undersigned's
competition with the iQ to the maximum extent, in both time and geography, which
the court shall find enforceable.
4.00 INJUNCTIVE RELIEF
- -----------------------
4.01 The Undersigned acknowledges that disclosure of any Confidential
Information or breach or threatened breach of any of the non-competition and
non-disclosure covenants or other agreements contained herein would give rise to
irreparable injury to iQ or clients of iQ which injury would be inadequately
compensable in money damages. Accordingly, iQ or where appropriate, a client of
iQ, may seek and obtain an injunctive relief from the breach or threatened
breach of any provision, requirement or covenant of this Agreement, in addition
to and not in limitation of any other legal remedies which may be available. The
Undersigned further acknowledges, agrees and stipulates that the Undersigned's
experience and capabilities are such that the Undersigned can obtain employment
in business activities which are of a different and non-competing nature with
the business activities of iQ and that the enforcement of a remedy hereunder by
way of injunction shall not prevent the Undersigned from earning a reasonable
livelihood. The Undersigned further acknowledges and agrees that the covenants
contained herein are necessary for the protection of iQ's legitimate business
interests and are reasonable in scope and content.
5.00 GENERAL
- -------------
5.01 This Agreement and all matters arising hereunder will be governed by and
construed in accordance with the laws of the Province of British Columbia, and
the laws of Canada applicable therein, and all disputes and claims, whether for
specific performance, injunction, declaration or otherwise howsoever both at law
and in equity, arising out of or in any way connected with this Agreement will
be referred to the courts of the Province of British Columbia exclusively, and
to the Supreme Court of Canada if need be, and, by execution and delivery of
this Agreement, each party hereby irrevocably submits and attorns to such
jurisdiction.
5.02 The Undersigned authorizes iQ to reveal the terms of this Agreement if it
is required so under any governmental laws applicable to iQ.
5.03 The Undersigned represents and warrants to iQ that the Undersigned is free
to enter into this Agreement and has no commitment, arrangement or understanding
to or with any party that restrains or is in conflict with the Undersigned's
performance of the covenants, services and duties provided for in this
Agreement.
5.04 During the term of this Agreement, this Agreement and the mutual duties
between the Undersigned and iQ under this Agreement may not be assigned by
either party without the written consent of the other.
5.05 This Agreement is binding upon the Undersigned and permitted assigns and on
iQ, its successors and assigns.
<PAGE>
Page 6
5.06 Any notice required or permitted to be given hereunder are sufficient if in
writing and delivered by hand, by facsimile or by registered or certified mail,
to a party.
5.07 If any provision of this Agreement or compliance by any of the parties with
any provision of this Agreement constitutes a violation of any law, or is or
becomes unenforceable or void, then such provision, to the extent only that it
is in violation of law, unenforceable or void, shall be deemed modified to the
extent necessary so that it is no longer in violation of law, unenforceable or
void, and such provision will be enforced to the fullest extent permitted by
law. If such modification is not possible, said provision, to the extent that it
is in violation of law, unenforceable or void, shall be deemed severable from
the remaining provisions of this Agreement, which provisions will remain binding
on the parties.
5.08 No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial waiver of a breach of any provision of this Agreement
operate or be construe as a waiver of any subsequent breach; nor will any single
or partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by law.
5.09 This instrument contains the entire agreement of the parties hereto and
supersedes all prior agreements, representations, warranties, statements,
promises, information, arrangements and understandings, whether oral or written,
express or implied, with respect to the subject matter hereof. This Agreement
may be changed only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
5.10 In the event it becomes necessary to enforce this Agreement through legal
action, whether or not a suit is actually commenced, the party which obtains
substantial success in a legal action shall be entitled to his actual reasonable
solicitor's fees and disbursements.
5.11 Any reference in this Agreement in the masculine gender shall include the
feminine and neuter genders, and vice versa, as appropriate. Any reference in
this Agreement in the singular shall mean the plural and vice versa, as
appropriate.
<PAGE>
Page 7
5.12 All references to money in this Agreement shall be to money in lawful money
of the United States of America.
Dated effective August 25, 1998.
Yours truly,
Undersigned:
____________________________________
HORST DIETER BRAUN
The above-noted terms and conditions are hereto agreed to by iQ effective August
25, 1998.
iQ POWER TECHNOLOGY INC.
Per: ____________________________________
Translation from the German into the English Language
Lease Agreement: Spima/IQ Battery
Exhibit 6.11
Page 1 of 6
Lease Agreement
Between
Spima Spitzenmanufaktur GmbH, represented by the business manager Heike Gunthe,
Henrich-Heine-Strasse 5, 09557 Floha
hereafter referred to as "Lessor" -
and the firm
IQ BATTERY Research & Development GmbH, represented by the business manager
Peter E. Braun, Heinrich-Heine-Strasse 5, 09557 Floha
hereafter referred to as "Lessee" -
Sec. 1 Subject of Lease
(1) The Lessor leases to the Lessee the Subject of Lease, as described in the
Sec. (2).
(2) Subject of the Lease is an office space located at Heinrich-Heine-Strasse
5, 09557 Floha of 60 sq.m. and the laboratory space of 105 sq.m. on the 3
floor, which are color marked on the orientation sketch in the attached
Enclosure 1.
Sec.2 Use of the Subject of Lease
(1) Subject of the lease is leased to the Lessee as Office and Laboratory. Any
changes in use need prior written consent of the Lessor.
(2) Sublease needs a prior written consent from the Lessor.
(3) The Lessee has official risk permits with regard to their persons and the
nature of business; and fulfills technical and other requirements as to
capitalization, which are based on the laws and other official regulations,
in order to fulfill its financial obligations.
<PAGE>
Page 2 of 6
Sec. 3 Time of Lease
The leasing relation begins, upon expiry of Main Lease Agreement between
Lessor and FZM Mittelsachsert GmbH on December 31, 1997, i.e. on January
01, 1998. Legal terms of termination are in force.
Sec. 4 Rent
(1) The monthly rent for the subject of lease as described in Sec.1 p.2 is for
office space of 60 sq.m. x 7.00 DM/sq.m. = DM 420.00
laboratory space of 105 sq.m. x 4.50 DM/sq.m. = DM 472.50
------------
DM 892.50
plus 15% value added tax DM 113.88
------------
DM 1,026.38
(verbally: one thousand and twenty six Deutsch Mark 38/100). Statutory
sales tax is added on.
(2) The rent is always due by the third of each month and it is to be paid to
the account of the Lessor at the Savings Bank Plauen, No. 3 180 007 (BLZ
870 580 00) at no operational charges.
Sec. 5 Working Costs and Extra Expenses.
The Lessee is responsible for taking over of extra fixed expenses, as
outlined in the Enclosure 2 to this Agreement. Method of payment is
specified in the Enclosure 2, a the part of this Agreement.
In addition the Lessee is liable for all operational costs resulting from
the use of the Subject to Lease.
Sec. 6 Delivery of the Subject of Lease
(1) The Lessor shall deliver to the Lessee and the Lessee shall accept the
Subject of Lease as described in Sec. 1 Sec.2, as well as all belonging
keys by January 01, 1998.
(2) The Lessee is acquainted with the subject to lease, as per previous lease
agreement with FZM GmbH Mittelsachsen. The Lessee shall take over as is,
according to the agreement and with exception for specific given warranty,
shall accept also hidden deficiencies, as far as such exception is legally
acceptable.
<PAGE>
Page 3 of 6
Sec. 7 Insurances
(1) The Lessor has taken land- and fire-insurance policies. The resulting
insurance premiums shall be included proportionately in the bill to the
Lessee as per Enclosure 2.
(2) The Lessee must pay at own cost premiums for liability insurance as well as
any other insurance specific to the nature of their business with a
sufficient coverage. The Lessor is entitled to inquire about existence of
such insurance.
Sec. 8 Liability of the Lessee
(1) The Lessee is liable to the Lessor for damages caused by negligence in any
of the necessary duties. Furthermore the Lessee is liable to the Lesser for
all damages caused by employees, suppliers, clients, visitors etc. Onus of
proof is on the Lessee.
(2) The Lessee shall promptly take care to compensate for damages. Should this
obligation not be fulfilled upon a written notice and within a prescribed
term, the Lessor reserves right to undertake necessary works at the expense
of the Lessee. In case of emergency it is not necessary to issue a written
notice with a set term.
Sec. 9 Upkeep, Changes in the Subject to Lease
(1) During the period of the lease, the Lessee is obligated at their expense to
provide professional repairs and to maintain the premises in visually good
condition. In particular such repairs shall be wallpapering, painting or
whitening walls and ceilings, painting of floors, heating elements
including pipes, interior doors, as well as windows and exterior doors from
the inside.
(2) The Lessee is entitled, at own cost, to install equipment in the subject to
lease, providing all official regulations and legal specifications are met.
(3) Any structural changes of the subject to lease require prior written
permission of the Lessor. The permission can be denied only for important
reasons. In each case the Lessee carries the associated construction and
legal risks.
<PAGE>
Page 4 of 6
(4) At the end of the Leasing Term, the Lessor is entitled to demand from the
Lessee to have the subject to lease returned in the original condition, as
it was on the day of leasing out, as if there were no changes in original
condition made by the Lessor, unless with express permission of the Lessor.
(5) By the end of the lease, the Lessor is not obligated to reimburse the
Lessee for structural changes or equipment installed in the subject to
lease, unless the Lessor will undertake such obligation in writing.
(6) The Lessee is entitled, and obligated on request of the Lessor, to remove
from the subject to lease as defined in Sec. 1 p.2, any installed equipment
which is their property. The Lessor can exercise rights of removal by
payment of measurable compensation, if the Lessee has no legal interest in
removal.
Sec. 10 Exterior Advertising
The Lessee is entitled to erect an advertising board on the subject to
lease, within limits of legal acceptability. Necessary official
restrictions are to be obeyed by the Lessee.
Sec. 11 Changes to Account, Discounts
The Lessee can make claims against the Lessor in respect of rent or any
other counterclaims and resulting from this contract regarding changes or
refunds, when such demand was acknowledged by the Lesser, or when the
Lessee is able to present a legal judgement.
Sec. 12 Entry to the Subject to Lease
The Lessor can visit the subject to lease during the normal business hours,
upon providing legal notice in advance, in order to inspect the condition
of the subject to lease.
Sec. 13 Termination for Important Reason
(1) The Lessor may terminate the Leasing Agreement prematurely,
<PAGE>
Page 5 of 6
a.) when the Lessee, despite of a written warning, remains in arrears with
rent for more than two months (extra expenses are calculated as
monthly rent),
b.) when the Lessee suspends payments, or if there is an insolvency, total
inability to pay, or a settlement process against their property was
commenced or such commencement indicates their total inability to pay,
or if their industry ceases to exist,
c.) when the Lessee, despite of a written warning, undertakes use of the
subject to lease contrary to the agreement.
(2) The right to termination on other important grounds remains unaffected.
(3) In case of an early conclusion of the lease agreement through termination
on important grounds, the other party to the contract responsible for the
termination is liable for any incurred losses.
(4) Each termination must be communicated by registered mail. For the
protection of terms the communication must be made by the opposing party.
Sec. 14 Ending of the Lease Agreement
(1) At the end of the lease agreement the Lessee is obligated to return the
subject to lease in orderly condition. At the time of return a surrender
report will be prepared, where all visible deficiencies and complaints will
be noted.
(2) The deficiencies recorded in the surrender report are to be promptly
settled by the Lessee at their expense. Upon written notice and with
setting an appropriate term, the Lessor may proceed with repairs of
deficiencies at the Lessee's expense.
Sec. 15 End Definitions
(1) There are no other agreements other than this agreement. Changes and/or
supplements to this agreement require a written form. This is also valid
for the written form itself.
(2) Should any of clauses of this contract be ineffective, or should this
contract contain omissions, the effectiveness of the remaining clauses
remains in force. In place of ineffective clauses effective clauses will be
valid, such which are equivalent both in sense and purpose to the
ineffective clause. In case of omissions, a such relevant clause is valid,
which is reasonable in sense and purpose of this contract, should that
clause had been agreed upon, when thought of at the time of opportunity
arisen.
<PAGE>
Page 6 of 6
Floha, December 09, 1997 Floha, December 09, 1997
Jorg Peter Strassburger
Lawyer
Monckbergerstrasse 11 20095 Hamburg
Tel. 040 32 55 77-0 Fax 040 32 55 77-99
- ---------------------------------------- ---------------------------------
/s/ Peter E. Braun /s/ Heike Gunthel
IQ BATTERY Research & Development Spima Spitzenmanufacur GmbH
GmbH, by Peter E. Braun, Business Manager by Heike Gunthel, Business Manager
/Enclosures
Exhibit 6.12
Commercial Lease Agreement
between Josef Landthaler GmbH [Handwritten: changed as per June'98
(see att.1)]
Wolfgang-Wagner-Str. 9d
85625 Glonn
- in the following referred to as lessor-
and
IQ Battery RESEARCH & DEVELOPMENT GmbH.
Heinrich-Heine-Stra(beta)e 5
09557 Flohe bei Chemnitz
- in the following referred to as lessee-
the following, two-part lease agreement is concluded:
Part 1
Sec. 1
Leased property
(1) The following commercial space located in the property Erlenhof Park
Unterhaching, Inselkammerstra(beta)e 4, 82008 Unterhaching, construction
part H II, attic is leased:
a) attic H II, size approximately 228.16 m(2)
b) 3 Underground parking spaces a DM 100.00
Rooms of an approximate total size of 228.16 m(2) are heatable.
(3) The lessee is entitled and obliged to utilize the leased property for the
following purposes: office for regular business operations.
(4) Any major change in utilization is admissible only upon prior receipt of
the lessor's written approval.
Sec. 2
Lease period
(1) The lease commences on 01.03.1996 and is effective until 28.02.2001.
(2) The lessee has the right to prolong the lease period once for another four
years at the agreed conditions. This (these) prolongation(s) are effective
if the lessee is submitting a written statement at least 12 months prior to
the expiry of the respective lease period.
- 1 -
<PAGE>
(3) Upon expiry of the lease period pursuant to paragraph (2) , the lease
period is prolonged implicitly for another two years, unless it is
terminated by one of the contract partners 12 months prior to its expiry.
(4) For the termination of the leases Secs. 20 and 21 are applicable.
(5) The lessee can only be released from this contract, if the lessor or a
broker to be briefed by the lessee finds a suitable substitute lessee who
guarantees to comply with all parts of the lease agreement. In case of a
substitute lessee, the lessor has the right to inquire his market
opportunities. The lessor is not obliged to accept the substitute lessee.
If the lessor is required to draw up a new lease agreement or take other
actions because of the substitute lessee suggested by the original lessee,
all incurring costs are to be carried by the lessee.
(6) The exact delivery date is announced in writing at least 14 days prior to
the commencement of the lease period.
(7) The lease payment is due with completion date and delivery, earliest on
01.03.1996.
