SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------------------------------------
INTACTA TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or jurisdiction of
incorporation or organization)
7371
(Primary Standard Industrial
Classification Code Number)
58-2488071
(I.R.S. Employer
Identification No.)
235 Peachtree Street, N.E.
2215 North Tower
Atlanta, Georgia 30303
(404) 880-9919
(Address, including zip code, and
telephone number,
including area code, of
registrant's principal executive
offices)
CT Corporation System
1633 Broadway
New York, New York 10019
(212) 664-1666
(Name, address, including zip
code, and telephone number,
including area code, of agent for
service)
________________
Copies to:
Altaf S. Nazerali
235 Peachtree Street, N.E.
2215 North Tower
Atlanta Georgia 30303
(404) 880-9919
Randal R. Jones
Dorsey & Whitney LLP
1420 Fifth Avenue, Suite 3400
Seattle, Washington 98101
(206) 903-8800
________________
Approximate date of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, check the following box. [X]
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.
______________
CALCULATION OF REGISTRATION FEE
Title of each
class of Amount
securities Proposed maximum Proposed maximum of
to be Amount to be offering price aggregate offering registration
registered registered per unit price (1)(2) fee
Common Stock, 8,874,000 $2.41 $21,386,340 $5,646
$0.0001 par
value per
share
(1) Pursuant to Rule 457(c), estimated solely for the purpose of
calculating the registration fee.
(2) Calculated based on the average of the high and low trading prices of
our common stock on the over-the-counter bulletin board as reported
on February 10, 2000.
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 become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
PROSPECTUS
Subject To Completion
February 14, 2000
8,874,000
INTACTA TECHNOLOGIES INC.
Common Stock
______________
This is a public offering of 8,874,000 shares of the common stock of Intacta
Technologies Inc., which will be referred to throughout the prospectus as
"Intacta," "we," or "us." All of the shares being offered, when sold, will be
sold by selling shareholders as identified in this prospectus. We will not
receive any of the proceeds from the sale of the shares. The shares offered
are being registered due to our obligations to the selling shareholder. The
selling shareholder may elect to sell all, a portion or none of the shares
described in this prospectus. The selling shareholder from time to time may
offer and sell the shares directly to purchasers or through agents,
underwriters or dealers on terms to be determined at the time of sale. If
required, the names of any agents, underwriters or dealers and any other
required information will be set forth in an accompanying prospectus
supplement. Such sales may be through brokers and may be at the market price
prevailing at the time of such sales. The selling shareholder will pay
regular commissions to any brokers effecting such sales. The shares also
may be offered by the selling shareholder in block trades, private
transactions or otherwise at prices to be negotiated. All expenses of
registration of these shares are being borne by us, but the selling
shareholder will pay any brokerage and other expenses of a sales incurred by
it.
Our common stock is currently traded in the United States on the Nasdaq
Over-the-Counter Bulletin Board under the symbol "ITAC," and in Germany on the
Berlin Stock Exchange's over-the-counter market under the symbol "ZFX." The
last reported sales price of the common stock on the Nasdaq Over-the-Counter
Bulletin Board on February 10, 2000 was $2.40 per share.
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.
Investing in the shares involves risks. See "Risk Factors" beginning on page
6.
The selling shareholder and any broker executing selling orders on behalf of
the selling shareholder may be deemed to be an "underwriter." Commissions
received by any broker may be deemed to be underwriting commissions.
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. Neither the delivery of this prospectus nor sale of common
stock means that information contained in this prospectus is correct after
the date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these shares of common stock in any
circumstances under which the offer or solicitation is unlawful.
______________
The date of this Prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY..................................................3
RISK FACTORS........................................................6
FORWARD-LOOKING STATEMENTS.........................................11
USE OF PROCEEDS....................................................12
DIVIDEND POLICY....................................................12
CAPITALIZATION.....................................................13
DILUTION...........................................................14
SELLING SHAREHOLDERS...............................................14
SELECTED FINANCIAL DATA............................................16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATION...........................................17
BUSINESS...........................................................23
MANAGEMENT.........................................................32
RELATED PARTY TRANSACTIONS.........................................39
PRINCIPAL SHAREHOLDERS.............................................40
DESCRIPTION OF CAPITAL STOCK.......................................42
SHARES ELIGIBLE FOR FUTURE SALE....................................44
PLAN OF DISTRIBUTION...............................................45
LEGAL MATTERS......................................................46
EXPERTS............................................................46
WHERE YOU CAN FIND MORE INFORMATION................................46
INDEX TO FINANCIAL STATEMENTS......................................F-1
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and financial statements and notes thereto appearing elsewhere in
this prospectus.
Intacta
We provide software and hardware products for the secure electronic
transmission of documents and electronic document management and archiving
using our patented compression, error correction and encoding and decoding
technology.
Intacta Technologies Inc. was incorporated in Nevada in 1997 under the name
InfoImaging Technologies Inc. In August 1999, we changed our name to Intacta
Technologies Inc. The terms "Intacta," "our company," and "we" in this
prospectus refer to Intacta Technologies Inc., a Nevada corporation, Intacta
Delaware Inc., our wholly owned subsidiary incorporated in Delaware, and
Intacta Labs Ltd., our wholly owned subsidiary incorporated in Israel,
collectively.
Our head office address is 235 Peachtree Street, N.E., 2215 North Tower,
Atlanta, Georgia, 30303, and our telephone number is (404) 880-9919. We
maintain a World Wide Web site address at www.Intacta.com. Information
on our Web site is not part of this prospectus.
<PAGE>
The Offering
Common stock offered by selling shareholders 8,874,000 shares
Common stock owned by the selling shareholders
after the offering zero shares (1)
Use of proceeds We will not receive any proceeds from
the sale of the shares. See "Use of
Proceeds."
_____________________________________
(1) This number assumes that each shareholder will sell all of its shares
available for sale during the effectiveness of the registration statement that
includes this prospectus. Shareholders are not required to sell their shares.
See "Plan of Distribution."
Unless otherwise specifically stated, information throughout this prospectus
excludes 1,375,000 shares issuable upon the exercise of outstanding options
and 1,667,100 shares reserved for future issuance under our stock option plan.
<PAGE>
Summary Financial Data
Years Ended Nine Months Ended
Dec 31, Dec 31, Dec 31, Sep 30, Sep 30,
1996 1997 1998 1998 1999
Statement of Operations Data:
Net sales 1,019,600 894,900 137,800 312,579 204,761
Gross margin (loss) 505,500 537,400 (198,500) 53,335 204,761
Operating loss (1,958,400)(1,455,900)(2,245,700)(2,005,056) (1,647,541)
Net loss (2,529,800)(2,199,700)(2,477,000)(2,009,027) (1,654,098)
Basic and diluted
loss per common share (0.22) (0.19) (0.15) (0.17) (.09)
Book and diluted
weighted average
common shares
outstanding 11,486,000 11,486,000 16,701,583 11,486,000 17,751,500
As of
September 30, 1999
Balance Sheet Data:
Cash and cash equivalents 1,443,683
Working capital 1,273,313
Total assets 2,086,641
Long-term obligations 0
Total shareholders' equity 1,566,636
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock. Any of these risk factors
could materially and adversely affect our business, financial condition or
operating results. In that case, the trading price of our common stock could
decline, and you could lose all or a part of your investment.
Our limited operating history makes it difficult to predict how our business
will develop and our future operating results.
We commenced operations in October 1997. We discontinued production and sales
of all of our retail products in late 1997 and focused on the research and
development of new products based on our existing technology. Of our
current products, only one, Intacta.MobileCE, is commercially available. We
have a limited operating history, and we face many of the risks and
uncertainties encountered by early-stage companies in rapidly evolving
markets.
These risks and uncertainties include:
- - no history of profitable operations;
- - uncertain market acceptance of our products;
- - our reliance on a limited number of products;
- - the risks that competition, technological change or evolving customer
preferences could adversely affect sales of our products;
- - the need to expand our sales and support capabilities;
- - our dependence on a limited number of key personnel, including our Executive
Vice President of Research and Development; and
- - the risk that our management will not be able to effectively manage growth
or any acquisition we may undertake.
Our limited operating history makes it difficult to predict how our business
will develop and our future operating results.
We have a history of losses, we may incur losses in the future and our losses
may increase because of our plan to increase operating expenses.
We have incurred net losses in each fiscal year since inception. In the year
ended December 31, 1998, we had a net loss of approximately $2.5 million and
in the nine months ended September 30 ,1999, we had a net loss of
approximately $1.6 million. We have increased our operating expenses in
recent periods and plan further increases in the future. Our planned
increases in operating expenses may result in larger losses in future periods.
As a result, we will need to generate significantly greater revenues than we
have to date to achieve and maintain profitability. We cannot assure you that
our revenues will increase. Our business strategies may not be successful,
and we may not be profitable in any future period.
Primarily as a result of our recurring losses, our independent auditors
modified their opinion on our 1998 financial statements to include an
explanatory paragraph wherein they expressed substantial doubt about our
ability to continue as a going concern.
<PAGE>
The market for our products is highly competitive.
The market for our software is intensely competitive, fragmented and rapidly
changing. We face competition from companies in two distinct markets, the
document management market and the electronic communication market. See
"Business - Competition."
In addition, as we develop new products, particularly applications focused on
electronic communication, we may begin competing with companies with whom we
have not previously competed. It is also possible that new competitors will
enter the market or that our competitors will form alliances that may enable
them to rapidly increase their market share.
Some of our actual and potential competitors are larger, better established
companies and have greater technical, financial and marketing resources.
Increased competition may result in price reductions, lower gross margins
or loss of our market share, any of which could materially adversely affect
our business, financial condition and operating results.
Our future revenue growth could be impaired if we are unable to expand our
direct sales infrastructure.
Our future revenue growth will depend in large part on our ability to
successfully expand our direct sales force. We may not be able to
successfully manage the expansion of this function or to recruit and train
additional direct sales support personnel. There is presently a shortage of
qualified personnel to fill these positions. If we are unable to hire
and retain additional highly skilled direct sales personnel, we may not be
able to increase our license revenue to the extent necessary to achieve
profitability. If we are unable to hire highly trained consulting and
customer support personnel we may be unable to meet customer demands. We are
not likely to be able to increase our revenues as we plan if we fail to expand
our direct sales force. Even if we are successful in expanding our direct
sales force capability, the expansion may not result in revenue growth.
The loss of our Executive Vice President of Research and Development or other
key personnel or our failure to attract and retain additional personnel could
adversely affect our business.
Our success depends largely upon the continued service of our executive
officers and other key management, sales and marketing and technical
personnel. The loss of the services of one or more of our executive officers
or other key employees could have a material adverse effect on our business,
results of operations and financial condition. In particular, we rely on Dr.
Menachem Tassa, our Executive Vice President, Research and Development and
director. Dr. Tassa does not have an employment agreement with us and,
therefore, could terminate his employment with us at any time without penalty.
We have key man insurance on the life of Dr. Tassa in the amount of
$2,000,000. However, this insurance would not sufficiently compensate us for
the loss of services of Dr. Tassa.
Our future success also depends on our ability to attract and retain highly
qualified personnel. The competition for qualified personnel is intense, and
we may be unable to attract or retain highly qualified personnel in the
future. In addition, due to intense competition for qualified employees, it
may be necessary for us to increase the level of compensation paid to existing
and new employees to the degree that our operating expenses could be
materially increased.
We may be unable to adequately protect our proprietary rights.
Our success depends in part on our ability to protect our proprietary software
and our other proprietary rights from copying, infringement or use by
unauthorized parties. To protect our proprietary rights we rely primarily on
a combination of copyright, trade secret and trademark laws, confidentiality
agreements with employees and third parties, and protective contractual
provisions such as those contained in license agreements with consultants,
vendors and customers, although we have not signed these types of agreements
in every case. Despite our efforts to protect our proprietary rights,
unauthorized parties may copy aspects of our products and obtain and use
information that we regard as proprietary. Other parties may breach
confidentiality agreements and
<PAGE>
other protective contracts we have entered into. We may not become aware of,
or have adequate remedies in the event of, these types of breaches or
unauthorized activities.
Claims by other companies that our products infringe their copyrights or
patents could adversely affect our ability to sell our products and increase
our costs.
If any of our products violates third-party proprietary rights, including
copyrights and patents, we may be required to reengineer our products or
obtain licenses from third parties to continue offering our products without
substantial reengineering. If a patent has been issued or is issued in the
future to a third party that prevents us from using technology included in our
products, we would need to obtain a license or reengineer our product to
function without infringing the patent. Any efforts to reengineer our
products or obtain licenses from third parties may not be successful and, in
any case, could substantially increase our costs, or force us to interrupt
product sales or delay product releases.
Our products and products we rely on may suffer from defects or errors.
Software products as complex as ours may contain errors or defects, especially
when first introduced or when new versions are released. Our new products and
product enhancements or new applications or features may not be free from
errors after commercial shipments have begun. Any errors that are discovered
after commercial release could result in loss of revenues or delay in market
acceptance, diversion of development resources, damage to our reputation,
increased service and warranty costs and liability claims.
In addition, third-party products we rely on, such as Microsoft platform
products, may contain defects or errors. Our electronic communications
products rely on these products to operate properly. Therefore, any defects
in these products could adversely affect the operation of and market for our
products, reduce our revenues, increase our costs and damage our reputation.
We expect to experience rapid growth which will place a strain on our
resources, and any failure to manage our growth effectively could cause our
business to suffer.
We expect to experience rapid growth in our number of employees, the scope our
operating and financial systems and the geographic area of our operations.
This growth will result in an increase in the level of responsibility for both
existing and new management personnel. To manage our growth effectively, we
will be required to continue to implement and improve our operating and
financial systems and to expand, train and manage our employee base. Any
failure by us to properly manage our growth or these systems could impair our
ability to efficiently manage our business, to maintain and expand important
relationships with third parties and to attract customers, and could cause us
to incur higher operating costs and delays in the execution of our business
plan or in the reporting or tracing of our financial results.
If the market for the windows CE operating system fails to develop fully or
develops more slowly than we expect, our business and operating results will
be materially harmed.
Windows CE is one of many operating systems developed for the intelligent
computing device, or ICD, market, and the extent of its future acceptance is
uncertain. Because all of our revenue to date has been generated by software
products and services dependent on the Windows CE operating system, if the
market for Windows CE fails to develop fully or develops more slowly than we
expect, our business and operating results will be significantly harmed.
Market acceptance of Windows CE will depend on many factors, including:
- - Microsoft's development and support of the Windows CE market. As the
developer and primary promoter of Windows CE, if Microsoft were to decide to
discontinue or lessen its support of the Windows CE operating system,
potential customers could select competing operating systems, which would
reduce the demand for our Windows CE-based software products and services. In
addition, Microsoft has developed a version of its Windows NT operating system
for ICDs and could decide to shift its support to this operating system to the
detriment of Windows CE;
<PAGE>
- - the ability of the Windows CE operating system to compete against existing
and emerging operating systems for the ICD market including: VxWorks from
WindRiver Systems Inc., pSOS from Integrated Systems, Inc., VRTX from Mentor
Graphics Corporation, JavaOS from Sun Microsystems, Inc. and LINUX. In
particular, in the market for palm-size devices, Windows CE faces intense
competition from PalmOS used on 3Com Corporation's Palm devices and to date
has had limited success in this market. Windows CE may be unsuccessful in
capturing a significant share of these two segments of the ICD market, or in
maintaining its market share in those other segments of the ICD market on
which our business currently focuses, including the markets for
Internet-enabled television set-top boxes, handheld industrial devices,
consumer Internet appliances such as kiosk terminals and vehicle navigational
devices, and Windows-based terminals;
- - the acceptance by OEMs and consumers of the mix of features and functions
offered by Windows CE; and
- - the willingness of software developers to continue to develop and expand the
applications that run on Windows CE. To the extent that software developers
write applications for competing operating systems that are more attractive to
ICD end users than those available on Windows CE, potential purchasers could
select competing operating systems over Windows CE.
If the market for ICDs fails to develop fully or develops more slowly than we
expect, our revenue will not grow as fast as anticipated, if at all.
The market for ICDs is emerging, and the potential size of this market and the
timing of its development are not known. As a result, our profit potential is
uncertain and our revenue may not grow as fast as we anticipate, if at all.
We are dependent upon the broad acceptance by businesses and consumers of a
wide variety of Windows CE-based ICDs, which will depend on many factors,
including:
- - the development of content and applications for ICDs;
- - the willingness of large numbers of businesses and consumers to use devices
such as handheld and palm-size PCs and handheld industrial data collectors to
perform functions currently carried out manually or by traditional PCs,
including inputting and sharing data, communicating among users and connecting
to the Internet; and
- - the evolution of industry standards that facilitate the distribution of
content over the Internet to these devices via wired and wireless
telecommunications systems, satellite or cable.
If Microsoft adds features to its Windows CE operating systems that directly
compete with software products and services we provide, our revenue could be
reduced and our profit margins could suffer.
As the developer of Windows CE, Microsoft could add features to its operating
system that directly compete with the software products and services we
provide to our customers. Such features could include, for example, faxing,
hardware-support packages and quality assurance tools. The ability of our
customers or potential customers to obtain software products and services
directly from Microsoft that compete with our software products and services
could harm our business. Even if the standard features of future Microsoft
operating system software were more limited than our offerings, a significant
number of our customers and potential customers might elect to accept more
limited functionality in lieu of purchasing additional software. Moreover,
the resulting competitive pressures could lead to price reductions
for our products and reduce our profit margins.
Unanticipated delays, or announcement of delays, by Microsoft of Windows CE
product releases could adversely affect our sales.
Unanticipated delays, or announcement of delays, in Microsoft's delivery
schedule for new versions of its Windows CE operating system could cause us to
delay our product introductions and impede our ability to complete customer
projects on a timely basis. These delays or announcements by Microsoft could
also cause our customers
<PAGE>
to delay or cancel their project development activities or product
introductions. Any resulting delays in, or cancellations of, our planned
product introductions or in our ability to commence or complete customer
projects may adversely affect our revenue and could cause our quarterly
operating results to fluctuate.
Investors in our common shares may not be able to readily resell their shares,
if at all, due to low liquidity in our stock.
Our common shares trade only on the Nasdaq Over-the-Counter Bulletin Board and
the Berlin Stock Exchange's over-the-counter market and therefore are subject
to low liquidity. As a result, investors may not be able to readily resell
their shares, if at all.
We conduct the majority of our research and development in Israel, and
instability in Israel may adversely affect our research and development
activities.
Our principal research and development facility is located in Beersheba,
Israel at the headquarters of our wholly owned Israeli subsidiary, Intacta
Labs Ltd. Our research and development activities may be adversely affected
by economic, political and military conditions in Israel and the Middle East.
We will need to raise significant additional capital in the next 6 months to
meet operating expenses.
Our management anticipates that we will need to raise at least $2.5 million
during the next 6 months to meet operating expenses. Our success will depend
in part on our ability to obtain additional financing. We may not be able to
obtain additional financing on terms favorable to us, if at all.
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about our business and
industry. These forward-looking statements involve risks and uncertainties.
Our actual results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors, as more fully
described in "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and elsewhere in
this prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
<PAGE>
USE OF PROCEEDS
This prospectus is part of a registration statement that permits selling
shareholders to sell their shares on a continuous or delayed basis in the
future. Because this prospectus is solely for the purpose of selling
shareholders, Intacta will not receive any proceeds from the sale of stock
being offered.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and we do not anticipate paying any cash dividends
in the foreseeable future.
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
September 30, 1999
(in thousands)
Cash and cash equivalents 1,443,683
==========
Long-term obligations, less current portion 0
----------
Shareholders' equity:
Preferred stock, undesignated, $0.0001 par value;
50,000,000 shares authorized; no shares issued
and outstanding 0
Common stock, $0.0001 par value, 100,000,000
shares authorized, 17,671,000 issued and
outstanding 1,824
Additional paid-in capital 16,603,710
Accumulated deficit (15,038,898)
----------
Total shareholders' equity 1,566,636
----------
Total capitalization 1,566,636
==========
<PAGE>
DILUTION
This offering is for sales of stock by existing Intacta shareholders on a
continuous or delayed basis in the future. Sales of common stock by
shareholders will not result in any substantial change to the net tangible
book value per share before and after the distribution of shares by the
selling shareholders. There will be no change in net tangible book
value per share attributable to cash payments made by purchasers of the shares
being offered. Prospectus investors should be aware, however, that the price
of Intacta's shares may not bear any rational relationship to net tangible
book value per share.
SELLING SHAREHOLDERS
The following are the shareholders for whose accounts the shares are being
offered; the amount of securities owned by each selling shareholder prior to
this offering; the amount to be offered for each selling shareholder's
account; and the amount to be owned by each selling shareholder following
completion of the offering:
Percent of Common
Shares Owned
Number of Number of Number of
Shares Shares Shares After Before the After the
Name Owned Offered Sale (1) Offering Offering
Cybermind AG(2) 1,500,000 1,500,000 - 8.4% -
Gestibroker
Consulting &
Financial
Management S.A 117,000 117,000 - - -
MFC Merchant
Bank SA 1,000,000 1,000,000 - 5.6% -
Francis Pizzulli 33,000 33,000 - * -
Zeljka Tepes 200,000 200,000 - 1.1% -
Value Invest Ltd. 830,000 830,000 - 4.6% -
Affaires
Financieres S.A. 750,000 750,000 - 4.2% -
Rahn & Badmer 786,000 786,000 - 4.4% -
Finter Bank 800,000 800,000 - 4.5% -
Euroswiss
Securities 810,000 810,000 - 4.5% -
Mandate
Management Ltd. 820,000 820,000 - 4.6% -
PreVision
Overseas
Management Ltd. 50,000 50,000 - * -
Valor Invest
Limited (2) 538,000 538,000 - 3.0% -
Pensbreigh
Holdings Ltd. (3) 640,000 640,000 - 3.6% -
_____________________
*Less than 1%
(1) This table assumes that each shareholder will sell all of its shares
available for sale during the effectiveness of the registration statement that
includes this prospectus. Shareholders are not required to sell their shares.
See "Plan of Distribution." Other than described in footnotes (2) and (3)
below, no other selling shareholder has held any position or office or had any
material relationship with Intacta during the past three years.
<PAGE>
(2) Includes 238,000 shares issued by us to Valor Invest in repayment of a
loan of U.S.$952,000 pursuant to a loan conversion at the rate of $4.00 per
share on June 30, 1999. Includes 300,000 shares purchased directly from
Corsa S.A. Holdings.
(3) Pensbreigh Holdings Ltd. and Intacta are parties to a contract dated
March 1, 1999 pursuant to which the services of our President, Chief Executive
Officer and a Director, Mr. Altaf S. Nazerali, provides his services to us.
See "Management Employment Contracts Altaf S. Nazerali." Mr. Nazerali is
a shareholder and officer of Pensbreigh Holdings Ltd.
______________
On May 31, 1998, we entered into an exchange agreement with Corsa S.A.
Holdings. Pursuant to the exchange agreement, Corsa S.A. Holdings transferred
100% of the outstanding shares of Intacta Delaware Inc. and 99% of the
outstanding shares of Intacta Labs Ltd. to us. In exchange, we issued
11,486,000 shares of our common stock to Corsa S.A. Holdings. See "Related
Party Transactions." Corsa S.A. Holdings subsequently sold 7,486,000 of the
11,486,000 shares to some of the selling shareholders above. Corsa S.A.
Holdings is not a selling shareholder pursuant to this registration statement.
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified in their entirety by
reference to, and you should read them in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and notes to such financial statements
included in this prospectus. We have derived the statements of operations
data for December 31, 1998 from our audited financial statements that appear
in this prospectus, and these data are qualified by reference to the financial
statements.
Nine months ended
Year ended December 31, September 30,
1996 1997 1998 1998 1999
(unaudited)(unaudited)
Statement of Operations Data:
Net sales 1,019,600 894,900 137,800 312,600 204,800
Cost of sales 514,100 357,500 336,300 259,200 0
---------- ---------- --------- --------- ---------
Gross margin 505,500 537,400 (198,500) 53,400 204,800
Operating Expenses:
Sales and marketing 526,800 297,000 113,100 247,000 81,100
Research and development 331,900 343,200 773,800 830,500 618,100
General and admin 1,605,200 1,353,100 1,160,300 727,300 1,144,800
---------- ---------- --------- --------- ---------
Total operating
expenses 2,463,900 1,993,300 2,047,200 1,804,800 1,844,000
---------- ---------- --------- --------- ---------
Loss from operations (1,958,400)(1,455,900)(2,245,700)(1,751,400)(1,639,300)
Interest expense (578,700) (755,300) (210,000) (253,700) (8,300)
Other 7,300 11,500 (21,300) (4,000) (6,600)
---------- ---------- --------- --------- ----------
Net loss (2,529,800)(2,199,700)(2,477,000)(2,009,100)(1,654,200)
========== ========== ========= ========= ==========
Basic and diluted net
loss per common share (0.22) (0.19) (0.15) (0.17) (0.09)
========== ========== ========= ========= ==========
Basic and diluted
weighted average common
shares outstanding 11,486,000 11,486,000 16,701,583 11,486,000 17,751,500
=========== ========= ========= ========== =========
As of
As of December 31, September 30,
1996 1997 1998 1999
(unaudited)
Balance Sheet Data:
Cash and cash equivalents 58,000 169,100 3,047,100 1,443,700
Working capital
(deficiency) (5,773,200) (9,693,400) 1,924,200 1,273,300
Total assets 545,500 1,151,800 3,760,700 2,086,600
Long-term obligations 2,015,900 -- -- --
Total shareholders'
equity (deficiency) (5,677,800) (9,407,800) 2,268,600 1,566,600
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATION
Overview
Our financial condition reported includes all amounts for the parent company,
Intacta Technologies Inc., a Nevada corporation, and our two wholly owned
subsidiary companies, Intacta Delaware Inc., a Delaware corporation, which we
refer to as Intacta Delaware, and Intacta Labs Ltd., an Israeli company, which
we refer to as Intacta Labs, on December 31, 1998. Our reported earnings from
operations include the combined earnings of the two subsidiaries for the full
1998 year together with the earnings of Intacta Technologies Inc. after May
31, 1998, the date on which we completed the acquisition of these companies.
Our company was incorporated in December, 1997 in the State of Nevada with the
intent that it would apply for listing on an exchange and by means of an
acquisition create an operating public company. Initially, we raised
approximately $1 million to fund our operations, primarily to complete our due
diligence review of our two wholly owned subsidiaries and to prepare all of
the necessary documentation associated with an acquisition transaction.
We acquired both subsidiaries after successful negotiation with Corsa S. A.
Holdings, which we refer to as Corsa, which owned both subsidiaries. While an
agreement had been signed in October of 1997, we did not complete the
acquisition until May 31, 1998. The parties agreed to exchange shares so that
we acquired all of the common shares of Intacta Delaware and all of the common
shares of Intacta Labs from Corsa for total consideration of $11,486,000, to
be paid through the issuance of 11,486,000 common shares of our capital stock
issued from treasury to Corsa, each share valued at $1.00.
Because we had only approximately five million shares issued, the 11,486,000
new shares issued to Corsa represented a majority holding of our stock and
consequently Corsa had control of the parent and both subsidiaries. In
instances like this, accounting principles require that the transaction be
reflected in financial statements as a "reverse acquisition" where the
subsidiaries essentially acquire the parent. In this form of accounting, the
statements are created by aggregating the accounts of the two subsidiaries, as
would have been the case if Corsa had retained ownership, and then adding the
accounts of the parent for the relevant period when all three companies came
under common control. In this case, common control started immediately after
the completion of the acquisition which was effective June 1, 1998.
Also, according to proper accounting practice, in order to portray all three
companies as if they were operating as a single entity, transactions between
the three companies have been eliminated.
In late 1997, after we acquired our two wholly owned subsidiaries, management
decided to cease production of our then-current products and to begin
development of new products based on our patented technology. We have
commercially launched one new product, Intacta.MobileCE, and anticipate
launching several new products in calendar 2000. See "Business - Technology
and Products."
Our management has completed its business planning, and is negotiating
additional licensing arrangements expected to provide revenues later in the
year. Development is complete on some of our new software products and
customisation is underway to satisfy new licensing specifications. Management
anticipates further additions to staff to support present and potential
licensing commitments and to expand its marketing efforts related to new
product developments through the remainder of this year and next.
Nine Months Ended September 30, 1999 Compared To Nine Months Ended September
30, 1998
Revenues.
Product sales revenues for the first nine months of 1999 were $116,300, a
decline of $65,800 or 36 per cent from those of 1998 when sales were $182,000.
The decline is a result of our wind-down of our marketing efforts for
existing products initiated during 1998. Of the current year's total
revenues, $62,500 was derived from existing
<PAGE>
licensing arrangements for use of our source code by other software companies.
Comparable revenues earned in 1998 were $32,400. Other revenues in the form of
interest earned on funds held on deposit during 1999 were $88,500. In 1998,
interest income was $130,550.
Costs of Goods Sold.
Costs of goods sold aggregated $336,300 in 1998 but were nil for the
comparable period in 1999 as little manufactured product was sold and all
product inventory had been written down to zero carrying value in the prior
year. The costs in 1998 represented both the actual costs of goods sold of
$85,300 for the first nine months and an adjustment to the value placed on the
remaining inventory on hand of $421,600 in the second quarter. During 1997 and
early 1998, sales volumes had fallen significantly and gross profits on these
sales were essentially reduced to zero. This necessitated a partial reduction
in the value of inventories in June 1998, and in December, management made a
further reduction in the recorded value of all existing products on hand to
nil.
Expenses.
Operating expenses overall for 1999 were $1,852,300. Operating expenses
include costs for research and development activities, sales and marketing and
general and administrative. This level was below that incurred in the prior
year, of $2,047,200, although significant changes between cost categories
occurred.
Sales and Marketing.
Sales and marketing costs declined to $81,100 in 1999 from $113,100 in 1998.
The reduction reflects management's decision late in 1997 to commence the wind
down of all marketing efforts and to focus on developing new products
utilising our proprietary technology. We released all sales staff in 1998 and
all senior management in early 1999. A number of new product applications have
been developed and are at the testing stages. We anticipate that we will
engage new marketing staff in the near future to initiate product launching
and manage our marketing and sales functions.
Research and Development.
Research and development expenditures were also lower at $618,100, down
$212,400 or 26 per cent from $773,800 in 1998. In 1998, several research staff
were added and additional set-up expenditures on computers, software
and development costs were incurred as a result of the ramping up of the
research efforts for new product applications in Intacta Labs, our research
and development subsidiary. The cost level in the current year represents the
costs of the continuous research activity, salaries for the staff and office
and other support facilities. We expect to maintain the current staffing level
and the costs of operating this facility.
Administration.
Administration costs increased 60 per cent over the prior year's amount of
$1,160,300 to $1,071,000 in 1999, the increase was due primarily to the
addition of several new executive staff and related office and travel expenses
in the parent company. This group is providing overall management of the
parent company as well as the subsidiaries, and is also managing several key
projects:
- - directing the development of our new business strategy,
- - performing market analysis for our new products,
- - developing new product branding and sales programs, and
- - pursuing proprietary technology licensing arrangements on a broader scale.
Other Expenses.
Expenses in 1998 included interest of $210,000 incurred by our two
subsidiaries on advances from their former parent company, Corsa S.A.
Holdings. These costs were all incurred prior to the acquisition in May 1998.
No further interest costs were incurred in the remainder of 1998 following the
acquisition. A small amount of interest expense was incurred in 1999 amounting
to $8,300 in our research and development department.
<PAGE>
Amortization expense rose from $58,500 in 1998 to $73,800 in 1999 due to
increased expenditures on research and development equipment.
Net Losses.
The 1999 net loss was $1,654,100 after provision for taxes of $6,600 for the
year. This was 18 per cent lower than the 1998 figure of $2,477,000, after
taxes of $1,700.
Year Ended December 31, 1998 Compared To Year Ended December 31, 1997
Revenues.
Consolidated revenues for the full year 1998 were only $137,800, down
significantly from the 1997 level of $894,900 when we were actively marketing
our products. In the fourth quarter of 1997, management of both Intacta
Delaware and Intacta Labs recognized that the market potential for its primary
product, FaxPal, and other related products was proving less than forecast and
they decided to reduce marketing efforts and initiate significant design
revisions to its core applications. Consequently, during all of 1998, the
marketing and sales effort was reduced and without this support, revenues
declined significantly.
Also because of this change in direction, management realised mid-year that
inventory levels conceived to support a high sales forecast early in the year,
were too high and recorded a write-down equal to the total value of the
current inventory of these products, amounting to approximately $240,100. As a
consequence of this write-down, cost of sales for 1998 totalled $336,300,
reflecting product costs of units sold in the year of $96,200, plus the above
reserve amount. By contrast, the 1997 cost of sales was $357,500, all related
to units sold.
Consequently, for 1998 a gross margin loss was incurred of ($198,500), whereas
in 1997, a gross profit of $537,400 was achieved.
Expenses.
In addition to cost of sales, we had operating expenses which include costs
for Research and Development activities, Sales and Marketing and General and
Administrative. In 1998, these costs aggregated $2,047,200, approximately
three per cent higher than the 1997 expenses of $1,993,300.
Research and Development.
The 1998 Research and development costs of $773,800 were more than double the
$343,200 incurred in 1997, the increase due to the additional developmental
work performed to carry out the product revisions. Costs in both years
include salaries and office support as well as some development software and
other equipment. Several additions to staff were made during 1998 and together
with costs of computer equipment and software for these new staff members as
well as materials for hardware development work related to the new products,
caused overall costs to rise 125 per cent.
Sales and Marketing.
Sales and marketing expenses are all incurred by Intacta Delaware. Sales and
marketing costs were only $113,100 in 1998, approximately 38 per cent of the
total incurred for 1997 of $297,000. The lower 1998 expenditures reflects our
decision to revise and reposition our products and to reduce marketing
efforts. Throughout 1998, the sales staff was reduced and all were released by
year-end.
General and Administrative.
General and administrative costs for 1998 were $1,160,300 representing a
decrease of $192,800 or 14 per cent below the 1997 costs of $1,353,100.
General and administrative costs include primarily salaries and other office
costs, professional and other consulting service fees and travel. The lower
overall costs in the current year
<PAGE>
reflect savings from reduced staffing of Intacta Delaware, and general
restraint during the corporate restructuring. This was offset to some
degree by the corporate costs of the parent company, salaries and office
costs, and professional fees, consulting support and travel costs related to
the restructuring and acquisition of the two subsidiary companies mid-year.
Losses from Operations.
The loss from operations for 1998 amounted to $2,245,700, which is 54 per cent
higher than the 1997 loss of $1,455,900. This increase reflects a number of
factors: the lower sales volumes in the current year, the inventory write-down
in cost of sales, higher development costs for product redesign, one-time
administrative costs for the restructuring and acquisition of the
subsidiaries, and the inclusion of the public company operating costs
following the acquisition, all of which were unusual to 1998. The 1997 loss
reflected more normal cost levels of operations of the business.
Net Losses.
The 1998 net loss was $2,477,000 after provision for interest costs of
$210,000 incurred as a result of loans from Corsa prior to the acquisition,
other costs of $19,600 and state taxes of $1,700 for the year. The 1997 net
loss of $2,199,700 was $277,300 or 11 per cent lower than that for 1998
primarily due to the large swing in the gross profits which amounted to
$735,900 between the two years, and an interest exchange change of
approximately $160,000.
Year Ended December 31, 1997 Compared To Year Ended December 31, 1996
Aggregate revenues in 1997 of $894,900 were down approximately 12 per cent
from those of 1996 of $1,019,600 when marketing expenditures were at their
highest level and our products were first being introduced. Sales
volumes of products introduced in 1996 declined in 1997 in varying amounts as
a consequence of reduced marketing efforts, but revenues were supplemented
somewhat from sales of new 32-bit product versions introduced in 1997.
Costs of sales for 1997 was $357,500 which was lower than in 1996 at $514,100,
due in part to lower unit costs in 1997 realised from higher volume purchases
and implicit lower unit pricing achieved as a result.
The gross profit achieved in 1997 was $537,400, which equates to approximately
60 per cent of sales. This was slightly better than the 1996 profit of
$505,500, or 50 per cent of sales.
Expenses.
1997 operating expenses aggregated $1,993,300, which was $470,600 lower than
the 1996 expenses of $2,463,900, due in part to reduced sales and marketing
and general and administrative costs.
Research and Development.
Research and development costs for 1997 of $343,200 were approximately the
same as those for 1996 of $331,900 reflecting essentially similar staff counts
and operations levels in both years.
Sales and Marketing.
Sales and marketing costs for 1997 were only $297,000, down dramatically from
the prior year's level of $526,800 when we were developing marketing tools,
completing market research and launching its product line.
<PAGE>
General and Administrative.
General and administrative costs for 1997 of $1,353,100 were 16 per cent lower
than those in 1996 of $1,605,200, reflecting our transition from a higher-cost
start-up mode in 1996 to an on-going, balanced operation in 1997.
Losses from Operations.
The 1997 loss from operations was $1,455,900, 26 per cent lower than the 1996
loss of $1,958,400. This decrease resulted from the slightly improved profit
in 1997 and the significant reductions in sales and marketing and general and
administrative expenses from the higher levels for the start-up and product
launch in 1996.
Net Losses.
The 1997 net loss was $2,199,700 after provision for interest costs of
$755,300 incurred from bank and shareholder loans to us and taxes of $1,600,
offset somewhat by other income of $13,100. The 1996 net loss of $2,529,800
was higher than the 1997 loss due primarily to the high sales and marketing
and general and administrative costs in the 1996 year.
Liquidity and Capital Resources
Liquidity.
On June 30, 1999 we issued 238,000 common shares to Valor Invest Limited in
repayment of a loan of $952,000 pursuant to a loan conversion at a rate of
$4.00 per share.
At September 30, 1999, we held cash amounting to $1,443,683, had working
capital of $1,362,313 in the form of cash and inventory net of our obligations
at that time, excluding shareholder loans, and had an overall net worth of
$1,566,636.
We anticipate that our working capital is sufficient to satisfy our cash
requirements only through our fiscal quarter ending June 30, 2000. We
anticipate we will be required to raise additional financing in the amount of
approximately $2,500,000 during the next two fiscal quarters ending June 30,
2000 to implement our business plan and to meet our anticipated cash
requirements. We anticipate that we will begin to raise additional capital
through the private placement of equity and/or debt during the next two fiscal
quarters ending June 30, 2000. We cannot assure you that we will be able to
successfully complete a private placement.
We believe our estimates of our capital requirements to be reasonable. The
capital requirements are only estimates and can change for many different
reasons, some of which are beyond our control. In addition to raising
additional capital through a private placement, we may seek to secure a credit
facility. We currently have no arrangements for a credit facility and there
can be no assurance that we will successfully acquire financing on terms
acceptable to us, if at all.
Primarily as a result of our recurring losses, our independent auditors
modified their opinion on our 1998 financial statements to include an
explanatory paragraph wherein they expressed substantial doubt about our
ability to continue as a going concern.
Year 2000 Issues
Even though the date is now past January 1, 2000 and we have not experienced
any immediate adverse impact from the transition to the Year 2000, we cannot
provide assurance that our suppliers and customers have not been affected in a
manner that is not yet apparent. In addition, certain computer programs which
were date sensitive to the Year 2000 may not process the Year 2000 as a leap
year and any negative consequential effects remain unknown. As a result, we
will continue to monitor our Year 2000 compliance and the Year 2000 compliance
of our suppliers and customers.
<PAGE>
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use," which is effective for
fiscal years beginning after December 15, 1998. SOP No. 98-1 provides
guidance on accounting for the costs of computer software developed or
obtained for internal use and defines specific criteria that determine when
such costs are required to be expensed, and when such costs may be
capitalized. The adoption of this standard has not had a material effect on
the Company's capitalization policy, results of operations, financial position
or cash flows.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 require companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the changes
in the fair value of the hedged assets or liability that are attributable to
the hedged risk or (ii) the earnings effect of the hedged forecasted
transaction. For a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of change. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard on January 1, 2001 to
affect its financial statements.
In February 1998, the FASB issued SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits, which standardizes the disclosure
requirements for pension and other postretirement benefits. The adoption of
SFAS No. 132 did not have a material impact on the Company's current
disclosures.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This statement established standards for
the way companies report information about operating segments in its financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The disclosures
prescribed by SFAS No. 131 did not have a material impact on the Company's
financial statements as the Company operates as one business segment.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non-owner sources. Examples of items
to be included in comprehensive income, which are excluded from net income,
include foreign currency translation adjustments and unrealized gain/loss on
available-for-sale securities. The disclosure prescribed by SFAS No. 130 did
not have a material impact on the Company.
<PAGE>
BUSINESS
Overview
We develop and market products to
- - enable businesses to manage the production, distribution and storage of
content over Internet and paper-based media. Our technology also permits the
seamless exchange of data between electronic and paper media.
- - reduce bandwidth and archiving requirements for content. Transmission time
and storage requirements of some types of large files and formats are
significantly reduced using our compression and error correction techniques
that offer advantages over other widely used methods such as TIFF and ZIP
compression.
- - secure the management, authentication and archiving of sensitive business
information. Our technology and products apply equally to electronic and
paper-based formats. We have developed specific products that have
applications in registration forms that can then be sent electronically or via
fax.
- - improve the performance and convenience of mobile wired and wireless
telecommunications and applications. These include the emerging category of
information and Internet devices such as palm/handheld computers, smart cell
phones, etc. Our compression technology lowers bandwidth requirements; our
security technology protects transmission and our error-correction technology
improves the integrity of content transmission under less than desirable
environments.
- - enhance hardware and software server products that integrate our proprietary
compression and error correction techniques.
- - increase user's satisfaction by improving convenience and time-savings. Our
technology allows users to compress/decompress and encode/decode
multiple-files containing different file formats with a single mouse click.
Our products include:
- - Intacta.Courier, a software application that is installed in a personal
computer, or network server, to enable a personal computer or network server
to send and receive standard and color faxes, send faxes via email and
send faxes with file attachments. Intacta.Courier incorporates our
compression and encoding technology. It also provides the capability of
automatic file conversion between Windows CE-based mobile communications and
Windows 95/98/NT-based enterprises.
- - Our Intacta.Bridgeway product is a hardware version of Intacta.Courier. It
can either stand alone or be integrated into an existing server environment.
Additionally Intacta.Bridgeway integrates several functions that allow it to
operate as an independent remote server.
- - Intacta.MobileCE is a software application that operates with Windows
CE-powered intelligent computing devices to enable the devices to send and
receive faxes, send faxes via email and send faxes with file attachments.
Each of these products provides our unique compression, encoding, decoding and
security features to local area network, wide area network and Internet faxes
and electronic messaging. Intacta.MobileCE and our document management
solutions are the only products we are currently marketing. When these
products are used together, they provide end-to-end solutions between the
mobile workers and a business. We intend to begin marketing Intacta.Courier
and Intacta.Bridgeway in April 2000.
<PAGE>
Industry Background
Document Management
Historically businesses relied solely on paper-based document management
systems. Today's computer-based business environment has altered the
historical business model, allowing businesses to manage, authenticate,
archive and transmit documents electronically. Many businesses have
recognized the cost savings of implementing an electronic document management
system. Electronic document management involves the application of imaging
and related technologies, to effectively convert unstructured paper-based
information into structured electronic data. Eliminating or reducing reliance
on paper in document management, authentication and archiving allows
information to be controlled, distributed, and utilized in an efficient,
cost-effective manner.
Our document management solution benefits businesses by providing a
comprehensive, cost-effective document management system.
Electronic Communications
The increasingly widespread use of electronic communications, including the
Internet, is enabling networks of businesses and consumers to collaborate,
access information and conduct business and personal interactions more
effectively. To be successful in the electronic communications market, we
believe that a solution provider must adequately address the issues of data
integrity, security, authentication, bandwidth, storage and archiving, unified
messaging and multicast requirements for both electronic and paper-based data.
Our technology provides the building blocks for creating a range of solutions
in the electronic communications market from streamlined applications for
small businesses to highly complex systems for large businesses. Our
technology is highly adaptable and customizable for incorporation into most
electronic software or hardware applications and into most non-electronic
printable media. With this inherent flexibility and scalability, our products
solve a variety of content management problems for businesses.
Solution
We provide a solution by providing products that enable electronic conversion
of documents. Our technology permits 100% of content and format to be easily
and efficiently exchanged between paper and electronic forms. This unique
technology provides the "missing link" between paper-based document
management, electronic document management and electronic communication of
both paper-based and electronic documents. We believe our solution
delivers the following benefits:
- - Savings in storage space since our compression techniques have the ability
to compress, for example, a 50-page document as one or two equivalent pages
depending on the graphic content of the original document.
- - We can transmit the original data in binary form either through fax or
e-mail, permitting the recipient to edit and view the original document with
its original formatting.
- - The transmitted documents can be encoded such that only the authorized or
intended recipient will be able to view the data.
- - Reduction in bandwidth usage, and transmission time resulting in significant
savings in telecommunications time for users. For example, a fifty-page
document can be sent as a single page via fax protocol, or significantly
compressed if sent by other electronic means, including e-mail.
<PAGE>
Technology and Products
Technology
Our solution is based on our technology which compresses digital files
comprising text, video, graphics (including color) or sound into a
two-dimensional graphical grid, which we call an Intacta.Code. Our patented
technology applies encoding and error correction applications to the digital
file creating a secure, damage resistant graphical representation of the
original digital file. The key features of our patented technology are:
- - Compression. The compression capability of our patented technology
decreases the amount of bandwidth required to transmit information (in the
form of an Intacta.Code) via a network, facsimile or the Internet. Our
compression rates exceed the current capabilities of standard tagged
information file format, or TIFF, and ZIP methods, enabling faster and more
effective management of large databases and complex files. The compression not
only increases the data density of the Intacta.Code image, but also improves
the performance of the error correction algorithm. For fax-based
communications, our technology reduces transmission costs by enabling
documents of up to 110 kilobytes of digital data (approximately 100 pages) to
be sent as a single page fax transmission.
- - Encoding and Decoding. The encoding and decoding capabilities of our
patented technology enable users to create an encoded Intacta.Code. Users can
decode an Intacta.Code by viewing it with our special viewer or by printing it
using a standard printer equipped with our special viewer.
- - Security. The security capability of our technology enables users to
protect information contained within an Intacta.Code. The security features
include the ability to restrict access to an Intacta.Code to particular users
only and the ability to verify the sender and contents of an Intacta.Code
containing sensitive information. Protection can also be layered such that a
reader would require a separate and distinct password to access successive
layers of information.
Products
Our solution, which is based on our patented technology, includes the
following products:
Intelligent computing devices. We intend to market a broad range of software
products that provide a variety of faxing functions to devices we call
intelligent computing devices, or ICDs, to enhance the functionality of those
devices. ICDs are an emerging class of products with sophisticated processing
power that are designed for specific computing and communications
applications. These devices are described as "intelligent" to distinguish
them from rudimentary single-purpose computing devices with only limited
functionality. Examples of ICDs include television "set-top boxes," which sit
on top of television sets and provide users with advanced cable TV access
services, sophisticated video gaming features and Internet access; handheld
and palm-size PCs; gaming systems; handheld industrial data collectors;
consumer "Internet appliances" such as kiosk terminals and navigational
devices in cars and trucks; and terminals. Compared to traditional
computers, ICDs are often less expensive and more adaptable in terms
of their size, weight and shape, while still providing sophisticated computing
and communications capabilities, including Internet connectivity.
Intacta.MobileCE. Intacta.MobileCE is a communications software suite
developed to respond to the Enterprise need for robust communications software
that is bundled with ICDs to enable ICDs to send and receive faxes, send faxes
via email and send faxes with file attachments. It is designed for use on any
Windows CE-powered system, with sufficient error correction capabilities for
wireless and satellite transmission. Intacta's unique compression process
saves bandwidth and transmission time, reduces communication costs and
enhances the value of mobile systems. Files, faxes and e-mail can be received,
viewed, and printed. A complementary product conversely allows desktop
systems to open and read files sent from a palm-top computer. Intacta.MobileCE
provides our unique compression, encoding, decoding and security features to
ICDs. Intacta.MobileCE is the only product we currently market for use with
ICDs.
Intacta.MobileCE is currently being evaluated by several U.S. and Japanese
manufacturers of Windows CE devices for integration into future products. We
cannot assure you that these evaluations will result in these
<PAGE>
manufacturers integrating Intacta.MobileCE into any of their Windows CE
devices. We also intend to launch a version of Intacta.MobileCE for retail
customers in early 2000. We are currently evaluating conversion of
Intacta.MoblileCE to Palm OS and EPOC OS-based systems.
Intacta.Courier. Intacta.Courier is a software application that is installed
in a personal computer, or network server, to enable the PC to send and
receive faxes, send faxes via email and send faxes with file attachments.
Intacta.Courier provides our unique compression, encoding, decoding and
security features to LAN, WAN and Internet faxes. We are currently
Beta-testing Intacta.Courier and anticipate that it will be commercially
available in February 2000. We are developing a module to Intacta.Courier,
called Intacta.Smartbar Fax Delivery Solution, which we anticipate will be
commercially available concurrently with Intacta.Courier. Intacta.Smartbar
Fax Delivery Solution allows users to embed digital information containing the
identity and addressing information of the sender and recipient of a fax into
the cover sheet of the fax. If a user employs Intacta.Smartbar when sending a
fax, the recipient can utilize the information in the Intacta.SmartBar to:
- - automatically add the sender's contact information to his address book,
- - reply to the sender by fax without creating a fax cover sheet,
- - reply to the sender by email without addressing the email,
- - incorporate automatic sender determined encryption and automatic recipient
determined decryption, and add additional macros for custom applications.
Intacta.Bridgeway. Intacta.Bridgeway is a hardware platform that supports all
common protocols in commercial and residential networks. It embeds all the
functionality of Intacta.Courier and our patented compression and encryption
technology. Intacta.Bridgeway incorporates our softmodem module that permits
fax communication between two Intacta.Bridgeway units at 33.6kps.
Intacta.Bridgeway provides a wide degree of customization for both vertical
and horizontal markets. Once installed and configured, the sending and
receiving processes are totally transparent to the user's operation. Examples
of applications include:
- - creates a unique and efficient network that allows any of the 100 million
legacy fax devices to connect to local and wide-area networks;
- - provides color faxing capability and the ability to produce original quality
documents by connecting to a color printer either directly or on a server;
- - functions as a mini document server which compresses and routes outgoing
documents using Intacta's proprietary technology, for cost efficiencies of up
to 90 percent;
- - enables legacy fax and multi-functional peripherals to send and receive
faxes via email and sends faxes with file attachments;
- - creates low-cost, secure closed-communications network with a unique
encoding/decoding dynamic link library for a specific customer's network;
- - enables remote polling for various applications where each unit has its own
unique Internet protocol address.
We are currently developing Intacta.Bridgeway and anticipate that it will be
commercially available in April 2000.
Both Intacta.Courier and Intacta.Bridgeway allow seamless file conversion
between Windows CE-based ICRs and Windows 95/98/NT-based businesses. The
combination of our Intacta.MobileCE and Intacta.Courier products form
an end-to-end solution for businesses with mobile workforces.
<PAGE>
Custom Designed Products. We are currently developing the following products
which we intend to market to large enterprises: Intacta.Compactor;
Intacta.Docmanager; Intacta.Smartform; and Intacta.Smartbar. Each of these
products will be custom designed for each business purchaser.
Intacta.Compactor. Intacta.Compactor is a software application that decreases
the need for data storage space and data transmission time by providing
compression capabilities for document management systems. Our
Intacta.Compactor compression technology provides the user with a choice of
lossy and lossless compression. Generally, lossy compression applies to image
and audio files where it is not imperative that 100% of the original content
is retrievable. Users can choose what level of picture or sound quality is
acceptable. Lossless compression dictates that 100% of the original content
is retrievable. Intacta.Compactor provides the following features to document
management systems:
- - unique compression and security features of our patented technology,
- - lossless compression efficiency that can be up to 40% more effective than
standard TIFF 4-file compression,
- - adjustable lossy compression up to 300%
- - easily customizable, and
- - can be used with any language.
We anticipate that we will begin marketing Intacta.Compactor by March 2000.
Intacta.Docmanager. Intacta.Docmanager is a software application that
decreases the need for data storage space by converting paper documents to
digital documents for document management systems. Intacta.Docmanager
converts paper documents to digital documents without optical character
recognition, or OCR, and reconverts the digital documents to paper documents
without OCR on an as-needed basis. Intacta.Compactor provides the following
features to document management systems:
- - document authentication,
- - safeguards against falsification,
- - compression efficiency that can be up to 40% more effective than standard
TIFF 4-file compression,
- - 100% accurate file recovery, and
- - can be used with any language.
We are currently seeking strategic industry partners to commercialize
Intacta.Docmanager.
Intacta.Smartform. Intacta.Smartform is a software application that
simplifies and improves product registration between a business and its
customers by automating the generation, processing and storing of product
registration information. Intacta.Smartform is easily customizable and can be
used with any language. We have signed an initial licensing agreement with
DataLode Inc., a provider of registration services to Hewlett-Packard.
Intacta.Smartbar. Intacta.Smartbar virtually creates a document within a
document, or DWD, or sub-document. The software application compresses and
encodes information contained in financial, legal and personal identification
documents and provides digital authentication and verification of that
information at a later time. Intacta.Smartbar creates a encrypted printed
code of the information that can be read with full accuracy by most standard
scanners. Intacta.Smartbar can create DWDs of various sizes and densities to
best fit a user's needs. Further benefits include multi-level security in
which a level can be read only by those with appropriate clearance. All
Intacta.Smartbar technology can be transmitted via any media. In addition,
Intacta.Smartbar can be used with any language. We are integrating
Intacta.Smartbar into our Intacta.Courier and Intacta.Bridgeway applications
and
<PAGE>
discussing with other developers the use of this module in third party
applications for embedding digital information in various forms and
security applications, e.g., insurance, health, secured documents such as
checks and bonds. Versions of Intacta.Smartbar have been licensed for use in
Japan's Ministry of Health and other applications.
Customers and Markets
Our large regional and international business customers are described below:
DataLode Inc. In July 1999, we signed a license agreement for our
Intacta.Smartform module with DataLode Inc. DataLode has a contract with
Hewlett-Packard and others to provide warranty registration services for
products in Europe and North America. DataLode has agreed to utilize our
Intacta.Smartform to eliminate manual data entry and the need for OCR. This
is anticipate to lower their cost, assure 100% data accuracy and increase the
overall efficiency of their operations.
Nippon Telegraph and Telephone Corporation. Our communications software has
been selected by NTT Electronics Corporation ("NEL"), a subsidiary of Nippon
Telegraph and Telephone Corporation of Japan, for NEL's new mobile
communications technology, RZ SSB, a digitally enhanced narrow band radio
communications system. NEL has developed a new mobile radio technology that
delivers transmission of data, telephone, fax, and video under mobile
conditions.
<PAGE>
Sales and Marketing
We plan to market and sell our products through a direct sales force and
through our Web site. We plan to locate our direct sales force in the United
States, Canada, Europe, the Middle East and Asia Pacific.
One of our key objectives is to create sales teams with a regional presence to
establish and build strong relationships with original equipment manufacturers
and systems integrators and to increase our responsiveness to customers and
local market opportunities.
Our marketing efforts are directed at promoting our products, creating market
awareness and generating leads. Our marketing activities include online
demonstrations, print and online advertising campaigns and attendance at
industry trade shows events and trade conferences. We plan to use the
Internet extensively to increase awareness of Intacta and communicate with
potential customers, existing customers and others. Through our Web site, we
plan to provide online access to our customer messages and information
regarding products, respond to customer inquiries, conduct direct online sales
of our products and generate sales leads for our direct sales force.
As of January 31, 2000, we employed a total of 3 people on our sales and
marketing team.
Strategic Relationships
We plan to implement arrangements with third parties through which we will
grant the third parties the right to sell and implement our products.
Specifically, we seek to reach agreements with the following types of third
parties:
- - Solution Providers. We plan to grant solution providers the right to market
and resell our products and to provide education, implementation and
customization for the solutions they sell as well as for sales made through
our direct sales team.
- - Systems Integrators. We plan to grant systems integrators the right to
provide implementation, customization and training services to customers who
have purchased solutions through our direct sales team.
<PAGE>
Research and Development
Our research and development team is responsible for the design, development
and release of our products. Our Chief Technology Officer works closely with
our sales and marketing department as well as with our customers and potential
customers to better understand customer and market needs.
During 1999, a substantial majority of our research and development scientists
and engineers were involved in the development of Windows CE-based products
and providing custom solutions for our customers. These members of our
research and development team have accumulated detailed knowledge of the
Windows CE environment.
As of January 31, 2000, we employed a total of 12 scientists and engineers on
our research and development team. Our research and development team is
located at our facilities in Beer Sheva, Israel.
Competition
We believe that no one competitor of our technology dominates the marketplace.
Two dimensional bar coding technology, a technology that evolved from
conventional barcodes, is a competitive technology to our technology which
embeds digital information on paper or other printable surfaces.
Historically, the primary markets of two dimensional bar coding were used in
applications such as shipment tracking and inventory control. However, two
dimensional bar coding technology requires that end-users must purchase
specific scanner devices from a manufacturer. A manufacturers' primary
objective is to sell its hardware scanners, not its technology. There are
approximately 20, 2-dimensional barcode technology companies of which we
believe only one, DataGlyph by Xerox, directly competes with our technology.
We believe the other 19 products do not compete with ours because none of them
offers a full range of functions and capabilities within its technology as we
provide in ours. DataGlyph by Xerox has a significant market advantage due to
its large distribution systems, its mature operations, partner relationships
and substantial financial resources.
Our competitor in the Windows CE mobile market is bsquare Corp.'s product,
bFAX-PRO 5.0. Our product, Intacta.MobileCE, and bFAX-PRO 5.0 offer the
mobile user the ability to send and receive faxes. The products differ in
that bFAX-PRO 5.0 offers internet faxing and our product offers fax by e-mail.
<PAGE>
Intellectual Property
Our success is dependent upon our ability to protect our intellectual property
rights. We rely principally on a combination of copyright, trademarks, trade
secret and patent laws, non-disclosure agreements and other contractual
provisions to establish and maintain our proprietary rights. We hold patents
in Israel, the United States, Canada, EPO, Australia, South Africa, and Japan,
related to our patented technology in the areas of authenticating,
transmitting, receiving, reading and storing compressed information.
As part of our confidentiality and operating procedures, we generally enter
into nondisclosure and confidentiality agreements with each of our key
employees and consultants and limit access to and distribution of our core
technology, documentation and other proprietary information. To protect
ourselves against any loss of essential information held by key personnel, we
have entered into provisions with our research and development employees with
regard to ownership of technological developments. We have implemented a
secure document control system with appropriate safeguards and backups. Our
source code for software and hardware products is maintained in a lock-box at
the offices of our Israeli law firm and is accessible only by members of our
board of directors. Through our committee of the board of directors and our
Intellectual Property Policy, we will continue to pursue the development of
strong patent portfolio and trade marking of our products.
Policing the unauthorized use of our technology is difficult. We will use all
viable and cost-permissive methods for defending and prosecuting any suspected
violators of our technology.
Employees
As of January 31, 2000, we employ a total of 24 employees, including 12 in
research and development and 12 in general, administrative and marketing
functions on a part and full-time basis. We plan to hire 10 additional
employees in sales, marketing, and administration over the next fiscal year
and plan to hire additional research and development employees on an as-needed
basis. If the need arises for additional research and development employees
and we are unable to hire qualified employees in a timely manner, we may
outsource non-critical research and development projects to third parties.
Facilities
Our principal administrative and marketing facilities are located in Atlanta,
Georgia and consist of approximately 2,200 square feet of office space held
under a lease that expires November 8, 2000. Our principal research and
development facility is located in Beer Shiva, Israel and consists of
approximately 3,000 square feet of office space held under a lease that
expires September 1, 2000.
Legal Proceedings
We are not currently party to any pending legal proceedings.
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information, as of October 30, 1999,
regarding the executive officers and directors of the Corporation:
Name Age Position
Yehoshua Sagi(1)(2)(4) 61 Chairman of the Board; Director
Altaf S. Nazerali(1)(2)(4) 46 President; Chief Executive Officer;
Director
Noel Bambrough(3)(4) 61 Executive Vice President; Chief Operating
Officer; Director
Menachem Tassa(3)(4) 57 Executive Vice President, Research and
Development; Director
Ross Wilmot 55 Vice President, Finance; Director
Marco Genoni 52 Vice President, Marketing
Yechiel Y. Sharabi(1)(2)(4) 66 Director
Amnon Shai 65 Director
_____________________________
(1)Member of Audit Committee.
(2)Member of Compensation Committee.
(3)Member of Intellectual Property Committee.
(4)Member of Executive Committee.
Yehoshua Sagi has served as Chairman of the Board and Director of the Company
since May 29, 1998. He was elected as a member of the Israeli Knesset in 1988
and as the Mayor of Bat-Yam, Israel in 1993. He continues to serve in those
capacities through to present. He previously headed Israeli Military
Intelligence, and was President of Tadiran Systems.
Altaf S. Nazerali has served as President, Chief Executive Officer and
Director of the Company since its incorporation in December 1997. In
addition, Mr. Nazerali serves in the following capacities of other companies:
(a) Chief Executive Officer (from November 1995 to present), President and
Director (each from October 1995 to present) of Multivision Communications
Corp, the operator of MMDS TV systems in Bolivia.; (b) Director of CTF
Technologies, Inc. (from April 1998 to present), a company engaged in the
servicing of electronic refueling technology in Brazil; (c) President and
Director of Intacta Technologies Inc. (formerly InfoImaging Technologies Inc.,
from October 1997 to present), a software technology company; and (d) Chief
Executive Officer and President of Canbras Communications Corp. (from November
1994 to October 1995), an operator of pay television and telephone systems in
Brazil.
Noel Bambrough has served as Executive Vice President, Chief Operating Officer
and Director of the Company since April 1, 1999. From November 1998 through
April 1999 Mr. Bambrough served as Consultant to Hunt Power Corporation, a
Texas-based utility company. Mr. Bambrough was responsible for developing a
Business Plan for the launch of telephone, internet and cable television
service to a mixed residential and industrial development owned by Hunt's real
estate subsidiary. From April 1995 through November 1998 Mr. Bambrough was
Executive Vice-President and Chief Operating Officer of Triax
Telecommunications Company L.L.C. From July 1993 to April 1995 he served as
Senior Vice-President of Shaw Communications, Inc., a major cable TV
corporation. In January 1993 Mr. Bambrough was appointed Interim CEO of
Microcell Telecommunications, Inc., a PCS service provider, and served until
July 1993. Mr. Bambrough continues to serve as a member of the Board of
Directors of Microcell. From 1984 until its acquisition by Shaw Communications
in January 1993, Mr. Bambrough served as President and CEO of Cablecasting
Ltd.
Menachem Tassa has served as Vice President, Research and Development and
Director of the Company since May 29, 1998. He is General Manager of Intacta
Labs Ltd., the Company's research and development
<PAGE>
subsidiary based in Beer Sheva, Israel. Dr. Tassa has three PhDs in applied
mathematics, physics and chemistry. He has been with the Company and its
predecessors since 1994. Between 1990 and 1992, he was a telecom consultant.
Prior to 1990, he
occupied various senior scientific positions with the Israeli government.
Ross Wilmot is a chartered accountant providing financial management services
since August 1991 to public companies. He has special expertise in
international operations and high tech start-ups, and has completed numerous
business valuations and acquisitions in this sector. He is also experienced in
public company reporting practices in both the United States and Canada. He
has served as Vice President, Finance and Director of the Company since its
incorporation in December, 1997.
Marco Genoni has served as Vice President, Marketing for the Company since
September 30, 1998. Since 1997, he has served as President and Managing
Partner of Premier Stratatech Inc., a private marketing and consulting
company specializing in high technology products. From 1994 to 1997, he
served as President and Chief Executive Officer of Memotec Communications
Inc., a public company that produces and sells telecommunications and network
products for medium and large enterprises. Mr. Genoni received his Masters of
Science in Physics from the Swiss Institute of Technology in 1971 and his
Ph.D. in Chemistry from the University of Basle (Switzerland) in 1974.
Amnon Shai has served as a Director of the Company since May 29, 1998. Mr.
Amnon Shai was Minister-Counselor for Commercial Affairs in the Israeli
Embassy in Paris from 1995 to 1998. From 1993 to 1995 he was Director of the
European Division, Foreign Trade Administration at the Ministry of Industry
and Trade. He completed his Masters in Business Administration at Columbia
University in New York in 1969. He graduated from the Hebrew University in
Jerusalem, majored in Political Science and Economics.
Yechiel Y. Sharabi has served as a Director of the Company from May 29, 1998
to December 9, 1998. He rejoined the Board effective September 1, 1999. He was
managing director of Mandate Management Ltd. from 1991 to 1998. Mr. Sharabi
earned his Masters in Public Administration in New Haven University of
Connecticut in 1996. He graduated with a Bachelor of Arts in General History
from the University of Tel Aviv.
Each director is elected for a period of one year at our annual meeting of
shareholders and serves until the next annual meeting or until his successor
is duly elected and qualified. The executive officers serve at the discretion
of the board. There are no family relationships among any of the directors
and executive officers of the Corporation.
Board Committees
On September 9, 1998, our board of directors established an audit committee,
compensation committee, and executive committee. Our board created the
intellectual property committee on September 21, 1999.
Audit Committee. The audit committee of the board of directors reviews our
internal accounting procedures and consults with and reviews the services
provided by our independent auditors. Messrs. Nazerali, Sagi and Sharabi
are members of this committee.
Compensation Committee. The compensation committee of the board of directors
reviews and recommends to the board of directors the compensation and benefits
of all our executive officers and establishes and reviews general policies
relating to compensation and benefits of our employees. Messrs. Nazerali,
Sagi and Sharabi are members of this committee. Except as described in
"Related Party Transactions," no interlocking relationships exist between our
board of directors or compensation committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
Intellectual Property Committee. The intellectual property committee of the
board of directors establishes, amends and maintains guidelines of Intacta
regarding the handling of intellectual property matters. Messrs. Bambrough
and Tassa are members of this committee. In addition, the secretary of
Intacta, Ms. Sandra Buschau, serves on this committee.
<PAGE>
Executive Committee. The executive committee of the board of directors
manages our day-to-day affairs and decides strategic direction. Messrs.
Bambrough, Nazerali, Sagi, Sharabi and Tassa are members of this committee.
Except as set forth in "Related Party Transactions," no interlocking
relationships exist between our board of directors or compensation committee
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.
Director Compensation
We do not currently pay any cash compensation to directors for serving on our
board, but we do reimburse directors for out-of-pocket expenses for attending
board and committee meetings. We do not provide additional compensation for
committee participation or special assignments of the board of directors. Of
our directors, only Messrs. Sagi, Shai and Sharabi received stock options for
their participation on our board. Messrs. Sagi, Shai and Sharabi each
received options to purchase 50,000 shares at a price of $1.50 per share.
Executive Compensation
The following table sets forth the compensation paid to our chief executive
officer and one other most highly compensated executive officer for the year
ended December 31, 1998. No other executive officer of Intacta earned a
salary and bonus for such fiscal year in excess of $100,000.
Summary Compensation Table
Annual Long Term
Compensation Compensation
Securities All Other
Name and Principal Position Salary Underlying Option Compensation
SARs (#)
Altaf S. Nazerali $25,000 (1) 150,000 --
President and CEO $100,000 (2)
Menachem Tassa $120,000 (1) 150,000 --
Vice Executive Vice $120,000 (2)
President, R&D
________________________
(1)Compensation in 1998
(2)Compensation in 1999. This compensation is paid directly to Mr.
Nazerali from Pensbreigh Holdings Ltd. from the monthly consulting fee we pay
to Pensbreigh. See "Employment Contracts - Altaf S. Nazerali."
Employment Contracts
Altaf S. Nazerali
We entered into a Consulting Agreement with Pensbreigh Holdings Ltd., an
independent contractor engaged in the business of providing various corporate
and consulting services to businesses, of which Mr. Nazerali is a shareholder
and officer ("Pensbreigh"), dated as of March 1, 1999. Pursuant to the terms
of the agreement, Pensbreigh, which is controlled by Mr. Nazerali, provides
the services of Mr. Nazerali and others to us. During the initial term of the
agreement, we agreed to pay Pensbreigh a monthly fee of US$16,666.00.
Beginning in October 1999, this fee has been accrued and not paid. Mr.
Nazerali is not an employee of Intacta and is therefore not entitled to any
benefit plans to which regular employees are entitled.
Marco Genoni
We entered into a letter agreement with Mr. Genoni, dated as of September 30,
1998, governing Mr. Genoni's services to us as Vice-President of Marketing, on
a contracting basis. Pursuant to the terms of the
<PAGE>
letter agreement, Mr. Genoni is paid a monthly fee of US$5,000. In addition
to the monthly fee, we granted Mr. Genoni options to purchase 30,000 shares of
common stock of Intacta at U.S.$1.50 per share. Pursuant to the terms of the
letter agreement, we and Mr. Genoni also agreed to a bonus structure as
follows:
- - 20% of any sales made by first reseller, including value added resellers
("VARs") and original equipment manufacturers ("OEMs"), during first year of
employment;
- - 15% of any sales made by any reseller during first year of employment;
- - 10% of any sales made by any reseller during second year of employment;
- - 5% of any sales made by any reseller during third, fourth and fifth years
year of employment;
Noel Bambrough
On March 31, 1999, we entered into an employment agreement with Noel
Bambrough, governing Mr. Bambrough's services to Intacta as Executive Vice
President and Chief Operating Officer. Commencing April 1, 1999 through the
closing of our next round of financing, we will pay Mr. Bambrough U.S. $12,500
per month. Commencing on the first full month of employment after the closing
of our next round of financing, we will pay Mr. Bambrough U.S. $20,833 per
month in base salary. After the closing of our next round of financing, Mr.
Bambrough will also be eligible for a bonus not to exceed $U.S. 100,000 per
year based on the achievement of certain agreed upon business goals and
targets. Pursuant to the terms of the agreement, we granted Mr. Bambrough an
option to purchase 200,000 shares of common stock at a price of U.S. $4.00.
In addition, subject to board of directors' approval, we must issue a minimum
of 10% of any future pools to Mr. Bambrough.
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding stock option
grants to our chief executive officer and one other most highly compensated
executive officer during the fiscal year ended December 31, 1998. The
potential realizable value is calculated based on the assumption that the
common stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the expiration of its term. These numbers are
calculated based on Securities and Exchange Commission requirements and do not
reflect our projection or estimate of future stock price growth. Potential
realizable values are computed by:
- - multiplying the number of shares of common stock subject to a given option
by the exercise price;
- - assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option; and
- - subtracting from that result the aggregate option exercise price.
Option Grants in the Last Fiscal Year
Individual Grants
Name Altaf Nazerali
Number of Securities Underlying Options Granted 150,000
% of Total Options Granted to Employees in Fiscal year (1) 14.9%
Exercise or Base Price (per share)(2) $1.50
Potential Realized Value at Assumed Annual Rates of Stock 6/1/00
Price Appreciation for Option Term
5% $17,200
10% $34,900
Name Menachem Tassa
Number of Securities Underlying Options Granted 150,000
% of Total Options Granted to Employees in Fiscal year (1) 14.9%
Exercise or Base Price (per share)(2) $1.50
Potential Realized Value at Assumed Annual Rates of Stock 6/1/01
Price Appreciation for Option Term
5% $23,400
10% $60,900
Option Exercises and Fiscal Year-End Values
The following table sets forth for our chief executive officer and one other
most highly compensated executive officer, the number of shares acquired upon
exercise of stock options during the fiscal year ended December 31, 1998
and the number of shares subject to exercisable and unexercisable stock
options held at December 31, 1998.
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year-End Option Values
Name Altaf Nazerali
Shares Acquired on Exercise --
Value Realized --
Number of Securities Underlying Unexercised Options
at December 31, 1998
Exercisable --
Unexercisable 150,000
Value of Unexercised In-the-Money Options at
December 31, 1998
Exercisable --
Unexercisable $423,000
Name Menachem Tassa
Shares Acquired on Exercise --
Value Realized --
Number of Securities Underlying Unexercised Options
at December 31, 1998
Exercisable --
Unexercisable 150,000
Value of Unexercised In-the-Money Options at
December 31, 1998
Exercisable --
Unexercisable $423,000
<PAGE>
Stock Option Plan
On June 1, 1999, our board of directors approved the creation of the 1998
Stock Option Plan. Under the plan, the board of directors may grant incentive
and non-qualified options to acquire up to a total of 1,667,100 common shares
to our directors, officers, employees and consultants. To date, our board has
granted options to acquire 1,375,000 common shares.