[handwritten: prolongation and termination clauses]
Sec.3
Lease payment and ancillary costs
(1) The monthly lease for the leased space amounts to for Sec. 1, sect.(1) a):
DM 4,563.20 (In words: Four Thousand Five Hundred and Sixty Three = DM
20.00/m(2)) for Sec. 1, sect.1(1)b) DM: 300.00 (in words: Three Hundred =
DM 100.00/parking space) Total: DM 4,863.20 (in words: Four Thousand Eight
Hundred and Sixty Three)
(2) The operating costs for the property are not included in the lease payment
(description and handling of operating costs, see Secs. 7 to 9) and have to
be paid separately per month as follows: heating and warm water supply and
operating costs prepayment DM 3.00/m(2) DM 664.48
(3) lease payment - Sec. 3(1) DM 4,863.20 operating costs - Sec. 3(2) DM 664.48
- 2 -
<PAGE>
extra charges pursuant Sec. 5, sect.3 DM 725.00 Total DM 6,272.68 Added
value tax, presently 15% DM 940.90 ----------- Monthly payment, total DM
7,213.58
(4) At the closing date, the lessee is required to deposit a security in the
amount of DM 20,000.00 (in words: DM Twenty Thousand) for the obligations
arising from the lease agreement, and if a cash deposit has been arranged,
to transfer the amount to the account identified in Sec. 4, section (1)
(see Sec. 11). The deposit does not bear interest. It may be guaranteed
jointly and severally by an accredited credit institute of the Federal
Republic of Germany or through the assignment or attachment of bank
balances at the above credit institutes.
If the deposit is utilized during the lease period, the lessee is obliged,
including in case of repetition, to immediately rebuild the deposit to the
agreed amount.
The guarantee has to be unlimited. Depositing of the secured amount is to
be excluded.
Sec.4
Special agreements
(1) Transfers from the lessee to the lessor with discharging effect can only be
made to the following account:
a) account holder: Josef Landthaler GmbH.[Handwritten: changed as per
June'98 (see att.1)]
b) bank: Kreissparkasse Unterhaching
c) account no. and International Banking Route: 9094244 (IBR 702 501 50)
(2) Transfers from the lessor to the lessee can be made with discharging effect
to the following account:
a) account holder: IQ Battery
b) bank: Commerzbank AG, branch Ottobrunn
c) account no. and International Banking Route: 56 13 001 IBR (700 400
41)
- 3 -
<PAGE>
(3) The lessee confirms to have received the integral part 2 of this lease
agreement, including Secs. 6 to 25 and to have read it prior to signing.
(4) The lessor will collect the due payment including ancillary costs and
surcharges as well as other payments from this contract by direct debiting.
If no other banking account for the direct debiting is or has been
identified, payments are to be collected from the account indicated in
section (2).
(5) All assets brought in by the lessee are subject to the lessor's lien (comp.
Sec. 12) pursuant to Sec. 559 ff, BGB.
Sec. 5
Additional agreements
(1) In the remainder the special agreements resulting from part II are valid
for the lease. Hereby the lessee explicitly confirms that all points of the
special agreement were discussed and negotiated.
(2) The calculation of the leased area is based on standard layout plans
1:100.In case of changes prior to the completion, the completed areas
become an integral part of the lease agreement. In this case, the lease
agreement is to be changed.
(3) The lessor takes over the costs incurred through special construction of
the leased space. These costs are apportioned to the leased space and
spread over the term of the lease. The apportionment of costs is calculated
as follows:
- basic figures: costs pursuant to special preference offer dated
19.01.1996: DM 36,223.00, term (illegible) months, interest
(illegible) per year.
Costs: 36,223.00
Interest: 7,244.00 Total: 43,467.00 apportionment to monthly payment:
43,467.00/(illegible)=(illegible) If lease option pursuant to Sec. 2,
section 2 is chosen, the extra charge is not applicable.
(4) If the lessees' special preferences result in smaller or larger spaces due
to changed separation walls, the area determined in the contract shall
serve as basis for the calculation of lease payments and ancillary costs.
In the remainder, the resulting space divergences do not entitle the
contract partners to any mutual claims whatsoever.
(5) For the fixtures of the leased space, the given specifications and layouts
shall be valid.
(6) The lessee needs the lessor's permission if he prefers any other fixtures
than those given in the specifications, respectively the layout. The room
organization determined according to the lessee's preferences is part of
this agreement. If the lessee's special preferences cause a delay in
completion, this has no influence on the date of delivery and the
contractual commencement of lease payments.
- 4 -
<PAGE>
(7) The lessee agrees to offer and distribute or to have offered and
distributed through a third person, exclusively beer and soft drinks
manufactured and/or distributed by brewery Aying, Franz Inselkammer OHG,
85653 Aying, and to purchase or purchase through a third person, above
products during the lease term permanently from the brewery Aying, Franz
Inselkammer OHG, 85653 Aying, or from a third person determined by it. The
deliveries are to be based on the respectively current conditions and
prices of brewery Aying, Franz Inselkammer OHG, 85653 Aying on the day of
delivery.
Glonn, 9.5.96
---------------------------- -------------------------------
(Place and date) (Place and date)
---------------------------- -------------------------------
(Signature) (Lessee)
Josef Landthaler GmbH. (Signature and stamp illegible)
- 5 -
<PAGE>
(Illegible)
IQ Battery RESEARCH & DEVELOPMENT GmbH.
Inselkammerstra(beta)e 4
82008 Unterhaching
18.06.98
Lease regarding property Inselkammerstra(beta)e, Unterhaching
Dear Madam, dear Sir:
According to lease contract of 09.05.1996, you have leased the space located in
property Inselkammerstra(beta)e 4, Unterhaching from J. Landthaler GmbH.
Inselkammer Grundstucksbebauungs-und VerwaltungsOHG (=Property construction and
management OHG) 85653 Aying, is the owner of this property and has leased this
entire property with lease contract dated 06.03.91 to the J. Landthaler GmbH.,
Glonn, now: "An der Waldstra(beta)e-Vermietungs GmbH",
Wolfgang-Wagner-Stra(beta)e 9d, 85625 Glonn for the purpose of commercial
sub-lease. Pursuant to Sec. 4, section 7 of this lease contract, J. Landthaler
GmbH (by now, as mentioned above, "An der Waldstra(beta)e-Vermietungs GmbH") has
assigned its claims arising from the above mentioned lease contract towards its
own lessees, e.g. also towards your home, to the Inselkammer OHG. I am enclosing
a copy of an excerpt of the lease contract dated 06.03.1991. We hereby are
disclosing this assignment, because considerable arrears in lease-payments have
accrued and are asking you to forthwith refrain from any more payments
(especially lease, ancillary costs/operating costs, deposit), which your lessor
can demand from you pursuant to above mentioned lease contract, to the An der
Waldstra(beta)e-Vermietungs GmbH", Glonn, but instead to make your payments
exclusively to
Fa. Inselkammer Grundstucksbebauungs-und VerwaltungsOHG ,
account no. 9379108, Kreissparkasse Munchen, IBR 70250150.
We are informing you that with receipt of this letter, payments with discharging
effect to the "An der Waldstra(beta)e-Vermietungs GmbH" (previously J.
Landthaler GmbH.) can no longer be processed by us.
Should you have any questions in this matter, do not hesitate to contact Mr.
Maier, Tel.08095/8827.
We appreciate your understanding.
With kind regards,
INSELKAMMER OHG
(signature illegible)
Enclosure.
- 6 -
Exhibit 6.13
Form of
Confidentiality Agreement
between
................................................................................
................................................................................
(N.N.)
and
iQ Battery Research & Development GmbH, Inselkammerstr. 4,
D-82008 Unterhaching, Munchen, Germany
(iQ)
N.N. and iQ agree upon the following conditions for the transfer and the secrecy
of CONFIDENTIAL INFORMATION:
1. This agreement is entering into force on ........... 1998.
2. CONFIDENTIAL INFORMATION will be transferred by both parties (OWNER) in the
framework of this agreement.
3. The parties name their following employees being coordinators for the
transfer and the receive of CONFIDENTIAL INFORMATION:
for N.N.: ............................................
for iQ: ............................................
4. The confidential informations that will be transferred in the framework of
this contract (CONFIDENTIAL INFORMATION) are described as followed:
N.N.:
...........................................................................
iQ:
...........................................................................
5. This agreement is valid only for information, that will be transferred
between the inforcement of this agreement and the ...........
6. The party, that is receiving CONFIDENTIAL INFORMATION in accordance with
this agreement (RECEIVER), is allowed to use this information only for the
following purposes:
...........................................................................
<PAGE>
7. The obligation of secrecy of CONFIDENTIAL INFORMATION expires three years
after the expiry of the term named in no. 3 for the transfer of this
information.
8. The RECEIVER will deal with the CONFIDENTIAL INFORMATION with the same care
he is using for his own trade and business secrets, but at least with the
common care, to keep the information secret and to prevent any use of this
CONFIDENTIAL INFORMATION not agreed by this agreement, any transmission to
third parties and/or employees of the RECEIVER that does not need the
CONFIDENTIAL INFORMATION for the fulfilling of their tasks, and the
publication of the CONFIDENTIAL INFORMATION.
9. The secrecy is only related to information, that are transferred by the
OWNER in written form and that were marked by the handing over with a
secrecy remark (e.g. "Confidential," "Secret," Intern data") or that were
transfered by the owner in another way, marked confidential at the
transmission and, in addition, within 30 (thirty) days were summarized in a
written form and, marked with a secrecy remark, are forwarded to the
coordinator of the RECEIVER.
10. The obligation to secrecy is invalid, if the CONFIDENTIAL INFORMATION
o were known already without the obligation to secrecy by the RECEIVER
before receiving them from the OWNER;
o without fault of the RECEIVER are or become known in common;
o were developed by the RECEIVER independently before the inforcement of
this agreement; in this case the RECEIVER will have the full burden of
proof, that the CONFIDENTIAL INFORMATION were developed by him
independently before the inforcement of this agreement;
o are transferred by the RECEIVER with the prior consent of the OWNER.
In case of the demand of a public authority or a court to transfer
CONFIDENTIAL INFORMATION to them, the RECEIVER is obliged to inform the
OWNER about it to enable him to proceed against this demand wih the
relevant means of legal redress. The RECEIVER is obliged to proceed himself
against this demand wih the relevant means of legal redress, if he is asked
to do so by the OWNER, the OWNER has got a legitimate interest to do so,
the OWNER (especially for the lack of entitlement to take legal action) is
hindered from proceeding against this demand wih the relevant means of
legal redress on his own, and the OWNER exempts the RECEIVER from the
possible expenses of this proceeding in advance.
11. The OWNER confirms expressivly that he is entitled to transfer the
CONFIDENTIAL INFORMATION.
<PAGE>
12. Except of the right of the RECEIVER to use the CONFIDENTIAL INFORMATION in
accordance with no. 6 of this agreement, all rights connected with the
CONFIDENTIAL INFORMATION stay with the OWNER.
13. This agreement is not commiting parties neither to the purchase nor to the
offer of goods or services that contain or use the CONFIDENTIAL
INFORMATION.
14. In acceptance of the American and the German regulations on export
controlls, the RECEIVER commits himself, that he will not knowingly export
or reexport
o CONFIDENTIAL INFORMATION, technical data (in accordance with the
definition of the US Export Administration Regulations resp. the
German "AuBenwirtschaftsgesetz") and/or software, he has got from the
OWNER; and/or
o any products, procedures or performances, that do result indirectly
from the use of the CONFIDENTIAL INFORMATION, the technical data or
the software,
to a receiver, to whom the export or the reexport is limited or forbidden
by American or German laws, without obtaining first the layed down approval
by the relevant authority.
15. With this agreement, no legal relation between the parties exceeding the
content of this confidentiality agreement is created.
16. This agreement is not transferable.
It contains all the agreements between the parties related to the secrecy
of CONFIDENTIAL INFORMATION and replaces eventually existing prior
agreements upon the same purpose.
Changes and amendments need to be in written form and signed by both
parties for their effectiveness.
This agreement shall be governed by the law of Germany.
The court of jurisdiction of lawsuites about this agreement is Munich I,
Germany
..................................... ........................................
(place, date) (N.N.)
..................................... ........................................
(place, date) (iQ)
Exhibit 6.14
Form of
Confidentiality and Nondisclosure Agreement
In order to protect certain proprietary and confidential information described
in Section 3 below,
- hereafter referred to as Confidential information-
- hereafter referred to as ___________
and
iQ Battery Research & Development GmbH,
Inselkammerstr.4,
D-82008 Unterhaching,
Germany
- hereafter referred to as iQ
agree that:
Section 1 Disclosing Parties
Both parties are disclosing Confidential Information.
Section 2 Primary Representative
Each party's representative for coordinating disclosure or receipt of
Confidential Information is:
................
iQ: Dr.-Ing. Gunther Bauer, Vice President Engineering
Section 3 Description of Confidential Information
The Confidential Information disclosed under this agreement is described as:
iQ: Development of a new starter battery and its system environment
Section 4 Use of Confidential Information
The party receiving Confidential Information
- hereafter referred to as Recipient
<PAGE>
shall use Confidential Information only for the following purpose(s):
iQ: Development of the above mentioned starter battery (Section 3)
The Recipient shall disclose Confidential Information received under this
agreement only to persons within its organization who have a "need to know" it
and hove been advised of the obligations of confidentiality and agree to be
bound.
Section 5 Confidentiality Period
This agreement and the Recipient's duty to hold Confidential Information in
confidence expire on:
Section 6 Disclosure Period
This Agreement pertains to Confidential Information that is disclosed between
the effective date and:
Section 7 Standard of Care
The parties shall use the some degree of care to avoid unauthorized use and
unauthorized disclosure of Confidential Information as it employs with its own
confidential and proprietary information of a like nature, but not less than a
reasonable degree of care.
Section 8 Marking
Recipient's obligations shall only extend to Confidential Information that is
described in Section 3 and that
- - comprises specific materials listed in Section 3,
- - is marked as "Confidential" at the time of disclosure, or
- - is unmarked (e.g. orally or visually disclosed) but treated as confidential
at the time of disclosure, and is designated as "Confidential Information"
in writing sent to the Recipient's primary representative within 30 days of
disclosure, summarizing the Confidential Information sufficiently for
identification.
Section 9 Exclusions
This Agreement imposes no obligation upon the Recipient with respect to
information that
- - was in the Recipient's possession before receipt from the discloser,
- - is or becomes a matter of public knowledge through no fault of the
Recipient,
- - is disclosed by the discloser to a third party without a duty of
confidentiality on the third party and is rightfully received by the
Recipient from this third party (or another party that rightfully received
that information from this third party without a duty of confidentiality),
- - was independently developed by Recipient, provided that Recipient does not
use any of discloser's Confidential Information,
- - is disclosed by the Recipient with the discloser's prior written consent.
Section 10 Warranty
<PAGE>
Each discloser warrants that it has the right to make the disclosures under this
agreement. No other warranties are made by either party under this agreement.
Any information disclosed under this agreement is provided "as is".
Section 11 Rights In Confidential Information
Each discloser retains title to all Confidential Information disclosed by it
under this agreement. Neither party acquires any intellectual property rights or
licenses under this agreement except the limited rights necessary to carry out
the purposes set forth in Section 4.
The Recipient shall, upon the earlier of the discloser's request or the
expiration of this agreement, promptly return to the discloser all Confidential
Information delivered to the Recipient under this agreement, and all copies and
reproductions thereof.
Section 12 Miscellaneous Provisions
This agreement imposes no obligation on either party to purchase, sell, license,
transfer or otherwise dispose of any technology, services or products. This
agreement does not create any agency or partnership relationship between the
parties.
Both parties shall adhere to all applicable laws, regulations and rules relating
to the export of technical data, and shall not export or reexport any technical
data any products received from the discloser or the direct product of such
technical data to any proscribed country listed in such applicable laws, rules
and regulations unless properly authorized.
This agreement is made under and shall be construed according to the laws of
Germany.
This agreement including attachments is the entire agreement between MCHP and iQ
regarding the subject matter hereof and supersedes and replaces all prior or
contemporaneous agreements, written or oral, pertaining therefore. All additions
or modifications to this agreement must be made in writing and be signed by both
MCHP and iQ. This is valid for this provision, too.
If a provision of this agreement is or becomes inoperative or impracticable or
if this agreement includes holes, the operativeness of the other provisions of
this agreement are not touched. Instead of the inoperative or impracticable
provision a provision is regarded as agreed, that is getting closest to the
spirit and purpose of the inoperative or impracticable provision in a legally
authorized way. In the case of holes of this contract a provision is regarded as
agreed, that fulfills in what would has been agreed corresponding to the spirit
and purpose of this agreement, if that matter would have been considered from
the start.
Effective date:
-------------------------------
Peter. Braun (Managing Director)
Exhibit 6.15
Cooperation Agreement
between
BASF Aktiengesellschaft
Specialty Foams
KSB/NM - Neopolen Marketing and Technical Support
67056 Ludwigshafen
hereinafter "BASF" and
iQ BATTERY Research & Development GmbH
82008 Unterhaching
hereinafter "iQ"
Preamble
Neopolen P is a material developed by BASF for a broad range of applications and
with the intention of firmly establishing its strategical positioning as an
energy absorbent and heat-insulating foam. The application as an insulating
casing for starter batteries with iQ technology appears to be an ideal way of
achieving this objective.
iQ has identified Neopolen P as a material which has the best properties for
this application and is interested in using it in the mass production of iQ
battery insulating casings, its further development and also a joint defense
against possible patent infringements by unlicensed casing manufacturers.
BASF and iQ resolve to continue and intensify existing cooperative work and
specify the following provisions in this respect:
1. Public relations
BASF and iQ shall be represented jointly in the media and at press conferences,
trade fairs and exhibitions. Actual events shall be planned and staged by the
marketing and PR representatives of the two companies in close cooperation.
Appropriate resources shall be made available by both parties to carry out these
intentions. Individual activities by one company which mention the other company
shall require prior consent.
2. Support in product development
The two parties shall support each other in the further development of their
respective products and the carrying out of corresponding tests.
The following areas may be mentioned by way of example for Neopolen P:
- surface design coloration
- thermal conductivity
<PAGE>
- gas tightness
- acid resistance
- mechanical strength
- crash safety tests
- support for processors
- support for mold making
The rights to existing know-how from joint development and from any patents as
well as exploitation thereof shall be covered in a know-how agreement.
3. Sales support
iQ shall stipulate to its licensees the specification for the battery insulating
casings based on Neopolen P in conformity with the BASF standard and shall
recommend exclusively the use of Neopolen P for this application to ensure the
technical properties of the iQ battery. For every kilogram of Neopolen P that is
used by the licensees for the application "insulating casing for starter
batteries with iQ technology", iQ shall receive support, as specified in the
supplementary sheet, for sales promotion measures. The amount of the payment
will be determined annually after completion of the third quarter by taking into
account the data from iQ and BASF. BASF undertakes in return to draw attention
to any patent infringements or attempts at evasion as they become known and to
support iQ in asserting its rights by making known the information which is
available to BASF.
4. Communication
The two parties shall maintain a regular exchange of information and keep one
another informed about their technical and commercial developments outside joint
activities. In particular, iQ shall notify BASF immediately of the name of every
licensee and shall endeavor to involve BASF at an early time as a partner in any
additional development tasks and as a supplier of Neopolen P.
5. Ending of the cooperation
The resolution to work together is for five years. It shall be extended
automatically for one further year unless written notification to terminate is
sent to the other party with a period of notice of six months.
The cooperation can be discontinued at any time by mutual consent.
The obligation to maintain absolute confidentiality with respect to third
parties concerning information which has been exchanged as part of the
cooperative venture according to the confidentiality agreement of June 30, 1997,
signed by both parties, shall apply beyond the end of the cooperative work for a
period of a further five years.
6. Miscellaneous
At the time when this agreement is concluded, it is not possible to foresee and
make exhaustive provisions for all possibilities that may arise from future
technical and commercial development and from any changes there may be to
statutory regulations. The parties to the agreement are agreed that the
principles of commercial loyalty must apply in their cooperative work, and
assure
<PAGE>
one another that they shall meet the contractual agreements in this spirit and
take account analogously of any future changes there may be in their mutual
relations.
Changes and additions to these agreements shall be legally valid only if they
can be made in writing.
Ludwiqshafen, (date) Unterhaching, (date)
Translation from the German into the English Language
BMW and IQ Battery Confidentiality Agreement
Exhibit 6.16
Page 1 of 3
Confidentiality Agreement
between Bayerische Motoren Werke
Aktiengesselschaft
D - 80788 Munchen
hereafter referred to as "BMW"
and IQ-Battery R&D GmbH
Inselkammerstr. 4
D 82008 Unterhaching
hereafter referred to as "Partner"
In consideration that the Parties
- - intend to exchange confidential information
- - wish to avoid misuse of that information
the Parties agree as per following:
<PAGE>
Page 2 of 3
1. BMW and the Partner intend to exchange confidential information in regard
of the following project:
Battery with integrated, intelligent heating function
-----------------------------------------------------
2. The Parties undertake hereby the obligation to handle all the information
obtained directly or indirectly from other Parties within the scope of the
Project in a confidential manner and use it only in relation to the project
as described in paragraph No.1. In particular an assurance is mutually
undertaken that this information shall not be not conveyed to a third
Party, nor be in any written form made available to a third Party, and all
preventable measures and provisions shall be undertaken that any access by
a third Party to this information be avoided. Privies (in meaning of ss. 15
AktG) are not considered the third Party.
3. In particular the Information as per understanding of the previous
paragraph No.2 is:
- know-how as well as results, which in the scope of the Project were
achieved or applied,
- description of the Projects,
- prospective time schedules, goals and ideas for developing of the
project,
- other, not frequently available information, which the Parties obtain
within the scope of the Project.
4. According to this agreement, the duties of non-disclosure are extended to
all the workers and the agents of the Parties, regardless of the nature and
arrangements of their co-operation. The Parties are obligated to execute
necessary non-disclosure agreements from the circle of persons involved, if
this has not already has been done.
5. According to this contract, the duties of non-disclosure remain in force
after completion of the Project as descibed in the paragraph No.1.
6. According to this contract, the duties of non-disclosure cease to exist
when it can be demonstrated that the concerned information
- is generally known, or
<PAGE>
Page 3 of 3
- became generally known at no fault of the Parties obligated to
maintain confidentiality, or
- has been obtained legally from the third Party, or
- already existed in the knowledge of the receiving Party.
7. It is known to the Parties that
- dissemination of industrial and business secrets is punishable under
ss.ss. 17, 18 UWG, and may be punishable with imprisonment up to five
years, and
- one who disseminates industrial and business secrets is liable for is
obligated to provide compensation for resulting losses, according with
ss. 19 UWG.
8. All legal disputes arising from this agreement are to be dealt with by the
Courts in Munich. All disputes resulting from- or in context of this
agreement are subject to Law of the Federal Republic of Germany.
Munich, 29.07.97
Bayerische Motoren Werke Aktiengesellschaft
EE Dr. Thoma EM-2 Lindner
Unterhaching, the day of . . .
IQ Battery Peter E. Braun
Translation from the German into the English Language
Confidentiality Agreement between MOLL/IQ and AUDI
Exhibit 6.17
Manufacturer of Batteries Moll GmbH + Co. KG
Postfach 1120 D-96225 Stafelstein
Telefon (09573) 9622-0
Mutual Confidentiality Agreement
between
Akkumulatorenfabrik MOLL GmbH + Co. KG, Angerstrasse 50,
96231 Staffelstein and IQ Battery GmbH, Munich
hereafter referred to as MOLL/IQ
and
AUDI AG, 85045 Ingolstadt
hereafter referred to as: AUDI
MOLL/IQ and AUDI have expressed mutual interest concerning cooperation on
development of a new, modified starter battery.
For the purpose of this cooperation a reciprocal confidence is agreed upon.
Both Partners obligate themselves to utilize all conveyed information (verbal,
written) according to principle "need to know" exclusively for agreed Projects.
Publicly accessible and available information is released from that
confidentiality. If the information must be forwarded on any occasion outside of
the Project, a specific agreement is required.
Staffelstein, 30.04.1998 . . . . . . . . . . . . . .
(MOLL)
Ingolstadt, 26.05.1998 . . . . . . . . . . . . . . .
(AUDI)
Translation from the German into the English Language
Confidentiality Agreement: Mercedes Benz and IQ Battery
Exhibit 6.18
Page 1 of 2
Confidentiality Agreement
Mercedes Benz Aktiengessellschaft
Mercedesstrasse 136, 70322 Stuttgart
Department EP/VEG
HPC T723
and
IQ-Battery R & D GmbH
Inselkammer Str. 4
82008 Unterhaching
enter the obligation as per the following: all technical and commercial
information, in particular intentions, experience, knowledge and designs which
were for the purpose of the project and during the period of this agreement made
accessible or were received by or from the partner to this contract, and until
expiry of five years after the end of the period of the contract, to treat
confidentially, not to make accessible to third parties, as well as not to use
for industrial purposes, as long as the partners to this contract did not agree
otherwise in writing.
This obligation of confidentiality is not valid for information and
documentation which:
a.) was evidently known to the receiving contract partner right from the
beginning when the cooperation begun;
b.) the receiving partner to the contract evidently obtained legally from third
parties;
c.) it is known publicly, or, without breaking obligations contained in this
contract, was known publicly;
<PAGE>
Page 2 of 2
d.) the receiving partner evidently developed within the scope of its own and
independent development work
The partners to this contract are under obligation to impose the same
obligations on their employees to whom such information, technical and
economical knowledge and experience will be conveyed, just as they were
themselves partners to this contract, as far it is possible legally, and also
for the term after separation.
The partners to this contract shall apply the same caution, as by handling their
own confidential information.
In case of sharing anticipated discoveries, the partners reserve right with
regard to eventual possible later patent protection.
This agreement becomes enforceable immediately, and shall have duration until
31.12.97
Stuttgart, 21.03.97
Mercedes-Benz Aktiengesselschaft1
Translation from the German into the English Language
-----------------------------------------------------
Business Letter from Akkumultorenfabrik Moll GmbH to IQ R&D GmbH
Exhibit 6.19
Page 1
MOLL
Business Management
Rubber stamp: RECEIVED 04 Aug. 1998
IQ Battery Research & 03.08.98
Development GmbH gmoe/fu
Erlenhoff Park
Inselkammer Str. 4
D - 82008 Unterhaching
Dear Mr. Braun,
Dear Dr. Bauer,
We had first contacts at our offices since October 1996, and I will take an
opportunity to discuss status of our cooperation at out next meeting on 11.08,
as well as to discuss possible perspectives. Therefore I would like to make a
contribution and present thoughts re. our discussion.
That is why I propose that we arrive at a more systematic cooperation within the
range of development, production, marketing and distribution. The cooperation
should also be summarized in written agreements.
The mutually undertaken so far steps should be conveyed into a firmly agreed to
cooperation.
Sincerely,
MANUFACTURER OF BATTERIES MOLL
Ltd. + Limited Partnership Co.
G. Moll-Mohrstedt
<PAGE>
Translation from the German into the English Language
-----------------------------------------------------
Letter from Akkumulatorenfabrik Moll GmbH to IQ Battery R&D GmbH
Page 1
MOLL
Business Management
IQ-Battery Research & 13.08.98
Development GmbH gmoe/fu
Erlenhoff Park
Inselkammer Strasse 4
82008 Unterhaching
Dear Mr. Braun,
Dear Dr. Bauer,
In reference to our conversation in our offices on 11.08.98, I would like to
sketch briefly results, in the interest of clarity and results for both sides.
We had an opportunity to convey to you our thoughts on the topics of
development, production, distribution and marketing in a sketchy form, the basis
of the discussion for that conference were as from our standpoint.
Regarding the topic Development, we propose that the following paragraphs be
actualized or established: (1) product requirements, (2) product description,
and (3) development plan.
Regarding the topic Production, we have made to you proposals in respect of
formation of a common basic Company. Your concepts are still outstanding.
The areas of distribution and marketing has no priority in the time schedule
until establishing joint-market-concepts for components of respective parts.
Also here we are awaiting your proposals.
The goal for the next meeting should be basic unification in cooperation and in
production of parts, and that further the people be identified, who are to be
working, and finally, the scientific basis to be established in the relation of
IQ GmbH and basic production company, so that assumptions would be given to
develop contracts.
Briefly regarding timelines, we can approach your proposals in detail after KW
37.
Lastly, we thank you for your visit and the information regarding further
development of the company and the endeavoured projects.
<PAGE>
Translation from the German into the English Language
-----------------------------------------------------
Letter from Akkumulatorenfabrik Moll GmbH to IQ Battery R&D GmbH
Page 2
Sincerely,
MANUFACTURER OF BATTERIES MOLL
Ltd. + Ltd. Partnership Co.
<PAGE>
Translation from the German into the English Language
Development Diagram Page 1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
Moll Development iQ
Responsible for 1. Product requirements responsible for
(parts must be decribed as per parts from outside
battery "housing" procura and changed battery)
for parts
Development control
M + IQ if not OK
OK
2. Product description
Moll V for batteries for parts ViQ
for
Moll V integrated battery
Adjustments to
product description
for integrated
batteries
with OE (East European?) clients
i.e. Audi/Porsche if not OK
OK
mutual conclusion of M + iQ
3. Timelines for development plan
expenditures, expenses, division
of tasks etc. for all 3 products
Development according to the
above plan
Test
OK release for O-series, parts of independent
<PAGE>
Translation from the German into the English Language
Development Diagram
Page 2
completing series product, quality etc.
viable for testing
<PAGE>
Translation from the German into the English Language
Moll Batterien - Development
Page 1
19745 v1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
DEVELOPMENT
We will issue our opinion, after the development point, where the idea of
product in the decisive phase of conversion can go into the product. For the
three different parts, the respective products must be for both sides dismissed
as binding product description, which flow into product description. It going
about
- - parts from iQ
- - the redesigned battery from Moll, and
- - the definite product, the integrated battery.