The plan is intended to retain the services of our valued key employees and
consultants and others that the plan administrator may select to:
- - encourage our employees and consultants to acquire a greater proprietary
interest in Intacta;
- - serve as an aid and inducement in the hiring of new employees; and
- - provide an equity incentive to consultants and others selected by the plan
administrator.
The primary difference between "incentive stock options" and non-qualified
options is the tax treatment of the option holder. Subject to certain
conditions, a holder of an incentive stock can defer recognition of income for
tax purposes until the shares underlying the options are sold. A holder of a
non-qualified option generally recognizes income on the date of exercise.
Incentive stock options may be granted to any individual who, at the time the
option is granted, is an employee of Intacta or any related corporation.
Non-qualified stock options may be granted to employees and to others at the
discretion of the plan administrator. The plan administrator fixes the
exercise price for options in the exercise of its sole discretion, except that
the exercise price for an incentive stock option must be at least the fair
market value per share of the common stock at the date of grant (as determined
by the plan administrator in good faith), or in the case of greater-than ten
percent shareholders, at least one hundred ten percent of the fair market
value per share. The exercise price may be paid in cash or, with the approval
of the plan administrator, by other means, including withholding of option
shares or delivery of previously held shares. Options granted under the plan
vest over a three-year period, with one-third becoming exercisable at the end
of each of the three years following the date of grant. The plan
administrator may accelerate the vesting of options in its sole discretion.
Options are non-transferable except by will or the laws of descent and
distribution or subject to a qualified domestic relations order. With certain
exceptions, vested but unexercised options terminate upon the earlier of:
- - the expiration of the option term specified by the plan administrator at the
date of grant (generally 10 years; or,
- - with respect to Incentive Stock options granted to greater-than ten percent
shareholders, a maximum of five years);
- - the expiration of 30 days from the date of an employee optionee's
termination of employment with us or any related corporation "for cause" as
defined in the plan;
- - the expiration of 90 days from the date of an employee optionee's
termination of employment with us or any related corporation for any reason
whatsoever other than for cause, death or disability (unless, in the case of
non-qualified stock options, extended by the plan administrator); or
- - the expiration of one year from the date of death or disability (as defined
in the plan) of the optionee.
If an employee optionee's employment is terminated by death, any option held
by the optionee is exercisable only by the person or persons to whom such
optionee's rights under the option pass by the optionee's will or by the laws
of descent and distribution of the state or county of the employee optionee's
domicile at the time of death. Unless accelerated in accordance with the
plan, unvested options terminate immediately upon termination of employment of
the optionee by us for any reason, including death or disability, and upon a
change of relationship between the optionee and us, such as from employee to
consultant. The plan administrator may amend or modify the plan, except that
no amendment with respect to an outstanding option may be made over the
objection of the holder of the option (other than those provisions triggering
acceleration of vesting of outstanding options).
<PAGE>
Indemnification of Directors, Officers and Others
Our Articles of Incorporation provide that we shall have the right to
indemnify any person for any liability or expenses incurred by that person by
reason of the fact that he was a director, officer, employee or agent and has
the right to advance or pay the expenses of directors and officers in
defending civil or criminal suit or proceeding to the full extent provided by
the Private Corporation Law of Nevada.
Our Bylaws provide that to the fullest extent permitted by law we may
indemnify our directors, officers and others who were or are a party or are
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding.
We do not maintain directors' and officers' liability insurance as of the date
of this prospectus.
<PAGE>
RELATED PARTY TRANSACTIONS
On May 31, 1998, we entered into an exchange agreement with Corsa S.A.
Holdings, an entity organized under the laws of Luxembourg. Corsa, 90%
controlled by Mr. Arie Halpern and 10% controlled by Shira Advising,
Communication and Investment Ltd., an Israeli corporation controlled by
Yechiel Y. Sharabi, one of our directors, and Hadassa Y. Sharabi, Mr.
Sharabi's wife, owned 69% of our common stock upon closing of the exchange
agreement. Pursuant to the exchange agreement, Corsa transferred 100% of the
outstanding shares of Intacta Delaware Inc. and 99% of the outstanding shares
of Intacta Labs Ltd. to us. In exchange, we issued 11,486,00 shares of common
stock to Corsa. Corsa subsequently sold 7,486,000 shares of its common stock
to some of the Selling Shareholders whose shares we are registering for resale
pursuant to this prospectus.
Pursuant to the exchange agreement, we agreed with Corsa that our board of
directors would be increased from three to seven persons, of which Corsa had
the right to appoint five directors (consisting of Yechiel Y. Sharabi, Amnon
Shai, Joshua Sagui, Marc Nehamkin and Menachem Tassa) and we maintained the
right to appoint two directors (consisting of Altaf Nazerali and Ross Wilmot).
Pursuant to the exchange agreement, we agreed to do the following:
- - enter into a Shareholders' Agreement governing the election of directors;
- - implement an equity incentive plan; and
- - raise an additional $5,000,000 gross through the sale of common stock
following the closing date of the exchange agreement.
We raised an additional $5,000,000 gross through the sale of one million
shares of common stock to MFC Merchant Bank SA in December of 1998 for a total
of $4,000,000 and the conversion into shares of common stock of advances made
to us by Valor Invest Limited for approximately $1,000,000. We are
registering for resale shares of our common stock by MFC Merchant Bank and
Valor Invest Limited pursuant to this prospectus.
Through a series of loans, Valor Invest Limited loaned Intacta a total of
$952,000. On June 30, 1999, Intacta issued 238,000 shares of common stock on
a private placement basis to Valor Invest Limited in repayment of the
$952,000, pursuant to a loan conversion at the rate of $4.00 per share.
During the calendar year 1998, Intacta paid approximately $257,000 to
International Portfolio Management in connection with administrative services
provided to Intacta. Altaf S. Nazerali, President, Chief Executive Officer
and a director of Intacta, is the sole shareholder of International Portfolio
Management. Ross Wilmot, Vice President, Finance and a director of Intacta,
is the Vice President, Finance of International Portfolio Management. Sandra
W. Buschau, the Secretary of Intacta, is a Vice President of International
Portfolio Management.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of our outstanding common stock as of September 30, 1999 for:
- - each person or group that we know owns beneficially more than 5% of our
common stock;
- - each of our directors and executive officers individually; and
- - all directors and executive officers as a group.
Certain rules of the Securities and Exchange Commission define the term,
"beneficial ownership." Under these rules, the term includes shares over
which the indicated beneficial owner exercises voting and/or investment power.
The rules also deem common stock subject to options currently exercisable, or
exercisable within 60 days, to be outstanding for purposes of computing the
percentage ownership of the person holding the options but do not deem such
stock to be outstanding for purposes of computing the percentage ownership of
any other person. The applicable percentage of ownership for each stockholder
is based on 17,909,000 shares of common stock outstanding as of September 30,
1999, together with applicable options for that shareholder. Except as
otherwise indicated, we believe the beneficial owners of the common stock
listed below, based on information furnished by them, have sole voting and
investment power over the number of shares listed opposite their names. The
information provided in the table below assumes no exercise of the
underwriters' over-allotment option.
Percent of
Shares Outstanding
Name and Address Number of Shares Before After
of Beneficial Owner Beneficially Owned Offering Offering
Yehoshua Sagi -- -- --
65 Ben-Gurion Street
Bat-Yam 59372, Israel
Altaf S. Nazerali(1) 192,000 1% 1%
555 Palisade Drive
North Vancouver, B.C. V7R 2H9
Canada
Noel Bambrough -- -- --
670 Tuxedo Place N.W.
Atlanta, GA 30342
USA
Menachem Tassa -- -- --
26 Habani St., #16
Jerusalem 96264, Israel
Ross Wilmot -- -- --
13548 19th Avenue
South Surrey, B.C. V4A 6B4
Canada
Marco Genoni -- -- --
4346 Westmount Avenue
Montreal, QC H3Y 1W5
Canada
Yechiel Y. Sharabi 400,000 2.3% 2.3%
Ha'techiya 12
Holon 58401, Israel
<PAGE>
Amon Shai -- -- --
20 Amzallag St.
Tel Aviv 65148, Israel
Corsa S.A. Holdings(2) 4,000,000 22.3% 22.3%
Rue Notre Dame
Luxembourg
Grand Duchy of Luxembourg
Cybermind AG(3) 1,500,000 8.4% --
All Officers and Directors 592,000 3.3% 3.3%
as a Group (7 Persons)
(1) All of these shares are held indirectly by Mr. Nazerali through his
partial ownership of Pensbreigh Holdings Ltd.
(2) Corsa S.A. Holdings is a Luxembourg holding company 90% controlled by Mr.
Arie Halpern and 10% controlled by Shira Advising, Communication and
Investments Ltd., a company controlled by Mr. Yechiel Y. Sharabi.
(3) Cybermind AG is a selling shareholder whose shares are being registered
for resale on the registration statement of which this prospectus forms a
part. We are registering all 1,500,000 shares held by Cybermind AG; however,
Cybermind AG may sell any, all or none of its shares.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 100,000,000 shares of common stock, $0.0001 par
value per share, and 50,000,000 shares of preferred stock, $0.0001 par value
per share. The following is only a summary of provisions of the common
stock and the preferred stock. It is not complete and may not contain all the
information you should consider before investing in the common stock. You
should carefully read our articles of incorporation and bylaws, which are
included as an exhibit to the registration statement containing this
prospectus.
Common Stock
As of September 30, 1999, we were authorized to issue 100,000,000 shares of
common stock, of which 17,909,000 shares were issued and outstanding held of
record by 45 stockholders. This public offering consists solely of shares of
common stock being resold by selling shareholders. Therefore, this offering
will not affect the total number of shares of common stock issued and
outstanding.
Holders of shares of common stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences of any
outstanding preferred stock, the holders of shares of common stock are
entitled to receive any dividends the board of directors declares out of funds
legally available for the payment of dividends. Upon the liquidation,
dissolution or winding up of Intacta, the holders of shares of common stock
are entitled to share all of our assets remaining after payment of liabilities
and after giving effect to the liquidation preferences of any outstanding
preferred stock. All outstanding shares of common stock are fully paid and
nonassessable.
Preferred Stock
Our articles of incorporation grant our board of directors the authority to
issue up to 50,000,000 shares of preferred stock. Nevada law provides our
board of directors the authority to determine the price, rights, preferences,
privileges and restrictions, including voting rights of those shares without
any further vote or action by the stockholders.
Anti-takeover Effects of Certain Charter and Bylaws Provisions and the Nevada
Business Corporation Act
Nevada law provides that any agreement providing for the merger, consolidation
or sale of all or substantially all of the assets of a corporation be approved
by the owners of at least the majority of the outstanding shares of that
corporation, unless a different vote is provided for in our Article of
Incorporation. Our Articles of Incorporation do not provide for a
super-majority voting requirement in order to approve any such transactions.
Nevada law also gives appraisal rights for certain types of mergers, plans of
reorganization, or exchanges or sales of all or substantially all of the
assets of a corporation. Under Nevada law, a stockholder does not have the
right to dissent with respect to:
- - a sale of assets or reorganization, or
- - any plan of merger or any plan of exchange, if the shares held by the
stockholder are part of a class of shares which are listed on a national
securities exchange or the Nasdaq National Market Systems, or are held of
record by note less than 2,000 shareholders, and the stockholder is not
required to accept for his shares any consideration other than shares of a
corporation that, immediately after the effective time of the merger or
exchange, will be part of a class of shares which are listed on a national
securities exchange or the Nasdaq National Market System, or are held of
record by not less than 2,000 holders.
The Nevada Private Corporation Law also has three provisions designed to deter
take-over attempts:
Control Share Acquisition Program. Under Nevada law, when a person has
acquire or offers to acquire one-fifth, one-third or a majority of the stock
of a corporation, stockholders meeting must be held after delivery of an
"offerors" statement, at the offerors expense, so that the stockholders of
stockholders of the corporation can vote
<PAGE>
on whether the shares proposed to be acquired can exercise voting rights.
Except as otherwise provided in a corporation's article of incorporation, the
approval of the majority of the outstanding stock not held by the offerors is
required so that the stock held by the offerors will have voting rights. The
control share acquisition provisions are applicable to any acquisition of a
controlling interest, unless the articles of incorporation or by-laws of a
corporation in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provides that the control share
acquisition provisions do not apply. We have not elected out of the control
share acquisition provisions of Nevada law.
Combination Moratorium Provision. Nevada law provides that a corporation may
not engage in any "combinations," which is broadly defined to include mergers,
sales and leases of assets, issuances of securities and similar transactions
with an "interested stockholder," which is defined as the beneficial owner of
10% or more of the voting power of the corporation, and certain affiliates of
their associates for three years after an interested stockholder's date of
acquiring the shares, unless the combination or the purchase of the shares by
the interested stockholder is first approved by the board of directors. After
the initial three-year period, any combination must still be approved by a
majority of the voting power not beneficially owned by the interested
stockholder or the interested stockholders affiliates or associates, unless
the aggregate amount of cash and the market value of the consideration other
than cash that could be received by stockholders as a result of the
combination is at least equal to the highest of the highest bid per share of
each class or series of shares, including the common shares, on the date of
the announcement of the combination or on the date the interested stockholder
acquired the shares, or for holders of preferred stock, the highest
liquidation value of the preferred stock.
Other Provisions. Under Nevada law, the selection of a period for achieving
corporate goals is the responsibility of the directors. In addition, the
directors and officers, in exercising their respective powers with a view to
the interest of the corporation,. Amy consider the interest of the
corporations employees, suppliers, creditors and customers, the economy of the
state and the nation, the interest of the economy and of society and the
long-term, as well as short-term, interests of the corporation and its
stockholders, including the possibility that those interest may be best
served by the continued independence of the corporation. The directors may
also resist any change or potential change of control of the corporation if
the directors, by majority vote of a quorum, determine that a change or
potential change is opposed to or not in the best interest of the corporation
"upon consideration of the interest of the corporation's stockholders," or for
one of the other reasons described above. The directors may also take action
to protect the interests of the corporation's stockholders.
Transfer Agent and Registrar
The registrant and transfer agent for our shares of common stock is Corporate
Stock Transfer, Republic Plaza, 370 17th Street, Suite 2350, Denver, Colorado,
80202-4614.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
There are 17,909,000 shares of common stock outstanding, 5,185,000 of which
are freely tradable and 8,874,000 of which are restricted securities that may
be offered by the selling stockholders pursuant to this prospectus as
described below.
Subject to the Registration Statement being declared and remaining effective,
all of the selling stockholder shares that may be offered hereby will be
immediately tradable without restriction or further registration under the
Securities Act.
No prediction can be made as to the effect, if any, that sales of shares of
common stock by the selling stockholders, or even the availability of such
shares for sale will have on the market prices prevailing from time to time.
The possibility that substantial amounts of common stock may be sold in the
public market may adversely affect prevailing market prices for the common
stock and could impair our ability to raise capital through the sale of its
equity securities.
<PAGE>
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling Shareholders. As used
herein, "Selling Shareholders" includes donees and pledgees selling shares
received from a named Selling Shareholder after the date of this prospectus.
All costs, expenses and fees in connection with the registration of the Shares
offered hereby will be borne by us. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of Shares will be borne by the
Selling Shareholders. Sales of Shares may be effected by Selling Shareholders
from time to time in one or more types of transactions (which may include
block transactions) in the over-the-counter market, in negotiated
transactions, through put or call options transactions relating to the Shares,
through short sales of Shares, or a combination of such methods of
sale, at market prices prevailing at the time of sale, or at negotiated
prices. Such transactions may or may not involve brokers or dealers. The
Selling Shareholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of Shares by the Selling Shareholders.
The Selling Shareholders may effect such transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions, or commissions from the Selling Shareholders
and/or purchasers of Shares for whom such broker-dealers may act as agents or
to whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers that act in connection with
the sale of Shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of Shares sold by them while
acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. We have agreed to indemnify each
Selling Shareholder against certain liabilities, including liabilities arising
under the Securities Act. The Selling Shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving
sales of the Shares against certain liabilities, including liabilities arising
under the Securities Act.
Because Selling Shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Shareholders will
be subject to the prospectus delivery requirements of the Securities Act.
We have informed the Selling Shareholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to
their sales in the market.
Selling Shareholders also may resell all or a portion of the Shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
Upon being notified by a Selling Shareholder that any material arrangement has
been entered into with a broker-dealer for the sale of Shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, we will file a supplement to this prospectus,
if required, pursuant to Rule 424(b) under the Act, disclosing (I) the name of
each selling shareholder and of the participating broker-dealer(s), (ii) the
number of shares involved, (iii) the price at which such shares were sold,
(iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify information set out or incorporated by
reference in this prospectus and (vi) other facts material to the transaction.
In addition, upon being notified by a Selling Shareholder that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to
this prospectus.
<PAGE>
LEGAL MATTERS
Dorsey & Whitney LLP will pass upon the legality of the shares offered by this
prospectus.
EXPERTS
The financial statements of Intacta Technologies, Inc. included in this
prospectus and in the registration statement have been audited by BDO Seidman,
LLP and by Meredith, Cardozo, Lanz & Chiu, LLP, whose practice was combined
with BDO Seidman, LLP, as stated in BDO Seidman, LLP's report, independent
certified public accountants, to the extent and for the periods set forth in
their report (which contain an explanatory paragraph regarding Intacta's
ability to continue as a going concern) appearing in this prospectus and in
the registration statement, and are included in reliance upon such report
given upon the authority of said firms as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 covering the shares being sold in this offering. We have
not included in this prospectus some information contained in the registration
statement, and you should refer to the registration statement, including
exhibits and schedules filed with the registration statement, for further
information. You may review a copy of the registration statement from the
public reference section of the Securities and Exchange Commission in Room
1024, Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549; and at
the SEC's Regional Office located at: 7 World Trade Center, Suite 1300, New
York, New York 10048 and 1400 Citicorp Center, 500 West Madison Street,
Chicago, IL 60661. You may also obtain copies of such materials at prescribed
rates from the public reference section at the Commission, Room 1024,
Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549. In addition,
the Securities and Exchange Commission 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 Securities and Exchange Commission.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Intacta Technologies Inc.
Financial Statements
Page
Audited Consolidated Financial Statements F-2
Report of Independent Accountants F-5
Balance Sheets for the periods ended December 31, 1997 and
December 31, 1998 F-6
Statements of Operations for the periods ended December 31,
1996, December 31, 1997 and December 31, 1998 F-8
Statements of Shareholders' Equity/Deficiency for the periods
ended December 31, 1996, December 31, 1997 and December
31, 1998 F-9
Statements of Cash Flows for the periods ended December 31,
1996, December 31, 1997 and December 31, 1998 F-10
Notes to Financial Statements F-11
Unaudited Financial Statements F-24
Balance Sheet for the nine months ended September 30, 1999 F-24
Consolidated Statement of Operations and Deficit for the nine
months ended September 30, 1999 F-25
Consolidated Statement of Cash Flows for the nine months
ended September 30, 1999 F-26
<PAGE>
ITI InfoImaging
Technologies, Inc.
Financial Statements
Years Ended December 31, 1998, 1997 and 1996
<PAGE>
ITI InfoImaging
Technologies, Inc.
Financial Statements
Years Ended December 31, 1998, 1997 and 1996
<PAGE>
ITI InfoImaging Technologies, Inc.
Contents
Audited Consolidated Financial Statements F-2
Report of Independent Certified Public Accountants F-5
Financial Statements
Balance sheets F-6
Statements of operations F-8
Statements of shareholders' equity (deficiency) F-9
Statements of cash flows F-10
Notes to financial statements F-11-F-23
<PAGE>
Report of Independent Certified Public Accountants
To The Board of Directors and Shareholders of
ITI InfoImaging Technologies, Inc.
We have audited the consolidated accompanying balance sheet of ITI InfoImaging
Technologies, Inc. as of December 31, 1998 and the related consolidated
statements of operations, shareholders' equity (deficiency) and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of one foreign subsidiary, whose statements reflect total assets of
$801,500 as of December 31, 1998 and total revenues of $0 for the year then
ended. Those statements were audited by other auditors whose report dated
March 16, 1999 has been furnished to us, and our opinion, insofar as it
relates to the amounts included for such subsidiary, is based solely on the
report of the other auditors. The combined balance sheet of ITI InfoImaging
Technologies, Inc. and Fontech Ltd., the predecessor entity, as of December
31, 1997 and the combined statements of operations, shareholders' deficiency
and cash flows for the years ended December 31, 1997 and 1996 were audited
by Meredith, Cardozo, Lanz & Chiu LLP (MCLC), whose practice has been combined
with our Firm and whose reports dated February 20, 1998 and August 11, 1998,
respectively, included explanatory paragraphs that discussed conditions that
raised substantial doubt about the Company's ability to continue as a going
concern. MCLC did not audit the financial statements of Fontech, whose
statements reflected total assets of $261,000 as of December 31, 1997 and
total revenues of $26,100 and $20,600 for the years ended December 31, 1997
and 1996, respectively. Those statements were audited by other auditors whose
report dated February 12, 1998 had been furnished to MCLC, whose opinion,
insofar as it related to the amounts included for Fontech, was based solely on
the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe our audit provides a reasonable basis
for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of ITI InfoImaging Technologies,
Inc. at December 31, 1998, and the results of its operations and cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations and, at December 31, 1998, has an accumulated deficit that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
San Jose, California
April 2, 1999
<PAGE>
ITI InfoImaging Technologies, Inc.
Balance Sheets
(Consolidated) (Combined)
December 31, 1998 1997
Assets
Current Assets:
Cash and cash equivalents (Note 12) $3,047,100 $ 169,100
Accounts receivable, less allowance for
doubtful accounts of $18,400 and
$68,400, respectively (Notes 11 and 12) 11,400 195,800
Inventories (Note 2) 298,700 474,700
Employee and other receivables 44,400 9,300
Prepaid expenses and other current assets 14,700 17,300
---------- ----------
Total Current Assets 3,416,300 866,200
Property and Equipment, net (Note 3) 231,700 116,600
Other Assets, net 112,700 169,000
---------- ----------
3,760,700 1,151,800
========== ==========
See accompanying notes to financial statements.
<PAGE>
ITI InfoImaging Technologies, Inc.
Balance Sheets
(Consolidated) (Combined)
December 31, 1998 1997
Liabilities and Shareholders' Equity (Deficiency)
Current Liabilities:
Accounts payable 93,800 261,800
Advances from shareholder (Notes 4
and 15) 1,321,000 9,919,800
Accrued expenses (Note 5) 77,300 190,000
Deferred revenue -- 51,300
Notes payable -- 136,700
---------- ----------
Total Current Liabilities 1,492,100 10,559,600
---------- ----------
Commitments and Contingencies (Note 6)
Shareholders' Equity (Deficiency)
(Notes 7 and 13):
Preferred stock, $.0001 par value;
50,000,000 shares authorized; no shares
issued and outstanding -- --
Common stock, $.0001 par value;
100,000,000 shares authorized; 17,671,000
and 11,486,000 shares issued and
outstanding, respectively 1,800 1,200
Additional paid-in capital 15,651,600 1,498,800
Accumulated deficit (13,384,800) (10,907,800)
---------- ----------
Total Shareholders' Equity (Deficiency) 2,268,600 (9,407,800)
---------- ----------
3,760,700 1,151,800
========== ==========
See accompanying notes to financial statements.
<PAGE>
ITI InfoImaging Technologies, Inc.
Statements of Operations
(Consolidated) (Combined) (Combined)
Years ended December 31, 1998 1997 1996
Net Sales (Notes 11) 137,800 894,900 1,019,600
Cost of Sales (Note 2) 336,300 357,500 514,100
---------- ---------- ----------
Gross Margin (198,500) 537,400 505,500
---------- ---------- ----------
Operating Expenses: (Note 8)
Research and development 773,800 343,200 331,900
Sales and marketing 113,100 297,000 526,800
General and administrative 1,160,300 1,353,100 1,605,200
---------- ---------- ----------
Total Operating Expenses 2,047,200 1,993,300 2,463,900
---------- ---------- ----------
Loss From Operations (2,245,700)(1,455,900) (1,958,400)
---------- ---------- ----------
Other (Expense) Income:
Interest expense (210,000) -- --
Interest expense shareholder (Note 4) -- (755,300) (578,700)
Other (19,600) 13,100 8,100
---------- ---------- ----------
Total Other (Expense) Income (229,600) (742,200) (570,600)
---------- ---------- ----------
Loss Before Provision for Income
Taxes (2,475,300)(2,198,100) (2,529,000)
Provision for Income Taxes (Note 9) 1,700 1,600 800
---------- ---------- ----------
Net Loss (2,477,000)(2,199,700) (2,529,800)
========== ========== ==========
Basic and Diluted Loss per Common Share (0.15) (0.19) (0.22)
========== ========== ==========
Basic and Diluted Weighted Average
Common Shares Outstanding 16,701,583 11,486,000 11,486,000
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
ITI InfoImaging Technologies, Inc.
Statements of Shareholders' Equity (Deficiency)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
January 1, 1996 1,320,878 1,500,000 -- (6,178,300)(4,678,300)
Recapitalization 10,165,122 (1,498,800) 1,498,800 -- --
Net loss -- -- -- (2,529,800)(2,529,800)
---------- ---------- ---------- ---------- ----------
December 31, 1996 11,486,000 1,200 1,498,800 (8,708,100)(7,208,100)
Net loss -- -- -- (2,199,700)(2,199,700)
---------- ---------- ---------- ---------- ----------
December 31, 1997 11,486,000 1,200 1,498,800 (10,907,800)(9,407,800)
Contributed capital -- -- 183,600 -- 183,600
Contributed capital
from principal
shareholder for
retirement of debt -- -- 8,929,800 -- 8,929,800
Common stock issued
in connection with
reverse
acquisition 5,185,000 500 1,439,500 -- 1,440,000
Issuance of common
stock in Private
Placement, net of
issuance costs of
$400,000 1,000,000 100 3,599,900 -- 3,600,000
Net loss -- -- -- (2,477,000)(2,477,000)
---------- ---------- ---------- ---------- ---------
December 31, 1998 17,671,000 1,800 15,651,600 (13,384,800) 2,268,600
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
ITI InfoImaging Technologies, Inc.
Statements of Cash Flows (Note 13)
Years ended December 31, 1998 1997 1996
Cash Flows From Operating Activities:
Net loss (2,477,000) (2,199,700) (2,529,800)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 92,100 89,200 77,300
Allowance for doubtful accounts -- 54,400 --
Write-down of inventory (Note 2) 240,100 -- --
Write-down of other assets 49,000 -- --
Changes in operating assets
and liabilities:
Accounts receivable 184,400 (105,300) (135,200)
Inventories (64,100) 71,600 (546,300)
Employee and other receivables (35,100) 58,600 (66,700)
Prepaid expenses and other
current assets 2,600 (11,200) (4,400)
Accounts payable (168,000) 17,100 78,600
Accrued interest on advances
from shareholder -- 568,300 434,200
Accrued expenses (112,700) (17,200) 107,600
Deferred revenue (51,300) (223,900) 134,000
---------- ---------- ----------
Net Cash Used In Operating
Activities (2,340,000) (1,698,100) (2,450,700)
---------- ---------- ----------
Cash Flows From Investing Activities:
Cash acquired in purchase of
business 1,440,000 -- --
Capital expenditures (191,900) (22,900) (91,900)
Other assets (8,000) (70,400) (29,400)
---------- ---------- ----------
Net Cash Provided By (Used) In
Investing Activities 1,240,100 (93,300) (121,300)
---------- ---------- ----------
Cash Flows From Financing Activities:
Contributed capital 183,600 -- --
Net proceeds from Private Placement 3,600,000 -- --
Advances from shareholder 3,062,000 2,064,100 2,533,500
Repayments of shareholder advances (2,731,000) -- --
Advances on notes payable -- -- 148,400
Repayments of notes payable (136,700) (161,900) (133,700)
---------- ---------- ----------
Net Cash Provided By Financing
Activities 3,977,900 1,902,200 2,548,200
---------- ---------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents 2,878,000 110,800 (23,800)
Cash and Cash Equivalents,
beginning of year 169,100 58,300 82,100
---------- ---------- ----------
Cash and Cash Equivalents,
end of year 3,047,100 169,100 58,300
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
1. Summary of Accounting Policies
The Company
ITI InfoImaging Technologies, Inc. (formerly InfoImaging Technologies, Inc., a
public corporation) (the Company), a Nevada corporation, was incorporated in
October 1997.
On May 31, 1998, the Company completed the acquisition of 100% of the
outstanding common stock of ITI InfoImaging Technologies, Inc. (ITI), a
Delaware corporation, and Fontech Ltd. (Fontech) in exchange for 11,486,000
shares of the Company's $.0001 par value common stock. For accounting
purposes, the acquisition has been treated as the acquisition of the Company
by ITI and Fontech, with the combined entity of ITI and Fontech, companies
under common control, as the acquirer (reverse acquisition). Since the
Company prior to the reverse acquisition was a public corporation with no
significant operations, pro forma information giving effect to the acquisition
is not presented. All shares and per share data prior to the acquisition have
been restated to reflect the stock issuance as a recapitalization of ITI. The
shares held by the shareholders of the Company prior to the acquisition
(5,185,000 shares) have been recognized as if they were issued in
connection with the acquisition of the Company by ITI.
ITI was incorporated in September 1994. ITI is engaged in the sale and
marketing of advanced compression and imaging technology products used for
transmitting and storing information. Products are sold through both direct
and indirect channels of top retailers, resellers and distributors. Bundled
and private labeled versions of the products are also sold through well-known
and recognized original equipment manufacturer customers around the world.
Fontech, an Israeli corporation, began operations in June 1992. Fontech
conducts product research, development and manufacturing in the high tech area
of Beer-Shiva, Israel, and is currently conducting research into even greater
time and cost savings techniques for easily transmitting and storing data in
secure formats.
Basis of Presentation
The accompanying consolidated 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
consolidated financial statements, the Company has an accumulated deficit of
$13,384,800 as of December 31, 1998, and incurred losses of $2,477,000,
$2,199,700, and $2,529,800 for the years ended December 31, 1998, 1997 and
1996, respectively.
These conditions give rise to substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of assets or the
amount and classification 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
<PAGE>
ITI InfoImaging Technologies Inc.
Notes to Financial Statements
to obtain additional financing as may be required and ultimately to attain
profitability. The Company is actively marketing its existing and new
products, which it believes will ultimately lead to profitable operations, and
is seeking to raise additional capital. There can be no assurance that the
Company will be successful in its efforts.
Consolidation and Combination
The accompanying consolidated financial statements for the year ended December
31, 1998 include the amounts of the Company and its wholly owned subsidiaries.
The combined financial statements for the years ended December 31, 1997 and
1996 include the amounts of ITI and Fontech. All intercompany accounts and
transactions have been eliminated in the consolidated and combined financial
statements.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with original maturities of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first in, first out) and market.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and
amortization. Depreciation is provided using the straight line method over
the estimated useful lives of the assets, generally ranging from three to
seven years. Leasehold improvements are amortized using the straight line
method over the lesser of the lease term and the estimated useful lives of the
related assets, generally three to seven years.
Other Assets
Other assets, consisting principally of patents, are amortized on a
straight-line basis over the estimated useful lives of the assets, generally
ten years. As of December 31, 1998 and 1997, accumulated amortization
aggregated approximately $55,500 and $40,400, respectively.
Long Lived Assets
Long-lived assets, such as patents and property and equipment, are evaluated
for impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows resulting from the use of these assets. When
any such impairment exists, the related assets will be written down to fair
value.
Revenue Recognition
Sales are recognized at the time of shipment provided no significant
obligations remain and collectibility is probable.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
Advertising Costs
The cost of advertising is expensed as incurred. Advertising costs for the
years ended December 31, 1998, 1997 and 1996 were approximately $48,100,
$261,000 and $150,400, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes,
which requires an asset and liability approach. This approach results in the
recognition of deferred tax assets (future tax benefits) and liabilities for
the expected future tax consequences of temporary differences between the book
carrying amounts and the tax basis of assets and liabilities. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be deductible or taxable when the assets and
liabilities are recovered or settled. Future tax benefits are subject to a
valuation allowance when management believes it is more likely than not that
the deferred tax assets will not be realized.
Earnings Per Share
The Company has adopted SFAS No. 128, Earnings Per Share, and has restated all
periods. Basic earnings per share is computed using the weighted-average
number of common shares outstanding during the period. Diluted earnings per
share is computed using the weighted-average number of common and common
equivalent shares outstanding during the period, if dilutive.
As a result of the loss incurred in the year ended December 31, 1998, the
662,100 stock options were antidilutive and accordingly, were excluded from
the computation of loss per share. There were no common equivalent shares
outstanding in the years ended December 31, 1997 and 1996.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Adoption of New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133,
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
requires companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge,
the objective of which is to match the timing of gain or loss recognition on
the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged assets or liability that are attributable to the hedged
risk or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standard on January 1, 2000 to affect its
financial statements.
In February 1998, the FASB issued SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits, which standardizes the disclosure
requirements for pension and other postretirement benefits. The adoption of
SFAS No. 132 did not have a material impact on the Company's current
disclosures.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This statement establishes standards for
the way companies report information about operating segments in its financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The disclosures
prescribed by SFAS No. 131 did not have a material impact on the Company's
financial statements as the Company operates as one business segment.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
SFAS No. 130 establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non owner sources. Examples of items
to be included in comprehensive income, which are excluded from net income,
include foreign currency translation adjustments and unrealized gain/loss on
available for sale securities. The disclosure prescribed by SFAS No. 130 did
not have a material impact on the Company.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents:
The carrying amount reported in the consolidated balance sheets for cash and
cash equivalents approximate fair values.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
Short term debt:
The fair value of short term debt (advances from shareholder and notes
payable) approximates cost because of the short period of time to maturity.
As of December 31, 1998 and 1997, the fair values of the Company's financial
instruments approximate their historical carrying amounts.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
Reclassifications
Certain 1997 and 1996 combined financial statement amounts have been
reclassified to conform to the 1998 presentation.
2. Inventories
As of December 31, 1998 and 1997, inventories comprised:
1998 1997
Components 181,000 --
Work in process 59,100 --
Finished products 58,600 474,700
---------- ----------
298,700 474,700
========== ==========
During 1998, the Company wrote-off approximately $240,100 of its inventory due
to reduced sales and obsolescence, which is included in cost of sales.
3. Property and Equipment
As of December 31, 1998 and 1997, property and equipment comprised:
1998 1997
Equipment 284,300 219,400
Purchased software 121,500 --
Furniture and fixtures 58,900 53,400
Vehicles 38,200 38,200
---------- ----------
502,900 311,000
Less accumulated depreciation 271,200 194,400
---------- ----------
231,700 116,600
========== ==========
4. Advances From Shareholder
Advances from shareholder represent non-interest bearing cash advances for
operating expenses that are due upon demand. During the year ended December
31, 1998, the Company received additional paid-in capital from its principal
shareholder in exchange for the retirement of $8,929,800 of debt, which
included accrued interest of approximately $1,200,000.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
5. Accrued Expenses
As of December 31, 1998 and 1997, accrued expenses comprised:
1998 1997
Salaries and related expenses 45,500 50,300
Advertising and consulting -- 70,000
Severance 23,300 32,800
Vacation 6,800 28,200
Other 1,700 8,700
---------- ----------
77,300 190,000
========== ==========
6. Commitments
Leases
The Company leases its facilities and certain equipment under operating
leases, which expire through August 1999. The facility leases require the
Company to pay certain maintenance and operating expenses, such as utilities,
property taxes, and insurance costs. Rent expense related to these operating
leases was $111,400, $120,500 and $82,500 for the years ended December 31,
1998, 1997 and 1996, respectively.