To conduct the processes there should be established a group of employees from
iQ and Moll operating under a description Development Management (2+2). iQ has
responsibility for setting the requirements for the parts, and Moll is
responsible for batteries and end-products, certainly alternately within the
veto right given by Development Management. The final description of product
will be agreed with OEM and serves the creation of the development plans. The
development plan encloses likewise 3 parts for 3 products and contains
- - planing of timing
- - regulating tasks
- - expenditures and expenses.
Divisions of costs of the development follows the responsibilities. The
development process runs according to the plan and is accompanied by the
Development Management. Update of practical work will be presented i.e. 1x
month, either in writing or at a meeting, any deviations are to be reported
without delay.
<PAGE>
Translation from the German into the English Language
Moll Batterien - Development
Page 2
The test phase, jointly with OEM is decisive for release to beginning of
0-series.
It is important that the parts developed by iQ have a specific test profile and
therefore are viable for testing.
That is very briefly part referring to development.
<PAGE>
Translation from the German into the English Language
Moll Batterien GmbH: Distribution + Marketing Diagram
Page 1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
Moll Distribution + Marketing iQ
Moll V Establishing Joint Marketing Concepts ViQ
for Parts
independent from A, B, C
Moll V distribution of parts ViQ
in support of A, B, C
Moll V Distribution and Marketing of
the integrated batteries
<PAGE>
Translation from the German into the English Language
Moll Batterien GmbH - Distribution and Marketing
Page 1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
DISTRIBUTION and MARKETING
The next range of our cooperation encompasses DISTRIBUTION and MARKETING.
Obviously, the distribution is dependent on the form of cooperation (A, B or C).
The business management teams of iQ and Moll will establish a marketing concept,
independently of A, B and C. That marketing concept should have a uniform
language, first of all establishing of pricing against third manufacturers of
batteries.
As already said, this concept is valid for all forms of cooperation. In
contrast, the actual distribution of parts in context of concept of A, B or C,
is still to be seen. This is self explanatory, without closer description. To
emphasize once again, distribution and marketing is intended here, distribution
and marketing of parts. Distribution and marketing of integrated batteries is
responsibility of Moll. It is self explanatory, that iQ is here involved in
concept, but the approach depends on East European Markets (OEM), and the
after-market is the ground part of our task. It is also important to point out
that Moll offers to each company involved in production of parts all the
expertise gained and related to integration of parts into the batteries. All
expenditures exceeding specific documentation will be billed to the
manufacturing company.
<PAGE>
Translation from the German into the English Language
Moll Batterien GmbH: Production Diagram
Page 1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
Moll Production iQ
Moll V Production of parts ViQ
1) Business plan
Supply to Moll and third parties
Moll V Production of batteries
1) Setting up of a joint company, i.e.
A) 50 : 50
B) Moll Europe 100 %
Remaining iQ 100 %
C) Own demand and selected (German) clients of Moll 100 %
<PAGE>
Translation from the German into the English Language
Moll Batterien GmbH: Production
Page 1
Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL
P.O. Box 1120 D-96225 Stafelstein
Tel. (09673) 98 22-0
PRODUCTION
----------
Two assumptions outline the beginning of the production:
1. Product ready for volume manufacturing speaking of the integrated
batteries, at least a volume accepted by OEM, where a minimum volume
assured.
2. A clear agreement between iQ and Moll about the economical conditions of
the cooperation in form of a contract.
The commencing point for all decisions consists of minimum amounts, business
plan, information provided about investment requirement, current expenses etc.
That business plan will be prepared jointly and this is the task assigned to the
business management. The plan should consider alternatives, i.e.
A) Production of parts will be conducted at a joint manufacturing firm with
participaction 50 : 50.
B) For Europe exclusively Moll will carry out production of parts, the rest of
the world is responsibility of iQ.
C) Moll exclusively carries out production of parts for own demand and
selected (German) clients.
We exclude that iQ appears as competing supplier of parts, even under special
conditions. In all cases A, B and C it is responsibility of each of the
manufacturing company to iQ to provide sufficiently each of the production
companies, i.e. licensees, with know-how,
<PAGE>
Translation from the German into the English Language
Moll Batterien GmbH: Production
Page 2
technical information etc., and iQ, as the developing company, will be
remunerated with a usual market licensing fee.
It must be presented that the setting of market price, where development costs
incurred up to date are taken into consideration, or saying more precisely, the
access to large volumes depends 50 % on quality of the product, and still better
said, it depends on improvement and 50 % on setting the price. The formula is:
lower input, higher volumes, more licenses. My position obviously is such, that
the patent situation is so far unequivocal, as far iQ will arrange for all
patents rights and obligations (i.e. commencement of actions when patents
infringed). Moll will set a business plan for production of the integrated
battery and inform iQ about it. The information includes also market access
considerations including sale price on the East European Markets (OEM). Moll is
ready anytime to manufacture parts (A, B and C) under a company name, and also
create other assumptions, where Moll will not be recognized on the market as
manufacturer.
Translation from the German into the English Language
Confidentiality Agreement: BMW and IQ Battery
Exhibit 6.20
Page 1 of 1
Mutual Confidentiality Agreement
between
Manufacturer of Batteries Moll, Angerstrasse 50, 96231 Staffelstein
hereafter referred to as MOLL
and IQ-Battery Research & Development GmbH, Inselkammerstrasse 4, 82008
Unterhaching referred to as: IQ
MOLL and IQ have expressed mutual interest in working on IQ's existing invention
in starter batteries.
For the purpose of this cooperation a reciprocal confidence is agreed upon.
Both Partners obligate themselves to utilize all conveyed information (verbal,
written) according to principle "need to know" exclusively for agreed Projects.
Publicly accessible and available information is released from that
confidentiality. If the information must be forwarded on any occasion outside of
the Project, a specific agreement is required.
Staffelstein, 8/9/97 . . . . . . . . . . . . . .
(MOLL)
Unterhaching 08/Sept.97 . . . . . . . . . . . . . . .
(IQ)
Translation from the German into the English Language
Exhibit 6.21
Page 1 of 2
Loan Contract
Mrs. Karin Witkewitz
Schreckenweg 1
85658 Egmating
hereafter referred as the Lender
and the
iQ BATTERY Research & Development GmbH
Inselkamerstr. 4
82008 Unterhaching
hereafter referred to as the Borrower
Sec. 1
Loan
The Lender has extended to the Borrower a loan in amount of DM 60,000.00 on
27.12.1996 from sale of business shares of nominal value DM 6,000.00.
Sec. 2
Interest
The loan carries annual interest of 3% above the existing bank rate of the
German Bundesbank. The interest is to be payable annually by January 31 of the
following year for the past calendar year.
Sec. 3
Termination
The loan may be terminated within six months after quarter of a calendar year,
however not earlier than December 31, 1998.
The Lender has right for termination only when in the relations between the
Borrower and the Lender disadvantageous circumstances were created, which upon
assessment of general business conditions justify termination. The termination
requires a written notice.
<PAGE>
Page 2 of 2
Sec. 5
Premature Repayment
The Borrower is entitled to premature repayment of the loan at any time.
Munich, 28.12.96
. . . . . . . . . . . . . . . . . . . . . . . . .
Place, date Signature Karin Witkewitz
Munich, 28.12.96
. . . . . . . . . . . . . . . . . . . . . . . . .
Place, date Signature iQ BATTERY
Translation from the German into the English Language
Exhibit 6.22
Page 1 of 9
Contract
concerning
Industrial Property Rights and Know-How
between
1. Mr. Dieter Braun
Schrenkweg 1
85658 Egmating
2. Mr. Peter Braun
Schopenhauer Strasse 23
85579 Neubiberg
hereafter referred to as the "Transferor"
and
the iQ BATTERY Research & Development GmbH,
offices in Floha,
HRB 11067 AG Chemnitz
hereafter referred to as the "Company"
1. The Transferors own German Patent, Patent Specification No. 4142 628 C1, as
well as the international patent application PCT/EP 92/02930 dated December
17, 1994 (hereafter referred to as "Property Rights"), regarding know-how
for starter batteries and other batteries, and regarding registered
national trade mark "iQ", registration number 206, 1981. The deed for the
German Patent, the international Patent registration, the know-how, as well
as the deed for the registration of the previously named Trade Marks, are
set forth in this Contract as Enclosure 1 of the attached compilation,
which is the essential component of this Contract (in the following
referred to as "Rights Subject to the Contract").
2. The Transferors intend to transfer these Property Rights, that know-how and
that Trade Mark together with all rights resulting from- or related to the
Rights Subject to the Contract, onto the Company.
<PAGE>
Page 2of 9
Sec. 1
Transfer of the Rights Subject to Contract
1. The Transferors transfer hereby all the Rights Subject to Contract to the
Company and relinquish all resulting from- or all related to- rights.
Simultaneously they transfer, at the time of finalizing of the contract,
all belonging documents concerning the Rights Subject to Contract, the
Subject to Contract Know-How, and the Subject to Contract Trade Mark, onto
the Company. The Transferors relinquish further all resulting claims with
regard to documents concerning the International Patent Registration, which
are held by their patent solicitor. The Transferors assure that, except as
per conditions of ss. 3, there are no other documents incorporating the
Property Rights or the Know-How.
2. The Company receives the transfer and the relinquishment.
3. The Transferors obligate themselves to undertake all explanations and
procedures necessary to transfer registration of Patent, Trade Mark
ownership and Patent Protection, and provide support to the Company in all
possible ways in the process of transfer.
4. The Transferors grant Power of Attorney irrevocably to the Company, to
undertake all the necessary procedures and explanations in respect of
transfer.
Sec. 2
Remuneration
1. As remuneration for conveyance to the Company of the Subject to Contract
Rights, according to ss. 1, the Company shall pay to the Transferors
a) one time an amount of DM 400,000 (German Mark: four hundred thousand)
plus applicable value added tax, due by the first exploitation by the
Company of the Subject to Contract Rights.
<PAGE>
Page 3 of 9
b.) 40% of the revenue from license fees not originating from sales, as
well as fees for guarantees of options to close the license
agreements, as well as
c.) 20 % of the entire annual and not originating from license sales gross
income of the Company from license contracts of the Rights Subject to
the Contract until year 2000.
The Parties agree that the amounts for b.) and c.) respectively will be
payable three months after the closing of the previous calendar half-year,
and they are subject to paying and additional and obligatory value added
tax, as long as the Company shows a positive business results, otherwise
the amounts will be postponed until a positive result will be brought
forward.
2. The Transferors put the demands outlined in par. 1 irrevocably, and
behind all demands of present and future third party creditors of the
Company, as long as the Company is in debt.
3. The purchase price is limited in all to 4 mil.
4. The expenses of conveyance of industrial property rights to the Company
shall be borne by the Company.
Sec. 3
Warranties
1. The Transferors hold liable the Company that the Rights Subject to the
Contract, except for information as contained in the Enclosure 2, are free
of third party rights, and they can access these freely. There are no legal
encumbrances on the Right to the Contract, or any relevant legal disputes
known to the Transferors. The Transferors assure therefore that besides of
Property Rights, as per Enclosure 1, there is no further ownership of
Property Rights.
2. The Transferors assure that there are not known to them any essential
negative facts in reference to existing extend of the Rights Subject to the
Contract, or to execution of this contract, in particular any rights of
prior users, or dependencies on Property Rights by third parties, or any
other rights of third parties. Excluded from here are such supporting
documents, as attached in the Enclosure 3 of this contract.
<PAGE>
Page 4 of 9
3. The Transferors decline any responsibility, nor provide any guarantees for
industrial usefulness of the Rights Subject to Contract.
4. It is known to the Company that the Know-How subject to the Contract was
made known to the third party during utilization conferences, as per
Enclosure 4 named enterprise, but never in its entirety.
Sec. 4
Protection of the Rights Subject to the Contract
1. The Company is obligated to do all to maintain protection of the Rights
Subject to the Contract.
2. The Transferors obligate themselves to support the Company in that, in
particular to provide the Company with the required and not yet available
documentation.
3. The Transferors and the Company obligate themselves mutually not to
disclose or convey the Rights Subject to the Contract to the third parties.
Sec. 5
Other Considerations
1. This contract is exclusively subject to German Law.
2. Place of legal dispute, as far as permissible, Munich (District Court
Munich II).
3. To become effective, any changes and additions to this contract, as well as
one side explanations of the parties to this Contract, are to be made in
written. This is valid also for written form clauses.
<PAGE>
Page 5 of 9
4. Should certain provisions of this contract become ineffective, or should be
ineffective, or not executable, or in case if this contract contains
omissions, the effectiveness of the remaining provisions will be not
affected. In place of an ineffective or unexecutable provision, such an
executable agreement becomes part of the agreement, which in its industrial
sense and purpose is legally possibly closest to its purpose. In case of
omissions, such relevant provision becomes valid which is reasonable in
sense and purpose, should that provision had had been agreed upon, when had
been thought of from the beginning.
Munich, March 15, 1995
(Dieter Braun) (iQ BATTERY Research & Development GmbH)
(Peter Braun)
Enclosure 1: List of the Rights Subject to the Contract
Enclosure 2: Evidence of the Rights Subject to the Contract
Enclosure 3: Patent Protection Rights of third parties or other rights of
third parties
Enclosure 4: Utilization conferences / Confidentiality Agreements
<PAGE>
Page 6 of 9
Enclosure 1
List of the Rights Subject to the Contract:
- -------------------------------------------
- - German Patent, Registration Number DE 4142628 C1
- - International Patent Application, file number PCT/EP 92/02930
- - Know-How for starter batteries and other batteries
- - National Trade Mark including registration number 206 1981
<PAGE>
Page 7 of 9
Enclosure 2
Evidence of the Rights Subject to the Contract:
- -----------------------------------------------
- - Company Agreement with Mr. Engelhorn, dated May 19, 1993
- - Utilization Agreement Fluhrer dated February 7, 1994
- - Patent Utilization Contract with InPROma, dated April 21, 1994
- - Extension of the Patent Utilization Contract with InPROma, dated November
29, 1994
- - Pledge according with Agreement dated March __ , 1995
<PAGE>
Page 8 of 9
Enclosure 3
Patent Protection Rights of third parties or other rights of third parties:
- ---------------------------------------------------------------------------
<PAGE>
Page 9 of 9
Enclosure 4
Utilization conferences / Confidentiality Agreements
- ----------------------------------------------------
- - Global & Yuasa Battery Co., dated September 27, 1994
- - Fraunhofer-Company patronage of undertaken research, dated January 28, 1995
- - GNB, dated July 1, 1994
- - GALT, dated May 11, 1994
Translation from the German into the English Language
Exhibit 6.23
Page 1 of 3
Supplementary Contract
to
Contract Concerning Commercial Protection Rights and Know-How
dated 15.03.1995, between
Mr. H. Dieter Braun, Schrenckweg 1, 85658 Egmating, and
Mr. Peter E. Braun, Schopenhauerstr. 33, 85579 Neubiberg, on one part, and
the iQ Battery Research & Development GmbH, Inselkammerstr. 4, 82008
Unterhaching, on the other part
1.
Sec. 1 1.2 of the above mentioned Contract, according to which Messrs. H. Dieter
and Peter E. Braun by the closing of the above mentioned Contract should convey
all relevant documents pertaining to Protection Rights Subject to Contract,
Know-How Subject to Contract and the Trade Mark Subject to Contract, and in
their possession, should that surrender obligation not have been fulfilled yet
by the time of closing of the above mentioned Contract and for the future, as
superimposed by ss. 4 2. of the above mentioned Contract, according to which
Messrs. H. Dieter and Peter E. Braun obligate themselves to present to iQ
Battery Research and Development GmbH not yet forwarded documents.
2.
In the Sec. 1 3. of the above mentioned Contract Messrs. H. Dieter and Peter E.
Braun have obligated themselves to undertake all the required explanations and
actions for immediate conveyance of Patent- and Trade Mark proprietorship as
well as registration of Protection Rights as required, as well as to support in
each possible way all the actions leading to conveyance to iQ Battery Research &
Development GmbH. The iQ Battery Research & Development GmbH explains that since
closing of the above mentioned Contract and further on, carrying out of
explanations and actions is renunciated and has been renunciated, until the
evidence of costs for that transfer will be presented, or until the transfer
from the owners will require at least in 75% of their business shares.
3.
<PAGE>
Page 2 of 3
In Sec. 3 1 . 2 of the above mentioned Contract Messrs. H. Dieter and Peter E.
Braun declared that there are not known to them any rights disputes in respect
of the Rights Subject to the Contract. Messrs. H. Dieter and Peter E. Braun and
the iQ Battery Research & Development GmbH understood that at the time of
closing the above mentioned Contract and in understanding of these explanations,
that the civil right dispute as per District Court Berlin (Case No. 3 O 40/94),
resting since 15.04.1994, is not to be understood as pending process in sense of
Sec. 3 1.2 of the above mentioned Agreement.
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . .
(place) (H. Dieter Braun)
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
for the iQ Battery Research & Development:
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . .
(place) (H. Dieter Braun)
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
as former Shareholders of iQ Battery Research & Development GmbH in mutual
acceptance of the above:
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . .
(place) (H. Dieter Braun)
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
as Shareholders of iQ Battery Research & Development GmbH in mutual acceptance
of the above:
. . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . .
(place) (Dr. Gunther Bauer)
<PAGE>
Page 3 of 3
. . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . .
(place) (Heinz Braun)
. . . . . . day of 31.07.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
. . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . .
(place) (Ursula Braun)
. . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . . .
(place) (Karin Wittkewitz)
Translation from the German into the English Language
Extension of the Contract
Exhibit 6.24
Page 1 of 2
Extension of the Contract
to
Contract Regarding Industrial Protection Rights and Know-How
dated 15.03.1995 between
Mr. H. Dieter Braun, Schrenckweg 1, 85658 Egmating,
Mr. Peter E. Braun, Schopenhauerstr. 33, 85579 Neubiberg, and
the iQ Battery Research & Development GmbH, Inselkammerstr. 4, 82008
Unterhaching.
1.
Messrs. H. Dieter and Peter E. Braun agree that the amount of DM 400,000.00
(Sec. 2 1. as of the above named Contract) is divided in the following
proportion: to Mr. H. Dieter Braun DM 300,000.00 and to Mr. Peter E. Braun DM
100,000.00.
2.
Messrs. H. Dieter and Peter E. Braun and iQ Battery Research & Development GmbH
agree that payments made by iQ Battery Research & Development GmbH on the
existing, at the time of concluding the above named Contract, loan
a. to Mr. H. Dieter Braun
aa. at the Dresdner Bank Berlin (original loan amount approx. DM 170,000.00)
bb. at the Deutsche Bank Berlin (original loan amount approx. DM 90,000.00)
cc. at the BCI Munich (original loan amount approx. DM 15,000.00)
b. to Mr. Peter E. Braun
aa. at the Dresdner Bank Dresden (original loan amount approx. DM 50,000.00)
bb. at the Deutsche Bank Berlin (original loan amount approx. DM 20,000.00)
cc. at the Deutsche Bank Fulda (original loan amount approx. DM 50,000.00)
will reduce the above named demand of Messrs. H. Dieter and Peter E. Braun
against iQ Battery Research & Development GmbH (ss. 2 1. of the above named
Contract).
<PAGE>
Page 2 of 2
for the iQ Battery Research & Development:
. . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (H. Dieter Braun)
. . . . . . . . day of 01.7.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
as former Shareholders of iQ Battery Research & Development GmbH in mutual
acceptance of the above:
. . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (H. Dieter Braun)
. . . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
as Shareholders of iQ Battery Research & Development GmbH in mutual acceptance
of the above:
. . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (Dr. Gunther Bauer)
. . . . . . . . day of 18.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (Heinz Braun)
. . . . . . . . day of 31.07.1996 . . . . . . . . . . . . . . . . . . .
(place) (Peter E. Braun)
. . . . . . . . day of 18.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (Ursula Braun)
. . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . .
(place) (Karin Wittkewitz)
Translation from the German into the English Language
Exhibit 6.25
Page 1 of 2
Consulting Contract
Between
the Company iQ Battery Research & Development GmbH, Heinrich-Heine-Str. 5, 09557
Floha
(hereafter referred to as the Firm)
and
Mr. Peter Braun, Kreuzberg 6, 85658 Egmating
(hereafter referred to as the Consultant)
the following is being agreed to:
Sec. 1. Subject of the Contract
The Consultant will advise the Firm on all commercial, technical and marketing
problems comprehensively. In particular to his duties belongs the overtaking of
the business management activity.
Sec. 2. Place and Time of the Activities
1. The Consultant sets his own place of work. However he must be at disposal
at the offices of the Firm, when it is necessary.
2. The Consultant organizes his time of work dutifully at his discretion.
Sec. 3 Remuneration
1. The Consultant receives a fee in amount of DM 73,200. - - annually plus
statutory sales tax. The fee is payable in monthly payments each of DM
(illegible - translator's note) beginning of September 1994.
<PAGE>
Page 2 of 2
Sec. 4 Expenses
The Firm is obligated to reimburse, upon presenting receipts, all necessary
expenses incurred on business of providing advisory activity.
Sec. 5 Discretion
1. The Consultant obligates himself to maintain strict confidentiality in
respect of all known previously or to be known to him business and
industrial affairs, also after ceasing of this Contract.
2. The Consultant will safeguard all conveyed to him business and industrial
documentation, as well as maintain confidentiality in respect of third
parties, and return these documents on request after the contract ended.
Sec. 6 Non-Competition
1. The Consultant obligates himself, during term of this Agreement not to be
active with any enterprise which competes with the Firm. He obligates
himself not to attend any a such enterprise on business, not to close any
advisor's contracts, obtain any remuneration directly or indirectly.
Furthermore, he is forbidden to form a competitive enterprise.
2. The Consultant will indicate undertaking of any activity, where doubts may
exist if such is in competition with advisory activity.
Sec. 7 Termination of the Contractual Relation
1. This consulting contract is subject to termination by either party on a
three months notice, effective end of the month, the earliest though on
December 31, 1996. The right to termination under special circumstances is
retained.
2. Termination requires a written form. The regular termination of the
contract does not require any substantiation.
Sec. 8 Format
Changes in clauses or additions to this Contract will be only recognized, when
submitted in writing or arranged in writing by both parties.
Floha, dated this August 28.1994
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iQ Research & Development GmbH) (Peter Braun)
Translation from the German into the English Language
Exhibit 6.26
Page 1 of 2
Consulting Contract
Between
the Company iQ Battery Research & Development GmbH, Heinrich-Heine-Str. 5, 09557
Floha (hereafter referred to as the Firm)
and
Dr. Gunther Bauer, Oderweg 7, 85521 Ottobrun (hereafter referred to as the
Consultant)
agree to the following:
Sec. 1. Subject of the Contract
The Consultant will advise the Firm on all commercial, technical and marketing
problems comprehensively. In particular his duties will also encompass
overtaking of the technical management of the development.
Sec. 2. Place and Time of the Activities
1. The Consultant sets his own place of work. However he must be at disposal
at the offices of the Firm, when it is necessary.
2. The Consultant organizes his time of work dutifully at his discretion.
Sec. 3 Remuneration
1. The Consultant receives a fee in amount of DM 21,000. - - gross, flat rate
for the services in 1996. Beginnning 01.01.1997 the fee due will be payable
in amount of DM 6,100. - - plus statutory sales tax.
Sec. 4 Expenses
The Firm is obligated to reimburse, upon presenting receipts, all necessary
expenses incurred on business of providing consulting activity.
Sec. 5 Discretion
1. The Consultant obligates himself to maintain strict confidentiality in
respect of all known previously or to be known to him business and
industrial affairs, also after ceasing of this Contract.
<PAGE>
Page 2 of 2
2. The Consultant will safeguard all conveyed to him business and industrial
documentation, as well as maintain confidentiality in respect of third
parties, and return these documents on request after the contract ended.
Sec. 6 Non-Competition
1. The Consultant obligates himself, during term of this Agreement not to be
active with any enterprise which competes with the Firm. He obligates
himself not to attend any a such enterprise on business, not to close any
advisor's contracts, obtain any remuneration directly or indirectly.
Furthermore, he is forbidden to form a competitive enterprise.
2. The Consultant will indicate undertaking of any activity, where doubts may
exist if such is in competition with advisory activity.
Sec. 7 Termination of the Contractual Relation
1. This consulting contract is subject to termination by either party on a
three months notice, effective end of the month, the earliest though on
December 31, 1997. The right to termination under special circumstances is
retained.
2. Termination requires a written form. The regular termination of the
contract does not require any substantiation.
Sec. 8 Format
Changes in clauses or additions to this Contract will be only recognized, when
submitted in writing or arranged in writing by both parties.
Floha, dated this 30.10.1996
. . . . . . . . . . . . . . . . . . . . . . .
(iQ Research & Development GmbH)
. . . . . . . . . . . . . . . . . . . . . . .
(Dr. Gunther Bauer)
Translation from the German into the English Language
Exhibit 6.27
Page 1 of 1
Agreement
between
iQ BATTERY Research & Development GmbH,
- - hereafter referred to as the "Debtor" -
and
Mr. Dieter Braun and Mr. Peter Braun
- - hereafter referred to as the "Creditors" -
As based on Contract from March 15, 1995, the iQ BATTERY Research & Development
GmbH owes to Messrs. Dieter and Peter Braun for relinquishing of the patents and
know-how for starter batteries amount of DM 400,000.00.
The Creditor declares in respect of his claim against the Debtor, that he places
his claim in order of other present and future Creditors of the Debtor, whereby
it is agreed with the Debtor that redemption of the interest will be depending
solely on the identifiable redemption ability of the Debtor, or on the future
liquidation surplus. Consequently, the Creditor obligates himself particularly
not to raise his claim against the Debtor for such a time period, as per partial
or complete release of these claims as based on calculations of the indebtedness
of the Debtor as in sense of ss. 63, s. 1 GmbH.
Unterhaching, December 27, 1996.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iQ BATTERY Research & (Dieter Braun) (Peter Braun)
Development GmbH)
Exhibit 6.28
Translation from the German into the English Language
Agreement
between
iQ BATTERY Research & Development GmbH,
- hereafter referred to as the "Debtor" and
Dr. Gunther Bauer
- - hereafter referred to as the "Creditor" -
As based on Project Contract from July 15, 1994, the iQ BATTERY Research &
Development GmbH owes to Dr. Gunther Bauer DM 95,000.- -.
The Creditor declares in respect of his claim against the Debtor, that he places
his claim in order of other present and future Creditors of the Debtor, whereby
it is agreed with the Debtor that redemption of the interest will be depending
solely on the identifiable redemption ability of the Debtor, or on the future
liquidation surplus. Consequently, the Creditor obligates himself particularly
not to raise his claim against the Debtor for such a time period, as per partial
or complete release of these claims as based on calculations of the indebtedness
of the Debtor as in sense of Sec. 63, Sec. 1 GmbH.
Unterhaching, December 27, 1996.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iQ BATTERY Research & Development GmbH) Dr. Gunther Bauer
Translation from the German into the English Language
Exhibit 6.29
Page 1 of 1
Waiver
Messrs.
Dr. Gunther Bauer
Oderweg 7
85521 Ottobrun
Horst Dieter Braun
Schrenckweg 1
85658 Egmating
Peter E. Braun
Schopenhauer Str. 23
85579 Neubiberg
and Mrs.
Karin Wittkewitz
Schreckweg 1
85658 Egmating
versus
iQ BATTERY Research & Development GmbH,
Inselkammerstr. 4
82008 Unterhaching
We waive hereby all interest fees payable for our long term demands against iQ
BATTERY for the year 1996 and the years prior to that.
. . . . . . . . . . . . . 15/12/97 . . . . . . . . . . . . . . . . .
Place, Date Signature Dr. Bauer
. . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . .
Place, Date Signature H.D. Braun
. . . . . . . . . . . . . 19/12/97 . . . . . . . . . . . . . . . . .
Place, Date Signature P.E. Braun
. . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . .
Place, Date Signature Karin Wittkewitz
. . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . .
Place, Date Signature iQ BATTERY
Agreement
Exhibit 6.30
Page 1 of 1
between
Mr. Horst Dieter Braun, Schrenkweg 1, 85658 Egmating
and
Mr. Peter Eugen Braun, grad. eng., Schopenhauerstr, 23,85579 Neubiberg,
on one part
and
IQ Battery Research & Development GmbH, Inselkammerstr.4,82008 Unterhaching.
We, Horst Dieter Braun and Peter E. Braun, grad. eng. Are hereby waiving the
counter performance payable to us pursuant to Sec.2.1b) and c) of the contract
regarding commercial property rights and Know-how effected between us and the IQ
Battery Research & Development GmbH., dated 15.03.1995 (40% of the revenue from
not turnover-dependent license fees, including fees for the granting of options
to effect license contracts, as well as 20% of all annual and turnover-dependent
license revenues of the company from license contracts with contract-related
industrial property rights up to the year 2000.
IQ Battery Research & Development GmbH. is accepting this waiver.
Place, date Horst Dieter Braun
Munich, 9.10.1998 (signature)
Place, date Peter Eugen Braun, grad. eng.
Munich, 9.10.1998 (signature)
Place, date IQ Battery Research & Development GmbH.
Munich, 9.10.1998 (signature)
Exhibit 6.31
iQ POWER TECHNOLOGY INC.
1998 STOCK OPTION PLAN
This 1998 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock (the "Common Stock") of iQ Power Technology
Inc., a Canadian corporation (the "Corporation"). The purposes of this Plan are
to retain the services of valued key employees and consultants of the
Corporation and such other persons as the Plan Administrator may select in
accordance with Section 2 below, to encourage such persons to acquire a greater
proprietary interest in the Corporation, thereby strengthening their incentive
to achieve the objectives of the shareholders of the Corporation, and to serve
as an aid and inducement in the hiring of new employees and to provide an equity
incentive to consultants and other persons selected by the Plan Administrator.