7. Shareholders' Equity
Stock Option Plan
In June 1998, the Company adopted its 1998 Incentive Stock Option Plan that
provides for the granting of stock options to employees (including officers
and directors) at prices not less than 85% of the fair market value of the
common shares on the date of the grant. Options vest over a maximum of five
years and expire in ten years. The Company has reserved 1,667,100 shares of
its common stock for issuance under the incentive stock option plan.
A summary of the status of the Company's stock option plan as of December 31,
1998, and changes during the year then ended, is presented in the following
table:
Options Options Outstanding
Available Wtd.-Avg.
For Grant Shares Exer. Price
Beginning 1,667,100 -- --
Granted (1,005,000) 1,005,000 $1.50
---------- ---------- ----------
Ending 662,100 1,005,000 $1.50
========== ========== ==========
Exercisable at year-end --
==========
Weighted average fair value of options granted during year $0.37
==========
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
All the options were granted in June 1998. Accordingly, the options have a
remaining contractual life of 9.5 years.
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees. However, no compensation cost has been recognized, as no options
were issued below fair market value.
SFAS No. 123, Accounting for Stock-Based Compensation, requires the Company to
provide pro forma information regarding the net loss as if the compensation
cost for the Company's stock option plan had been determined in accordance
with the fair market value based method prescribed by SFAS No. 123. The
Company estimates the fair value of stock options at the grant date by using
the minimum value method with the following assumptions used for the grants
during 1998: dividend yield of 0; risk-free interest rate of 5.70%; and an
expected life of five years for all plan options.
Under the accounting provisions of SFAS No. 123, the Company's net loss and
basic and diluted loss per common share would have been adjusted to the pro
forma amounts indicated below:
Years ended December 31, 1998 1997
Net loss, as reported (2,477,000) (2,199,700)
========== ==========
Net loss, pro forma (2,514,200) (2,199,700)
========== ==========
Basic and diluted loss per share, as reported(0.15) (0.22)
========== ==========
Basic and diluted loss per share, pro forma (0.15) (0.22)
========== ==========
8. Related Party Transactions
During 1998, the Company received administrative, consulting, management and
marketing services from several organizations that are owned by directors or
shareholders of the Company. These services aggregated approximately $294,200
for the year ended December 31, 1998. There were no similar related party
transactions for the years ended December 31, 1997 and 1996.
9. Income Taxes
For the years ended December 31, 1998, 1997 and 1996, the provision for income
taxes consists of current minimum state taxes.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
The following table summarizes the differences between the income tax expense
and the amount computed by applying the Federal income tax rate of 34% in
1998, 1997 and 1996 to loss before income taxes:
Years ended December 31, 1998 1997 1996
Federal income tax benefit at
statutory rate (841,600) (747,300) (859,900)
State income tax benefit, net of
federal tax benefit (144,300) (128,100) (147,400)
Foreign operations not subject to
taxes 277,000 179,100 180,100
Tax benefits not currently
recognizable 91,900 122,400 22,500
Change in valuation allowance 618,700 575,500 805,500
---------- ---------- ----------
1,700 1,600 800
========== ========== ==========
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
As of December 31, 1998 and 1997, deferred tax assets (liabilities) comprise:
1998 1997
Net operating loss carryforward 3,965,000 3,292,400
Accumulated depreciation and
amortization 10,300 7,100
---------- ----------
Total deferred tax assets 3,975,300 3,299,500
---------- ----------
Reserves not currently deductible (193,500) (127,800)
Other, net (2,700) (11,300)
---------- ----------
Total deferred tax liabilities (196,200) (139,100)
---------- ----------
Net deferred tax asset 3,779,100 3,160,400
Valuation allowance (3,779,100) (3,160,400)
---------- ----------
-- --
========== ==========
The Company has net operating loss carryforwards available to reduce future
taxable income, if any, of approximately $10,803,200, $5,094,400 and $614,300
for Federal, California state and foreign tax purposes, respectively. The
benefits from these carryforwards expire through 2018. As of December 31,
1998, management believes it cannot be determined that it is more likely than
not that these carryforwards and its other deferred tax assets will be
realized, and accordingly, fully reserved for these deferred tax assets.
In 1998, the Company experienced a "change of ownership" as defined by the
provisions of the Tax Reform Act of 1986. As such, the Company's future
utilization of its net operating loss carryforwards will be limited; however,
the Company has not yet determined the amount of limitation.
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
10. Employee Profit Sharing Plan
The Company has a profit sharing plan (the Plan) covering all eligible
employees meeting certain age and service requirements. Under the Plan, the
Board of Directors, at their election, can authorize contributions up to a
maximum of 3% of eligible participants' total compensation. For the years
ended December 31, 1998 and 1997, the Company contributed $2,500 and $9,800,
respectively. The Company made no contributions for the year ended December
31, 1996.
11. Major Customers and Export Sales
Major Customers
During 1998, four customers accounted for approximately 27%, 26%, 15% and 12%
of net sales. The customer with 27% of net sales had an accounts receivable
balance of $7,200 as of December 31, 1998, while the other major customers had
a zero balance.
During 1997, two customers accounted for approximately 14% and 11% of net
sales, with accounts receivable of $5,400 and $28,800 as of December 31, 1997,
respectively.
During 1996, one customer accounted for approximately 11% of net sales, with
accounts receivable of $66,100 as of December 31, 1996.
Geographic Segments
The following table presents sales and other financial information of Fontech,
located in Israel, for the years ended December 31, 1998, 1997 and 1996:
Years ended December 31, 1998 1997 1996
Sales to unaffiliated customers -- 26,100 20,600
========== ========== ==========
Inter-area sales to affiliates 49,900 714,100 696,600
========== ========== ==========
Operating losses (601,600) (272,900) (310,000)
========== ========== ==========
Long-lived assets 325,200 185,500 95,400
========== ========== ==========
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
Export Sales
During the year ended December 31, 1998, the Company had sales of
approximately $78,400 to the Far East. There were no other significant export
sales for 1998. Export sales for the years ended December 31, 1997 and 1996,
were as follows:
Years ended December 31, 1997 1996
Far East 92,100 526,500
Africa/Middle East 25,700 50,700
South America -- 34,900
Other 12,900 8,100
---------- ----------
130,700 620,200
========== ==========
12. Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentration
of credit risk, consist principally of cash and cash equivalents and trade
receivables. The Company places its cash and cash equivalents with high
quality financial institutions and, by policy, limits the amounts of credit
exposure to any one financial institution.
A significant portion of the Company's accounts receivable are derived from
one major class of customer (distributors) with the remainder spread across
many other customers in various industries. The Company believes any risk of
accounting loss is significantly reduced due to provision being made at the
date of sale for returns and allowances, diversity of its products, end
customers and geographic sales areas. The Company performs credit evaluation
of its customers' financial condition whenever necessary. The Company
generally does not require cash collateral or other security to support
customer receivables.
13. Statements of Cash Flows
Cash was paid during the years ended December 31, 1998, 1997 and 1996 for:
Years ended December 31, 1998 1997 1996
Income taxes 1,700 1,600 2,400
========== ========== ==========
Interest 68,300 52,100 1,900
========== ========== ==========
<PAGE>
ITI InfoImaging Technologies, Inc.
Notes to Financial Statements
During the year ended December 31, 1998, the Company's non-cash financing
activities included the receipt of additional paid-in capital in exchange for
the retirement of $8,929,800 of debt. There were no non-cash activities in the
years ended December 31, 1997 and 1996.
14. Year 2000 Issue (Unaudited)
Like other companies, the Company could be adversely affected if the computer
systems that the Company and its providers' use do not properly process and
calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices, such
as production equipment, elevators, etc. At this time, because of the
complexities involved in the issue, management cannot provide assurances that
the Year 2000 issue will not have an impact on the Company's operations.
15. Subsequent Events
On January 4, 1999, the Company purchased a $2,575,000 EuroSwiss Securities
note, maturing May 31, 1999, with interest at 6.75%. On February 19, 1999, the
Company redeemed $500,000 of this note and used $250,000 of this amount to pay
down its advances from shareholder.
<PAGE>
INTACTA TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
BALANCE SHEET
AS AT SEPTEMBER 30, 1000
(US Dollars)
1999 1998
ASSETS
CURRENT ASSETS
Cash 1,443,683 612,752
Accounts receivable 42,231 89,705
Inventory 307,404 290,642
---------- ----------
1,793,318 993,099
CAPITAL ASSETS
Computer hardware, furniture, and
other equipment 177,892 129,940
OTHER ASSETS 115,431 113,215
---------- ----------
2,086,641 1,236,254
========== ==========
LIABILITIES
CURRENT LIABILITIES
Accounts payable 257,500 340,077
Due to related parties 173,505 126,599
Shareholder loan 89,000 1,671,000
---------- ----------
520,005 2,137,676
SHAREHOLDERS' EQUITY
CAPITAL STOCK 1,824 2,901,342
ADDITIONAL PAID-IN CAPITAL 16,603,710 9,113,430
DEFICIT (15,038,898) (12,916,794)
---------- ----------
2,086,641 1,236,254
========== ==========
<PAGE>
INTACTA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
1999 1998
REVENUES
Product sales 116,267 182,029
Other revenue 88,494 130,550
Cost of goods sold -- (259,244)
---------- ----------
GROSS PROFIT 204,761 53,335
---------- ----------
EXPENSES
Sales and marketing 81,105 246,977
Research and development 618,080 830,485
Administration 1,071,039 668,774
Interest on short-term debt, net 8,290 253,678
Amortization 73,788 58,477
---------- ----------
1,852,302 2,058,391
---------- ----------
NET LOSS FOR THE PERIOD BEFORE TAXES AND
OTHER (1,654,098) (2,009,027)
Taxes 6,557 3,971
Other -- --
---------- ----------
NET LOSS FOR THE PERIOD (1,654,098) (2,009,027)
DEFICIT BEGINNING OF PERIOD (13,384,800) (10,907,767)
---------- ----------
DEFICIT END OF PERIOD (15,038,898) (12,916,794)
========== ==========
<PAGE>
INTACTA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
1999 1998
OPERATING ACTIVITIES
Net loss for the period (1,654,098) (2,009,027)
Amortization of fixed assets 73,788 58,477
Decrease (Increase) in accounts receivable 28,269 194,976
Decrease (Increase) in inventory (8,704) 184,021
Increase (Decrease) in accounts payable 86,534 (299,763)
Increase (Decrease) in related party payables173,505 70,272
---------- ----------
(1,300,706) (1,801,044)
---------- ----------
INVESTING ACTIVITIES
Fixed assets (14,880) (71,780)
Deferred charges (7,831) 55,774
---------- ----------
(22,711) (16,006)
---------- ----------
FINANCING ACTIVITIES
Shareholder loans (1,232,000) (7,264,659)
Capitalization of loans 952,000 9,113,430
Shares issued on acquisition, net -- 1,401,942
Notes payable -- (990,000)
---------- ----------
(280,000) 2,260,713
---------- ----------
INCREASE/(DECREASE) IN CASH DURING
THE PERIOD (1,603,417) 443,663
CASH - BEGINNING OF PERIOD 3,047,100 169,089
---------- ----------
CASH - END OF PERIOD 1,443,683 612,752
========== ==========
<PAGE>
8,874,000 Shares To Be Sold
by Current Shareholders
Common Stock
PROSPECTUS
, 2000
Dealer Prospectus Delivery Obligation:
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Amount
Securities and Exchange Commission Registration Fee 5,646
Legal Fees and Expenese 50,000
Accounting Fees and Expenses 10,000
Printing and Engraving Expenses 3,000
Miscellaneous Expenses 5,000
------
Total 73,646
======
Item 14. Indemnification of Directors and Officers.
Pursuant to Nevada Revised Statutes Section 78.7502 and 78.751, our Articles
of Incorporation and bylaws provide for the indemnification of our officers
and directors. Mandatory indemnification is required for present and former
directors. However, the director must have conducted himself in good faith
and reasonably believes that his conduct was in, or not opposed to, our best
interests. In a criminal action he must not have had a reasonable cause to
believe his conduct was unlawful. Advances for expenses may be made if the
director affirms in writing that he believes he has met the standards and that
he will personally repay the expense if it is determined he did not meet the
standards. We provide permissive indemnification for officers, employees or
agents. Our Board must approve such indemnification and the standards and
limitations are the same as for a director.
We will not indemnify a director or officer adjudged liable due to his
negligence or willful misconduct toward us, adjudged liable to us, or if he
improperly received personal benefit. Indemnification in a derivative action
is limited to reasonable expenses incurred in connection with the proceeding.
Also, we are authorized to purchase insurance on behalf of an individual for
liabilities incurred whether or not we would have the power or obligation to
indemnify him pursuant to our bylaws.
Item 15. Recent Sales of Unregistered Securities.
On November 8, 1997, the Company issued 4,000,000 shares of Common Stock on a
private placement basis to seventeen institutional investors for an aggregate
offering price of $600,000 in cash. The Company issued an additional 60,000
shares of Common Stock to two agents, West America and Christopher Dieterich,
as payment for commissions and fees in connection with the offering.
On December 19, 1997, the Company issued 975,000 shares of Common Stock on a
private placement basis to eight institutional investors for an aggregate
offering price of $390,000 in cash.
On April 30, 1998, the Company issued 117,000 shares of Common Stock on a
private placement basis to Gestibroker Consulting for an aggregate offering
price of $351,000 in cash.
On May 12, 1998, the Company issued 33,000 shares of Common Stock on a private
placement basis to Francis Pizzulli for an aggregate offering price of $99,000
in cash.
On May 31, 1998, pursuant to the terms of an Exchange Agreement between the
Company and Corsa S.A. Holdings ("Corsa"), the Company issued 11,486,000
shares of Common Stock on a private placement basis to Corsa in exchange for
the transfer of 100% of the outstanding shares of InfoImaging Technologies
Inc., a Delaware corporation, and 99% of the outstanding shares of Fontech
Ltd., an Israeli corporation, the current subsidiaries of the Company.
<PAGE>
On December 31, 1998, the Company issued 1,000,000 shares of Common Stock on a
private placement basis to MFC Merchant Bank S.A. for an aggregate offering
price of $4,000,000 in cash. Pursuant to the terms of an Agency Agreement
dated October 23, 1998, the Company paid $400,000 to Barons Financial Services
(U.K.) Ltd., the agent for the offering.
On June 30, 1999, the Company issued 238,000 shares of common stock on a
private placement basis to Valor Invest Limited in repayment of a loan of
$952,000 pursuant to a loan conversion at the rate of $4.00 per share.
With the exception of the May 12, 1998 offer and sale of securities, the
Company relied on the exclusion from registration provided by Regulation S
under the Securities Act of 1933, as amended (the "Securities Act") in
connection with the offer and sale of securities in the above transactions.
In connection with the May 12, 1998 offer and sale of securities to Francis
Pizzulli, the Company relied on the exemption from registration provided by
Regulation D under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
Exhibits
Exhibit No. Description
3.1 Articles of Amendment and Articles of Incorporation of
Intacta Technologies Inc.
3.2 Bylaws of Intacta Technologies Inc.
4.1 Specimen Stock Certificate
5.1* Opinion of Dorsey & Whitney LLP
10.1+ Licensing Agreement dated July 19, 1999, between registrant
and DataLode Inc.
10.2+ International Distributor Agreement dated September 20,
1997, between registrant and Orbit Company, Ltd.
10.3+ International Distributor Agreement dated June 28, 1996,
between registrant and Rexton Corporation
10.4+ License Agreement dated May 31, 1997, between registrant and
Brother Industries, Ltd.
10.5+ License Agreement dated April 29, 1997, between registrant
and Brother Industries, Ltd.
10.6+ Authorized OEM Agreement dated August 6, 1996, between
registrant and SmithMicro Software, Inc.
10.7 Sublease Agreement dated September 16, 1999 between Outdoor
West, Inc. and registrant
10.8 Tenancy Agreement dated August 31, 1999 between Mrs. Hana
Kimchi and Fontech Ltd. (English translation of original
Hebrew agreement)
10.9 Shareholders Agreement dated May 31, 1998, among registrant,
Valor Invest, Ltd. and Corsa SA Holdings
10.10 1998 Stock Option Plan
10.11 Consulting Agreement dated October 1, 1998, between
registrant and Pensbreigh Holdings Ltd.
10.12 Letter Agreement dated September 30, 1998, between
registrant and Marco Genoni.
10.13 Agreement dated March 31, 1999, between registrant and Noel
R. Bambrough.
21.1 List of subsidiaries of registrant
<PAGE>
23.1 Consent of BDO Siedman, LLP
23.2* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
- ------------------
* To be filed by amendment.
+ Confidential treatment has been requested as to certain portions of this
exhibit. Omitted portions will be filed separately with the Securities and
Exchange Commission.
Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
Item 17. 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 Securities and Exchange Commission
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 of
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 hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names by the underwriter to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(3) For purposes of determining any liability under the Securities Act, 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 pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(4) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Vancouver, province of British Columbia, on February 14, 2000.
Intacta Technologies Inc.
By:/s/ Altaf S. Nazerali
Altaf S. Nazerali
President, Chief Executive Officer and
Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of
Altaf S. Nazerali and Ross Wilmot his or her attorney-in-fact and agent, with
the full power of substitution and resubstitution and full power to act
without the other, for them in any and all capacities, to sign any and all
amendments, including post-effective amendments, and any registration
statement relating to the same offering as this registration that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, as amended, to this registration statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Altaf S. Nazerali President, Chief Executive Officer February 14, 2000
Altaf S. Nazerali and Director
/s/ Ross Wilmot Vice President, Finance and February 14, 2000
Ross Wilmot Director
/s/ Yehoshua Sagi Director February 14, 2000
Yehoshua Sagi
/s/ Noel Bambrough Executive Vice President, Chief February 14, 2000
Noel Bambrough Operating Officer and Director
/s/ Menachem Tassa Executive Vice President, Research February 14, 2000
Menachem Tassa and Development and Director
/s/ Yechiel Y. Sharabi Director February 14, 2000
Yechiel Y. Sharabi
/s/ Amnon Shai Director February 14, 2000
Amnon Shai
<PAGE>
Exhibit Index
Exhibit No. Description
3.1 Articles of Amendment and Articles of Incorporation of Intacta
Technologies Inc.
3.2 Bylaws of Intacta Technologies Inc.
4.1 Specimen Stock Certificate
5.1* Opinion of Dorsey & Whitney LLP
10.1+ Licensing Agreement dated July 19, 1999, between registrant and
DataLode Inc.
10.2+ International Distributor Agreement dated September 20, 1997,
between registrant and Orbit Company, Ltd.
10.3+ International Distributor Agreement dated June 28, 1996, between
registrant and Rexton Corporation
10.4+ License Agreement dated May 31, 1997, between registrant and
Brother Industries, Ltd.
10.5+ License Agreement dated April 29, 1997, between registrant and
Brother Industries, Ltd.
10.6+ Authorized OEM Agreement dated August 6, 1996, between registrant
and SmithMicro Software, Inc.
10.7 Sublease Agreement dated September 16, 1999 between Outdoor West,
Inc. and registrant
10.8 Tenancy Agreement dated August 31, 1999 between Mrs. Hana Kimchi
and Fontech Ltd. (English translation of original Hebrew agreement)
10.9 Shareholders Agreement dated May 31, 1998, among registrant, Valor
Invest, Ltd. and Corsa SA Holdings
10.10 1998 Stock Option Plan
10.11 Consulting Agreement dated October 1, 1998, between registrant and
Pensbreigh Holdings Ltd.
10.12 Letter Agreement dated September 30, 1998, between registrant and
Marco Genoni.
10.13 Agreement dated March 31, 1999, between registrant and Noel R.
Bambrough.
21.1 List of subsidiaries of registrant
23.2 Consent of BDO Siedman, LLP
23.3* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
- ------------
* To be filed by amendment.
+ Confidential treatment has been requested as to certain portions of this
exhibit. Omitted portions will be filed separately with the Securities and
Exchange Commission.
ARTICLES OF INCORPORATION
OF
InfoImaging Technologies, Inc.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under and pursuant to the
laws of the State of Nevada, and we do hereby certify:
I
The name of the Corporation shall be:
INFOIMAGING TECHNOLOGIES, INC.
II
The principal office and place of business of the corporation in Nevada shall
be:
1408 Pawnee Drive
Las Vegas, Nevada 89109
in the County of Clark. Michael Savage, at this address, shall be the
resident agent. Offices for the transaction of any business of the
corporation and where meetings of the Board of Directors and of the
stockholders may be held, may be established and maintained in any other part
of the State of Nevada, or in any other State, Territory or Possession of the
United States or in any foreign country.
III
The nature of the business and the object and purposes to be transacted,
promoted and carried on by the corporation are and shall continue to be:
To engage in any lawful business authorized and permitted by the laws of
the State of Nevada, United States, and any and all counties, states or
cities wherein this said corporation may undertake to engage in
business.
<PAGE>
IV
The total authorized shares of capital stock of the corporation shall be
100,000,000 shares of common stock at $0.0001 par value per share, and
50,000,000 shares of preferred stock at $0.0001 par value per share. The
capital stock, after the amount of the subscription price is paid in, shall be
and remain non-assessable. The private property of the stockholders shall not
be liable for the debts or liabilities of the corporation.
V
the members of the governing board shall be styled directors. The first Board
of Directors shall consist of three (3) members whose names and addresses are
as follows:
Name Address
Robert Kay 4510 E. Thousand Oaks Boulevard, Suite 100
Westlake Village, California 91362
Christopher Dieterich 781 Linda Flora Drive
Los Angeles, California 90049
Peter Brocklesby 2950 31st Street, Suite 240
Santa Monica, California 90405
The number of directors of this corporation may, from time to time, be
increased or decreased by an amendment of the By-Laws in that regard, without
the necessity of amending these Articles of Incorporation, provided the number
shall not be reduced to less than three, unless there may be fewer than three
stockholders in said corporation, in which case the number of directors may be
as few as the number of stockholders.
VI
No stockholder of the corporation shall, by reason of his holding shares of
any class of stock of the corporation, have any preemptive or preferential
right to purchase or subscribe to any shares of any class of stock of the
corporation now or hereafter to be authorized or any notes, debentures, bonds,
or other securities convertible into or carrying options or warrants to
purchase shares of any class of stock, now or hereafter to be authorized,
whether or note the issuance of any such shares, or such notes, debentures,
bonds or other securities would adversely affect the dividend or voting
rights of such shareholder, other than such rights, if any, as the Board of
Directors in its discretion from time to time may grant, and at such price as
the Board of Directors, in its discretion, may fix; and the Board of Directors
may issue shares of any class of stock of the corporation, or any notes,
debentures, bonds or other securities convertible into or carrying options or
warrants to purchase shares of any
<PAGE>
class of stock, either in whole or in part, to the existing stockholders of
any class of stock.
VII
This corporation is to have perpetual existence.
VIII
The name and post office of each of the incorporators signing these Articles
of Incorporation is as follows:
Name Address
Christopher H. Dieterich 11300 W. Olympic, Suite 800
Los Angeles, California 90064
IX
To the fullest extent permitted by Chapter 78 of the Nevada Revised Statutes,
as the same exists or may hereafter be amended, an officer or director of the
corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the corporation, or is or was serving at the request of the
corporation as an officer, director, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified by
the corporation against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
IN WITNESS WHEREOF, the incorporators have hereunto subscribed their names
this 8th day of October, 1997.
"Chris Dieterich"
------------------------
Christopher H. Dieterich
<PAGE>
STATE OF CALIFORNIA )
)
County of Los Angeles )
On this 8th day of October, 1997, personally appeared before me, the
undersigned, a Notary Public, Christopher H. Dieterich, KNOWN TO ME TO BE the
person who acknowledges that he executed the foregoing instrument.
"Jeffrey S. Gales"
- ---------------------
Notary Public
Commission # 1147973
Notary Public - California
Los Angeles County
My Commission expires: 7/21/01
-------
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
INFOIMAGING TECHNOLOGIES, INC.
-------------------------------
Name of Corporation
We the undersigned, Altaf Nazerali, President, and Sandra Buschau, Secretary
of InfoImaging Technologies, Inc. Do hereby certify:
That the Board of Directors of said corporation by unanimous consent dated
July 30th, adopted a resolution to amend the original articles as follows:
Article 1 is hereby amended to read as follows:
That name of the Corporation is: INTACTA TECHNOLOGIES INC.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is 17,671,000; that the said
changes and amendment have been consented to and approved by a majority
consent of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
"A. Nazerali"
-----------------------------
Altaf Nazerali, President
"Sandra Buschau"
-----------------------------
Sandra Buschau, Secretary
State/Province of British Columbia)
)
County/City of Vancouver )
On August 10, 1999, personally appeared before me, a Notary Public, Altaf
Nazerali, who acknowledged that he executed the above instrument.
"J. Radelet"
----------------------------
James W. Radelet
A Commissioner for taking Affidavits
for British Columbia
A Notary Public in and for the
Province of British Columbia
Barrister and Solicitor, Radelet &
Company
Suite 1230, 1075 West Georgia Street
Vancouver, B.C., Canada, V6E 3C9
<PAGE>
SECRETARY OF STATE
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that INFOIMAGING TECHNOLOGIES, INC. did on October 21, 1997
file in this office the original Articles of Incorporation; that said Articles
are now on file and of record in the office of the Secretary of State of the
State of Nevada, and further, that said Articles contain all the provisions
required by the law of said State of Nevada
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office, in
Carson City, Nevada, on October 21, 1997.
"Dean Heller"
--------------------
Secretary of State
By "Rachel A. Harder"
--------------------
Certification Clerk
<PAGE>
ARTICLES OF INCORPORATION
OF
InfoImaging Technologies, Inc.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under and pursuant to the
laws of the State of Nevada, and we do hereby certify:
I
The name of the Corporation shall be:
INFOIMAGING TECHNOLOGIES, INC.
II
The principal office and place of business of the corporation in Nevada shall
be:
1408 Pawnee Drive
Las Vegas, Nevada 89109
in the County of Clark. Michael Savage, at this address, shall be the
resident agent. Offices for the transaction of any business of the
corporation and where meetings of the Board of Directors and of the
stockholders may be held, may be established and maintained in any other part
of the State of Nevada, or in any other State, Territory or Possession of the
United States or in any foreign country.
III
The nature of the business and the object and purposes to be transacted,
promoted and carried on by the corporation are and shall continue to be:
To engage in any lawful business authorized and permitted by the laws of
the State of Nevada, United States, and any and all counties, states or
cities wherein this said corporation may undertake to engage in
business.
<PAGE>
IV
The total authorized shares of capital stock of the corporation shall be
100,000,000 shares of common stock at $0.0001 par value per share, and
50,000,000 shares of preferred stock at $0.0001 par value per share. The
capital stock, after the amount of the subscription price is paid in, shall be
and remain non-assessable. The private property of the stockholders shall not
be liable for the debts or liabilities of the corporation.
V
the members of the governing board shall be styled directors. The first Board
of Directors shall consist of three (3) members whose names and addresses are
as follows:
Name Address
Robert Kay 4510 E. Thousand Oaks Boulevard, Suite 100
Westlake Village, California 91362
Christopher Dieterich 781 Linda Flora Drive
Los Angeles, California 90049
Peter Brocklesby 2950 31st Street, Suite 240
Santa Monica, California 90405
The number of directors of this corporation may, from time to time, be
increased or decreased by an amendment of the By-Laws in that regard, without
the necessity of amending these Articles of Incorporation, provided the number
shall not be reduced to less than three, unless there may be fewer than three
stockholders in said corporation, in which case the number of directors may be
as few as the number of stockholders.
VI
No stockholder of the corporation shall, by reason of his holding shares of
any class of stock of the corporation, have any preemptive or preferential
right to purchase or subscribe to any shares of any class of stock of the
corporation now or hereafter to be authorized or any notes, debentures, bonds,
or other securities convertible into or carrying options or warrants to
purchase shares of any class of stock, now or hereafter to be authorized,
whether or note the issuance of any such shares, or such notes, debentures,
bonds or other securities would adversely affect the dividend or voting
rights of such shareholder, other than such rights, if any, as the Board of
Directors in its discretion from time to time may grant, and at such price as
the Board of Directors, in its discretion, may fix; and the Board of Directors
may issue shares of any class of stock of the corporation, or any notes,
debentures, bonds or other securities convertible into or carrying options or
warrants to purchase shares of any
<PAGE>
class of stock, either in whole or in part, to the existing stockholders of
any class of stock.
VII
This corporation is to have perpetual existence.
VIII
The name and post office of each of the incorporators signing these Articles
of Incorporation is as follows:
Name Address
Christopher H. Dieterich 11300 W. Olympic, Suite 800
Los Angeles, California 90064
IX
To the fullest extent permitted by Chapter 78 of the Nevada Revised Statutes,
as the same exists or may hereafter be amended, an officer or director of the
corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the corporation, or is or was serving at the request of the
corporation as an officer, director, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified by
the corporation against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
IN WITNESS WHEREOF, the incorporators have hereunto subscribed their names
this 8th day of October, 1997.
"Chris Dieterich"
------------------------
Christopher H. Dieterich
<PAGE>
STATE OF CALIFORNIA )
)
County of Los Angeles )
On this 8th day of October, 1997, personally appeared before me, the
undersigned, a Notary Public, Christopher H. Dieterich, KNOWN TO ME TO BE the
person who acknowledges that he executed the foregoing instrument.
"Jeffrey S. Gales"
- ---------------------
Notary Public
Commission # 1147973
Notary Public - California
Los Angeles County
My Commission expires: 7/21/01
-------
<PAGE>
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
I, Michael Savage, hereby accept appointment as resident agent for InfoImaging
Technologies Inc.
Dates: October 8, 1997 "Michael Savage"
-------------------------
Michael Savage
1408 Pawnee Drive
Las Vegas, Nevada 89109
<PAGE>
InfoImaging Technologies Inc.
- ------------------------------
(Name of Corporation)
Nevada CORPORATION
- ------------------------
(State of Incorporation)
FOR THE FILING PERIOD Oct. 21, 1997 to Dec. 31, 1997
The Corporation's duly appointed Resident Agent in Nevada is:
Michael Savage
1408 Pawnee Drive
Las Vegas, Nevada 89109
IF THE ABOVE INFORMATION IS INCORRECT, PLEASE CHECK THIS BOX AND A CHANGE OF
RESIDENT AGENT/ADDRESS FORM WILL BE SENT.
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING THIS FORM.
- - print or type names and address, either resident or business, for all
officers and directors. A president, secretary, treasurer and at least one
director must be names.
- - have an officer sign the form. FORM WILL BE RETURNED IF UNSIGNED.
- - return the completed form with the $85.00 filing fee. A $15.00 penalty must
be added for failure to file this form within 60 days from the date of
incorporation.
- - Make your check payable to the Secretary of State. Your canceled check will
constitute a certificate to transact business per NRS 78.155. If you need the
below attachment file stamped, enclose a self-addressed stamped envelope. To
receive a certified copy, enclose a copy of this completed form, an additional
$10.00 and appropriate instructions.
- - Return the completed form to Secretary of State, Capital Complex, Carson
City, NV 69710. (702)687-5203
Altaf Nazerali President
Suite 1200 1185 W. Georgia Vancouver Canada V6E 4E6
Chris Dieterich Secretary
Suite 800 11300 W. Olympic Los Angeles CA 90064
Ross Wilmot Treasurer
Suite 800 11300 W. Olympic Los Angeles CA 90064
Altaf Nazerali Director
Suite 1200 1185 W. Georgia Vancouver Canada V6E 4E6
Chris Dieterich Director
Suite 800 11300 W. Olympic Los Angeles CA 90064
Ross Wilmot Director
Suite 800 11300 W. Olympic Los Angeles CA 90064
"Chris Dieterich"
- ------------------
Chris Dieterich,
Secretary
11 Nov 97
I, Dean Heller, the duly qualified Secretary of State of Nevada do hereby
certify that the above corporation after having paid the annual fee of $85.00
for filing in this office a list of its officers and directors and designation
of resident agent for the above filing period, together with penalty in the
sum of $85.00 and having also filed the aforesaid list as required by Nevada
Revised Statutes Section 78.150 - 78.165 and 80.110 - 80.140, as amended, is
hereby authorized to transact and conduct business within this state for the
aforesaid period.
"Dean Heller"
- -------------------
Dean Heller
Secretary of State
BYLAWS
OF
INFOIMAGING TECHNOLOGIES, INC.
A Nevada Corporation
ARTICLE 1
----------
Stockholders
Section 1. Annual meeting. Annual meetings of the stockholders, commencing
with the year 1997, shall be held on the 21st day of October each year if not
a legal holiday and, if a legal holiday, then on the next secular day
following, or at such other time as may be set by the Board of Directors from
time to time, at which the stockholders shall elect by vote a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute of by the Articles
of Incorporation, may be called by the President or the Secretary by
resolution of the Board of Directors or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose of the proposed meeting.
Section 3. Place of Meetings. All annual meetings of the stockholders shall
be held at the registered office of the corporation or at such other place
within or without the State of Nevada as the directors shall determine.
Special meetings of the stockholders may be held at such time and place within
or without the State of Nevada as shall be stated in the notice of meeting, or
in a duly executed waiver of notice thereof. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 4. Quorum: Adjourned Meetings. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote, present in person or represented by
<PAGE>
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announces at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified.
Section 5. Voting. Each stockholder of record of the corporation holding
stock which is entitled to vote at this meeting shall be entitled at each
meeting of shareholders to one vote for each share of stock standing in his
name on the books of the corporation. Upon the demand of any shareholder, the
vote for directors and the vote upon any question before the meeting shall be
by ballot.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall be sufficient to elect directors or to decide any
question brought before such meeting, unless the question is one upon which by
express provision of the statutes or of the Articles of Incorporation, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 6. Proxies. At any meeting of the stockholders any stockholder may
be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two
or more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of
the persons so designated unless the instrument shall otherwise provide. No
proxy or power of attorney to vote shall be used to vote at a meeting of the
stockholders unless it shall have been filed with the secretary of the
meeting. All questions regarding the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
inspectors of election who shall be appointed by the Board of Directors, or if
not appointed, then by the presiding officer of the meeting.
Section 7. Action Without Meeting. Any action which may be taken by the vote
of the stockholders at a meeting may be taken without a meeting if authorized
by the written consent of stockholders holding at least a majority of the
voting power, unless the provisions of the statutes or of the Articles of
Incorporation require a greater proportion of voting power to authorize such
action in which case such greater proportion of written consents will be
required.
<PAGE>
ARTICLE II
------------
Directors
Section 1. Management of Corporation. The business of the corporation shall
be managed by its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 2. Number, Tenure, and Qualifications. The number of directors which
shall constitute the whole board shall be at least one. The number of
directors may from time to time be increased or decreased to not less than one
nor more than fifteen. The directors shall be elected at the annual meeting
of the stockholders and except as provided in Section 2 of this Article, each
director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 3. Vacancies. Vacancies in the Board of Directors including those
caused by an increase in the number of directors may be filled by a majority
of the remaining directors, though less than a quorum, or by a sole remaining
director, and each director so elected shall hold office until his successor
is elected at an annual or a special meeting of the stockholders. The holders
of two-thirds of the outstanding shares of stock entitled to vote may at any
time peremptorily terminate the term of office of all or any of the directors
by vote at a meeting called for such purpose or by a written statement filed
with the secretary or, in his absence, with any other officer. Such removal
shall be effective immediately, even if successors are not elected
simultaneously.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in
case of the death, resignation or removal of any directors, or the authorized
number of directors, or the stockholders fail at any annual or special meeting
of stockholders at which any director or directors are elected to elect the
full authorized number of directors to be voted for at that meeting.
If the Board of Directors accepts the resignation of a director tendered to
take effect at a future time, the Board or the stockholders shall have power
to elect a successor to take office when the resignation is to become
effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
<PAGE>
Section 4. Annual and Regular Meetings. Regular meetings of the Board of
Directors shall be held at any pace within our without the State which has
been designated from time to time by resolution of the Board or by written
consent of all members of the Board. In the absence of such designation
regular meetings shall be held at the registered office of the corporation.
Special meetings of the Board may be held either at a place so designated or
at the registered office.
Regular meetings of the Board of Directors may be held without ca or notice at
such time and at such place as shall from time to time be fixed and determined
by the Board of Directors.
Section 5. First Meeting. The first meeting of each newly elected Board of
Directors shall be held immediately following the adjournment of the meeting
of stockholders and at the place thereof. No notice of such meeting shall be
necessary to the directors in order legally to constitute the meeting,
provided a quorum be present. In the event such meeting is not so held, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors.