1. ADMINISTRATION.
This Plan will be administered initially by the Board of Directors of the
Corporation (the "Board"), except that the Board may, in its discretion,
establish a committee composed of two (2) or more members of the Board or two
(2) or more other persons to administer the Plan, which committee (the
"Committee") may be an executive, compensation or other committee, including a
separate committee especially created for this purpose. The Committee will have
the powers and authority vested in the Board hereunder (including the power and
authority to interpret any provision of the Plan or of any Option). The members
of any such Committee will serve at the pleasure of the Board. A majority of the
members of the Committee will constitute a quorum, and all actions of the
Committee will be taken by a majority of the members present. Any action may be
taken by a written instrument signed by all of the members of the Committee and
any action so taken will be fully effective as if it had been taken at a
meeting. The Board or, if applicable, the Committee is referred to in this Plan
as the "Plan Administrator."
If and when the Corporation becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Plan Administrator will be either the full Board of Directors or a committee
composed of two (2) or more members of the Board who are "Non-Employee
Directors" as defined under Rule 16b-3 (as amended from time to time)
promulgated under the Exchange Act or any successor rule or regulatory
requirement.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator has sole authority, in its absolute discretion,
to (i) construe and interpret this Plan; (ii) define the terms used in the Plan;
(iii) prescribe, amend and rescind the rules and regulations relating to this
Plan; (iv) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (v) grant Options under this Plan; (vi) determine
the individuals to whom Options will be granted under this Plan; (vii) determine
the time or times at which Options are granted under this Plan; (viii) determine
the number of shares of Common Stock subject to each Option, the exercise price
of each Option, the duration of each Option and the times at which each Option
will become exercisable; (ix) determine all other terms and conditions of the
Options; and (x) make all other determinations and interpretations necessary and
advisable for the administration of the Plan. All decisions, determinations and
interpretations made by the Plan Administrator will be binding and conclusive on
all participants in the Plan and on their legal representatives, heirs and
beneficiaries.
The Board or, if applicable, the Committee may delegate to one or more
executive officers of the Corporation the authority to grant Options under this
Plan to employees of the Corporation who, on the Date of Grant, are not subject
to Section 16 of the Exchange Act with respect to the Common Stock ("Insiders"),
and in connection therewith the authority to determine: (i) the number of shares
of Common Stock subject to such Options; (ii) the duration of the Option; (iii)
the vesting schedule for determining the times at which such Option will become
exercisable; and (iv) all other terms and conditions of such Options. The
exercise price for any Option granted by action of an executive officer or
officers pursuant to such delegation of authority will not be less than the fair
market
- 1 -
<PAGE>
value per share of the Common Stock on the Date of Grant. Unless expressly
approved in advance by the Board or the Committee, such delegation of authority
will not include the authority to accelerate vesting, extend the period for
exercise or otherwise alter the terms of outstanding Options. The term "Plan
Administrator" when used in any provision of this Plan other than Sections 1,
4(f),4(m), and 10 refers to the Board or the Committee, as the case may be, and
an executive officer who has been authorized to grant Options pursuant thereto,
insofar as such provisions may be applied to persons that are not Insiders and
Options granted to such persons.
2. ELIGIBILITY.
Options may be granted to officers, directors, employees of the Corporation
or its subsidiaries ("Employees") and to such other persons, including
consultants, as the Plan Administrator may select. Options may be granted in
substitution for outstanding Options of another corporation in connection with
the merger, consolidation, acquisition of property or stock or other
reorganization between such other corporation and the Corporation or any
subsidiary of the Corporation. Options also may be granted in exchange for
outstanding Options. Any person to whom an Option is granted under this Plan is
referred to as an "Optionee." Any person who is the owner of an Option is
referred to as a "Holder."
3. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of 3,000,000 common shares of the Corporation's authorized but unissued,
or reacquired, Common Stock. The number of shares with respect to which Options
may be granted hereunder is subject to adjustment as set forth in Section 5(m)
hereof. If any outstanding Option expires or is terminated for any reason, the
shares of Common Stock allocable to the unexercised portion of such Option may
again be subject to an Option granted to the same Optionee or to a different
person eligible under Section 2 of this Plan.
4. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan will be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options must also comply
with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement must state the number of shares of Common Stock to
which it pertains.
(b) Date of Grant.
Each Agreement must state the date the Plan Administrator has deemed
to be the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) Option Price.
Each Agreement must state the price per share of Common Stock at which
it is exercisable. The Plan Administrator may fix the exercise price in its sole
discretion; provided that Options granted in substitution for outstanding
options of another corporation in connection with the merger, consolidation,
acquisition of property or stock or other reorganization involving such other
corporation and the Corporation or any subsidiary of the Corporation may be
granted with an exercise price equal to the exercise price for the substituted
option of the other
- 2 -
<PAGE>
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator will
designate, subject to paragraph 4(g) below, the expiration date of the Option.
In the absence of action to the contrary by the Plan Administrator in connection
with the grant of a particular Option, all Options granted under this Section 4
will expire ten (10) years from the Date of Grant.
(e) Vesting Schedule.
No Option will be exercisable until it has vested. The Plan
Administrator will specify the vesting schedule for each Option at the time of
grant of the Option prior to the provision of services with respect to which
such Option is granted; provided, that if no vesting schedule is specified at
the time of grant, the Option will vest according to the following schedule:
Number of Years Percentage of Total
Following Date of Grant Option Vested
- ------------------------------------- ----------------------------------
One 25%
Two 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services related
to the achievement of the performance objectives. Performance objectives will be
expressed in terms of one or more of the following: return on equity, return on
assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or the
Corporation's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Corporation as a whole
(whether on a consolidated or unconsolidated basis), or a subdivision, operating
unit, product or product line of either of the foregoing. Performance objectives
may be absolute or relative and may be expressed in terms of a progression or a
range. An Option that is exercisable (in full or in part) upon the achievement
of one or more performance objectives may be exercised only following written
notice to the Optionee and the Corporation by the Plan Administrator that the
performance objective has been achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by
the Plan Administrator at such times and in such amounts as it determines in its
sole discretion.
(g) Term of Option.
Vested Options will terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events: (i) the expiration of
the Option, as designated by the Plan Administrator in accordance with Section
4(d) above; (ii) the date of an Optionee's termination of employment or
contractual relationship with the Corporation or any subsidiary for cause (as
determined in the sole discretion of the Plan Administrator); (iii) the
expiration of ninety (90) days from the date of an Optionee's termination of
employment or contractual relationship with the Corporation or any subsidiary
for any reason whatsoever other than cause, death or Disability (as defined
- 3 -
<PAGE>
below) unless the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option; or (iv) the expiration of
one year from termination of an Optionee's employment or contractual
relationship by reason of death or Disability (as defined below) unless the
exercise period is extended by the Plan Administrator until a date not later
than the expiration date of the Option. Upon the death of an Optionee, any
vested Options held by the Optionee will be exercisable only by the person or
persons to whom such Optionee's rights under such Option will pass by the
Optionee's will or by the laws of descent and distribution of the state or
county of the Optionee's domicile at the time of death and only until such
Options terminate as provided above. For purposes of the Plan, unless otherwise
defined in the Agreement, "Disability" means medically determinable physical or
mental impairment which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months or that can be expected to result in
death. The Plan Administrator will determine whether an Optionee has incurred a
Disability on the basis of medical evidence acceptable to the Plan
Administrator. Upon making a determination of Disability, the Plan Administrator
will, for purposes of the Plan, determine the date of an Optionee's termination
of employment or contractual relationship.
Unless accelerated in accordance with Section 4(f) above, unvested
Options will terminate immediately upon termination of employment of the
Optionee by the Corporation for any reason whatsoever, including death or
Disability. For purposes of this Plan, transfer of employment between or among
the Corporation and/or any subsidiary will not be deemed to constitute a
termination of employment with the Corporation or any subsidiary. For purposes
of this subsection, employment will be deemed to continue while the Optionee is
on military leave, sick leave or other bona fide leave of absence (as determined
by the Plan Administrator). The foregoing notwithstanding, employment will not
be deemed to continue beyond the first ninety (90) days of such leave, unless
the Optionee's re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options will be exercisable, in full or in part, at any time after
vesting, until termination. If less than all of the shares included in the
vested portion of any Option are purchased, the remainder may be purchased at
any subsequent time prior to the expiration of the Option term. No portion of
any Option for less than fifty (50) shares (as adjusted pursuant to Section 4(m)
below) may be exercised; provided, that if the vested portion of any Option is
less than fifty (50) shares, it may be exercised with respect to all shares for
which it is vested. Only whole shares may be issued pursuant to an Option, and
to the extent that an Option covers less than one (1) share, it is
unexercisable.
Options or portions thereof may be exercised by giving written notice
to the Corporation, which notice will specify the number of shares to be
purchased, and be accompanied by payment in the amount of the aggregate exercise
price for the Common Stock so purchased, which payment must be in the form
specified in Section 4(i) below. The Corporation will not be obligated to issue,
transfer or deliver a certificate of Common Stock to the Holder of any Option,
until provision has been made by the Holder, to the satisfaction of the
Corporation, for the payment of the aggregate exercise price for all shares for
which the Option has been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or any transferee who takes title
to such Option in the manner permitted by subsection 4(k) hereof.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price will be
paid to the Corporation in cash or by certified or cashier's check. In addition,
the Holder may pay for all or any portion of the aggregate exercise price by
complying with one or more of the following alternatives:
(1) by delivering to the Corporation shares of Common Stock previously
held by such Holder, or by the Corporation withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares of Common
Stock received or withheld have a fair market value at the date of exercise (as
- 4 -
<PAGE>
determined by the Plan Administrator) equal to the aggregate exercise price to
be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a sufficient
portion of the shares and deliver directly to the Corporation the amount of sale
or margin loan proceeds to pay the exercise price; or
(3) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
(j) Rights as a Shareholder.
A Holder will have no rights as a shareholder with respect to any
shares covered by an Option until such Holder becomes a record holder of such
shares, irrespective of whether such Holder has given notice of exercise.
Subject to the provisions of Section 5(m) hereof, no rights will accrue to a
Holder and no adjustments will be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Holder becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or pursuant to a qualified domestic
relations order, and will not be subject to execution, attachment or similar
process; provided however, that any Agreement may provide or be amended to
provide that an Option to which it relates is transferable without payment of
consideration to immediate family members of the Optionee or to trusts or
partnerships or limited liability companies established exclusively for the
benefit of the Optionee and the Optionee's immediate family members. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option will
thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares will not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares must comply
with all relevant provisions of law, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
thereunder and the requirements of any stock exchange or automated inter-dealer
quotation system of a registered national securities association upon which such
shares may then be listed, and such issuance will be further subject to the
approval of counsel for the Corporation with respect to such compliance,
including the availability of an exemption from registration for the issuance
and sale of such shares. The inability of the Corporation to obtain from any
regulatory body the authority deemed by the Corporation to be necessary for the
lawful issuance and sale of any shares under this Plan, or the unavailability of
an exemption from registration for the issuance and sale of any shares under
this Plan, will relieve the Corporation of any liability with respect to the
non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator
may require the Holder to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Corporation, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also
- 5 -
<PAGE>
may require such other documentation as may from time to time be necessary to
comply with federal and state securities laws. THE CORPORATION HAS NO OBLIGATION
TO REGISTER THE OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF
OPTIONS.
(2) The Holder must pay to the Corporation by certified or cashier's
check, promptly upon exercise of an Option or, if later, the date that the
amount of such obligations becomes determinable, all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon exercise of an Option or from a transfer
or other disposition of shares of Common Stock acquired upon exercise of an
Option or otherwise related to an Option or shares of Common Stock acquired in
connection with an Option. Upon approval of the Plan Administrator, a Holder may
satisfy such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator:
(A) by delivering to the Corporation shares of Common Stock
previously held by such Holder or by the Corporation withholding shares of
Common Stock otherwise deliverable pursuant to the exercise of the Option,
which shares of Common Stock received or withheld must have a fair market
value at the date of exercise (as determined by the Plan Administrator)
equal to any withholding tax obligations arising as a result of such
exercise, transfer or other disposition;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Corporation to pay
any withholding taxes due under this Paragraph 2, with such repayment terms
as the Plan Administrator may select; or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met and that the Holder has paid or
otherwise satisfied any withholding tax obligation as described in (2) above.
(m) Stock Dividend or Reorganization.
(1) If (i) the Corporation is at any time involved in a corporate
merger, consolidation, acquisition of property or shares, separation,
reorganization or liquidation to which the Corporation or a parent or subsidiary
corporation of the Corporation is a party, (ii) the Corporation declares a
dividend payable in, or subdivides or combines, its Common Stock or (iii) any
other event with substantially the same effect occurs, the Plan Administrator
will, subject to applicable law, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock subject to such
Option and/or the exercise price per share so as to preserve the rights of the
Holder substantially proportionate to the rights of the Holder prior to such
event, and to the extent that such action includes an increase or decrease in
the number of shares of Common Stock subject to outstanding Options, the number
of shares available under Section 4 of this Plan will automatically be increased
or decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Corporation, the Corporation's shareholders,
or any Holder.
(2) If the presently authorized capital stock of the Corporation is
changed into the same number of shares with a different par value, or without
par value, the stock resulting from any such change will be deemed to be Common
Stock within the meaning of the Plan, and each Option will apply to the same
number of shares of such new stock as it applied to old shares immediately prior
to such change.
(3) If the Corporation at any time declares an extraordinary dividend
with respect to the Common Stock, whether payable in cash or other property, the
Plan Administrator may, subject to applicable law,
- 6 -
<PAGE>
in the exercise of its sole discretion and with respect to each outstanding
Option, proportionately adjust the number of shares of Common Stock subject to
such Option and/or adjust the exercise price per share so as to preserve the
rights of the Holder substantially proportionate to the rights of the Holder
prior to such event, and to the extent that such action includes an increase or
decrease in the number of shares of Common Stock subject to outstanding Options,
the number of shares available under Section 4 of this Plan will automatically
be increased or decreased, as the case may be, proportionately, without further
action on the part of the Plan Administrator, the Corporation, the Corporation's
shareholders, or any Holder.
(4) The foregoing adjustments in the shares subject to Options will be
made by the Plan Administrator, or by any successor administrator of this Plan,
or by the applicable terms of any assumption or substitution document.
(5) The grant of an Option will not affect in any way the right or
power of the Corporation to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, to merge, consolidate or
dissolve, to liquidate or to sell or transfer all or any part of its business or
assets.
5. EFFECTIVE DATE; TERM.
Options may be granted by the Plan Administrator from time to time on or
after the date on which this Plan is adopted (the "Effective Date") through the
day immediately preceding the tenth anniversary of the Effective Date.
Termination of this Plan will not terminate any Option granted prior to such
termination.
6. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option will impose no obligation upon the Optionee to
exercise such Option.
7. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
The Plan Administrator will determine whether or not any Options are to be
granted under this Plan in its sole discretion, and nothing contained in this
Plan will be construed as giving any person any right to participate under this
Plan. The grant of an Option will in no way constitute any form of agreement or
understanding binding on the Corporation or any subsidiary, express or implied,
that the Corporation or any subsidiary will employ or contract with an Optionee
for any length of time, nor will it interfere in any way with the Corporation's
or, where applicable, a subsidiary's right to terminate Optionee's employment at
any time, which right is hereby reserved.
8. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
issued upon the exercise of Options will be used for general corporate purposes,
unless otherwise directed by the Board.
9. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator will be indemnified by the
Corporation for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel
- 7 -
<PAGE>
selected by the Corporation), except to the extent that such expenses relate to
matters for which it is adjudged that such Plan Administrator member is liable
for willful misconduct; provided, that within fifteen (15) days after the
institution of any such action, suit or proceeding, the Plan Administrator
member involved therein will, in writing, notify the Corporation of such action,
suit or proceeding, so that the Corporation may have the opportunity to make
appropriate arrangements to prosecute or defend the same.
10. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this
Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; provided, however, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof will be made over the objection of
such Holder; further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated without
the consent of Holders. The Plan Administrator may condition the effectiveness
of any such amendment on the receipt of shareholder approval at such time and in
such manner as the Plan Administrator may consider necessary for the Corporation
to comply with or to avail the Corporation and/or the Optionees of the benefits
of any securities, tax, market listing or other administrative or regulatory
requirement. Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive Options
under this Plan who are foreign nationals or employed outside of Canada to
recognize differences in local law, tax policy or custom.
This Plan was approved and adopted by the shareholders and directors of the
Corporation on June 30, 1998.
- ---------------------------
SECRETARY
Effective Date: June 30, 1998.
- 8 -
Exhibit 6.32
iQ POWER TECHNOLOGY INC.
1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of the _______ day of ________________, 1998
("Date of Grant") between
iQ Power Technology Inc., a Canadian corporation (the "Corporation"),
and
*(the "Optionee").
WHEREAS, the Board of Directors of the Corporation (the "Board") has approved
the 1998 Stock Option Plan (the "Plan"), pursuant to which the Board is
authorized to grant to employees and other selected persons stock options to
purchase common stock, no par value, of the Corporation (the "Stock");
WHEREAS, the Plan Administrator (the "Plan Administrator") appointed by the
Board has authorized the grant to the Optionee of options to purchase a total of
* shares of Stock (the "Options");
NOW, THEREFORE, the Corporation agrees to offer to the Optionee the option to
purchase, upon the terms and conditions set forth herein, * shares of Stock.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Plan.
1. Exercise Price. The exercise price of the Options shall be US$1.00 per share.
--------------
2. Limitation on the Number of Shares. If the Options granted hereby are
-------------------------------------
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
-----------------
following vesting schedule:
(a) all Options may be exercised effective from the Date of Grant.
The vesting of one or more outstanding Options may be accelerated by the Plan
Administrator at such times and in such amounts as it shall determine in its
sole discretion. The vesting of Options also shall be accelerated under the
circumstances described in Sections 5(m) and 5(n) of the Plan.
4. Options not Transferable. This Option and the rights and privileges conferred
------------------------
by this Agreement may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will and by
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar proce
Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any Option or of any right or
privilege conferred by this Agreement contrary to the provisions hereof, or upon
the sale, levy or any attachment or similar process upon the rights and
privileges conferred by this Agreement, such Option shall thereupon terminate
and become null and void.
5. Investment Intent. By accepting the Option, the Optionee represents and
------------------
agrees that none of the shares of Stock purchased upon exercise of the Option
will be distributed in violation of applicable federal and state laws and
regulations. In addition, the Corporation may require, as a condition of
exercising the Options, that the Optionee execute an undertaking, in such a form
as the Corporation shall reasonably specify, that the Stock is being purchased
only for investment and without any then-present intention to sell or distribute
such shares.
6. Termination of Employment and Options. Vested Options shall terminate, to the
-------------------------------------
extent not previously exercised, upon the occurrence of the first of the
following events:
(i) Expiration: five (5) years from the Date of Grant.
----------
- 1 -
<PAGE>
(ii) Termination Due to Death or Disability: The expiration of one (1) year
--------------------------------------
from the date of the death of the Optionee or cessation of an Optionee's
employment or contractual relationship by reason of Disability (as defined
in Section 5(g) of the Plan). If an Optionee's employment or contractual
relationship is terminated by death, any Option held by the Optionee shall
be exercisable only by the person or persons to whom such Optionee's rights
under such Option shall pass by the Optionee's will or by the laws of
descent and distribution of the state or county of the Optionee's domicile
at the time of death.
(iii) Termination for Cause. The date of an Optionee's termination of
----------------------
employment or contractual relationship with the Corporation or any Related
Corporation for cause (as defined in Section 5(n) of the Plan.
(iv) Termination for Any Other Reason: The expiration of ninety (90) days
--------------------------------
from the date of an Optionee's termination of employment or contractual
relationship with the Corporation for any reason whatsoever other than
cause, death or Disability (as defined in Section 5(g) of the Plan).
Notwithstanding the occurrence of one of the above events, the exercise period
of an Option may be extended by resolution of the Plan Administrator until a
date not later than the expiration date of the Option. Each unvested Option
granted pursuant hereto shall terminate immediately upon termination of the
Optionee's employment or contractual relationship with the Corporation for any
reason whatsoever, including death or Disability unless vesting is accelerated
in accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in the
-----
nature of shares of Stock covered by this Agreement, the number of shares and
exercise price shall be proportionately adjusted as set forth in Sections 5(m)
of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at any
------------------
time after vesting, until termination. If less than all of the shares included
in the vested portion of any Option are purchased, the remainder may be
purchased at any subsequent time prior to the expiration of the Option term. No
portion of any Option for less than fifty (50) shares (as adjusted pursuant to
Sections 5(m) and (n) of the Plan) may be exercised; provided, that if the
vested portion of any Option is less than fifty (50) shares, it may be exercised
with respect to all shares for which it is vested. Only whole shares may be
issued pursuant to an Option, and to the extent that an Option covers less than
one (1) share, it is unexercisable.
Options or portions thereof may be exercised by giving written notice to the
Corporation (which may be in the form attached hereto as Exhibit A) which notice
shall specify the number of shares to be purchased and be accompanied by either:
(i) the aggregate exercise price in cash or by certified or cashier's
check. In addition, upon approval of the Plan Administrator, an Optionee
may pay for all or any portion of the aggregate exercise price by
delivering to the Corporation shares of Stock previously held by such
Optionee or, with the prior consent of the Plan Administrator, by having
shares withheld from the amount of Stock to be received by the Optionee.
The shares of Stock received or withheld by the Corporation as payment for
shares of Stock purchased on the exercise of Options shall have a fair
market value at the date of exercise (as determined by the Plan
Administrator) equal to the aggregate exercise price (or portion thereof)
to be paid by the Optionee upon such exercise; or
(ii) upon prior consent of the Plan Administrator, delivery of an
irrevocable subscription agreement obligating the Optionee to take and pay
for the shares of Stock to be purchased within one year of the date of such
exercise.
The Corporation shall not be obligated to issue, transfer or deliver a
certificate of Stock to any Optionee, or to his personal representative, until
the aggregate exercise price has been paid for all shares for which the Option
shall have been exercised and adequate provision has been made by the Optionee
for satisfaction of any tax withholding obligations associated with such
exercise. During the lifetime of the Optionee, Options are exercisable only by
the Optionee.
- 2 -
<PAGE>
It is a condition precedent to the issuance of shares of Stock that the Optionee
execute and deliver to the Corporation a Stock Transfer Agreement, in a form
acceptable to the Corporation, to the extent required pursuant to the terms
thereof.
9. Subject to the 1998 Stock Option Plan. The terms of the Options are subject
--------------------------------------
to the provisions of the Plan, as the same may be amended from time to time, and
any inconsistencies between this Agreement and the Plan, as the same may be
amended from time to time, shall be governed by the provisions of the Plan, a
copy of which has been delivered to the Optionee, and which is available for
inspection at the principal offices of the Corporation.
10. Professional Advice. The acceptance of the Options and the sale of Stock
--------------------
issued pursuant to the exercise of Options may have consequences under tax and
securities laws which may vary depending upon the individual circumstances of
the Optionee. Accordingly, the Optionee acknowledges that he or she has been
advised to consult his or her personal legal and tax advisor in connection with
this Agreement and his or her dealings with respect to Options for the Stock.
11. No Rights as a Shareholder. The Optionee shall have no rights as a
-----------------------------
shareholder with respect to any shares covered by an Option until the Optionee
becomes a record holder of such shares, irrespective of whether the Optionee has
given notice of exercise. Subject to the provisions of Sections 5(m) of the
Plan, no rights shall accrue to the Optionee and no adjustments shall be made on
account of dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights declared on, or created in, the
Stock for which the record date is prior to the date the Optionee becomes a
record holder of the shares of Stock covered by the Option, irrespective of
whether the Optionee has given notice of exercise.
12. No Rights to Employment. Nothing contained in this agreement shall be
------------------------
construed as giving any person any right to employment with the Corporation. The
grant of Options hereby shall in no way constitute any form of agreement or
understanding binding on the Corporation or any Related Corporation (as defined
in the Plan), express or implied, that the Corporation or any Related
Corporation will employ or contract with an Optionee for any length of time.
13. Entire Agreement. This Agreement is the only agreement between the Optionee
----------------
and the Corporation with respect to the Options, and this Agreement and the Plan
supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options.
14. Notices. All notices and other communications required or permitted under
-------
this Agreement must be in writing and will be deemed received and effective upon
the earlier of: (i) hand delivery to the recipient; (ii) one day after posting
by traceable air courier; (iii) two (2) days after posting by certified or
registered mail, postage prepaid, return receipt requested; or (iv) when
initially transmitted by facsimile transmission (if confirmed by notice
complying with (i), (ii) or (iii) above):
(i) if to the Corporation:
iQ Power Technology Inc.
Suite 304, 850 Burrard Street
Vancouver, BC V6Z 2J1
Canada
Tel.: (604) 681-5152
Fax: (604) 681-7877
(ii) if to the Optionee:
*
-------------------------
-------------------------
Tel.: -------------------------
Fax: -------------------------
or to such other person or address as either of the parties will furnish in
writing to the other party from time to time.
- 3 -
<PAGE>
15. Law and Jurisdiction. This Agreement is governed by the internal laws of the
--------------------
Province of British Columbia, without giving effect to any laws or principles
that would apply the laws of any other jurisdiction. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against either of the parties in the courts of the
Province of British Columbia, and each of the parties irrevocably consents to
the non-exclusive jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on either party anywhere in the world.
16. Headings And Gender. The headings of the Sections of this Agreement have
-------------------
been included for convenience of reference purposes only and will in no way be
interpreted to restrict or modify the terms of this Agreement. The use of
pronouns of any gender in this Agreement will include pronouns of all other
genders, as applicable.
17. Counterparts; Delivery by Facsimile. This Agreement may be signed in
--------------------------------------
counterparts, either one of which will be deemed to be an original and both of
which, when taken together, will constitute one and the same agreement. Delivery
of an executed counterpart of a signature page to this Agreement by telephone
facsimile transmission will be effective as delivery of a manually executed
counterpart of this Agreement.
18. Severability. Any term, condition or other provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction will be ineffective, as to
such jurisdiction, to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of such term, condition or provision in
any other jurisdiction and without invalidating the remaining terms, conditions
and other provisions of this Agreement
19. Attorneys' Fees. In the event of litigation arising out of or in connection
with this Agreement, the prevailing party will be entitled to recover from the
other party all of its attorneys' fees and other expenses incurred in connection
with such litigation.
20. Parties in Interest. This Agreement may not be assigned or delegated by
either party without the consent of the other, except that this Agreement
(without the necessity of such consent) will be binding on and inure to the
benefit of any successors, and assigns of the Corporation or any Related
Corporation, whether by merger, consolidation, sale of assets or otherwise, and
reference herein to the Corporation will be deemed to include any such successor
or successors.
IQ POWER TECHNOLOGY INC.
By: _____________________________ _____________________________
Optionee
Its: ____________________________
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE SECURITIES LAWS FOR THE ISSUANCE OF SHARES OF STOCK
UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS CANNOT BE EXERCISED
UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED UPON EXERCISE OF THESE
OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS
AVAILABLE.
- 4 -
<PAGE>
EXHIBIT A
Notice of Election to Exercise
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 5(h) of the iQ Power Technology Inc. 1998 Stock Option Plan (the
"Plan") and Section 8 of that certain Stock Option Agreement (the "Agreement")
dated as of the ______ day of _____________ between iQ Power Technology Inc.
(the "Corporation") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
__________ shares of the common stock of the Corporation at a price of
$__________ per share, for aggregate consideration of $______, on the terms and
conditions set forth in the Agreement and the Plan. Such aggregate
consideration, in the form specified in Section 8 of the Agreement, accompanies
this notice.
The undersigned has executed this Notice this ____ day of __________, 19__.
-------------------------------------------
Signature
-------------------------------------------
Name (typed or printed)
- 5 -
Exhibit 6.33
LICENSE AGREEMENT
THIS AGREEMENT is dated effective September 1, 1998.
Between: IQ POWER TECHNOLOGY INC.
of 1111 West Hastings Street, Suite 708-A, Vancouver, BC, V6E 2J3
(the "Licensee")
And: MATTALEX MANAGEMENT LTD.
of 1111 West Hastings Street, Suite 708, Vancouver, BC, V6E 2J3
(the "Licensor")
In consideration of the fees to be paid and the covenants on the part of the
Licensee to be performed, the undersigned licensor (the "Licensor") hereby
grants to the Licensee a non-exclusive license (the "License") to occupy the
Office Premises described below for its business office use on the following
terms and conditions:
Office: Premises: Southwest corner office in the Licensor's leased
office premises at 1111 West Hastings Street, Suite 708,
Vancouver, BC, or such equivalent office as may be
designated by the Licensor from time to time therein.
Access: The Licensee shall have access to the Office Premises
between the normal business hours of the Licensor.
Reception
Services: The Licensor shall provide the Licensee with the
non-exclusive services of a receptionist.
Telephone: The Licensor, at the expense of the Licensee, shall provide
the Licensee with telephone services through the Licensor's
normal office telephone system.
Term: The License shall have a term of one year commencing
September 1, 1998, and continuing thereafter on a month to
month basis until terminated, provided however, either party
may terminate the License on one month's notice at any time
after December 1, 1998.
Monthly Fee: The Licensee shall prepay to the Licensor on the first day
of each month a monthly fee of $750.00 for the use of the
Office Premises during the month. The Licensee shall on
execution of this License Agreement forthwith prepay $1,500,
one-half of which represents payment of the first month fee
and the remainder a deposit for the last month of the
License.
Other Charges: Except for the monthly fee, all other office services
provided to the Licensee by the Licensor or its authorized
suppliers shall be provided under the policies and at the
rates from time to time established by the Licensor. All
such charges shall be due on the rendering of an account
therefor.
Termination: If the Licensee
a. fails or refuses to comply with the orders or requests
of the Licensor, or
b. permits any conduct or act which in the opinion of the
Licensor is improper, or renders it inadvisable that
the Licensee should be allowed to continue occupying
the Office Premises under this License, or
c. fails to comply with the terms and conditions in this
License,
the Licensor may terminate this License and take possession
of the Office Premises and at the cost of the Licensee,
remove him and all property therefrom, by force if
necessary, and the Licensor shall not be liable in damages
or otherwise by reason thereof, and notwithstanding such
termination or removal the Licensee shall pay in full the
License Fee.