Section 6. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman or the President or by any Vice-President or by any
two directors.
Written notice of the time and place of special meetings shall be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to him at his address as
it is shown upon the records or if such address is not readily ascertainable,
at the place in which the meetings of the directors are regularly held. In
case such notice is mailed or telegraphed, it shall be deposited in the United
States mail or delivered to the telegraph company at least three (3) days
prior to the time of the holding of the meeting. In case such notice is hand
delivered as above provided, it shall be so delivered at least twenty-four
(24) hours prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery as above provided shall by due, legal and personal
notice to such director.
Section 7. Business of Meetings. The transactions of any meeting of the
Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, of a
quorum be present, and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, or a consent to
holding such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
<PAGE>
Section 8. Quorum: Adjourned Meetings. A majority of the authorized number of
directors shall be necessary to constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regard as the act of the Board of
Directors, unless a greater number be required by law or by the Articles of
Incorporation. Any action of a majority, although not at a regularly called
meeting, and the record thereof, if assented to in writing by all of the other
members of the Board shall be as valid and effective in all respects as if
passed by the Board in a regular meeting.
A quorum of the directors may adjourn any directors meeting to meet again at a
stated day and hour; provided, however, that in the absence of a quorum, a
majority of the directors present at any directors meeting, either regular or
special, may adjourn from time to time until the time fixed for the next
regular meeting of the Board.
Notice of the time and place of holding an adjourned meeting need not be given
to the absent directors if the time and place be fixed at the meeting
adjourned.
Section 9. Committees. The Board of Directors may, by resolution adopted by
a majority of the whole Board, designate one or more committees of the Board
of Directors, each committee to consist of at least one or more of the
directors of the corporation which, to the extent provided in the resolution,
shall have and may exercise the power of the Board of Directors in the
management of the business and affairs of the corporation and may have power
to authorize the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as may
be determined from time to time by the Board of Directors. The members of any
such committee present at any meeting and not disqualified from voting may,
whether or not they constitute a quorum, unanimously appoint another member of
the Board of Directors to act at the meeting in the pace of any absent or
disqualified member. At meetings of such committees, a majority of the
members or alternate members shall constitute a quorum for the transaction of
business, and the act of a majority of the members or alternate members at any
meeting at which there is a quorum shall be the act of the committee.]
The committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors.
Section 10. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the
Board or committee.
<PAGE>
Section 11. Special Compensation. The directors may be paid their expenses
of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like reimbursement
and compensation for attending committee meetings.
ARTICLE III
-----------
Notices
Section 1. Notice of Meetings. Notices of meetings shall be in writing and
signed by the President or a Vice-President or the Secretary or an Assistant
Secretary or by such other person or persons as the directors shall designate.
Such notice shall state the purpose or purposes for which the meeting is
called and the time and the place, which may be within or without this State,
where it is to be held. A copy of such notice shall be either delivered
personally to or shall be mailed, postage prepaid, to each stockholder of record
entitled to vote at such meeting not less than (10) nor more than sixty (60)
days before such meeting. If mailed, it shall be directed to a stockholder at
his address as it appears upon the records of the corporation and upon such
mailing of any such notice, the service thereof shall be complete and the time
of the notice shall begin to run from the date upon which such notice is
deposited in the mail for transmission to such stockholder. Personal
delivery of any such notice to any officer of a corporation or association, or
to any member of a partnership shall constitute delivery of such notice to
such corporation, association or partnership. In the event of the transfer of
stock after delivery of such notice of and prior to the holding of the meeting
it shall not be necessary to deliver or mail notice of the meeting to the
transferee.
Section 2. Effect of Irregularly Called Meetings. Whenever all parties
entitled to vote at any meeting, whether of directors or stockholders,
consent, either by a writing on the records of the meeting or filed with the
secretary, or by presence at such meeting and oral consent entered on the
minutes, or by taking part in the deliberations at such meeting without
objection, the doings of such meeting shall be as valid as if had at a meeting
regularly called and noticed, and at such meeting any business may be transacted
which is not excepted from the written consent or to the consideration of which
no objection for want of notice is made at the time, and if any meeting be
irregular for want of notice or of such consent, provided a quorum was present
at such meeting, the proceedings of said meeting may be ratified and approved
and rendered likewise valid and the irregularity or defect therein waived by a
writing signed by a parties having the right to vote at such meeting; and such
consent or approval of stockholders may be by proxy or attorney, but al such
proxies and powers of attorney must be in writing.
<PAGE>
Section 3. Waiver of Notice. Whenever any notice whatever is required to be
given under the provisions of the statutes, of the Articles of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
ARTICLE IV
----------
Officers
Section 1. Election. The officers of the corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer, none
of whom need be directors. Any person may hold two or more offices. The
Board of Directors may appoint a Chairman of the Board, Vice-Chairman of the
Board, one or more vice presidents, assistant treasurers and assistant
secretaries.
Section 2. Chairman of the Board. The Chairman of the Board shall preside at
meetings of the stockholders and the Board of Directors, and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
Section 3. Vice-Chairman of the Board. The Vice-Chairman shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties as the Board of Directors may from time to time prescribe.
Section 4. President. The president shall be the chief executive officer of
the corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all instruments
requiring such execution except to the extent the signing and execution
thereof shall be expressly designated by the Board of Directors to some other
officer or agent of the corporation. In the absence of the President the Vice
President will assume al of the President's responsibilities.
Section 5. Vice-President. The Vice-President shall act under the direction
of the President and in the absence or disability of the President shall
perform the duties and exercise the powers of the President. They shall
perform such other duties and have such other powers as the President or the
Board of Directors may from time to time prescribe. The Board of Directors
may designate one or more Executive Vice-Presidents or may otherwise specify
the order of seniority of the Vice-Presidents. The duties and powers of the
President shall descend to the Vice-Presidents in such specified order or
seniority.
<PAGE>
Section 6. Secretary. The Secretary shall act under the direction of the
President. Subject to the direction of the President he shall attend all
meetings of the Board of Directors and al meetings of the stockholders and
record the proceedings. He shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the President or
the Board of Directors. In the absence of the Secretary the Vice President
will assume all of the Secretary's responsibilities.
Section 7. Assistant Secretaries. The Assistant Secretaries shall act under
the direction of the President. In order of their seniority, unless otherwise
determined by the President or the Board of Directors, they shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
Section 8. Treasurer. The Treasurer shall act under the direction of the
President. Subject to the direction of the President he shall have custody of
the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered
by the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition
of the corporation. In the absence of the Treasurer the Vice-President will
assume al of the Treasurer's responsibilities.
If required by the Board of Directors, he shall give the corporation a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 9. Assistant Treasurers. The Assistant Treasurers in the order of
their seniority, unless otherwise determined by the President or the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. They shall perform such
other duties and have such other powers as the President or the Board of
Directors may from time to time prescribe.
<PAGE>
Section 10. Compensation. The salaries and compensation of all officers of
the corporation shall be fixed by the Board of Directors.
Section 11. Removal; Resignation. The officers of the corporation shall hold
office at the pleasure of the Board of Directors. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
ARTICLE V
---------
Capital Stock
Section 1. Certificates. Every stockholder shall be entitled to have a
certificate signed by the President or a Vice-President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation.
If the corporation shall be authorized to issue more than one class of stock
or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of the various
classes of stock or series thereof and the qualifications, limitations or
restrictions of such rights, shall be set forth in full or summarized on the
face or back of the certificate, which the corporation shall issue to represent
such stock.
If a certificate is signed (1) by a transfer agent other than the corporation
or its employees or (2) by a registrar other than the corporation or its
employees, the signatures of the officers of the corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall cease to be such officer before such
certificate is issued, such certificate may be issued with the same effect as
though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
Section 2. Surrendered; Lost or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the corporation
alleged to have been lost or destroyed upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
<PAGE>
Section 3. Replacement Certificates. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation, if it is
satisfied that all provisions of the laws and regulations applicable to the
corporation regarding transfer and ownership of shares have been complied with,
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transactions upon its books.
Section 4. Record Date. The Board of Directors may fix in advance a date not
exceeding sixty (60) days nor less than ten (10) days preceding the date of
any meeting of stockholders, or the date for the payment of any distribution,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining the consent of stockholders for any purpose, as a
record date for the determination of the stockholders entitled to notice of
and to vote at any such meeting, and any adjournment thereof, or entitled to
receive payment of any such distribution, or to give such consent, and in
such case, such stockholders, and only such stockholders as shall be
stockholders of record on the date so fixed, shall be entitled to notice of
and to vote at such meeting, or any adjournment thereof, or to receive payment
of such distribution, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of stock on the books of the corporation after any such record date
fixed as aforesaid.
Section 5. Registered Owner. The corporation shall be entitled to recognize
the person registered on its books as the owners of shares to be the exclusive
owner for all purposes including voting and distribution, and the corporation
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Nevada.
ARTICLE VI
----------
General Provisions
Section 1. Registered Office. The registered office of this corporation
shall be in the State of Nevada.
The corporation may also have offices at such other places both within and
without the State of Nevada as the Board of Directors may from time to time
determine or the business of the corporation may require.
<PAGE>
Section 2. Distributions. Distributions upon the capital stock of the
corporation, subject to the provisions of the Articles of Incorporation, if
any may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Distributions may be paid in cash, in property or in shares
of the capital stock, subject to the provisions of the Articles of
Incorporation.
Section 3. Reserves. Before payment of any distribution, there may be set
aside out of any funds of the corporation available for distributions such sum
or sums as the directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
distributions or for repairing or maintaining any property of the corporation
or for such other purpose as the directors shall think conducive to the
interest of the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
Section 4. Checks; Notes. All checked or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Section 6. Corporate Seal. The corporation may or may not have a corporate
seal, as may from time to time be determined by resolution of the Board of
Directors. If a corporate seal is adopted, it shall have inscribed thereon
the name of the corporation and the words "Corporate Seal" and "Nevada". The
sea may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
ARTICLE VII
-----------
Indemnification
Section 1. Indemnification of Officers and Directors, Employees and Other
Persons. Every person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
crimina, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer
of the corporation or is or was serving at the request of the corporation or
for its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless to the fullest extent legally
permissible under the general corporation law of the State of Nevada from time
to time against all expenses, liability and loss (including attorney's fees,
judgements, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The expenses of officers
and
<PAGE>
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is
not
entitled to be indemnified by the corporation. Such right of indemnification
shall be a contract right which may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as
their rights under this Article.
Section 2. Insurance. The Board of Directors may cause the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or any other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
Section 3. Further Bylaws. The Board of Directors may from time to time
adopt further Bylaws with respect to indemnification and may amend these and
such Bylaws to provide at a times the fullest indemnification permitted by the
Genera Corporation Law of the State of Nevada
ARTICLE VIII
------------
Amendments
Section 1. Amendments by Stockholders. The Bylaws may be amended by a
majority vote of all the stock issued and outstanding and entitled to vote for
the election of directors of the stockholders, provided notice of intention to
amend shall have been contained in the notice of the meeting.
Section 2. Amendments by Board of Directors. The Board of Directors by a
majority vote of the whole Board at any meeting may amend these Bylaws,
including Bylaws adopted by the stockholders, but the stockholders may from
time to time specify particular provisions of the Bylaws which shall not be
amended by the Board of Directors.
<PAGE>
APPROVED AND ADOPTED THIS 29th day of October, 1997.
"Chris Dieterich"
- -----------------
Chris Dieterich, Secretary
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of InfoImaging Technologies, Inc.
And that the foregoing Bylaws, consisting of 13 pages, constitute the code of
Bylaws of InfoImaging Technologies, Inc. As duly adopted at a regular meeting
of the Board of Directors of the Corporation held October 29, 1997.
In witness whereof, I have hereunto subscribed my name this 29th day of
October, 1997.
"Chris Dieterich"
- -----------------
Chris Dieterich, Secretary
INFOIMAGING TECHNOLOGIES INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
This Certifies That:
CUSIP 45665S 10 9
is the record holder of
Fully Paid and Non-Assessable Shares of Common Stock, Par Value $.001 Per
Share of
Info Imaging Technologies, Inc.
transferable on the books of the Corporation by the holder hereof, in person
or by duly authorized attorney, upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be subject to all the provisions of the Articles of Incorporation of the
Corporation and any amendments thereof and the By-Laws, to all of which the
holder of this Certificate by acceptance hereof assents.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
"Chris Dieterich" "Altaf Nazerali"
- ----------------- -------------------
Chris Dieterich Altaf Nazerali
Secretary President
LICENSING AGREEMENT
This agreement made and entered into this 19th day of July, 1999 (the
"Agreement") by and between InfoImaging Technologies Inc., a Delaware
corporation, with offices located at 7026 Koll Center Parkway, Suite 201,
Pleasanton, CA 94566, hereinafter called "ITI" and DataLode Inc., a
California corporation organized and existing under the laws of California
with principal offices at 25 Simms, San Rafael, CA, hereinafter called
"DataLode".
WHEREAS, ITI owns certain patented and Proprietary Technology (Software)
related to, compression, error correction, encoding and decoding of data on
printed and electronic mediums.
WHEREAS, ITI has developed Products based on such Software that ITI
wishes to market
WHEREAS, DataLode is in the business of providing solution in the area of
customer relationships such as product registration
WHEREAS, DataLode wishes to integrate some of ITI's applications and
products into its own product and solution offerings.
NOW, THEREFORE, the parties have agreed as follows:
Article 1. DEFINITIONS
1.1 "Software" shall mean all dynamic library links ("DLLs") or other
executable files or components required to accomplish ITI's encoding and
decoding functionality.
1.2 "Products" means products, which ITI developed, develops and will
develop
1.3 "SRF" means the Smart Registration Form (SRF) Product that ITI which
may originate from the Proprietary Technologies of compression, encoding,
decoding, error correction and other third party software included in the
Products.
1.4 "Proprietary Technology" shall mean U.S. Patent No. 5,313,564, copyrights
in the Software and any trade secrets and know how related to the Software and
the Products.
<PAGE>
Article 2. LICENSE
2.1 ITI hereby grants to DataLode the worldwide, non-exclusive, perpetual
and royalty-bearing right and license to incorporate the SRF and modifications
thereof in DataLode's products and solution offerings, and to use, reproduce,
display, market and distribute the SRF and modifications thereof, as part of
the DataLode's products.
Article 3. MARKETING
3.1 DataLode will use commercially reasonable efforts to develop a demand for
the SRF by promoting and extending the sale of its products together with the
SRF.
Article 4. DELIVERY OF SOFTWARE AND TECHNICAL SUPPORT
4.1 ITI shall deliver to DataLode one copy, for all Windows 3.x, 95 & 98
operating systems as existing at the date of execution of this license
agreement, of the SRF Software upon execution of this Agreement. Furthermore,
ITI agrees to deliver to DataLode an SRF Software based on Macintosh 7.55
operatins system by September 10, 1999. ITI shall deliver all subsequent
releases of this version upon release by ITI.
4.2 ITI will provide, at no cost to DataLode, reasonable technical support to
DataLode personnel in the form of phone, e-mail and fax support during ITI's
regular business hours.
4.3 ITI will provide maintenance support for Software during the period this
license agreement is in effect. ITI will notify DataLode of, and ITI will
send to DataLode on DataLode's request, all available software releases
related to the Software. These potentially could include maintenance
releases, corrections, modifications and changes or work-arounds.
4.4 ITI shall provide (*) man-days of such maintenance support, free of any
charge to DataLode during any twelve months period. For any additional day of
maintenance support requested by DataLode, ITI will charge daily fees of
US$(*) per man-day or $(*) per man-hour.
4.5 During the period this license agreement is in effect, any maintenance
support related to bug fixing will be provided by ITI free of charge to
DataLode.
Article 5. ROYALTIES
5.1 As consideration for the license grants contained herein and subject to
other conditions and terms hereof, DataLode shall pay to ITI a per unit
royalty of US$(*) for each single use of the SRF by DataLode or by any third
party using DataLode's product.
*** Confidential portion omitted
<PAGE>
or solution offering that incorporates the SRF. A single use is defined as
receiving and scanning the SRF into a readable and data accessible format.
5.2 Notwithstanding anything to the contrary herein, DataLode shall have no
obligation to pay any royalty under section 5.1 for any maintenance,
replacement, support and demonstration copies of the SRF, provided, however,
distribution of demonstration copies of SRF or modification thereof are
consistent with reasonable and customary industry practices.
Article 6. ACCOUNTING
6.1 Within thirty (30) days after each calendar quarter DataLode shall send to
ITI a report signed by an officer of DataLode setting forth the
appropriate royalties due to ITI pursuant to Section 5.1 herein. The amount
declared in this report must be paid to ITI within thirty (30) days after each
calendar quarter.
6.2 DataLode agrees that it will maintain separate records of its sales of the
SRF. DataLode further agrees that it will provide to ITI, at DataLode's cost
and not later than 90 days after the end of DataLode's fiscal year, a
certified statement regarding the use of ITI's SRF by DataLode and/or by
DataLode's customers. Furthermore, DataLode agrees to allow an ITI financial
auditor access to records of DataLode's SRF usage, including client billing.
Such access will be granted during DataLode's normal business hours once a
year.
Article 7. WARRANTIES, DISCLAIMER, AND INDEMNIFICATION
7.1 EXCEPT AS OTHERWISE SET FORTH HEREIN, ITI'S PRODUCT IS SOLD AND
LICENSED "AS IS". ALL WARRANTIES, EITHER EXPRESSED OR IMPLIED ARE DISCLAIMED
AS TO THE SOFTWARE AND ITS QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS
FOR ANY BUSINESS OR ANY PARTICULAR PURPOSE. IN NO EVENT WILL ITI BE
LIABLE FOR DIRECT, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES RESULTING
FROM ANY DEFECT IN THE SOFTWARE, AND ITS SOLE RESPONSIBILITY WILL BE TO
CORRECT ANY DEFECT IN THE SOFTWARE WITHIN A REASONABLE TIME AFTER RECEIVING A
COMPLAINT.
UNDER NO CIRCUMSTANCES SHALL THE TOTAL LIABILITY OF ITI PURSUANT TO THIS
SECTION 7.1 EXCEED THE ROYALTIES PAID BY LICENSEE TO ITI.
7.2 ITI warrants that it has the right to enter into this Agreement, to
disclose the Proprietary Technology and to grant the specified licenses and
that there are no outstanding assignments, grants, licenses, encumbrances,
obligations, or agreements inconsistent with this Agreement.
7.3 ITI warrants that the Software included in the SRF and the SRF do not
infringe any third party patents, copyrights or trade secrets and that it is
not aware of any facts or
<PAGE>
circumstances that would constitute an infringement on any third party
patents, copyrights or trade secrets.
7.4 ITI agrees to defend, indemnify and hold harmless DataLode. its
subsidiaries, affiliates and their respective directors, officers and
employees from and against any and all alleged or actual claims by a third
party arising out of, or in connection with a breach by ITI of its
warranties in this Agreement, and pay all costs, damages, expenses, attorney
fees, liens and liabilities whatsoever incurred by DataLode in connection
therewith.
Article 8. COPYING RESTRICTIONS
8.1 Except as otherwise provided herein, DataLode shall only make copies of
the SRF for the purpose of incorporating it in its products. Unauthorized
copying of the Software, and Proprietary Technology directly or indirectly by
DataLode or by any of its employees or independent contractors will constitute
a fundamental and material breach of this Agreement.
8.2 DataLode shall have an unrestricted right to make copies of the SRF for
internal use, for the purposes of demonstration and evaluation as well as for
including it into its own product and business solution offering.
Article 9. PROPRIETARY RIGHTS
DataLode agrees that:
9.1 The Software, the SRF, ITI's logo, product names, software,
documentation and other support materials are either patented, copyrighted,
trademarked or owned by ITI as trade secrets and/or proprietary
information. DataLode agrees not to remove any Software copyright or patent
notices of such proprietary restriction from Software. ITI retains
exclusive ownership of the Software, of printed material and of the Software's
trademarks. All techniques, algorithms and processes contained in Software or
any modification or extraction thereof constitute trade secrets and/or
proprietary information of IRI ("Confidential Information") and will be
protected by this Agreement.
9.2 DataLode agrees that the Proprietary Technology shall be held in the
strictest confidence and shall not be reproduced or disclosed to others in
while or in part without the express written consent of ITIensor except in the
case of DataLode's personnel and Dealers having a need to know such
information for the purpose of this Agreement.
9.3 DataLode shall procure an undertaking from any such personnel and dealers
to keep the Proprietary Technology confidential. DataLode undertakes to take
legal action against any personnel and Dealer who will not act according to
the above. ITI shall be entitled to call from time to time for a
certificate signed by a responsible officer of the DataLode that DataLode has
complied with the provisions of this article.
<PAGE>
9.4 DataLode will immediately bring to the attention of ITI any improper
or wrongful use of Software which came to the notice of DataLode.
9.5 The provisions of this Article shall continue in full force and effect
notwithstanding termination of this Agreement howsoever arising.
Article 10. ASSIGNMENT
Either party agree not to assign, transfer, or otherwise dispose of this
Agreement in whole or in part to any third party without the prior consent of
the other party.
Article 11. TERMINATION
11.1 If the terms and conditions of this agreement are breached by either
party, and such breach is not rectified within thirty (30) days after
receiving a written notice from the other party, the injured party may, in
addition to any other remedy available to it, terminate this Agreement
immediately.
11.2 If a petition in a bankruptcy is filed involuntarily against either party
and is not discharged or withdrawn within 60 days, the other party shall have
the right to forthwith terminate this Agreement unconditionally with a written
notice to the counter party.
11.3 If DataLode shall do or allow to be done any act or thing which it
knows or can reasonably be expected to know as likely to jeopardize ITI's
rights in the Software or any part thereof and in particular if DataLode
shall make or allow to be made unauthorized copies of the Software. ITI
shall have the right to terminate this Agreement provided that ITI has
give written notice of such circumstance to DataLode and DataLode failed to
remedy such default within thirty (30) days of such notice.
11.4 Upon termination of this Agreement, DataLode will certify, in writing to
ITI, that through its best efforts, and to the best of its knowledge, the
original and copies in whole or in part of the programs have been destroyed
and deleted from any updated work into which they have been merged. except
that, upon prior written authorization from ITI, DataLode may retain a
copy for archive purposes only.
11.5 DataLode will compensate ITI for SRF and Software usage for programs in
distribution where SRF and/or Software cannot be removed. ITI shall be
obligated to perform its obligations as described in Article 4. Of this
agreement.
11.6 In the event of non-payment by DataLode, ITI shall have the right to
terminate DataLode's license, provided that ITI has given written notice of
non-payment to DataLode and DataLode failed to remedy such default within
thirty (30) days of such notice.
<PAGE>
11.7 ITI's and DataLode's obligations of confidentiality pursuant to this
Agreement, or any other agreement, shall survive termination of this Agreement
for any reason.
Article 12. CAPACITY OF PARTIES
This Agreement shall not be deemed to create any partnership, joint venture,
agency or employment relation between the parties.
Article 13. ENTIRE AGREEMENT
This Agreement and the exhibits constitute the entire agreement between the
parties hereto and supersedes all previous negotiations, agreements,
commitments in respect thereto, and shall not be released, discharged, changed
or modified in any manner, except by instrument signed by duly authorized
officers or representatives of each of the parties thereto.
Article 14. JURISDICTION, GOVERNING LAW AND ARBITRATION
14.1 This Agreement and the interpretation thereof shall be in accordance with
and governed by the laws of California, excluding that body of law known as
conflicts law.
14.2 Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled pursuant to the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"), and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Notice of a demand for arbitration of any dispute
subject to arbitration by one party shall be filed in writing with the other
party and the AAA One of the arbitrators shall be appointed to decide
discovery disputes, and the decision of this arbitrator shall be final and
binding as to discovery. Discovery and disclosure shall be completed within
90 days after filing of such notice of arbitration unless extended by such
arbitrator upon a showing of good cause. Provided, however, that this
paragraph shall not apply to claims for equitable relief.
Article 15. WAIVER
The failure or delay of a party hereto to enforce any of its rights under this
Agreement shall not be deemed to be a continuing waiver or a modification by
such party of any of its rights or obligations of the other party under this
Agreement Any failure to enforce or delay in enforcement shall not constitute
a defense.
<PAGE>
Article 16. NOTICE
16.1 All notices required or permitted to be given hereunder (except for
routine communications to be addressed to the persons in charge of its subject
business) shall be in writing and shall be valid and sufficient is dispatched
by a reputable express delivery service by air or registered airmail, and
addressed as follows:
If to Data Lode: If to InfoImaging Technologies Inc.
DataLode Inc. ITI Inc.
27 Simms 7026 Koll Center Parkway #201
San Rafael, CA Pleasanton, CA 9456
Fax: Fax 925-485-4100
Attention: Marco Genoni
All notices to be given hereunder shall be in writing and sent by registered
mail or fax to the addresses stated above or to such addresses as are notified
in writing by the parties. If either party has changed its address, a written
notice thereof shall be given to the other party.
16.2 All notices shall be deemed to have been given on the day when such
notice is received by registered mail or fax.
In witness whereof the contracting parties have signed this Agreement.
DATALODE INC. INFOIMAGING TECHNOLOGIES INC.
"Gaylyn De Martini" "Marco Genoni"
- ---------------------- ----------------------
Gaylyn De Martini Marco Genoni
President Vice-President
07/21/99 07/20/99
INTERNATIONAL DISTRIBUTOR AGREEMENT
This Agreement entered into this 20th day of September, 1997 by and between
InfoImaging Technologies, Inc., (hereinafter called "COMPANY"), having its
principle place of business at 7026 Koll Center Parkway, Suite 201,
Pleasanton, CA 94566, and Orbit Company, Ltd. having its principle place of
business at Prince Mohammed Abju Aziz Street (Tahlia St.); Concord Plaza; 3rd
Floor, Jeddah, Kingdom of Saudi Arabia (hereinafter called "DISTRIBUTOR").
WITNESSETH
That THE PARTIES, in consideration of their respective promises set forth
below, agree as follows:
I. APPOINTMENT AND TERRITORY
DISTRIBUTOR accepts appointment as a exclusive DISTRIBUTOR for the purpose of
marketing by way of sale or lease, or otherwise, COMPANY'S products specified
in Attachment "A", DISTRIBUTOR price list.
II. DATES OF COMING INTO FORCE AND NORMAL EXPIRATION OF THE CONTRACT
This Agreement shall become effective as of the date written above for twelve
months, and shall remain in full force unless terminated for any reason or no
reason by either party in writing at least thirty (30) days prior to the
termination date. However, if at any time DISTRIBUTOR shall: (a) commit a
breach of any material obligation imposed upon it by agreement, (b) default in
making any payment required hereunder, (c) become insolvent, be subject to a
petition in bankruptcy filed by or against committee or creditor, (d) assign
or attempt to assign this Agreement, COMPANY may terminate this agreement by
notifying DISTRIBUTOR by certified mail or confirmed fax of the default.
DISTRIBUTOR shall have 30 days from this notice to cure said default(s). In
the event DISTRIBUTOR does not, termination shall take effect at the end of
the thirty (30) day period.
Such termination shall not prejudice any cause of action or claim of COMPANY
which COMPANY may have on account of any breach of this Agreement.
In the event of termination on grounds other than provisions (a) to (d) above,
DISTRIBUTOR will receive discounts, as appropriate, on a unfilled orders
placed prior to termination.
III. CONTRACTUAL PRICES
The prices at which COMPANY will sell its products to the DISTRIBUTOR are set
forth in Attachment "A". These prices are Ex COMPANY'S factory and it
exclusive of State and local taxes. COMPANY'S prices do not include sales,
use, excise, value-added or similar taxes. Consequently, in addition to the
price specified herein, DISTRIBUTOR shall pay, or reimburse COMPANY for the
gross amount of any present or future sales, use, excise, value-added or
similar tax applicable to the sale or furnishing of any services or Products
hereunder, or to their use by COMPANY with tax exemption evidence acceptable
to the tax authorities.
<PAGE>
a. Increases
Prices are Ex COMPANY'S factory, and may be changed by COMPANY by notification
in writing to the DISTRIBUTOR.
However, no price may be increased for Products purchased under a firm and
outstanding order in effect at the time of the price increase notification.
b. Reductions
If, during the term of this Agreement, COMPANY makes a general price reduction
in the prices of any of the Products, such newly established prices shall
apply
for the duration of this Agreement or until such prices are further reduced.
IV. METHOD OF SHIPMENT
Shipment will be made Ex COMPANY'S factory. COMPANY reserves the right to
utilize any commercia mode of shipment unless otherwise specified by
DISTRIBUTOR at time of order.
V. RIGHTS AND OBLIGATIONS OF COMPANY
a. Acceptance of Orders
COMPANY agrees to accept orders placed for Products which are submitted in
compliance with this Agreement. Orders shall be considered accepted on the
mailing of their formal order acknowledgment. Shipment of all or part of the
goods ordered shall also be considered accepted on the same terms, but
shipment of an order shall not obligate COMPANY to make further shipments.
COMPANY shall have no obligation to ship unless the terms of payment are
satisfactory to COMPANY at is sole and absolute discretion, at the time of
shipment.
b. Excusable Delays
COMPANY shall not be liable for delays in delivery or performance, or for
failure to manufacture, deliver or perform, due to (1) causes beyond its
reasonable control, (2) acts of God, distributor, civil or military authority,
governmental priorities, strike or other labor disturbances, floods,
epidemics,
war, riot, delays in transportation, (2) COMPANY'S inability to obtain
necessary materials, components, services, or facilities.
c. Marketing Support
COMPANY will supply reasonable quantities of marketing material and Product
support information to the DISTRIBUTOR at no charge for the term of this
Agreement.
d. Company's Industrial Property Rights
The DISTRIBUTOR will promptly inform COMPANY of any infringement that may come
to his notice in the course of his work in respect to patent rights,
copyright, trademark, and the like, being the property of or used by COMPANY,
and assist COMPANY'S request in taking necessary steps to defend these rights.
<PAGE>
The DISTRIBUTOR may use COMPANY'S trademark during the life of this Agreement
solely in conjunction with the sale of the product and, upon termination of
this Agreement, shall discontinue all such uses and any representations which
make it appear that DISTRIBUTOR is still handling COMPANY'S Products; provided
that the DISTRIBUTOR shall be permitted to dispose of inventory after the
termination of this Agreement for any reason other than its breach of
Contract.
e. No Power to Enter into Binding Agreements
DISTRIBUTOR shall not sign any contract in the name of COMPANY in any way to
any obligation and shall not hod itself out or purport to act as COMPANY'S
legal partner or legally empowered agent or representative for an purpose
whatsoever.
f. No Capacity to Act in the Name of InfoImaging
The relationship between COMPANY and DISTRIBUTOR created hereby is intended to
be that of vendor and vendee and, with respect to sales by COMPANY to third
parties, that of an independent distributor and not that of principal or
agent. DISTRIBUTOR shall not, and is not authorized to, enter into any
commitment on behalf of COMPANY.
g. Confidential Information
The DISTRIBUTOR and COMPANY shall maintain in confidence and not use any
business and technical information marked "Confidential", which becomes
available to either party under or in connection with this Agreement, unless
written permission is obtained from the other party. This obligation shall
continue for two (2) years after the termination of this Agreement.
h. Compliance with Laws
The COMPANY' parties' obligations hereunder shall be at all times subject to
the exports, imports, and other laws and regulations of countries.
VI. RIGHTS AND OBLIGATIONS OF THE DISTRIBUTOR
a. Maintaining an Adequate Sales Capacity
DISTRIBUTOR shall maintain a sales capability to supply and service COMPANY'S
Products.
DISTRIBUTOR shall stock Product in inventory sufficient to maintain and expand
sales.
b. Sales Aid and Advertising Matter
DISTRIBUTOR shall effectively advertise and promote COMPANY'S Products
utilizing advertising programs in keeping with good business practices.
c. Product Warranties
The DISTRIBUTOR accepts COMPANY'S Warranty given in Attachment "B", and agrees
that such Warranty shall commence at the date of shipment of Products.
<PAGE>
d. Limited Liability
Neither party will be liable for any direct, indirect, incidental,
consequential, or special damages suffered by the other party, its customers,
or others arising out of or related to this agreement or the products even if
advised of the possibility of such damages.
e. Non-Assignment of Agreement Clause
DISTRIBUTOR shall not assign all or any part of its interest in this Agreement
without the prior written consent of COMPANY and shall give COMPANY thirty
(30) days prior written notice of any transaction affecting the majority of
ownership of DISTRIBUTOR which shall be considered an assignment under this
agreement. Any attempted assignment without COMPANY'S prior written consent
will be void.
VII. GOVERNING LAWS
The rights and obligations of the parties hereunder shall be determined in
accordance with the laws of the State of California, excluding the body of
laws
known as conflicts of law.
VIII. NOTICES
All formal notices and communications hereunder shall be sent by certified
mail, or facsimile (fax), with a copy sent by ordinary mail. It shall be
deemed to have been given the date received in the case of certified mail, or
on the receipt facsimile (fax). Understanding that either party may from
time-to-time change the address to which notices to it are to be sent, written
notice of such change is to be given to the other party.
IX. GENERAL CLAUSE
This Agreement embodies the entire Agreement of THE PARTIES with respect to
the subject matter hereof. Any previous understanding, correspondence or
Agreement, verbal or otherwise, between THE PARTIES is of no effect, for the
amendments or modifications shall be made only in writing, specifically
referring to this Agreement and signed by THE PARTIES. In the event of
dispute between THE PARTIES, THE PARTY prevailing shall recover from THE OTHER
PARTY reasonable attorney fees and costs.
IN WITNESS WHEREOF THE PARTIES hereto have caused this Agreement to be
executed as of the date first written above, by their duly authorized officers
or representatives.
DISTRIBUTOR INFOIMAGING
"Adel Al-Sharif" "J. Douglas Wather"
- ------------------------- -------------------------
Adel Al-Sharif J. Douglas Wather
General Manager V.P. Sales & Marketing
20/9/97 29/9/97
<PAGE>
ATTACHMENT A
CONFIDENTIAL
INTERNATIONAL DISTRIBUTOR PRICING
InfoImaging international distributors shall be awarded specific, exclusive
territory of Saudi Arabia and the Arabian Gulf states in which they will
market the 3D FAX product line for twelve months. The qualified Distributor
typically sells to end-users, and concentrates heavily on software and/or data
communications and fax technology users as a large part of their business.
SOFTWARE
- --------
International Price Part Number
3D FaxFile Professional $(*) FF33776
3D FaxFile Freeware $(*) FF33373
FaxSpeed $(*) FS77372
HARDWARE
- --------
International Price Part Number
3D FaxPal Plus, .5M memory $(*) FP05758
(includes line sharing and bonus 3D FaxFile basic software)
3D FaxPal Plus, 2.5M memory $(*) FP20758
(includes line sharing and bonus 3D FaxFile basic software)
FaxPal II, .5M memory $(*) FP05372
(Non-line sharing-unit only)
FaxPal II, 2M memory $(*) FP20372
2M memory upgrade $(*) MC22273
4M memory upgrade $(*) MC42273
Distributor Guidelines
Exclusivity Terms: - wire transfer to InfoImaging account --- $(*) upon
execution of contract
- wire transfer to InfoImaging account --- $(*) 4
months after execution
- wire transfer to InfoImaging account --- $(*) 8
months after execution
Purchasing Terms: - orders placed during each 4 month period will be
deducted from the $(*) wire transfer. Funds not used during a particular
4-month period are non-refundable and non-transferable to the next 4-month
period. Any purchase requirements during a 4-month period over the $(*)
deposit will apply to the next 4-month purchase requirement and funds must be
sent via wire transfer before shipment.
With opening software order Distributor receives Freeware Packages to
distribute to his prospects.
With opening software order Distributor receives appropriate literature and
sales tools.
Distributor provides technical support to his customers.
All shipments are FOB manufacturer. Above prices do not include freight.
All prices are in U.S. Dollars, ex Company's factory, Pleasanton, California,
U.S.A.
*** Confidential portion omitted
<PAGE>
ATTACHMENT B
LIMITED WARRANTY
ITI warrants only (a) that the media on which the product is furnished and
protection device will be free from defects in materials and workmanship under
normal use for a period of 90 days from the date of delivery to the end user
and (b) that the product will operate substantially as described in the user
manual during that 90 day period.
THE END USER MUST ASSUME FULL RESPONSIBILITY FOR THE SELECTION OF THE PRODUCT
TO ACHIEVE THEIR INTENDED PURPOSES, FOR THE PROPER INSTALLATION AND USE OF THE
PRODUCT AND FOR VERIFYING THE RESULTS OBTAINED FROM USE OF THE PRODUCT. ITI
DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCT WILL MEET END
USER REQUIREMENTS, THAT THE PROGRAM IS FIT FOR ANY PARTICULAR PURPOSE OR THAT
THE OPERATION OF THE PROGRAM WILL BE INTERRUPTED, ERROR FREE OR VIRUS FREE.
Should the end user discover a defect in the recording medium or an error in
the product within the 90 day warranty period, they must return the defective
item to ITI. A copy of the receipt or other proof that the warranty period
has not expired must be included. ITI will, upon verification of the defect
or error, either repair or replace the defective item or refund the amount
paid.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL OR
WRITTEN. ANY IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED.
INTERNATIONAL DISTRIBUTOR AGREEMENT
This Agreement entered into this 28th day of June, 1996 by and between
InfoImaging Technologies, Inc., (hereinafter called "COMPANY"), having its
principle place of business at 3977 East Bayshore Road, Suite B, Palo Alto, CA
94303, and Rexton Corporation having its principle place of business at Wada
Bldg. 2F, I-Chome 2-6 Komagata, Taito-Ku, Japan (hereinafter called
"DISTRIBUTOR").
WITNESSETH
That THE PARTIES, in consideration of their respective promises set forth
below, agree as follows:
I. APPOINTMENT AND TERRITORY
DISTRIBUTOR accepts appointment as a exclusive DISTRIBUTOR in the country of
Japan for the purpose of marketing by way of sale or lease, or otherwise,
COMPANY'S products specified in Attachment "A", DISTRIBUTOR price list.
II. DATES OF COMING INTO FORCE AND NORMAL EXPIRATION OF THE CONTRACT
This Agreement shall become effective as of the date written above, and shall
remain in full force for a period of two (2) years unless terminated.
However, if at any time DISTRIBUTOR shall; (a) commit a breach of any material
obligation imposed upon it by this agreement, (b) default in making any
payment required hereunder, (c) become insolvent, be subject to a petition in
bankruptcy filed by or against committee or creditor, (d) assign or attempt to
assign this Agreement, (e) fail to meet minimum sales commitments as outlined
in Attachment "C", COMPANY may terminate this agreement by notifying
DISTRIBUTOR by certified mail or confirmed fax of the default. DISTRIBUTOR
shall have 30 days from this notice to cure said default(s). In the event
DISTRIBUTOR does not, termination shall take effect at the end of the thirty
(30) day period.
Such termination shall not prejudice any cause of action or claim or COMPANY
which COMPANY may have on account of any breach of this Agreement.
In the event of termination on grounds other than provisions (a) to (d) above,
DISTRIBUTOR will receive discounts, as appropriate, on all unfilled orders
placed prior to termination.
III. CONTRACTUAL PRICES
The prices at which COMPANY will sell its products to the DISTRIBUTOR are set
forth in Attachment "A". These prices are Ex COMPANY'S factory and is
exclusive of State and local taxes. COMPANY'S prices do not include sales,
use, excise, value-added or similar taxes. Consequently, in addition to the
price specified herein, DISTRIBUTOR shall pay, or reimburse COMPANY for the
gross amount of any present or future sales, use, excise, value-added or
similar tax applicable to the sale or furnishing of any services of Products
hereunder, or to their use by COMPANY with tax exemption evidence acceptable
to the tax authorities.
<PAGE>
a. Increases
Prices are Ex COMPANY'S factory and may be changed by COMPANY by notification
in writing to the DISTRIBUTOR.
However, no price may be increased for Products purchased under a firm and
outstanding order in effect at the time of the price increase notification.
b. Reductions
If, during the term of this Agreement, COMPANY makes a general price reduction
in the prices of any of the Products, such newly established prices shall
apply
fur the duration of this Agreement or until such prices are further reduced.
IV. METHOD OF SHIPMENT
Shipment will be made Ex COMPANY'S factory. COMPANY reserves the right to
utilize any commercial mode of shipment unless otherwise specified by
DISTRIBUTOR at time of order.
V. RIGHTS AND OBLIGATIONS OF COMPANY
a. Acceptance of Orders
COMPANY agrees to accept orders placed for Products which are submitted in
compliance with this Agreement. Orders shall be considered accepted on the
mailing of their forma order acknowledgment. Shipment of all or part of the
goods ordered shall also be considered accepted on the same terms, but
shipment of an order shall not obligate COMPANY to make further shipments.
COMPANY shall have no obligation to ship unless the terms of payment are
satisfactory to COMPANY at its sole and absolute discretion, at the time of
shipment.
b. Excusable Delays
COMPANY shall not be liable for delays in delivery or performance, or for
failure to manufacture, deliver or perform, due to (1) causes beyond its
reasonable control, (2) acts of God, distributor, civil or military authority,
government priorities, strike or other labor disturbances, floods, epidemics,
war, riot, delays in transportation, (3) COMPANY'S inability to obtain
necessary materials, components, services, or facilities.
c. Marketing Support
COMPANY will supply reasonable quantities of marketing material and Product
support information to the DISTRIBUTOR at no charge for the term of this
Agreement. COMPANY will also support DISTRIBUTOR in a reasonable cooperative
advertising, exhibition and technical support programs mutually agreed upon by
both parties. COMPANY'S contribution for cooperative advertising, exhibition
and technical support will total a maximum of (*) ((*)) percent of
DISTRIBUTOR'S quarterly sales total. Allocated funds may be used at
DISTRIBUTOR'S discretion, but pre-approved by COMPANY executive.
*** Confidential Portion Omitted
<PAGE>
d. COMPANY'S Industrial Property Rights
The DISTRIBUTOR will promptly inform COMPANY of any infringement that may come
to his notice in the course of his work in respect to patent rights,
copyright, trademark, and the like, being the property of or used by COMPANY,
and assist COMPANY'S request in taking necessary steps to defend these rights.
The DISTRIBUTOR may use COMPANY'S trademark during the life of this Agreement
solely in conjunction with the sale of the product and, upon termination of
this Agreement shall discontinue all such uses and any representations which
make it appear that DISTRIBUTOR is still handing COMPANY'S Products; provided
that the DISTRIBUTOR shall be permitted to dispose of inventory after the
termination of this Agreement for any reason other than its breach of
Contract.
e. No Power to Enter into Binding Agreements
DISTRIBUTOR shall not sign any contract in the name of COMPANY in any way to
any obligation and shall not hold itself out or purport to act as COMPANY'S
legal partner or legally empowered agent or representative for any purpose
whatsoever.
f. No Capacity to Act in the Name of InfoImaging
The relationship between COMPANY and DISTRIBUTOR created hereby is intended to
be that of vendor and vendee and, with respect to sales by COMPANY to third
parties, that of an independent distributor and not that of principal or
agent. DISTRIBUTOR shall not, and is not authorized to, enter into any
commitment on behalf of COMPANY.
g. Confidential Information
The DISTRIBUTOR and COMPANY shall maintain in confidence and not use any
business and technical information marked "Confidential", which becomes
available to either party under or in connection with this Agreement, unless
written permission is obtained from the other party. This obligation shall
continue for two (2) years after the termination of this Agreement.
h. Compliance with Laws
The COMPANY'S parties' obligations hereunder shall be at all times subject to
the exports, imports, and other laws and regulations of countries.
VI. RIGHTS AND OBLIGATIONS OF THE DISTRIBUTOR
a. Maintaining an Adequate Sales Capability
DISTRIBUTOR and DISTRIBUTOR'S customers shall maintain a sales capability to
supply and service COMPANY'S Products.
DISTRIBUTOR and DISTRIBUTOR'S customers shall stock Product in inventory
sufficient to maintain and expand sales.
<PAGE>
b. Sales Aid and Advertising Matter
DISTRIBUTOR and DISTRIBUTOR'S customers shall effectively advertise and
promote COMPANY'S Products utilizing advertising programs in keeping with good
business practices.
c. Product Warranties
The DISTRIBUTOR accepts COMPANY'S Warranty given in Attachment "B", and agrees
that such Warranty shall commence at the date of shipment of Products.
d. Limited Warranty
Neither party will be liable for any direct, indirect, incidental,
consequential, or special damages suffered by the other party, its customers,
or others arising out of or related to this agreement or the products even if
advised of the possibility of such damages.
e. Non-Assignment of Agreement Clause
DISTRIBUTOR shall not assign all or any part of its interest in this Agreement
without the prior written consent of COMPANY and shall give COMPANY thirty
(30) days prior written notice of any transaction affecting the majority
ownership of the DISTRIBUTOR which shall be considered an assignment under
this agreement. Any attempted assignment without COMPANY'S prior written
consent will be void.
VII. GOVERNING LAWS
The rights and obligations of the parties hereunder shall be determined in
accordance with the laws of the State of California, U.S.A. excluding the body
of laws known as conflicts of law.
VIII. NOTICES
All formal notices and communications hereunder shall be sent by certified
mail, or facsimile (fax), with a copy sent by ordinary mail. It shall be
deemed to have been given the date received in the case of certified mail, on
on the receipt of facsimile (fax). Understanding that either party may from
time-to-time change the address to which notices to it are to be sent, written
notice of such change is to be given to the other party.
IX. GENERAL CLAUSE
This Agreement embodies the entire Agreement of THE PARTIES with respect to
the subject matter hereof. Any previous understanding, correspondence or
Agreement, verbal or otherwise, between THE PARTIES is of no effect, for the
amendments or modifications shall be made only in writing, specifically
referring to this Agreement and signed by THE PARTIES. In the event of
dispute between THE PARTIES, THE PARTY prevailing shall recover from THE OTHER
PARTY reasonable attorney fees and costs.
<PAGE>
IN WITNESS WHEREOF THE PARTIES hereto have caused this Agreement to be
executed as of the date first written above, by their duly authorized officers
or representatives.
DISTRIBUTOR INFOIMAGING
"Katsumi Sato" "Charles Leysek"
- ------------------------- -------------------------
Katsumi Sato Charles Leysek
President President
07/06/96 07/06/96
<PAGE>
ATTACHMENT A
CONFIDENTIAL
INTERNATIONAL DISTRIBUTOR PRICING
PRODUCT PRICE
3D Fax Professional $(*) Without User's Manual $(*)
3D Fax Standard $(*) Without User's Manual $(*)
3D Fax Personal $(*) Without User's Manual $(*)
3D Fax Basic $(*) Without Packaging $(*)
3D Fax Freeware $(*) Without Packaging $(*)
3D FaxPal $(*)
Smart Code Quoted per application
All prices are in U.S. Dollars, Ex COMPANY'S factory, Palo Alto, California,
USA.
Payment terms are Irrevocable Letter of Credit or Cash Wire Transfer.
*** Confidential Information Omitted
<PAGE>
ATTACHMENT B
LIMITED WARRANTY
ITI warrants only (a) that the media on which the product is furnished and
protection device will be free from defects in materials and workmanship under
normal use for a period of 90 days from the date of delivery to you and (b)
that the product will operate substantially as described in the user manual
during that 90 day period.
YOU MUST ASSUME FULL RESPONSIBILITY FOR THE SELECTION OF THE PRODUCT TO
ACHIEVE YOUR INTENDED PURPOSES, FOR THE PROPER INSTALLATION AND USE OF THE
PRODUCT AND FOR VERIFYING THE RESULTS OBTAINED FROM USE OF THE PRODUCT. ITI
DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCT WILL MEET YOUR
REQUIREMENTS, THAT THE PROGRAM IS FIT FOR ANY PARTICULAR PURPOSE OR THAT THE
OPERATION OF THE PROGRAM WILL BE UNINTERRUPTED, ERROR FREE OR VIRUS FREE.
Should you discover a defect in the recording medium or an error in the
product within the 90 day warranty period, then return the defective item to
ITI. Include a copy of your receipt or other proof that the warranty period
has not expired. ITI will, upon verification of the defect or error, either
repair or replace the defective item or refund the amount paid.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL OR
WRITTEN, ANY IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED.
<PAGE>
ATTACHMENT C
EXCLUSIVE DISTRIBUTORSHIP
TERMS, CONDITIONS AND PERFORMANCE COMMITMENTS
BETWEEN
INFOIMAGING TECHNOLOGIES, INC.
AND
REXTON CORPORATION
1. PAYMENTS AS ADVANCES ON SALES
A. No later than June 28th, 1996 Rexton will pay to the Company $(*)
((*)) U.S. dollars as an advance on sales under this agreement.
B. No later than July 22nd, 1996 Rexton will pay to the Company an additional
$(*) ((*)) U.S. dollars as an advance on sales.
C. During the term of this agreement each order, placed by Distributor and
shipped by Company, in excess of $(*), will be discounted by (*)% until the
aggregate discounts equal the total of $(*) of advances on sales
Distributor paid to Company. After such time Company will process and ship
Distributors orders at full face value.
2. ORDERS
A. Distributor will place orders for (*) ea. Business and (*) ea. Personal
versions of Japanese 3DFAX Software for delivery in June 1996.
B. Distributor will place orders for (*) ea. Business and (*) ea. Personal
versions of Japanese 3DFAX Software for delivery in July 1996.
C. Distributor agrees to do their best effort to place orders for (*)
FAXPALS for delivery in July 1996. In any event Distributor will place an
order for a minimum of (*) FAXPALS for delivery in July 1996. Product must
meet Japanese Regulatories.
*** Confidential Portion Omitted
<PAGE>
ATTACHMENT C
3. EXCLUSIVITY AND SALES PERFORMANCE
A. Distributor sales commitments for the term of this agreement are as
follows:
July 1, 1996 - December 31, 1996 = (*)
January 1, 1997 - June 30, 1997 = (*)
July 1, 1997 - December 31, 1997 = (*)
January 1, 1998 - June 30, 1998 = (*)
July 1, 1998 - December 31, 1998 = (*)
January 1, 1999 - June 30, 1999 = (*)
B. If the first twelve month goal is met by Distributor, Company will grant
an automatic extension for a third year.
C. If Distributor fails to meet sales commitment within any six month period,
it will have the following six month period to cumulatively meet that 12 month
period commitment. Failure to do so establishes the right by the Company to
terminate the exclusive portion of this agreement under the terms of Paragraph
II.
*** Confidential Portion Omitted
LICENSE AGREEMENT
This Agreement is made and entered into as of the 31st day of May, 1997, by
and between InfoImaging Technologies, Inc., having its principal place of
business at 7026 Koll Center Parkway, Suite 201, Pleasanton, CA 94566
(hereinafter referred to as ("ITI") and Brother Industries, Ltd., a Japanese
corporation, having its principal place of business at 15-1 Naeshiro-cho,
Mizuho-ku, Nagoya 467, Japan (hereinafter referred to as "Brother").
Article 1. Definitions
- -----------------------
1.1 "Software" shall mean the object code of 3D FAX software conforming to the
Specification set forth in Exhibit A ("Specification") and the end-user's
documentation and technical documentation therefor.
1.2 "Products" shall mean any multi-functional devices manufactured by or for
Brother that is connected to the personal computer and that is capable of,
including without limitation stand-alone facsimile, stand-alone copy, scanning
and printing functions.
Article 2. Delivery, Inspection and Acceptance
- ----------------------------------------------
2.1 ITI shall deliver Brother the following items relating to the Software
within fifteen (15) days after the execution of this Agreement.
[items]
(1) Straging Media contains 3D FAX and users documentations
(2) N/A
2.2 Brother shall have fifteen (15) days after receipt of such items to either
accept or reject the items. Brother's failure to notify ITI in writing within
such period will be deemed to be acceptance by Brother. If Brother elects to
reject the items delivered by ITI, Brother shall give ITI within such period a
written notice with the reasons for rejecting in sufficient detail to assist
ITI in correcting such rejected items. ITI shall make correction of the
rejected items and deliver a corrected one to Brother within fifteen (15) days
after ITI's receipt of rejection notice from Brother.
Article 3. License
- -------------------
3.1 ITI hereby grants to Brother a non-exclusive, non-transferable and
worldwide license to reproduce the Software or have such Software reproduced
by third parties, and distribute, sell and otherwise dispose of the Software
to end users, distributors and re-sellers solely in conjunction with the
Products.
3.2 Brother shall distribute the Software with the end user agreement in
accordance with the form separately agreed by both parties.
<PAGE>
Article 4. Considerations
- --------------------------
4.1 In consideration of the license granted herein, Brother shall pay ITI the
unit royalty of US$(*) for every unit of Software distributed by Brother in
connection with the Products.
4.2 Brother shall provide to ITI, within forty-five (45) days after the end of
each calendar quarter, a written statement showing the number of the Software
distributed by Brother and the amount of royalties due in each calendar
quarter, and shall pay ITI such amount of royalties.
4.3 All taxes imposed by the Japanese Government pursuant to the Income Tax
Convention between U.S.A. and Japan on the payment of royalties by Brother
shall be borne by ITI. Brother, in making payments, shall withhold the proper
amount of the tax levied on such payment by the Japanese Government, shall
promptly effect payment of such taxes so withheld to appropriate Japanese tax
authorities and shall transmit to ITI official tax receipts or other
certification issued by such authorities sufficient to enable ITI to support a
claim for appropriate foreign tax credit in respect of such taxes as withheld
and paid against taxes which may be levied in U.S.A.
Article 5. Title and Notice of Copyright and Trademark
- -------------------------------------------------------
5.1 All title and intellectual property right, including without limitation
copyright, in or relating to the Software shall remain the exclusive property
of ITI. Brother agrees to place ITI's copyright notice on each copy of the
Software and on the packaging materials for the Software in accordance with
the form provided by ITI.
5.2 ITI permits Brother to use the ITI's trade names or trademarks relating to
the Software (hereinafter referred to as "ITI's Marks") in connection with the
distribution or marketing of Products which bundles the Software in accordance
with the form provided by ITI. Brother agrees to include appropriate
trademark notices, in accordance with such form, on any advertising or
packaging materials for the Products which bundles the Software.
Article 6. Warranty
- --------------------
ITI warrants Brother that the Software stored in the item specified in Article
3.1 shall be free from defect in workmanship and material and shall conform to
the Specification for a period of ninety (90) days from the date it is
delivered to Brother. If any defect or nonconformity with the Specification
are found in the Software, ITI, at its own expense, shall immediately correct
such defect or nonconformity and shall replace such defective or
noncorformable items to the corrected items.
Article 7. Indemnification
- --------------------------
7.1 ITI warrants and represents that it has the right to grant license herein,
that it has the power and authority to enter into this Agreement and that the
Software and ITI's Marks shall not infringe any copyright, patent, trademark,
trade secret or other proprietary right of third party.
*** Confidential Portion Omitted
<PAGE>
7.2 ITI shall indemnify and hold Brother harmless from and against and defend
any claim, suit or proceeding, and pay any settlement amounts or damages
awarded by a court of final jurisdiction, arising out of claims by third
parties that the Software or ITI's Mark infringes any copyright, trademark,
patent, trade secret or other proprietary right, provided that ITI is given
prompt notice from Brother of such claim, suit or proceeding.
Article 8. Confidentiality
- -------------------------
8.1 Each party shall maintain any technical and/or business information
disclosed by other party with specific designation as confidential in strict
confidence and secret, and shall not disclose it to any third party.
8.2 The obligation set forth in Article 9.1 above shall not apply to
information which the receiving party can prove:
a) before or at the time of disclosure is known to the receiving party or
already in the public domain,
b) after the time of disclosure becomes publicly known without any fault of
the receiving party,
c) the receiving party has at any time lawfully obtained from a third party
without restriction against disclosure, or;
d) is disclosed by the disclosing party to any third party on an unrestricted
basis.
Article 9. Term and Termination
- --------------------------------
9.1 This Agreement shall become effective as of the execution of both parties
and continue in force for two (2) year unless previously terminated as
hereinafter provided, and shall thereafter be automatically renewed from year
to year unless either party gives written notice to the other party at least
two (2) months prior to the expiry of the term that it does not wish to renew
this Agreement for further one (1) year.
9.2 In the event that either party should breach any material provision of
this Agreement, the non-defaulting party may terminate this Agreement if other
party should fail to remedy such default within thirty (30) days after receipt
of written notice thereof.
9.3 Upon termination or expiration of this Agreement (except for termination
due to default by Brother), Brother shall have the right to continue to
distribute or otherwise dispose of the Software bundled in Product remaining
in its inventory on the date of such termination or expiration for a period of
three (3) months after termination or expiration.
Article 10. Survival
- ---------------------
The provisions of Article 4,5,6,7,8 and 9.3 in this Agreement shall survive
termination or expiration of this Agreement.
<PAGE>
Article 11. Assignment
- ----------------------
This Agreement or any right or obligation hereunder shall not be assigned by
either party except with the prior written consent of the other party.
Article 12. Notice
- ------------------
Any notice or other communications under this Agreement shall be sent to the
addresses first set forth above, or such other places as they may from time to
time specify by notice in writing to the other party. Any such notice or
communications shall be in writing and shall be deemed to have been duly given
if mailed by registered or certified mail, or by facsimile, the recipient of
which is confirmed by return facsimile or other written notice of receipt.
Article 13. Entire Agreement
- -----------------------------
This Agreement sets forth the entire agreement and understanding of the
parties on the subject matter hereof and supersedes all prior and
contemporaneous written and/oral agreement, arrangement, communications and
understandings relating to the subject matter hereof. This Agreement may not
be modified or amended except by a written instrument signed by the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
InfoImaging Technologies, Inc. Brother Industries, Ltd.
By: "Charles Lejsek" By: "S. Ishikawa"
---------------- -----------------
Charles Lejsek S. Ishikawa
President General Manager
05/31/97 05/25/97
<PAGE>
Exhibit A
Software Description
The FaxSpeed software program allows users to send files via their fax
application. Fax speed incorporates both a Send module and a Read module.
The Send module allows the user to select which files are to be sent.
FaxSpeed then compresses these files and converts them into infoimages. These
infoimages can then be printed or faxed by the appropriate software programs.
On the receiving side, FaxSpeed Read module will convert the received
infoimages back into the original data files.
All FaxSpeed Read modules are identical across all InfoImaging's 3D FaxFile
products. Each product model differs only in the Send module capabilities.
The following table shows these Send Module differences.
3D FaxSpeed Professional
Version 2.0 Version 2.0
---------- ------------
File Size Transmission No Limits No Limits
Low Resolution Max. Capacity 9K per Page 9K per Page
Medium Resolution Max. Capacity 36K per Page 36K per Page
High Resoution Max. Capacity 102 K per Page
Error Correction Yes Yes
Direct Read from Fax Application Yes Yes
Partial Resend Yes Yes
Send Macros Yes Yes
Password Protection Yes
Color Picture Manipulation Yes
Executable File Transmission Yes
Retail Pricing $49.00 $199.00
LICENSE AGREEMENT
This Agreement is made and entered into as of the 29th day of April, 1997, by
and between InfoImaging Technologies, Inc., having its principal place of
business at 7026 Koll Center Parkway, Suite 201, Pleasanton, CA 94566
(hereinafter referred to as "ITI") and Brother Industries, Ltd., a Japanese
corporation, having its principal place of business at 15-1 Naeshiro-cho,
Mizuho-ku, Nagoya 467, Japan (hereinafter referred to as "Brother").
Article 1. Definitions
- -----------------------
1.1 "Software" shall mean the object code of 3D FAX software conforming to the
Specification set forth in Exhibit A ("Specification") and the end-user's
documentation and technical documentation therefor.
1.2 "Products" shall mean any multi-functional devices manufactured by or for
Brother that is connected to the personal computer and that is capable of,
including without limitation stand-alone facsimile, stand-alone copy, scanning
and printing functions.
Article 2. Delivery, Inspection and Acceptance
- -----------------------------------------------
2.1 ITI shall deliver Brother the following items relating to the Software
within fifteen (15)) days after the execution of this Agreement.
[items]
(1) Straging Media contains 3D FAX and users documentations
2.2 Brother shall have fifteen (15) days after receipt of such items to either
accept or reject the items. Brother's failure to notify ITI in writing within
such period will be deemed to be acceptance by Brother. If Brother elects to
reject the items delivered by ITI, Brother shall give ITI within such period a
written notice with the reasons for rejecting in sufficient detail to assist
ITI in correcting such rejected items. ITI shall make correction of the
rejected items and deliver a corrected one to Brother within fifteen (15) days
after ITI's receipt of rejection notice from Brother.
Article 3. License
- -------------------
3.1 ITI hereby grants to Brother a non-exclusive, non-transferable and
worldwide license to reproduce the Software or have such Software reproduced
by third parties, and distribute, sell and otherwise dispose of the Software
to end users, distributors and re-sellers solely in conjunction with the
Products.
3.2 Brother shall distribute the Software with the end user agreement in
accordance with the form separately agreed by both parties.
<PAGE>
Article 4. Considerations
- ---------------------------
4.1 In consideration of the license granted herein, Brother shall pay ITI the
unit royalty of US$(*) for every unit of Software distributed by Brother in
connection with the Products.
4.2 Brother shall provide to ITI, within forty-five (45) days after the end of
each calendar quarter, a written statement showing the number of the Software
distributed by Brother and the amount of royalties due in each calendar
quarter, and shall pay ITI such amount of royalties.
4.3 All taxes imposed by the Japanese Government pursuant to the Income Tax
Convention between U.S.A. and Japan on the payment of royalties by Brother
shall be borne by ITI. Brother, in making payments, shall withhold the proper
amount of the tax levied on such payment by the Japanese Government, shall
promptly effect payment of such taxes so withheld to appropriate Japanese tax
authorities and shall transmit to ITI official tax receipts or other
certification issued by such authorities sufficient to enable ITI to support a
claim for appropriate foreign tax credit in respect of such taxes as withheld
and paid against taxes which may be levied in U.S.A.
Article 5. Title and Notice of Copyright and Trademark
- -------------------------------------------------------
5.1 All title and intellectual property right, including without limitation
copyright, in or relating to the Software shall remain the exclusive property
of ITI. Brother agrees to place ITI's copyright notice on each copy of the
Software and on the packaging materials for the Software in accordance with
the form provided by ITI.
5.2 ITI permits Brother to use the ITI's trade names or trademarks relating to
the Software (hereinafter referred to as "ITI's Marks") in connection with the
distribution or marketing of Products which bundles the Software in accordance
with the form provided by ITI. Brother agrees to include appropriate
trademark notices, in accordance with such form, on any advertising or
packaging materials for the Products which bundles the Software.
Article 6. Warranty
- --------------------
ITI warrants Brother that the Software stored in the item specified in Article
3.1 shall be free from defect in workmanship and material and shall conform to
the Specification for a period of ninety (90) days from the date it is
delivered to Brother. If any defect or nonconformity with the Specification
are found in the Software, ITI, at its own expense, shall immediately correct
such defect or nonconformity and shall replace such defective or
noncorformable items to the corrected items.
Article 7. Indemnification
- --------------------------
7.1 ITI warrants and represents that it has the right to grant license herein,
that it has the power and authority to enter into this Agreement and that the
Software and ITI's Marks shall not infringe any copyright, patent, trademark,
trade secret or other proprietary right of third party.
*** Confidential Portion Omitted
<PAGE>
7.2 ITI shall indemnify and hold Brother harmless from and against and defend
any claim, suit or proceeding, and pay any settlement amounts or damages
awarded by a court of final jurisdiction, arising out of claims by third
parties that the Software or ITI's Mark infringes any copyright, trademark,
patent, trade secret or other proprietary right, provided that ITI is given
prompt notice from Brother of such claim, suit or proceeding.
Article 8. Confidentiality
- ---------------------------
8.1 Each party shall maintain any technical and/or business information
disclosed by other party with specific designation as confidential, in strict
confidence and secret, and shall not disclose it to any third party.
8.2 The obligation set forth in Article 9.1 above shall not apply to
information which the receiving party can prove:
a) before or at the time of disclosure is known to the receiving party or
already in the public domain,
b) after the time of disclosure becomes publicly known without any fault of
the receiving party,
c) the receiving party has at any time lawfully obtained from a third party
without restriction against disclosure, or;
d) is disclosed by the disclosing party to any third party on an unrestricted
basis.
Article 9. Term and Termination
- --------------------------------
9.1 This Agreement shall become effective as of the execution of both parties
and continue in force for two (2) year unless previously terminated as
hereinafter provided, and shall therefore be automatically renewed from year
to year unless either party gives written notice to the other at least two (2)
months prior to the expiry of the term that it does not with to renew this
Agreement for further one (1) year.
9.2 In the event that either party should breach any material provision of
this Agreement, the non-defaulting party may terminate this Agreement if other
party should fail to remedy such default within thirty (30) days after receipt
of written notice thereof.
9.3 Upon termination or expiration of this Agreement (except for termination
due to default by Brother), Brother shall have the right to continue to
distribute or otherwise dispose of the Software bundled in Product remaining
in its inventory on the date of such termination or expiration for a period of
three (3) months after termination or expiration.
Article 10. Survival
- ---------------------
The provisions of Article 4,5,6,7,8 and 9.3 in this Agreement shall survive
termination or expiration of this Agreement.
<PAGE>
Article 11. Assignment
- -----------------------
This Agreement or any right or obligation hereunder shall not be assigned by
either party except with the prior written consent of the other party.
Article 12. Notice
- -------------------
Any notices or other communications under this Agreement shall be sent to the
addresses first set forth above, or such other places as they may from time to
time specify by notice in writing to the other party. Any such notice or
communications shall be in writing and shall be deemed to have been duly given
if mailed by registered or certified mail, or by facsimile, the recipient of
which is confirmed by return facsimile or other written notice of receipt.
Article 13. Entire Agreement
- ----------------------------
This Agreement sets forth the entire agreement and understanding of the
parties on the subject matter hereof and supersedes all prior and
contemporaneous written and/or oral agreement, arrangement, communications and
understandings relating to the subject matter hereof. This Agreement may not
be modified or amended except by a written instrument signed by the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
InfoImaging Technologies, Inc. Brother Industries, Ltd.
By: "Charles Lejsek" By: "S. Ishikawa"
-------------------- -----------------------
Charles Lejsek S. Ishikawa
President & CEO General Manager
April 29, 1997 April 17, 1997
<PAGE>
Exhibit A
Software Description
The FaxSpeed software program allows users to send files via their fax
application. Fax speed incorporates both a Send module and a Read module.
The Send module allows the user to select which files are to be sent.
FaxSpeed then compresses these files and converts them into infoimages. These
infoimages can then be printed or faxed by the appropriate software programs.
On the receiving side, FaxSpeed Read module will convert the received
infoimages back into the original data files.
All FaxSpeed Read modules are identical across all InfoImaging's 3D FaxFile
products. Each product model differs only in the Send module capabilities.
The following table shows these Send Module differences.
3D FaxSpeed Professional
Version 2.0 Version 2.0
---------- ------------
File Size Transmission No Limits No Limits
Low Resolution Max. Capacity 9K per Page 9K per Page
Medium Resoution Max. Capacity 36K per Page 36K per Page
High Resoution Max. Capacity 102 K per Page
Error Correction Yes Yes
Direct Read from Fax Application Yes Yes
Partial Resend Yes Yes
Send Macros Yes Yes
Password Protection Yes
Color Picture Manipulation Yes
Executable File Transmission Yes
Retail Pricing $49.00 $199.00
AUTHORIZED OEM AGREEMENT
This Agreement is entered as of this ____ day of July, 1996 ("Effective Date")
between InfoImaging Technologies, Inc., a Delaware corporation (Company) and
SmithMicro Software, Inc., a California corporation ("OEM").
IN CONSIDERATION of the promises contained herein and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledge the
parties agree as follows:
1. DEFINITIONS
1.1 "Bundled Product(s)." The combination of OEM Product(s) or products of
OEM's permitted sublicensees and Licensed Software for purposes of marketing
under a single unit price for the combined products.
1.2 "Retail Products" A Licensed Software in commercial package to be re-sold
as a stand alone retail product.
1.3 "Confidential Product and Price List." A description of Company products
authorized for remarketing by OEM, together with related restrictions and
purchase prices, attached as Exhibit "A", and by reference made a part hereof
which is subject to change by Company from time to time without notice.
1.4 "Distributor." A person or entity that market Bundled and Retail
Product(s) to other dealers, retailers and/or End Users.
1.5 "Documentation." The written materials furnished by Company in
conjunction with the use of the Licensed Software by End Users described on
Exhibit "A".
1.6 "End-Users." Customers who acquire Bundled and Retail Product(s) pursuant
to an End-User License Agreement for their internal use and not for
redistribution, remarketing, time-sharing, or service bureau use.
1.7 "End-User License Agreement." A written license agreement in a form used
and required by Company for distribution of its software, including stand
alone and network versions attached hereto as Exhibit "B". - See Attached.
1.8 "Expiration Date." The Expiration Date shall be One year after the
Effective Date.
1.9 "Licensed Software." Company's computer program(s) (including corrections
to same) in executable machine code form only and related user's manual(s) as
described on Exhibit "A", as modified from time to time by Company.
1.10 "Marks." Any trademarks, service marks or trade names of Company
associated with the Licensed Software or Documentation as designated by
Company.
1.11 "Master Copy." A master copy of the Licensed Software on magnetic media
and a master copy of the Documentation either on magnetic media or in hard
copy as determined in the reasonable discretion of Company.
1.12 "OEM Product(s)." Computer products and/or computer hardware products
owned or licensed by OEM to be combined by OEM with Licensed Software to
create Bundled Product(s) as specified on Exhibit "A".
<PAGE>
1.13 "Proprietary Rights." All rights in and to copyrights, rights to
register copyrights, trade secrets, inventions, patents, patent rights,
trademarks, trademark rights, confidential and proprietary information
protected under contract or otherwise under law, and other similar rights or
interests in intellectual or industrial property.
2. APPOINTMENT OF OEM
2.1 Grant of License. Subject to the limitations and restrictions provided in
this Section 2 and to the other terms and conditions hereof, Company hereby
grants, and OEM hereby accepts, the following non-transferable, non-exclusive
right and licenses:
2.1.1 To sublicense, distribute, and demonstrate the Licensed Software only as
a component of Bundled Product(s) through Distributors and OEMs, to End-Users
for use on computers, for such End-User's internal use only pursuant to the
terms of the End-User Agreement.
2.1.2 To package and resell License Software as a retail package(s) and to
provide support services for Distributors, worldwide and End-users of Licensed
Software.
2.1.3 To use Company's Marks in accordance with the requirements of Section 6
below in association with the Licensed Software and Bundled Product(s).
2.2 Territory Clause. OEM's distribution rights are non-exclusive and shall
extend to End-Users, Dealers, OEM's and Distributors, Worldwide. OEM shall
comply with all export and import laws and regulations.
2.3 Field of Use Restrictions. OEM shall distribute the Licensed Software
with OEM Product(s) as provided herein. OEM may distribute Bundled Product(s)
to Distributors which may be authorized to bundle Bundled Product(s) with
other products.
2.4 Retained Rights. Company reserves and retains all rights not expressly
granted herein, including but not limited to the rights to market the Licensed
Software either directly or through distributors and/or third parties. In
addition, except as authorized by an Addendum to this Agreement, OEM shall
have no rights to reproduce the Licensed Software.
2.5 Sublicensing.
2.5.1 OEM shall have the right to sublicense the rights granted to the OEM
under this Agreement, provided that:
(i) each Sublicensee who, pursuant to a sublicense granted by OEM,
incorporates any portion of the Licensed Software into such Sublicensee's
product or products shall execute a written sublicense agreement with OEM (the
"Sublicense Agreement") which shall prohibit such Sublicensee from
sublicensing any of the rights granted to in the Sublicense Agreement, except
to end users, and a provision stating that such Sublicense Agreement and all
rights granted therein shall terminate automatically without notice and
without further action on OEM's part upon the expiration or termination of
this Agreement for any reason.
OEM'S FAILURE TO ENSURE THAT ALL MATERIAL FOREGOING CONDITIONS HAVE BEEN MET
WITH RESPECT TO ALL SUBLICENSEES SHALL BE DEEMED A MATERIAL BREACH OF THIS
AGREEMENT.