If payment of fees and all other moneys is not made in
accordance with the terms of this License, this License may
be canceled by written notice from the Licensor without
prejudice to the Licensor's rights to recover for moneys due
and owing hereunder.
Transferability: The License may not be assigned or transferred in whole or
<PAGE>
in part.
In consideration of the grant of the License, the Licensee covenants and agrees
as follows:
1. to pay the monthly fee and all other charges due hereunder;
2. to indemnify the Licensor and its partners and employees from all
claims, costs and liabilities which may arise as a result of the
granting of this License;
3. the Licensor shall not be liable for the loss of or injury to any
property, goods or effects of the Licensee due to any cause whatsoever;
<PAGE>
4 to procure at its own expense all licenses and permits from municipal
or provincial authorities which may be required to operate or conduct
its trade or business and to pay all taxes that may be levied against
it as a result of the operation of its trade or business in the Office
Premises; and
5. not to assign or transfer the License.
Executed and delivered by and on behalf of the Licensor at Vancouver, British
Columbia, effective the date above-noted.
IQ POWER TECHNOLOGY INC.
Per: --------------------------------
================================================================================
================================================================================
Executed and delivered by and on behalf of the Licensor at Vancouver, British
Columbia, effective the date above-noted.
MATTALEX MANAGEMENT LTD.
Per: --------------------------------
Exhibit 6.34
AGREEMENT RE RIGHTS AND INTERESTS
This Agreement is made this 9th day of December, 1998 by and between H.
Dieter Braun and Peter E. Braun, both citizens of Germany and residing at
Schrenckweg 1, 85658 Egmating, Germany and Reineke Strasse 56, 81545 Munich,
Germany (collectively "Assignors") and iQ Battery Research & Development GmbH, a
German corporation having offices at Inselkammerstr. 4, 8008 Unterhaching,
Germany ("Assignee").
WHEREAS, Assignors and Assignee have entered into agreements relating
to the assignment of German Patent No. 41 42 628 and other rights and interests
(collectively, the "IP Rights") through their Contract Concerning Industrial
Property Rights and Know-How dated March 15, 1995 (the "Contract") and through
their Patent Assignment and Trademark Assignment dated December 9, 1998;
WHEREAS, Assignors and Assignee wish to address other interests as
between them that are the subject of the Contract and related documents;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and intending for the Assignors and the Assignors'
successors and assigns, and Assignee and Assignee's successors and assigns to be
legally bound hereby, the parties hereby agree as follows:
1. The parties acknowledge that Section 2 of the Contract provides for payment
to Assignors of the sum of four hundred thousand German Marks (DM 400,000) plus
applicable value added tax thereon (collectively, the "Sum and VAT"), and, in
addition, for payment of certain percentages of revenues from license fees and
other income of Assignee. Notwithstanding this fact, Assignors and each of them
hereby waive any and all rights to compensation based on the transfer of rights
in any of the IP Rights to Assignee with the exception of the right to payment
of the Sum and the VAT.
2. The parties further agree that the Sum and VAT shall be payable by Assignee
to Assignors only out of and only to the extent of the gross profits of the
Assignee. Such payment shall become due upon the availability of sufficient
gross profits of the Assignee; provided, however, that Assignee may elect to pay
the Sum and VAT at any time, in whole or in part.
3. The parties agree that no interest shall be due to Assignors from Assignee on
the Sum and VAT irrespective of when the Sum and VAT are paid.
4. No course of dealing between Assignors and Assignee, nor any failure to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
1
<PAGE>
4. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of the Agreement in any jurisdiction.
5. This Agreement constitutes the entire agreement as to the subject matter
hereof, and is subject to modification only by a writing signed by the parties.
6. The benefits and burdens of the Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.
7. This agreement constitutes
IN WITNESS WHEREOF, the Assignors and the duly authorized officers of
Assignee have executed this Agreement.
ASSIGNOR:
/s/ H. Dieter Braun
-------------------
H. Dieter Braun
ASSIGNOR:
/s/ Peter E. Braun
------------------
Peter E. Braun
ASSIGNEE:
iQ Battery Research & Development GmbH
By: /s/ Peter E. Braun
-------------------------
Name: Peter E. Braun
Title: President
2
Exhibit 6.35
TRADEMARK ASSIGNMENT
This Agreement is made this 9th day of December, 1998 by and between H. Dieter
Braun, a citizen of Germany having his address at Schrenckweg 1, 85658 Egmating,
Germany ("Assignor") and iQ Battery Research & Development GmbH, a German
corporation having offices at Inselkammrstr. 4, 8008 Unterhaching, Germany
("Assignee").
WHEREAS, Assignor is listed as owner of German Trademark Registration No.
2,061,981 for IQ and Design (the "Trademark");
WHEREAS, Assignor wishes for all rights and interest in such trademark
registration and trademark in Germany to be transferred to and owned by
Assignee;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and intending for the Assignor and the Assignor's
successors and assigns, and Assignee and Assignee's successors and assigns to be
legally bound hereby, the parties hereby agree as follows:
1. Assignors hereby confirms the assignment of the Trademark as provided for
in the Contract Concerning industrial Property Rights and Know-How between
Assignor and Peter E. Braun and Assignee and dated March 15, 1995. To the extent
that such assignment may have been ineffective to transfer all rights, title and
interest in the Trademark from Assignor to Assignee, Assignor hereby assigns all
such rights, title and interest in the Trademark to Assignee.
2. Assignor hereby agrees to execute all documents, and do all things that may
be reasonably required by Assignee to fully and properly secure, protect and
perfect in Assignee its rights title and interest in the Patent Rights.
3. No course of dealing between Assignor and Assignee, nor any failure to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
4. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of the Agreement in any jurisdiction.
5. This Agreement is subject to modification only by a writing signed by the
parties.
6. The benefits and burdens of the Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.
<PAGE>
IN WITNESS WHEREOF, the Assignor and the duly authorized officers of
Assignee have executed this Agreement.
ASSIGNOR:
/s/ H. Dieter Braun
----------------------------------
H. Dieter Braun
ASSIGNEE:
iQ Battery Research & Development GmbH
/s/ Peter E. Braun
By: ------------------------------
Name: Peter E. Braun
Title: President
Exhibit 6.36
PATENT ASSIGNMENT
This Agreement is made this 9th day of December, 1998 by and between H. Dieter
Braun and Peter E. Braun, both citizens of Germany and residing at Schrenckweg
1, 85658 Egmating, Germany and Schopenhaur Str. 23, 85579 Neubiberg, Germany
(collectively "Assignors") and iQ Battery Research & Development GmbH, a German
corporation having offices at Inselkammrstr. 4, 8008 Unterhaching, Germany
("Assignee").
WHEREAS, Assignors or the Assignor H. Dieter Braun are listed as owners
and/or owner of German Patent No. P4142628.2, European Patent No. EP 0617846 ,
U.S. Patent Nos. 5,508,126 and 5,599,636 and other patents and/or patent
applications claiming priority based on the filing date of and/or disclosing
substantially the same subject matter as said German patent;
WHEREAS, Assignors wish for all rights and interest in such patents and
applications, including all divisionals, patents of addition, continuations and
continuations-in-part (the "Patent Rights") to be transferred to and owned by
Assignee;
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, and intending for the Assignors and the Assignors'
successors and assigns, and Assignee and Assignee's successors and assigns to be
legally bound hereby, the parties hereby agree as follows:
1. Assignors hereby confirms the assignment of all of the Patent Rights as
provided for in the Contract Concerning industrial Property Rights and Know-How
between Assignors and Assignee and dated March 15, 1995. To the extent that such
assignment may have been in any respect ineffective to transfer all rights,
title and interest in the Patent Rights from Assignors to Assignee, Assignors
hereby assign all such rights, title and interest in the Patent Rights to
Assignee, including the right to claim priority based on any and/or all of such
patent applications. Assignors hereby further confirm the assignment of, and to
the extent such assignment may have been in any respect ineffective, do hereby
transfer all rights title and interest in all know-how relating to starter
batteries and other batteries of the kind covered by the Patent Rights,
including the rights to file for and obtain patents and to claim priority.
2. Assignors hereby agree to execute all documents, and do all things that may
be reasonably required by Assignee to fully and properly secure, protect and
perfect in Assignee its rights title and interest in the Patent Rights.
3. No course of dealing between Assignors and Assignee, nor any failure to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
<PAGE>
4. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of the Agreement in any jurisdiction.
5. This Agreement is subject to modification only by a writing signed by the
parties.
6. The benefits and burdens of the Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.
IN WITNESS WHEREOF, the Assignors and the duly authorized officers of
Assignee have executed this Agreement.
ASSIGNOR:
/s/ H. Dieter Braun
----------------------------------
H. Dieter Braun
ASSIGNOR:
/s/ Peter E. Braun
----------------------------------
Peter E. Braun
ASSIGNEE:
iQ Battery Research & Development GmbH
/s/ Peter E. Braun
By: ------------------------------
Name: Peter E. Braun
Title: President
List of Material Foreign Patents
Exhibit 7.1
Page 1 of 1
Name of Patent Date Issuer
Holder Number
1. Braun, Dieter Nr. 41 42 628 05/06/93 Bundesrepublik
Deutschland - URKUNDE
2. Braun, Dieter European Patent 07/10/96 European Patent Office
No. 0617846
[Deloitte & Touche Letterhead]
Suite 2100 Telephone: (604) 669-4466
1055 Dunsmuir Street Facsimile: (604) 685-0395
P.O. Box 49279
Four Bentall Centre
Vancouver, British Columbia
V7X 1P4
Exhibit 10.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report relating to iQ Power Technology Inc. dated October 15, 1998,
in the Registration Statement on Form SB-1 and related Prospectus of iQ Power
Technology Inc.
/s/ Deloitte & Touche L.L.P.
Chartered Accountants
Vancouver, British Columbia, Canada
December 9, 1998
[Deloitte & Touche Letterhead]
Suite 2100 Telephone: (604) 669-4466
1055 Dunsmuir Street Facsimile: (604) 685-0395
P.O. Box 49279
Four Bentall Centre
Vancouver, British Columbia
V7X 1P4
Exhibit 10.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report relating to iQ Battery Research and Development GmbH dated
October 15, 1998, in the Registration Statement on Form SB-1 and related
Prospectus of iQ Power Technology Inc.
/s/ Deloitte & Touche GmbH
Chartered Accountants
Munich, Germany
December 9, 1998
Exhibit 13.1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form F-X
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS AND
UNDERTAKING
A. Name of issuer or person filing ("Filer"): IQ POWER TECHNOLOGIES INC.
B. This is
[x] an original filing for the Filer
[ ] an amended filing for the Filer
C. Identify the filing in conjunction with which this Form is being filed:
Name of registrant: IQ POWER TECHNOLOGIES INC.
Form type: Form SB-1 Registration Statement
File Number:
Filed by: IQ POWER TECHNOLOGIES INC.
Dated Filed: Filed Concurrently
D. The Filer is incorporated or organized under the laws of the Canada and has
its principal place of business at Suite 708-A, 1111 West Hastings Street,
Vancouver, British Columbia V6E 2J3. Its phone number at that location is (604)
669-3132.
E. The Filer designates and appoints Bogle & Co., Suite 4700, 601 Union
Street, Seattle, Washington 98101-2346 as the agent of the Filer upon whom may
be served any process, pleadings, subpoenas, or other papers in
(a) any investigation or administrative proceeding conducted by the
Commission; and
(b) any civil suit or action brought against the Filer or to which the
Filer has been joined as defendant or respondent, in any appropriate court in
any place subject to the jurisdiction of any state or of the United States or of
any of its territories or possessions or of the District of Columbia, where the
investigation, proceeding or cause of action arises out of or relates to or
concerns (i) any offering made or purported to be made in connection with the
securities registered or qualified by the Filer on Form SB-1 on November ___,
1998 or any purchase or sales of any security in connection therewith; (ii) the
securities in relation to which the obligation to file an annual report on Form
40-F arises, or any purchases or sales of such securities; (iii) any tender
offer for the securities of a Canadian issuer with respect to which filings are
made by the Filer with the Commission on Schedule 13E-4F, 14D-1F or 14D-9F; or
(iv) the securities in relation to which the Filer acts as trustee pursuant to
an exemption under Rule 10a-5 under the Trust Indenture Act of 1939. The Filer
stipulates an agrees that any such civil suit or action or administrative
proceeding may be commenced by the service of process upon, and that service of
an administrative subpoena shall be effected by service upon such agent for
service of process, and that service as aforesaid shall be taken and held in all
courts and administrative tribunals to be valid and binding as if personal
service thereof had been made.
F. Each person filing this Form in connection with:
(a) the use of Form F-9, F-10, 40-F, or SB-2 or Schedule 13K-4F, 14D-1F or
14D-9F stipulates and agrees to appoint a successor agent for service of process
and file an amended Form F-X if the Filer
<PAGE>
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time until six years have elapsed from the date the
issuer of the securities to which such Forms and Schedules relate has ceased
reporting under the Exchange Act;
(b) the use of Form F-8 or Form F-80 stipulates and agrees to appoint a
successor agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time until six years have elapsed following the
effective date of the latest amendment to such Form F-8 or Form F-80;
(c) its status as trustee with respect to securities registered on Form
F-7, F-8, F-9, F-10, F-80, or SB-2 stipulates and agrees to appoint a successor
agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time during which any of the securities subject to
the indenture remain outstanding; and
(d) the use of Form 1-A or other Commission form for an offering pursuant
to Regulation A stipulates and agrees to appoint a successor agent for service
of process and file an amended Form F-X if the Filer discharges the Agent or the
Agent is unwilling or unable to accept service on behalf of the Filer at any
time until six years have elapsed from the date of the last sale of securities
in reliance upon the Regulation A exemption.
Each filer further undertakes to advise the Commission promptly of any change to
the Agent's name and address during the applicable period by amendment of this
Form, referencing the file number of the relevant form in conjunction with which
the amendment is being filed.
G. Each person filing this Form, other than a trustee filing in accordance
with General Instruction I (e) of this Form, undertakes to make available, in
person or by telephone, representatives to respond to inquiries made by the
Commission staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the Forms, Schedules and offering
statements described in General Instructions I. (a), I. (b), I. (c), I. (d) and
I. (f) of this Form, as applicable; the securities to which such Forms,
Schedules and offering statements relate; and the transactions in such
securities.
The Filer certifies that it has duly caused this power of attorney,
consent, stipulation and agreement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Vancouver, Province of
British Columbia, Country of Canada, this 30th day of November , 1998.
IQ POWER TECHNOLOGIES INC.
By /s/ Gunther Bauer
----------------------------------------
Its Vice President, Research & Development
---------------------------------------
This statement has been signed by the following persons and on the dates
indicated.
/s/ Peter Braun
------------------------------------------
Signature
------------------------------------------
Title President
------------------------------------------
Date November 30, 1998