<PAGE>
2.5.2 OEM will use its best efforts to ensure that all Sublicensees under such
Sublicensee Agreement abide by the terms of such Sublicense Agreements and,
upon request by Company, will keep Company apprised of its activities to
enforce such provisions with particular Sublicensees. In addition, OEM agrees
that (I) Company may join OEM as a named plaintiff in any suit brought by OEM
against any Sublicensee with respect to the Licensed Software and (ii) OEM
will take such other actions, give such information, and render such aid, as
may be reasonably necessary to allow Company to bring and prosecute such
suite.
2.5.3 OEM will remain responsible for al its obligations under this Agreement
notwithstanding any Sublicense Agreement, including without limitation, the
payment to Company of al amounts due to Company from the reproduction and
distribution of the Licensed Software, regardless of whether such reproduction
and distribution is performed by OEM or its Sublicensees.
2.5.4 Company shall have the right to approve sublicensees of OEM for
unbundled products sod through another reseller, which approval will not be
unreasonably withheld.
3. COMPANY'S MARKETING AND SUPPORT RESPONSIBILITIES
3.1 Duties of Company. From Company's principal place of business, Company
shall:
3.1.1 Provide to OEM (and not to End-Users) technical assistance by telephone
during Company's normal operating hours regarding the Licensed Software.
Company shall not be obligated to accept any calls or other communications
from End-Users sublicensed by OEM. OEM shall notify all such End-Users to
only contact OEM's support services. OEM shall never communicate to any
End-User sublicensed by OEM any directions, including but not limited to
publishing Company's telephone numbers in documentation, or information that
recommend or facilitate contacting Company for support.
3.1.2 Provide to OEM two (2) days of training at the principal office of OEM.
Company agrees to provide additional one (1) day training services to OEM upon
a mutually agreeable schedule when major releases or revisions are announced
and both companies deem such training necessary.
3.2 Product Warranty: Company warrants that for a period of 90 days following
delivery to OEM, the Software will perform substantially in accordance with
Company current specifications. COMPANY HEREBY DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITH LIMITATION, THE IMPLIED
WARRANTEES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. OEM
EXPRESSLY ACKNOWLEDGES THAT NO REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS AGREEMENT HAVE BEEN MADE RESPECTING THE GOODS OR SERVICES TO BE PROVIDED
HEREUNDER, AND THAT OEM HAS NOT RELIED ON ANY REPRESENTATION NOT EXPRESSLY SET
OUT IN THIS AGREEMENT.
3.3 Proprietary Rights Indemnification. Company shall indemnify and hold OEM
harmless from any final award of costs and damages against OEM for any action
based on infringement or misappropriation of any U.S. copyright, trademark, or
trade secret as a result of the use or distribution of a current, unaltered
version of the Licensed Software; provided, however, that Company is promptly
notified in writing of any such suit or claim, and further provided that OEM
permits Company to defend, compromise, or settle same, and provides all
available information and reasonable assistance to enable Company to do so.
The foregoing states the entire liability of Company and sole remedy of OEM
with respect to infringement or misappropriation of any Proprietary Rights by
the Licensed Software.
<PAGE>
3.4 Limitation of Liability. IN NO EVENT SHALL COMPANY OR ITS DEVELOPERS,
DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES BE LIABLE TO OEM FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, DAMAGES FOR LOSS OF DATA, LOSS OF USE OF COMPUTER HARDWARE
DOWNTIME, LOSS OF GOODWILL, LOSS OF BUSINESS OR COMPUTER HARDWARE
MALFUNCTION), WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE USE OF
OR INABILITY TO USE THE LICENSED SOFTWARE OR ACCOMPANYING WRITTEN MATERIALS,
REGARDLESS OF THE BASIS OF THE CLAIM AND EVEN COMPANY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
3.5 Notification. Company agrees to advise OEM of updates and or revisions to
the Licensed Software, if any, when Company makes sure information generally
available; provided, however, that Company shall have no obligation to make
any such updates or revisions to OEM under this agreement. Company agrees to
offer updates and or revisions to the Licensed Software to the OEM at the best
customer price.
3.6 Standard of Performance. Company shall use its best efforts to perform
each of the duties described in Section 4.1 hereof in a commercially
reasonable manner that preserves and protects OEM's business reputation and
its Proprietary Rights.
3.7 Indemnification. Company shall indemnify and hold OEM harmless from and
against any and all claims, liabilities, costs and expenses (including legal
fees) arising out of (i) any duty, obligation, or warranty regarding the
Licensed Software created by Company, (ii) the improper installation, support
or maintenance of the Product(s) by Company or its employees, (iii) any
violation by Company of any material provision of this Agreement, or (iv) any
claims of intellectual property infringement which relate to the products and
would not cover the Licensed Software standing alone.
3.8 Compliance with Applicable Laws. Company shall:
(i) At its own expense, make obtain, and maintain in force at all times during
the term of this Agreement, all filings, registrations, reports, licenses,
permits and authorizations (collectively "Authorizations") in order for
Company to perform its obligations under this Agreement. OEM shall provide
Company with such assistance as Company may reasonably request in making or
obtaining any such Authorizations. In the event that the issuance of any
Authorization is conditioned upon an amendment or modification to this
Agreement which is unacceptable to OEM, OEM shall have the right to terminate
this Agreement without further obligation whatsoever to Company.
4. OEM'S MARKETING AND SUPPORT RESPONSIBILITIES
4.1 Duties of OEM. OEM shall:
4.1.1 Promote and market the Product(s) listed in Exhibit A, at OEM's
discretion.
4.1.2 Maintain sufficient inventory levels of Product(s) to satisfy reasonably
anticipated demand.
4.1.3 Comply with the limitations on distribution provided in Section 2
hereof.
4.1.4 Provide all technical assistance to End-Users and Distributors the
nature and extent of which shall be determined by OEM in OEM's sole
discretion.
OEM shall prominently display OEM's technical support telephone number in the
Documentation and other materials delivered with the Products.
4.1.5 Notify Company promptly of any defects in the Licensed Software and
distribute Licensed Software connections as required by Company.
<PAGE>
4.1.6 Perform the obligations concerning reproduction and packaging set forth
on the Packaging Addendum, if any, attached hereto.
4.1.7 Produce and deliver to Company all reports and other reports required
herein.
4.1.8 Print the Company logo or marks specified by Company on the front and
other sides of the retail boxes containing the Products.
4.2 Standard of Performance. OEM shall use its best efforts to perform each
of the duties described in Section 4.1 hereof in a commercially reasonable
manner that preserves and protects Company's business reputation and its
proprietary rights.
4.3 Warranty Limitation. OEM shall not make or create any duty, obligation,
or warranty on behalf of Company regarding the Licensed Software.
4.4 Indemnification. OEM shall indemnify and hold Company harmless from and
against any and all claims, liabilities, costs and expenses (including legal
fees) arising out of (i) any duty, obligation, or warranty regarding the
Licensed Software created by OEM, (ii) the improper installation, support or
maintenance of the Product(s) by OEM or its employees, (iii) any violation by
OEM of any material provision of this Agreement, or (iv) any claims of
intellectual property infringement which relate to the products and would not
cover the Licensed Software standing alone.
4.5 Compliance with Applicable Laws. OEM shall:
(i) At its own expense, make, obtain, and maintain in force at all times
during the term of this Agreement, all filings, registrations, reports,
licenses, permits and authorizations (collectively "Authorizations") in order
for OEM to perform its obligations under this Agreement. Company shall
provide OEM with such assistance as OEM may reasonably request in making or
obtaining any such Authorizations. In the event that the issuance of any
Authorization is conditioned upon an amendment or modification to this
Agreement which is unacceptable to Company, Company shall have the right to
terminate this Agreement without further obligation whatsoever to OEM.
5. PRODUCT SUPPLY, PAYMENT, AND SHIPMENT
5.1 Price and Payment.
5.1.1 Price, Resale Prices. Subject to the Initial Inventory Requirement,
Minimum Purchase Commitment, and the other terms and conditions set forth in
the Confidential Product and Price List, OEM shall pay to Company the price
indicated per unit of the Licensed Software in the Confidential Product and
Price List. Any suggested retail prices indicated by Company from
time-to-time are not binding on OEM and OEM is free to determine its own
resale prices.
5.1.2 Payment Terms. Payment terms are payment in full to Company within
thirty (30) days after the end of the quarter in which reproduction of the
Licensed Software by OEM. Company reserves the right in its reasonable
commercial judgment to place OEM on credit hold if payment is not made withing
60 days after the end of the month above, in which event Company will promptly
inform OEM, and Company may suspend OEM rights to reproduce Licensed Software.
5.1.3 Taxes and Duties. The prices stated are exclusive of income taxes,
sales or use taxes ad valorem taxes, duties, licenses, or levies imposed on
the production, storage, sale transportation or use of the Licensed Software.
OEM shall pay all such charges either as levied by taxing authorities, or in
lieu thereof, OEM shall provide an exemption certificate acceptable to the
relevant taxing authorities.
<PAGE>
5.2 Late Payment Charge. OEM shall pay interest to Company on delinquent
accounts and any other fees not paid within thirty (30) days after becoming
due to Company as provided hereunder at the rate of ONE AND ONE-HALF PERCENT
(1-1/2 %) per month or the maximum amount allowed by law, whichever is less,
commencing thirty (30) days after the date payment was due.
6. PROPRIETARY RIGHTS
6.1 Use Restrictions. OEM acknowledges that this transaction is a license
only, and that Company or its suppliers, retain sole ownership of all
Proprietary Rights embodied in the Licensed Software. Except as permitted
herein, OEM shall not: (i) copy reproduce, market, sell, distribute, modify,
decompile, disassemble, or otherwise reverse engineer the Licensed Software or
create derivative works based on the Licensed Software or any portions thereof
or obtain possession of any source code or other technical material relating
to the Licensed Software; (ii) distribute, transfer, loan, rent or provide a
ccess to the Licensed Software, except as provided herein; (iii) remove or add
any Proprietary Rights notice associated with the Licensed Software without the
express written permission of Company; (iv) process OEM's own internal data
with the Licensed Software or use the Licensed Software for other internal use
except as provided herein.
6.2 Trademark Rights. The trademarks and trade names under which Company
markets its Licensed Software are the exclusive property of Company. This
Agreement gives OEM no rights therein, except the restricted license to
reproduce such trademarks and trade names as required for OEM's marketing
efforts. OEM shall not: (i) register Company's trademarks or trade names in
its name or in any other name; (ii) use Company's trademarks and trade names
as part of OEM's corporate name or trade name; (iii) market the Licensed
Software under any other or different trademarks or trade names than those
specified in writing by Company. In written communications and in
advertising, OEM's use of the Marks shall at all times be in accordance with
such styles and together with such trademark notices as Company may require.
Upon the request of Company, OEM agrees to discontinue the use of (i) any
Marks used by OEM in a manner inconsistent with the guidelines set forth
above, or (ii) any trademark, service mark, or trade name deemed to create a
likelihood of confusion with a Mark.
6.3 Notice of Infringement. OEM will promptly notify Company of any and all
infringements or violations by third parties or attempted infringements or
violations of any of the Marks copyrights or other legal rights of Company
that may come to OEM's attention. OEM will provide reasonable assistance to
Company, at Company's expense, in taking such action to enforce Company's
rights against the parties infringing or violating such rights as Company may
elect in its sole discretion.
6.4 Injunctive Relief. The parties hereby agree that any breach of Section 6
would constitute irreparable harm to Company, and that Company shall be
entitled to specific performance and/or injunctive relief in addition to other
remedies at law or in equity.
6.5 Disclosure. Each party hereunder may disclose to the other party certain
Trade Secrets and Confidential Information, including, without limitation,
Company's pricing policies set out in the Confidential Product and Price List.
For purposes of this Agreement, "Trade Secrets" means information which: (a)
derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy;
"Confidential Information" means information, other than Trade Secrets, that
is of value to its owner and is treated as confidential; "Proprietary
Information" means Trade Secrets and Confidential Information; "Owner" refers
to the party disclosing Proprietary Information hereunder, whether such party
is Company or OEM; and "recipient" refers to the party receiving any
Proprietary Information hereunder, whether such party is Company or OEM.
<PAGE>
6.6 Requirement of Confidentiality. Recipient agrees to hold the Proprietary
Information of Owner in strictest confidence and not to, directly or
indirectly, use, copy, reproduce, distribute, manufacture, duplicate, reveal,
report, publish, disclose, cause to be disclosed, or otherwise transfer the
Proprietary Information of Owner to any third party, or utilize the
Proprietary Information of Owner for any purpose whatsoever other than as
expressly contemplated by this Agreement. With regard to the Trade Secrets,
this obligation shall continue for so long as such information constitutes a
trade secret under applicable law. With regard to the Confidential
Information, this obligation shall continue for the term of this Agreement and
for a period of one (1) year thereafter. The foregoing obligations shall not
apply if and to the extent that: (a) Recipient establishes that the
information communicated was already known to Recipient, without obligations
to keep such information confidential, at the time of Recipient's receipt from
Owner, as evidenced by documents in the possession of Recipient prepared or
received prior to disclosure of such information; (b) Recipient establishes
that the information communicated was received by Recipient in good faith
from a third party lawfully in possession thereof and having no obligation to
keep such information confidential; (c) Recipient establishes that the
information communicated was publicly known at the time of Recipient's receipt
from Owner or has become publicly known other than by a breach of this
Agreement; or (d) Recipient establishes that the Proprietary Information was
not marked as Confidential when received from the Owner.
6.7 Security Measures. Without limiting the general obligations specified
above, Recipient agrees to implement those security procedures it uses to
protect its own Proprietary and confidential Information of like nature, but
in no circumstances less than reasonable care.
6.8 Ownership. OEM acknowledges and agrees that Company expressly retains
title and ownership to all worldwide intellectual property rights, including
without limitation, design, trade secrets, know-how, patent rights, trademarks
and copyrights in and to the Licensed Software.
6.9 No Reverse Engineering. OEM agrees not to reverse assemble, reverse
engineer, decomplie or otherwise attempt to derive source code from the
Licensed Software; provided, however, that if OEM's address set forth above is
located within a Member State of the European Community, then such activities
shall be permitted solely to the extent, if any, permitted by Article 6 of the
Council Directive of 14 May 1991 on the legal protection of computer programs,
and implementing legislation thereunder.
7. TERM AND TERMINATION
7.1 Term of Agreement. The initial term of this Agreement shall commence as
of the Effective Date and shall terminate at 11:59 pm., U.S. Eastern Time, on
the Expiration Date.
7.2 Renewal. This agreement may be renewed for any number of successive one
(1) year terms. Both the initial term and any renewal term are subject to
earlier termination as otherwise provided herein. Company or OEM may choose
not to renew this Agreement without cause for any reason, so long as notice
not to renew is given at least 30 days in advance of the end of the current
term.
7.3 Automatic Termination. Unless both parties promptly after discovery of
the relevant facts notifies each party to the contrary in writing, this
Agreement will terminate immediately without notice upon the institution of
insolvency, bankruptcy, or similar proceedings by or against either party, any
assignment or attempted assignment by either party for the benefit of
creditors, or any appointment or application for such appointment, of a
receiver for either party.
7.5 Mutual Termination. Either Party shall be entitled to terminate this
Agreement at any time if either party breaches any material provision of this
Agreement if such breach is not cured within thirty (30) days after
notification by either party.
<PAGE>
7.6 Acknowledgment and Waiver. The parties acknowledge that the provisions
of this Section 7 are essential, fair, and reasonable, and that the occurrence
of any of the events described herein shall constitute good, just and
sufficient cause for the termination or nonrenewable of this Agreement.
7.7 Distribution Grace Period. Upon the expiration or termination hereof, OEM
may continue to distribute its fully-paid, current inventory of Licensed
Software (not including any Licensed Software reproduced by OEM after such
termination), but in no event longer than four (4) months after expiration or
termination. During this period, the provisions of this Agreement shall
continue in force for purposes of permitting OEM to distribute its fully-paid,
current inventory. Notwithstanding the above, OEM shall not be entitled to
distribute any Licensed Software reproduced by OEM after termination of this
Agreement. Notwithstanding anything herein or elsewhere to the contrary, OEM
shall pay all invoices for license fees and other sums due to Company
regardless of whether this Agreement has terminated or expired. Company shall
have no obligation of any kind to repurchase or grant a credit for any
Licensed Software whether or not it has been licensed to End Users.
7.8 Continuing Obligations. Sections 3.2, 3.3, 3.4, 3.5, 4.4, 5, 6, and 8
shall survive the expiration or termination hereof (including all rights for
the grace period in Section 7)).
7.9 Obligations upon Termination. Upon cancellation or termination of this
Agreement for any reason, OEM shall pay to Company immediately all License
fees, support fees, and other sums due to Company hereunder and immediately
return to Company all Company property, including, but not limited to, the
Master Copy, all Demonstration Copies and the Proprietary Information of
Company.
OEM may keep in its possession however, the materials necessary to support its
customers for a period of 90 days. Upon return of such materials, OEM shall
provide Company with a signed written statement certifying that it has
returned all Company property to Company. Upon termination of this Agreement
for any reason, all rights and licenses granted by Company hereunder to OEM
shall immediately cease, provided such termination shall not result in
termination of End User Agreements extended to End Users. Upon termination or
cancellation of this Agreement for any reason, all invoices and any other
monies due to Company bo OEM shall remain due and payable in accordance with
the terms hereof. Upon termination or cancellation of this Agreement for any
reason, OEM shall promptly notify all Sublicensees of such termination.
7.10 Limitation of Liability upon Termination. In the event of termination by
either party in accordance with any of the provisions of this Agreement,
neither party shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, inventory,
investments, leases or commitments in connection with the business or goodwill
of Company or OEM. Termination shall not, however, relieve either party of
obligations incurred prior to the termination.
8. GENERAL PROVISIONS
8.1 Notices. All notices shall be given in writing and shall be effective
when either served by personal delivery, or by airmail or communicated
electronically by cable, telegram or facsimile transmission and addressed to
the parties at their respective addresses set forth beneath their signature
below, or to such other address as either party may later specify by written
notice.
8.2 Merger; Amendment. OEM has not relied on any representation by Company
that is not provided herein. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter of this
Agreement and merges all prior communications, understandings, and agreements.
This Agreement may be modified only by a written agreement signed by the
parties. All Exhibits and Addendum attached hereto and referred to herein are
by this reference made a part hereof by this reference.
<PAGE>
8.3 Independent Contractor. OEM is an independent contractor, and nothing
herein shall be construed to create a partnership, joint venture, or agency
relationship between the parties. OEM shall have no authority to enter into
agreements of any kind on behalf of Company and shall not have the power or
authority to bind or obligate Company in any manner to any third party.
8.4 Assignment. OEM shall not be entitled to assign this Agreement, by
operation of aw or otherwise, without the prior written consent of Company.
Company shall not be entitled to assign this Agreement by operation of law or
otherwise without written consent of OEM. In neither case shall written
consent be unreasonably withheld.
8.5 Severability. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be contrary to law or public policy, the
remaining provisions shall remain in full force and effect.
8.6 No Implied Waivers. The failure of either party to enforce at any time
any of the provisions hereof shall not be a waiver of such provision, or any
other provision, or of the right of such party thereafter to enforce any
provision hereof.
8.7 Governing Law and Arbitration. The rights and obligations of the parties
under this Agreement shall not be governed by the 1980 U.N. Convention on
Contracts for International Sale of Goods; rather such rights and obligations
shall be governed by and construed under the laws of the State of California,
including its Uniform Commercial Code, without reference to conflict of laws
principles.
8.8 Force Majeure. Neither Company or OEM shall be liable for damages for any
delay or failure of delivery arising out of causes beyond their reasonable
control and without their fault or negligence, including, but not limited to,
acts of God, acts of civil or military authority, fires, riots, wars, or
embargoes.
8.9 Multiple Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each one of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
8.10 No Fee Paid; Trademarks. Except for payment of advance fees as otherwise
provided herein, OEM has not paid and will not pay any fee to Company in
connection with entering into this Agreement or any prior agreement with
Company or its predecessors. OEM acknowledges that its rights under this
Agreement and the operations of its business are not substantially related to
the use of any trademark, trade name, logo, service mark, or other commercial
symbol of Company or its products.
8.11 Language. This Agreement is in the English language only, which language
shall be controlling in all respects, and all versions hereof in any other
language shall not be binding on the parties hereto. All communications and
notices to be made or given pursuant to this Agreement shall be in the
English language.
8.12 Applicability of Provisions Limiting Company's Liability. The provisions
of this Agreement under which the liability of Company is excluded or limited
shall not apply to the extent that such exclusions or limitations are declared
illegal or void under the applicable laws, unless the illegality or
invalidity is cured under the laws of the Territory by the fact that the Law
of California governs this Agreement.
<PAGE>
8.13 U.S. Export Control. OEM understands and acknowledges that Company is
subject to regulation by agencies of the U.S. Government, including, but not
limited to, the U.S. Department of Commerce, which prohibit export or
diversion of certain products and technology to certain countries. Any and
all obligations of Company to provide the Licensed Software, documentation, or
any media in which any of the foregoing is contained, as well as any other
technical assistance shall be subject in all respects to such United States
laws and regulations as shall from time to time govern the license and
delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, Bureau of Export
Administration. OEM agrees to cooperate with Company, including, without
Limitation, providing require documentation, in order to obtain export
licenses or exemptions therefrom. OEM warrants that it will comply with the
Export Administration Regulations and other United States laws and regulations
governing exports in effect from time to time.
8.14 Foreign Corrupt Practices Act. In conformity with the United States
Foreign Corrupt Practices Act and with Company's established corporate
policies regarding foreign business practices, OEM and its employees and
agents shall not directly or indirectly make an offer, payment, promise to
pay, or authorize payment, or offer a give, promise to give, or authorize the
giving of anything of value for the purpose of influencing an act or decision
of an official of any government within the United States Government
(including a decision not to act) or inducing a decision not to act) or
inducing such a person to use his influence to affect any such governmental
act or decision in order to assist Company in obtaining, retaining or
directing any such business.
8.15 Government Approvals and Enforceability. OEM hereby represents and
warrants that no consent, approval or authorization of or designation,
declaration or filing with any governmental authority in the Territory is
required in connection with the valid execution, delivery and performance of
this Agreement. OEM represents and warrants that the provisions of this
Agreement and the rights and obligations of the parties hereunder, are
enforceable under the laws of the countries within the Territory.
8.16 Exhibits and Addendum. The Exhibits and Addendum attached hereto are by
this reference made a part hereof, including the Packaging Addendum.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
BY: "Charles M. Lejsek" BY: "William W. Smith"
------------------- --------------------
Charles M. Lejsek William W. Smith, Jr.
President President/CEO
08/06/1996 08/06/1996
3977 E. Bayshore Road #B
Palo Alto CA 94303
(415) 960-0100
(415) 960-0205
<PAGE>
EXHIBIT "A"
INFOIMAGING TECHNOLOGIES, INC.
PRODUCT DESCRIPTION
Bundled Product(s). The following Licensed Software Product(s) are authorized
to be Bundled by OEM with the corresponding OEM Product(s) or sold as Retail
Product(s) pursuant to the terms of the Agreement.
Authorized Licensed Software Product for Retail Only
3D FaxFile Standard
CONFIDENTIAL PRICE LIST
1. Royalty price of $(*) per unit for 3D FaxFile Standard
Authorized Licensed Software Produce for OEM Bundled Products Only
3D FaxFile Basic
CONFIDENTIAL PRICE LIST
1. Royalty price of $(*) per unit for 3D FaxFile Basic, 4K send capability
2. Royalty price of $(*) per unit for 3D FaxFile Basic, 8K send capability
3. Royalty price of $(*) per unit for 3D FaxFile Basic, 16K send capability
4. Royalty price of $(*) per unit for 3D FaxFile Basic, 32K send capability
5. A special royalty price of $(*) per unit for 3D FaxFile Basic, 32K sent
capability to be sold only to OEM's customer Brother International.
COMPANY PACKAGING ADDENDUM ROYALTY
Master Disks. Notwithstanding anything to the contrary in the Authorized OEM
Agreement ("Agreement") to which this Addendum is attached, Company is not
obligated to deliver any copies of the Licensed Software or Packaging except
for one copy of the Master Copy(s) and the End User Agreement for 3D FaxFile
Basic. 3D FaxFile Standard Product will be supplied on individual disks.
Additional License Rights. In addition to the licenses rights granted in
Section 2 of the Agreement, during the term of the Agreement Company grants to
OEM the non-transferable, non-exclusive right and license:
To reproduce copies of the Licensed Software from the Master Copy for the
purpose of creating Bundled and Retail Product(s) and for distribution to (i)
End-Users, OEM customers and (ii) Distributors solely for sublicense and
distribution to End Users in accordance with the Agreement.
To reproduce copies of the End User Agreement that is specified and required
by Company to accompany each copy of the Licensed Software distributed by OEM.
*** Confidential Portion Omitted
<PAGE>
Packaging. OEM hereby agrees that all Licensed Software distributed hereunder
pursuant to Orders described herein including the Licensed Software reproduced
by OEM pursuant to the provisions of this Addendum shall be distributed in the
packaging approved by Company ("Packaging") and shall be accompanied by an
End-User Agreement. OEM shall not alter, obliterate, modify, change or
replace the Packaging or the End-User Agreement without Company's consent.
OEM agrees to use the Marks in association with the Packaging and the Licensed
Software in compliance with the requirements of this Agreement.
Reports. On or before thirty (30) days after the end of each sales quarter
(May-July; August-October; November-January; and February-April) during the
term of this Agreement and at such other times as Company may request, OEM
shall deliver to Company written fee reports certified as accurate by an
authorized representative of OEM disclosing the number of copies of the
Licensed Software distributed, including any reproduced copies OEM is
authorized to distribute, and the names and addresses of the End Users and
Distributors who licensed the Licensed Software during the previous month.
OEM shall keep complete and accurate records to allow Company to examine and
audit OEM's accounts with respect to the licensing of the Licensed Software
and payment of fees.
Audit. Upon reasonable notice from Company, OEM agrees to permit Company, no
more than once for each annual period, access, during OEM's normal business
hours, to OEM's records which are relevant to this Agreement, in order for
Company to verify and audit OEM's compliance with this Agreement. Such
verification and audit shall be at Company's expense and may be performed, at
Company's option, by an independent third party selected by Company which
party shall be bound by reasonable obligations of confidentiality. OEM agrees
to permit Company or, at its option, a certified public accountant paid by
Company, to inspect such records at reasonable times during normal business
hours. In the event such audit discloses that the fees or other sums
previously paid or reported as due to Company have been underpaid or
under-reported as of the date of the audit, then OEM shall immediately pay to
Company
the difference. If the audit discloses that the fees due and payable to
Company pursuant to this Agreement have been underpaid or under-reported by an
amount that exceeds five (5%) percent of the fees paid by OEM during the
period covered by the audit, then OEM shall pay all expenses incurred by
Company in performing the audit.
BY: "Charles M. Lejsek" BY: "William W. Smith"
------------------- --------------------
Charles M. Lejsek William W. Smith, Jr.
President President/CEO
08/06/1996 08/06/1996
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (the "Sublease"), made as of this 16th day of
September, 1999, by and between Outdoor West, Inc., a Texas corporation
("Sublessor"); and Intacta Technologies, Inc., a ____________ corporation
("Sublessee").
WITNESSETH:
WHEREAS, Sublessor, as "Tenant" entered into a lease with P.C. Tower L.P., a
Georgia limited partnership (the "Prime Landlord"), dated November 1, 1991,
leasing space on the 16th floor of that certain building known as South Tower,
25 Peachtree Street, Atlanta Georgia. Said lease has been amended three (3)
times. The third amendment by and between Sublessor and Peachtree Complex,
L.P., a Georgia limited partnership, is dated October 22, 1997 and is for that
certain space located on the 22nd floor of the North Tower, 235 Peachtree
Street, Atlanta, Georgia (the "Building"). Said lease and Amendments (the
"Prime Lease") to which reference made above is incorporated herein by this
reference as Exhibit "A".
WHEREAS, Sublessor and Sublessee have agreed that Sublessor shall sublet
approximately 2,208 square feet to the Sublessee, as such space is shown on
Exhibit "B" attached hereto and by this reference incorporated herein, upon
the terms and conditions as herein described.
NOW THEREFORE, for Ten and No/100 Dollar ($10.00) and other good and valuable
consideration, paid by the parties hereto to one another, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto hereby covenant and agree as follows:
1. Premises, Rent and Term.
A. Sublessor hereby subleases to Sublessee the 2,208 square feet of space on
the 22nd floor of the Building shown on Exhibit "B" (the "Sublease Premises"),
beginning on November 1, 1999 and ending on November 8, 2000.
B. The base rent for such Sublease Premises shall be equal to Ten and 00/100
Dollars per rentable square foot ($10.00/RSF) per year which equates to One
Thousand Eight Hundred Forty and 00/100 Dollars ($1,840.00) per month due in
advance on the first day of each month during the Term. Sublessor agrees to
deliver space to Sublessee no later than October 31, 1999. Should Sublessor
fail to deliver premises by October 31, 1999, Sublessee may: (1) terminate
this sublease upon delivery of written notice to Sublessor, and Sublessor
shall immediately return to Sublessee the first month's rent ($1,840.00) and the
security deposit ($1,840.00) previously paid by Sublessee to Sublessor; or (2)
receive as damages $250.00 per day of delay in the delivery of the premises.
If the term commences on a day other than the beginning or end of the month,
then the rent shall be prorated on a per diem basis.
2. No Assignment. Sublessee shall not assign this Sublease nor sublet the
Sublease Premises in whole or in part without prior written consent of
Sublessor and Prime Landlord. Said consent from Sublessor shall not be
unreasonably withheld, delayed. Sublessee shall not permit Sublessee's
interest in this Sublease to be vested in any third party by operation of law
or otherwise.
3. Other Charges. If Sublessee shall procure any additional services from
the Building, such as alterations or after-hour air conditioning, Sublessee
shall pay for same a the rates charged therefor by the Prime Landlord and
shall make such payment to the Sublessor or Prime Landlord, as Sublessor shall
direct. Any Rent or other sums payable by Sublessee under this Paragraph 3
shall be Additional Rent and collectible by Sublessor as such. If Sublessor
shall receive any refund from Prime Landlord, Sublessee shall be entitled to
the return of so much thereof as shall be attributable to prior payments by
Sublessee.
4. Subordinate to Prime Lease. This Sublease is subject and subordinate in
all instances and under all circumstances to the Prime Lease. Except as may
be inconsistent with the terms hereof, all the terms, covenants and conditions
in the Prime Lease contained shall be applicable to this Sublease with the
same force and affect as if Sublessor were the "Landlord" under the Prime
Lease and Sublessee were the "Tenant" thereunder; and in case of any breach
hereof by Sublessee, Sublessor shall have all the rights against Sublessee as
would be available to Prime Landlord against Sublessor as "Tenant" under the
Prime Lease.
<PAGE>
5. Services. Notwithstanding anything to the contrary contained herein, the
only services or rights to which Sublessee is entitled hereunder are those to
which Sublessor is entitled to as "Lessee" under the Prime Lease and that for
all such services and rights Sublessee will look to Prime Landlord under Prime
Lease.
6. No Acts - Sublessee. Sublessee shall neither do nor permit anything to be
done which would cause the Prime Lease to be terminated or forfeited or any
claims to accrue to the benefit of Prime Landlord by reason or any right of
termination or forfeiture reserved or vested in Prime Landlord under the Prime
Lease, or any rights to damages accruing to or for the benefit of Prime
Landlord under the Prime Lease, and Sublessee shall indemnify and hold
Sublessor harmless from and against all loss, cost, damage or expense,
including, but not limited to, attorney's fees and court costs, incurred by
Sublessor by reason of default on the part of Sublessee by reason of which the
Prime Lease may be terminated or forfeited, or any claims shall accrue to the
benefit of or for the Prime Landlord under the Prime Lease by reason of any
default on the part of Sublessee.
7. No Acts - Sublessor. Sublessor shall do nor permit anything to be done
which would cause the Prime Lease to be terminated or forfeited or any claims
to accrue to the benefit of Prime Landlord by reason of any right of
termination or forfeiture reserved or vested in Prime Landlord under the Prime
Lease, or any rights to damages accruing to or for the benefit of Prime
Landlord under the Prime Lease, and Sublessor shall indemnify and hold the
Sublessee harmless from and against all loss, costs, damage or expense
including, but not limited to, attorneys' fees and court costs, incurred by
Sublessee by reason of any default on the part of Sublessor by reason of which
the Prime Lease may be terminated or forfeited, or any claims shall accrue to
the benefit of or for Prime Landlord under the Prime Lease by reason of any
default on the part of Sublessor. Sublessor represents and warrants that
Sublessor shall pay to Prime Landlord any and all sums owed to Prime Landlord
under the Prime Lease and, upon request by Subtenant, shall provide written
evidence thereof. Sublessor shall also deliver to Sublessee on or before five
(5) days from Sublessor's receipt thereof any notice of default delivered to
Sublessor from Prime Landlord. In the event that Sublessor fails to pay any
sums owed to Prime Landlord or perform any act required under the Prime Lease,
Subtenant shall have the right but not the obligation to pay Prime Landlord
any amounts or perform any act required of Sublessor under the Prime Lease in
order to cure Sublessor's failure to perform. Any amount paid by Sublessee to
Prime Landlord on behalf of Sublessor to cure Sublessor's default of the Prime
Lease shall accrue interest at the rate of five percent (5%). On or before
five (5) days after receipt of written notice from Sublessee, Sublessor shall
pay to Sublessee any and all amounts paid by Sublessee (i) on behalf of
Sublessor or (ii) to cure Sublessor's default, together with any interest
accruing thereon as provided herein.
7. Payment to Sublessor by Sublessee. Sublessee has paid to Sublessor upon
the execution and delivery of this Sublease One Thousand Eight Hundred Forty
and 00/100 Dollars ($1,840.00) as payment for the first month of rent,
November 1999 under the Sublease. Sublessee has also paid Sublessor, upon the
execution and delivery of the Sublease, the sum of One Thousand Eight Hundred
Forty and 00/100 Dollars $1,840.00) as security for the full and faithful
performance of the terms, covenants and conditions of this Sublease on
Sublessee's part to be performed or observed, including, but not limited to,
payment of Rent or for any other sum which Sublessor may expend or be required
to expend by reason of Sublessee's failure to company with the terms and
conditions of the Prime Lease or this Sublease, including, but not limited to,
any damages or deficiency incurred by Sublessor as "Tenant" under the Prime
Lease in relating the Sublease Premises, in whole or in part, whether such
damages shall accrue before or after summary proceedings or other re-entry by
Sublessor. Sublessee shall fully and faithfully comply with all the terms,
covenants and conditions of this Sublease. The security deposit, or any
unapplied balance thereof, shall be returned to Sublessee within fifteen (15)
days after the time fixed as the expiration of the Term.
8. Sublease Premises Improvements - Sublessee agrees to accept the premises
in as-is condition.
9. Agency Disclosure. Lambert Smith Hampton is representing the Sublessee in
this transaction, and not the Sublessor. Lambert Smith Hampton will be paid a
commission by the Sublessor and Sublessor will indemnify Sublessee for all
damages and costs related to non-payment of same.
10. No Other Agreements. All prior understandings and agreements between the
parties are merged within this Sublease, which along fully and completely sets
forth the understanding of the parties hereto. This Sublease may not be
changed or terminated in any manner other than by an agreement in writing,
executed by the party against whom enforcement of the change or termination is
sought.
<PAGE>
11. NOTICE. Any notice of demand which either party may or must give to the
other hereunder shall be in writing and delivered personally or sent by
certified mail, return receipt requested, addressed if to Sublessor, as
follows:
Outdoor West, Inc.
2976 North Expressway
Griffin, GA 30223
Attn: Charles Renfroe
and if to Sublessee, as follows:
Intacta Technologies, Inc.
3350 Riverwood Parkway, S.E.
Suite 1900
Atlanta, Georgia 30339
Attn: Noel R. Bambrough
Executive Vice-President and Chief Operating Officer
Either party may, by notice in writing, direct that future notices or demands
be sent to a different address.
12. Binding. The covenants and agreements herein contained shall bind and
inure to the benefit of Sublessor, Sublessee, and their respective executors,
administrators, successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this Sublease to be executed
under seal and delivered, on the day and year above written.
SUBLESSOR: OUTDOOR WEST, INC.
By: "Charles Renfroe"
---------------------
Charles Renfroe, CEO
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
SUBLESSEE: INTACTA TECHNOLOGIES, INC.
By: "Noel R. Bambrough"
-----------------------
Noel R. Bambrough, Executive Vice President
(CORPORATE SEAL)
<PAGE>
CONSENT TO SUBLEASE
THIS CONSENT TO SUBLEASE (this "Consent") is executed as of the 21st day of
September, 1999 by PEACHTREE-TSG ASSOCIATES, LLC ("Landlord"), Outdoor West,
Inc. ("Sublandlord"), INTACTA TECHNOLOGIES, INC. ("Subtenant").
RECITALS
WHEREAS, Landlord, or its predecessor in title, and Sublandlord (as "Tenant")
did enter into that certain Lease Agreement, as amended from time to time,
originally dated ______________ (collectively the "Lease").
WHEREAS, Sublandlord and Subtenant have entered into that certain Sublease
Agreement, dated as of 11/01/99 (the "Sublease"), for the Leased Premises (the
"Subleased Premises").
WHEREAS, Sublandlord must obtain the consent of Landlord to the subletting.
NOW, THEREFORE, in consideration of the foregoing, Landlord does agree as
follows:
1. Landlord hereby consents to the subletting in the Sublease. This Consent
and the occupancy of the Sublease Premises by Subtenant shall not be a consent
to the making of any alterations, or to any other provisions contained in the
Sublease, other than the as specifically set forth herein.
2. This Consent and the occupancy of the Subleased Premises by Subtenant
shall not be deemed to be a waiver or release of any of the obligations of
Sublandlord under the Lease.
3. Sublandlord and Subtenant will not modify, alter, amend or terminate the
Sublease without the prior written consent of Landlord.
4. Nothing contained in the Sublease or in this Consent shall be deemed a
waiver, modification or amendment of the Lease or any of Sublandlord's
obligations thereunder including, but not limited to, the obligations to pay
Base Rent, Additional Rent and any other charges under the Lease and the
obligation obtain Landlord's approval of plans and specifications and
contractors and to pay any fees applicable thereto, all in accordance with the
Lease, prior to making alterations in any portion of the Subleased Premises.
5. The Sublease shall in all respects be subject and subordinate to the Lease
and to all modifications, amendments and extensions thereof. Any term,
condition or provision contained in the Sublease in conflict with the Lease
shall be null and void as to Landlord (although effective between Sublandlord
and Subtenant) notwithstanding Landlord's consent to the subletting. Subject
to Landlord's rights in Paragraph 8 below, any termination of the Lease shall
result in a termination of the Sublease.
<PAGE>
6. Nothing contained in this Consent shall be deemed a waiver of Landlord's
right to approve or disapprove of any further or additional subletting of the
Premises or the Subleased Premises or any assignment of either the Lease or
the Sublease.
7. This Consent may not be changed, amended or modified in any manner other
than by agreement in writing specifically referring to this Consent and
executed by Landlord, Sublandlord and Subtenant.
8. If Landlord shall recover or come into possession of the Subleased
Premises before the stated expiration date of the Lease, Landlord shall have
the right, but not the obligation, to take over the Sublease and to succeed to
all rights of Sublandlord thereunder, Sublandlord hereby assigning (effective
as of the date of Landlord's succession to Sublandlord's estate in the
Subleased Premises) the Sublease if Landlord shall elect take over. The
subletting thereunder is subject to the condition that, from and after the
termination of the Lease or re-entry by Landlord thereunder or other
succession by Landlord to Sublandlord's estate in the Sublease Premises,
Subtenant hereby waives any right to surrender possession or to terminate the
Sublease and, at Landlord's election, shall be bound to Landlord for the
balance of the term thereof and shall attorn to and recognize Landlord as its
landlord, under all of the then executory terms of the Sublease, except that
Landlord shall not be (a) liable for any previous act, omission or negligence
of Sublandlord under the Sublease, (b) subject to any counterclaim, defense or
offset theretofore accruing to Subtenant against Sublandlord, (c) bound by any
previous modification or amendment of the Sublease made without Landlord's
consent or by any previous prepayment of more than one month's rent and
additional rent unless paid as provided in the Sublease, or (d) obligated to
perform any repairs or other work in the Sublease Premises or the Building
beyond Landlord's obligations under the Lease, and Subtenant shall execute and
deliver such instruments as Landlord may reasonably request to evidence and
confirm such attornment.
9. Upon the occurrence of any default by Sublandlord of its obligations under
the Lease, Landlord may elect, by written notice to Sublandlord and Subtenant,
to require Subtenant to pay all rental and other amounts due under the
Sublease directly to Landlord. Landlord may apply such payment first to the
costs necessary to cure Sublandlord's default and then to Sublandlord's
outstanding payment obligations under the Lease. Sublandlord hereby
authorizes Subtenant to comply, without inquiry, with any such directive
received from Landlord.
10. The provisions of this Consent shall bind and inure to the benefit of
Sublandlord, Subtenant and their respective successors and assigns. The word
"Landlord" as used herein shall mean not only the original Landlord named in
the first paragraph of this Consent but also all future owners of the property
in which the Subleased Premises is located. The word "Subtenant" as used
herein shall mean not only the original Subtenant named in the first paragraph
of this Consent but also all future holders of the tenant's leasehold estate
under the Sublease (but only such future holders that have been consented to
by Landlord as required herein.)
11. Sublandlord and Subtenant shall indemnify and hold Landlord harmless from
any and all claims, suits, or judgements (including, without limitation,
reasonable attorneys' fees and court costs incurred in connection with such)
for any fees, commissions or compensation of any kind which arise out of or
are in any way connected with any claimed agency relationship with Sublandlord
or Subtenant, related to the Sublease.
<PAGE>
12. This Consent shall be construed under the laws of the State of Georgia.
IN WITNESS WHEREOF, the undersigned has executed this Consent as of the day
and year first above written.
LANDLORD:
PEACHTREE-TSG ASSOCIATES LLC, a
Delaware limited liability company
By: Mezzanine Investors Partners, a New York
general partnership
By: Taylor Simpson Capital Management, L.P.,
a Delaware limited partnership, a partner
By: TSGP Inc., a Delaware corporation, its
general partner
By: "RBW"
-----
SUBLANDLORD:
By: "Charles H. Renfroe"
--------------------
Charles H. Renfroe
CEO
(CORPORATE SEAL)
SUBTENANT
By: "Noel R. Bambrough"
-------------------
Noel R. Bambrough
Executive Vice-President
(CORPORATE SEAL)
Tenancy Agreement
Date: August 31, 1999
Parties: 1. The Landlord Mrs. Hana Kimchi
2. The Tenant: Fontech Ltd.
Property: Empty single family house, of 180 square meters, divided into 7
rooms, kitchen and 2 bathrooms
Location: 49 Shietrit Street, Beer Sheva, 84781, Israel
Term: One year, from Sep. 01, 1999 to Aug. 31, 2000
Rent: US$14,220.00
Payable: In advance by equal US$7,110.00 installments on Sep. 01, 1999 and
Dec. 01, 1999. Payment is made in NIS at the representative exchange rate on
the day of payment.
Taxes: Fontech Ltd. Will pay the Rent Tax, directly to the government, at
the legal rate of 35% (US$4,977 in NIS), in conjunction wih the payables to
the Landlord.
Expenses: Fontech Ltd. Will pay the suppliers for all gas, electricity,
water, telephones service supplied to the Property during the tenancy.
SIGNED by the above-named
(the Landlord) (the Tenant)
SHAREHOLDERS AGREEMENT
The parties to this Agreement are Valor Invest, Ltd., an Irish company having
an office at 29 Quai des Bergues, Geneva, CH1201 Switzerland ("Valor Invest"),
Corsa SA Holdings, a Luxembourg entity ("Corsa") with offices at 2 Kaufman
Street, Textile Center Bldg., Tel Aviv 68012 Israel, and InfoImaging
Technologies, Inc., a Nevada corporation ("ITI Nevada"), having offices at
1300-1075 West Georgia Street, Vancouver, B.C. V6E 3C9 (the "Company").
WHEREAS, The Company has acquired control of all of the outstanding shares of
InfoImaging Technologies, Inc., a Delaware corporation ("ITI Delaware") and
WHEREAS, The Company has acquired control of all but one of the shares of
Fontech, Ltd., an Israeli company ("Fontech"), and
WHEREAS, In connection with the acquisition of control over ITI Delaware and
Fontech, Corsa as the controlling shareholder of these two entities
("Controlling Shareholder"), transferred all interest it held in Fontech and
ITI Delaware in exchange for common shares of the Company; and
WHEREAS, Fontech and/or ITI Delaware own certain technology, know-how and
patents which upon execution of the Exchange Agreement will be among the
assets to be owned by ITI Nevada, and
WHEREAS, Valor Invest and the Controlling Shareholder (together, the
"Shareholders") are the beneficial owners of certain shares of the Company,
and
WHEREAS, the Shareholders wish to enter into this agreement in order to record
their respective rights and obligations with respect to their ownership of
shares in the Company:
NOW, THEREFORE, in reliance on the mutual terms and conditions contained
within this Agreement the parties agree as follows:
<PAGE>
SECTION ONE
DEFINITIONS
Definitions
1.0 In this Agreement, except as expressly provided or unless the context
otherwise requires,
1.1 Affiliate means a person which Controls that Shareholder or a corporation
controlled by the same person that Controls the Shareholder.
1.2 Base Shares means the shares held by Corsa, and the shares held by Valor
Invest
1.3 Board means the board of directors of the Company.
1.4 Company means ITI Nevada and any successor corporation.
1.5 Control and Controls mean in relation to a corporation the right to elect
or appoint, directly or indirectly, a majority of the directors of the
corporation or a majority of other persons who have the right to manage or
supervise the management of the affairs and business of the corporation.
1.6 Confidential Information means all confidential and proprietary
information, intellectual property (including trade secrets) and confidential
facts relating to the business and affairs of the Company and its
Subsidiaries.
1.7 Interest means, with respect to a Shareholder at any time, the entire
right, title and interest at that time of the Shareholder in and to any of the
shares of the Company and any loan and accrued interest thereon and any other
right or claim the Shareholder may have against the Company as a Shareholder
and the Shareholder's interest in and to this Agreement.
1.8 Person includes an individual, corporation, partnership, party, trust
fund, association and any other organized group of persons and the personal or
other legal representative of a person to whom the context can apply
according to law.
1.9 Shares means, with respect to a Shareholder at any time, all shares of the
Company then owned by that Shareholder, a Subsidiary or Affiliate.
1.10 Subsidiary, is relation to a person, means an other person, other than an
individual, which is controlled directly or indirectly by that person.
In this Agreement, except as expressly provided or unless the context
otherwise requires:
<PAGE>
1.11 "This Agreement" means this Shareholders Agreement as from time to time
supplemented or amended by one or more agreements entered into pursuant to the
applicable provisions hereof.
1.12 The headings in this Agreement are inserted for convenience only and do
not form a part of this Agreement and are not intended to interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
1.13 The word "including", when following any general statement or term, is
not to be construed as limiting the general statement or term to the specific
items or matters set forth or to similar items or matters, but rather as
permitting the general statement or term to refer to al other items or mattes
that could reasonably fall within its broadest possible scope.
1.14 All accounting terms not otherwise defined herein have the meanings
assigned to them, and all calculations to be made hereunder are to be made, in
accordance with US generally accepted accounting principles applied on a
consistent basis.
1.15 All references to currency mean currency of the United States of America.
1.16 A reference to a statute includes all regulations made thereunder, all
amendments to the statute or regulations in force from time to time, and any
statute or regulation that supplements or supersedes such statute or
regulations.
1.17 A reference to an entity includes any successor to that entity.
1.18 Words importing the masculine gender include the feminine or neuter,
words in the singular include the plural; words importing a corporate entity
include individuals, and vice versa.
1.19 A reference to "approval", "authorization" or "consent" means written
approval, authorization or consent.
1.20 A reference to a Section is to a Section of this Agreement and the symbol
s followed by a number or some combination of numbers and letters refers to
the Section, paragraph, subparagraph, clause or subclause of this Agreement so
designated.
SECTION TWO
MANAGEMENT
2.1 As long as it or he holds Shares of the Company, each Shareholder will
vote its Shares, or cause it or his Shares to be voted, in such manner that,
and use it or his best efforts to
<PAGE>
ensure that:
2.1.1 The Company will have a Board of seven (7) directors;
2.1.2 The Board will be comprised of two individuals nominated by Valor
Invest, and five individuals nominated by Corsa.
2.1.3 Any vacancy that occurs on the Board will be filled by the election or
appointment of a replacement director by the Shareholder who nominated the
former director.
2.1.4 A quorum of the directors of the Company will be five out of the seven
directors, at least one of which must be a Valor Invest nominee, except, where
a Valor nominee fails to attend a validly called meeting of the directors for
the second time, then a quorum shall be any four directors.
2.1.5 Except with the approval of a majority of the Board of Directors at a
validly called meeting of the Board (or a written consent resolution signed by
all the directors), the Company, its Subsidiaries and Affiliates, will not:
(a) sell, lease, transfer, mortgage, pledge or otherwise dispose of its
business and undertaking, it being understood that the Company may sell or
lease all manufactured products produced in its ordinary course of business;
(b) consolidate, merge or amalgamate with any other Company, association,
partnership or legal entity;
(c) amend its Company charger;
(d) make any single capital expenditure of more than $250,000 or lease any
property having a fair market value of more than $250,000, except as may have
already been approved by the majority of the directors at the time of the
approval of the annual business plan;
(e) make any borrowing or the incurring of any debt whatsoever whereby the
aggregate consolidated indebtedness of the Company would be more than $350,000
at any one time;
(f) make any loan to a Shareholder or a Subsidiary or Affiliate of the
Shareholder;
<PAGE>
(g) undertake any transaction out of the ordinary course of its business or
undertaking;
(h) except for the Fontech licenses, including any amendment hereto, enter
into a contract with a Shareholder or a Subsidiary or Affiliate of the
Shareholder, and
(i) enter into any exclusive licensing or technology transfer agreement with a
third party which may materially affect the commercial viability of the
technology owned or licensed to the Company, a Subsidiary or Affiliate. This
section is not intended to prevent sales of software licenses in the normal
course of the company's business.
2.1.6 The President & CEO, Vice-President-Finance, and the Corporate Secretary
of the Company will be initially appointed by Valor Invest through its
nominee. The parties agree that Mr. Altaf Nazerali will be appointed as
President & CEO during the term of this Agreement.
2.1.7 In addition to its audit committee, the Board will establish separate
executive and compensation committees, and a Valor Invest nominee to the Board
will be a member of each of the audit, compensation and executive committees.
Nothing in this Section will be construed so as to fetter the discretion of
the
directors to act in the best interest of the Company, a subsidiary or
Affiliate or to require the directors to act in a particular manner with
respect to any of the foregoing matters.
SECTION THREE
INDEMNIFICATION
Indemnity
3.1 Without prejudice to any other remedy available to a party (the
"Indemnified Party") at law or in equity, the other party (the "Indemnifying
Party") hereby agrees, forthwith upon demand, to indemnify and save harmless
the Indemnified Party from and against any and all costs, losses, damages or
expenses suffered or incurred by the Indemnified Party in any manner arising
out of, in connection with, with respect to or relating to any representation
or warranty of
<PAGE>
the Indemnifying Party to observe or perform any of its obligations pursuant
hereto, and any and all goods and services taxes, actions, suits, proceedings,
demand, assessments, judgments, reasonable costs and reasonable legal and
other expenses incidental thereto.
SECTION FOUR
TERM
4.1 This Agreement will terminate in its entirety on the earlier of
4.1.1 June 1, 2000.
4.1.2 the written agreement of all Shareholders.
4.1.3 the dissolution of the Company or the making by the Company of an
assignment, or the issue with respect to the Company of a receiving order,
under the provision of the United States bankruptcy laws, and
4.1.4 only one Shareholder remaining the beneficial owner of any Shares.
4.2 The termination of this Agreement will not affect or prejudice a right or
obligation that has accrued or arisen under this Agreement before the time of
termination and such right and obligation will survive the termination of this
Agreement.
SECTION FIVE
GENERAL
Compliance by Company
5.1 Subject to applicable law, the Company will, and will cause its
Subsidiaries to, carry out and be bound by the provisions of this Agreement.
Compliance by Shareholders
<PAGE>
5.2 Each Shareholder will vote or cause to be voted such Shareholder's Shares
so as to give full effect to the provisions of this Agreement, which
provisions will supersede and have precedence over the Articles and By-laws of
the Company.
Equitable Remedies
5.3 The Parties acknowledge that a breach by a Party of any of the provisions
of this Agreement would result in damages to other Parties and that such other
Parties could not adequately be compensated for such damages by a monetary
award, and accordingly if there is any such breach, in addition to all of the
remedies available to such other Parties at law or in equity, they will be
entitled as a matter of right to apply to a court of competent jurisdiction
for such relief by way of an order for specific performance, restraining
order, injunction, or otherwise, as may be appropriate to ensure compliance
with the provisions of this Agreement.
Confidentiality
5.4 None of the Parties, other than the Company, will at any time or under any
circumstances, without the unanimous consent of the Shareholders, directly or
indirectly communicate or disclose to any person any Confidential Information
howsoever acquired by such Party nor use or make available any such
Confidential Information directly or indirectly, unless
5.4.1 the Confidential Information is available to the public or in the public
domain at the time of such disclosures or use,
5.4.2 disclosure is required to be made by any law, regulation, governmental
body or authority or by court order, or
5.4.3 disclosure is made on a confidential basis to consultants or advisors.
Waiver
5.5 No consent or waiver, express or implied, by a party to or of a breach or
default by any other party of any obligation of the other party under this
Agreement will
5.5.1 be valid unless it is in writing and stated to be a consent or waiver
pursuant to this Section,
5.5.2 be relied upon as a consent to or waiver of any other breach or default
of that or any other obligation of the other party,
5.5.3 constitute a general waiver under this Agreement, or
<PAGE>
5.5.4 eliminate or modify the need for a specific consent waiver pursuant to
this Section in any other or later instance.
Time of the Essence
5.6 Time is of the essence in the performance of each obligation under this
Agreement.
Governing Law
5.7 This Agreement is and will be deemed to be made in the State of Nevada and
for all purposes will be governed exclusively by and construed and enforced in
accordance with the laws prevailing in the State of Nevada, and the rights and
remedies of the parties will be determined in accordance with those laws.
Attornment
5.8 Each party irrevocably attorns to the jurisdiction of the courts of the
State of Nevada and all courts having appellate jurisdiction thereover, and
any proceeding commenced or maintained in respect of or arising because of
this Agreement will be commenced or maintained only in such of thos Courts as
is appropriate.
Cumulative Remedies
5.9 The rights, powers and remedies of a party provided in this Agreement are
cumulative and do not affect any right, power or remedy otherwise available to
that party at law or in equity.
Notice
5.10 Every notice, request, demand or direction (each for the purposes of this
Section a notice) to be given pursuant to this Agreement by one party to
another will be in writing and will be delivered or sent by registered or
certified mail postage prepaid and mailed in any government post office in the
city listed below as the address for delivery by the parties giving notice, or
by telecopier or other similar form of written communication, in each case,
addressed as applicable as follows:
(A) If to Valor Invest:
29 Quai des Bergues
Geneva, CH1201
Switzerland
Attention: Pierre Besuchet
(B) If to Corsa:
<PAGE>
2 Kaufman Street
Textile Centre Bldg.
Tel Aviv 68012 Israel
Attention: Yechiel Sharabi
(C) If to the Company:
1300-1075 West Georgia Street
Vancouver, B.C.
V6E 3C9
Attention: Altaf Nazerali
5.11 A notice delivered or sent in accordance with 2.10 will be deemed to be
given and received
(A) if delivered, on the day of delivery,
(B) if mailed, on the earliest of the day of actual receipt and the 20th
business day in the applicable destination listed in 5.10 (the "Destination")
after the day of mailing, or
(C) if sent by telecopier or other similar form of written communication, on
the first business day in the Destination after the day of transmittal.
5.12 If a notice is sent by mail and mail service is interrupted between the
point of mailing and the destination by strike, slowdown, force majeure or
other cause on or within 20 Business Days before or after the day of mailing,
the notice will not be deemed to be received until actually received, and the
party sending the notice will use any other service which has not been so
interrupted or will deliver the notice in order to ensure prompt receipt.
Entire Agreement
5.13 This Agreement constitutes the entire agreement among the parties and
supersedes every previous agreement, communication, expectation, negotiation,
representation or understanding, whether oral or written, express or implied,
statutory or otherwise, between the parties with respect to the subject matter
of this Agreement.
Severability
5.14 If a provision of this Agreement is at any time unenforceable or invalid
for any reason, it will be severable from the remainder of this Agreement and,
in its application at that time, this Agreement will be construed as if it had
been executed without the unenforceable or invalid provision.
<PAGE>
Amendment
5.15 This Agreement may not amended except in writing executed by each of the
parties hereto.
Assignment
5.16 No party may assign any right, benefit or interest in this Agreement
without the written consent of every other party, and any purported assignment
without such consent will be void.
Further Assurances
5.17 Each party will, at its own expense and without expense to any other
party, execute and deliver such further agreements and other documents and do
such further acts and things as any other party reasonably requests to
evidence, carry out or give full force and effect to the intent of this
Agreement.
Binding Effect
5.18 This Agreement will endure to the benefit of and be binding upon the
respective legal representatives and/or successors of the parties.
Dated: May 31, 1998
Corsa SA Holdings Valor Invest, Ltd.
By: "Yechiel Sharabi" By: "Altaf Nazerali"
----------------- ----------------
Yechiel Sharabi, Director Altaf Nazerali, Director
INFOIMAGING TECHNOLOGIES INC.
1998 STOCK OPTION PLAN
This 1998 Stock Option Plan (the "Plan") provides for the grant of options to
acquire shares of common stock, $0.0001 par value (the "Stock"), of
InfoImaging Technologies, Inc., a Nevada corporation (the "Company"). Stock
options granted under this Plan that qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options". Incentive Stock Options and stock options that do
not qualify under Section 422 of the Code ("Non-Qualified Stock Options")
granted under this Plan are referred to collectively as "Options".
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key employees
and consultants of the Company and such other persons as the Plan
Administrator may select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, 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.
2. ADMINISTRATION.
This Plan will be administered initially by the Board of Directors of the
Company (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 Company 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. In addition, if the Board decides to maintain eligibility for
the benefits of Section 162(m) of the Code, the Plan Administrator will be
either the full Board of Directors if each director is an "Outside Director",
as defined under Section 162 (m) of the Code (as amended from time to time)
and the regulations (or any successor regulations) promulgated thereunder
("Section 162(m) of the Code") or by the Committee which will be composed of
two (2) or more members of the Board who are Outside Directors.
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
and whether the Option is an Incentive Stock Option or a Non-Qualified Stock
Option; (vii) determine the time or times at which Options are granted under
this Plan; (viii) determine the number of shares of Stock subject to each
Option, the exercise price of each Option, the duration
<PAGE>
of each Options 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 Company the authority to grant Options under this
Plan to employees of the Company who, on the Date of Grant, are not subject to
Section 16 of the Exchange Act with respect to the Stock ("Insiders"), and are
not "covered employees" as such term is defined for purposes of Section 162(m)
of the Code ("Covered Employees"), and in connection therewith the authority
to determine: (i) the number of shares of 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 value per share of the 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 2, 5(f), 5(m), and 11 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 not Covered Employees and
Options granted to such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time the
Option is granted, is an employee of the Company or any Related Corporation
(as defined below) ("Employees"). Non-Qualified Stock Options may be granted
to Employees and to such other persons 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 Company or any subsidiary of the Company. 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".
As used in this Plan, the term "Related Company" means any corporation (other
than the Company) that is a "Parent Corporation" of the Company or "Subsidiary
Corporation" of the Company, as those terms are defined in Sections 424(e) and
424(f), respectively, of the Code (or any successor provisions) and the
regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a total
of one million six hundred and sixty-seven thousand and one hundred
(91,667,100) shares of the Company's authorized but unissued, or reacquired,
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
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 3 of this Plan.
5. 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
<PAGE>
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 Stock to which it pertains
and whether the Option is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence of action to the contrary by the
Plan Administrator in connection with the grant of an Option, all Options will
be Non-Qualified Stock Options. The aggregate fair market value (determined at
the Date of Grant, as defined below) of the Stock with respect to which
Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive
Stock Option plans of the Company, a Related Corporation or a predecessor
corporation) must not exceed $100,000, or such other limit as may be
prescribed by the Code as it may be amended from time to time. Any portion of
an Option which exceeds the annual limit will not be void but rather will be a
Non-Qualified Stock Option.
(B) Date of Grant.
Each Agreement must state the date the Plan Administrator has deemed to be the
effective date of the Option for the purposes of this Plan (the "Date of
Grant").
(C) Option Price.
Each Agreement must state the price per share of Stock at which the Option is
exercisable. The Plan Administrator may fix the exercise price in its sole
discretion; provided that the per share exercise price for an Incentive Stock
Option or (if the Company decides to maintain eligibility for the benefits of
Section 162(m) of the Code) any Option granted to a Covered Employee must not
be less than the fair market value per share of the Stock at the Date of Grant
as determined by the Plan Administrator in good faith; provided further, that
with respect to Incentive Stock Options granted to greater-than-ten percent
(>10%) shareholders of the Company (as determined with reference to Section
424(d) of the Code), the exercise price per share must not be less than one
hundred ten percent (110%) of the fair market value per share of the Stock at
the Date of Grant as determined by the Plan Administrator in good faith; and,
provided further, 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 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 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 grant of he Option, the Plan Administrator will designate,
subject to paragraph 5(g) below, the expiration date of the Option, which date
must not be later than ten (10) years from the Date of Grant in the case of
Incentive Stock Options; provided that the expiration date of any Incentive
Stock Option granted to a greater-than-ten percent (>10%) shareholder of the
Company (as determined under Sections 422(b)(6) and 424(d) of the Code) must
not be later than five (5) years from the Date of Grant. In absence of action
to the contrary by the Plan Administrator in connection with the grant of a
particular Option, and except in the case of Incentive Stock Options as
described above, all Options granted under this Section 5 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:
<PAGE>
Number of Years Percentage of Total
Following Date of Grant Options Vested
- ----------------------- -------------------
One 33 1/3%
Two 66 2/3%
Three 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
assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or
the Company's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated bases), a Relater Corporation, 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 Company 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. The vesting of Options also will be accelerated under the
circumstances described in Section 5(m)(2).
(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
5(d) above; (ii) the expiration of thirty (30) days from the date of an
Optionee's termination of employment or contractual relationship with the
Company or any Related Corporation for cause (as defined in Section 5(n) and
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 Company or any Related
Corporation for any reason whatsoever other than cause, death or Disability
(as defined below) unless, in the case of a Non-Qualified Stock Option, 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, in the case of a
Non-Qualified Stock Option, 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 5(f) above, unvested Options
will terminate immediately upon termination of employment of the Optionee by
the Company for any reason whatsoever, including death or Disability. If, in
the case of an Incentive Stock Option, an Optionee's relationship with the
Company
<PAGE>
changes (e.g., from an Employee to a non-Employee, such as a consultant) such
change will constitute a termination of an Optionee's employment with the
Company and the Optionee's Incentive Stock Option shall terminate in
accordance with this subsection. For purposes of this Plan, transfer of
employment between or among the Company and/or any Related Corporation will
not be deemed to constitute a termination of employment with the Company or
any Related Corporation. 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 5(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
Company, which notice will specify the number of shares to be purchased, and
be accompanied by either: (i) payment in the amount of the aggregate exercise
price for the Stock so purchased, which payment must be in the form specified
in Section 5(i) below, 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 company will not be obligated to issue, transfer
or deliver a certificate of Stock to the Holder of any Option, until provision
has been made by the Holder, to the satisfaction of the Company, 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 in the case of a Non-Qualified Stock
Option, transferee who takes title to such Option in the manner permitted by
subsection 5(k) hereof.
(I) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate price will be paid to the
Company in cash or by certified or cashier's check. In addition, upon prior
written approval of the Plan Administrator, an Optionee 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 Company shares of capital stock of the Company
previously held by such Optionee or by having shares withheld from the amount
of shares of Stock to be received by the Optionee. The shares of Stock
received or withheld from the amount of shares of Stock purchased upon the
exercise of Options will have a fair market value at the date of exercise (as
determined by the Plan Administrator) equal to the aggregate exercise price to
be paid by the Optionee upon such exercise;
(2) 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 Stock for which the record
date is prior to the date the
<PAGE>
Holder becomes a record holder of the shares of 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 (except in the case of an
Incentive Stock Option) 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 a
Non-Qualified Stock 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 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 complies with all
relevant provisions of law, including, without limitation, Section 162(m) of
the Code, 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 Company 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 Company to obtain from any regulatory body
the authority deemed by the Company to be necessary for the lawful issuance
and sale of any shares under this Plan, or the unavailability of exemption
from registration for the issuance and sale of any shares under this Plan,
will relieve the Company of any liability with respect to the non-issuance or
sale of such shares.
As a condition to the exercise of an Option, the Company 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 Company, a stop-transfer order against such shares may be placed on the
stock books and records of the Company, 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
may require such other documentation as may from time to time be necessary to
comply with federal and state securities laws. THE COMPANY HAS NO OBLIGATION
TO REGISTER THE OPTIONS OF THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF
OPTIONS.
(2) The Holder must pay to the Company be 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 Stock acquired upon exercise of an Option or
otherwise related to an Option of shares of 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 Company shares of Stock previously held by such
Holder or by the Company withholding shares of Stock otherwise deliverable
pursuant to the exercise of the Option, which shares of Stock received or
withheld must have a fair market value at the date of exercise (as
<PAGE>
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 Company 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 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 Company is at any time involved in a transaction described in
Section 424(a) of the Code (or any successor provision) or any "corporate
transaction" described in the regulations thereunder; (ii) the Company
declares a dividend payable in, or subdivides or combines, its 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 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 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 Company, the
Company's shareholders, or any Holder.
(2) If the presently authorized capital stock of the Company 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 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 Company at any time declares an extraordinary dividend with respect
to the Stock, whether payable in cash or other property, the Plan
Administrator may, subject to applicable law, in the exercise of its sole
discretion and with respect to each outstanding Option, proportionately adjust
the number of shares of 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 Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan will automatically increased or
decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company, the Company'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 Company 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.
<PAGE>
(N) Redemption of Stock Upon Termination of Employment.
If an Optionee has acquired shares of Stock pursuant to the exercise of the
Option granted pursuant to the Plan in consideration of his or services to the
Company or a Related Corporation as an employee or consultant, the Plan
Administrator may require as a condition to exercise by the Optionee of the
Option that the Optionee execute and deliver to a Stock Transfer Agreement in
the form approved by the Plan Administrator, which provides that:
(1) if the engagement of the Optionee is terminated for any reason other than
for "cause" as defined herein, the Optionee will at the option of the Plan
Administrator in its sole discretion within thirty (30) days of the
termination of Optionee's employment, sell back to the Corporation the
shares acquired pursuant to the exercise of such Options at the higher of the
exercise price or the Fair Market Value of the Stock; or
(2) if the employee is terminated for cause, as defined herein, the Optionee
shall, at the option of the Plan Administrator in its sole discretion and
within thirty (30) days of Optionee's termination of employment, sell back
such shares at the lower of the Fair Market Value of the Stock or the exercise
price.
For purposes of the Plan, fair market value will be determined in good faith
by the Plan Administrator. The foregoing provision applies to all shares
acquired pursuant to the exercise of Options granted under the Plan prior to
the initial public offering of shares of the Stock of the Corporation. Solely
for the purposes of the Plan, "cause" has the meaning assigned to that term in
the Optionee's employment or consulting agreement with the Company or any
Related Corporation or, if there is no such agreement or definition, "cause"
means (A) the Optionee's breach of the terms of his or her engagement with the
Company or any Related Corporation; (B) the Optionee's failure to adhere to
any written policy of the Company or any Related Corporation; (C) the
appropriation (or attempted appropriation) of a material business opportunity
of the Company or any Related Corporation, including attempting to secure or
securing any personal profit in connection with any transaction entered into
on behalf of the Company or any Related Corporation; (D) the misappropriation
(or attempted misappropriation) of any funds of property of the Company or any
Related Corporation; (E) the commission of any crime with respect to which
imprisonment is a possible punishment; or (F) any act or omission by the
Optionee involving intentional disloyalty, fraud, willful misconduct or gross
negligence.
6. EFFECTIVE DATE; TERM.
Incentive Stock 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. Non-Qualified Stock Options may be granted by the Plan Administrator on
or after the Effected and until this Plan is terminated by the Board in its
sole discretion. Termination of this Plan will not terminate any Option
granted prior to such termination. Any Incentive Stock Options granted by the
Plan Administrator prior to the approval of this Plan by a majority of the
shareholders of the Company in accordance with Section 422 of the Code will be
granted subject to ratification of this Plan by the shareholders of the
Company within twelve (12) months before or after the Effective Date. If such
shareholder ratification is sought and not obtained, all Options granted prior
thereto and thereafter will be considered Non-Qualified Stock Options and any
Options granted to Covered Employees will not be eligible for the exclusion
set forth in Section 162(m) of the Code with respect to the deductibility by
the Company of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option will impose no obligation upon the Optionee to exercise
such Option.
<PAGE>
8. 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 Company or any Related Corporation,
express or implied, that the Company or any Related Company will employ or
contract with an Optionee for any length of time, nor will it interfere in any
way the Company's or, where applicable, a Related Company's right to
terminate Optionee's employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock issued upon the
exercise of Options will be used for general corporate purposes, unless
otherwise directed by the Board.
10. 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
Company for all reasonable expenses and liabilities of any type or nature,
including attorney's 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 selected by the Company), 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 Company of such action, suit or proceeding, so that the
Company may have the opportunity to make appropriate arrangements to prosecute
or defend the same.
11. 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 Company to comply with or to avail the Company
and/or the Optionees of the benefits of any securities, tax, market listing or
other administrative or regulatory policy. 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 the United States to recognize differences in local law, tax
policy or custom.
Effective Date: May ______, 1998.
INFOIMAGING TECHNOLOGIES, INC.
CONSULTING AGREEMENT
THIS AGREEMENT is made as of October 1, 1998.
BETWEEN:
InfoImaging Technologies, Inc., 1408 Pawnee Dr., Las Vegas Nevada, USA, 89109
(the "Company")
AND:
Pensbreigh Holdings Ltd., a company constituted in accordance with the laws
of Barbados, having its registered office at Chancery House, High Street,
Bridgetown, Barbados, (the "Consultant")
WHEREAS:
(A) The Consultant is an independent contractor engaged in the business of
providing various corporate and consultant services to business ventures;
(B) The Company wishes to engage the services of the Consultant;
(C) The parties have mutually agreed to evidence the terms of the consultant's
service to the Company by this Agreement;
WITNESS that in consideration of the respective covenants and agreements
herein contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by each party, the parties
mutually agree as follows:
<PAGE>
PART 1
INTERPRETATION
For all purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires,
(A) "this Agreement" means this agreement for services from time to time
supplemented or amended by one or more agreements entered into pursuant to the
applicable provisions hereof,
(B) the words "herein", "hereof", and "hereunder" and other words of similar
import refers to this Agreement as a whole and not to any particular
paragraph, subparagraph or other subdivision,
(C) all references to currency mean United States currency, unless otherwise
specified,
(D) a reference to an entity includes any entity that is a successor to such
entity,
(E) a reference to a Part is to a part of this Agreement, and the symbol s
followed by a number or some combination of numbers and letter refers to the
section, paragraph, subparagraph, clause or sub-clause of this Agreement so
designated,
(F) the headings are for convenience only and are not intended as a guide to
interpretation of this Agreement or any portion hereof, and
(G) a reference to a statute includes all regulations made pursuant thereto,
all amendments to the statute or regulations in force from time to time, and
any statute or regulation, which supplements or supersedes such statute or
regulations.
PART 2
ENGAGEMENT
Engagement
2.1 The Company hereby retains the Consultant to provide services to the
Company and the Consultant hereby agrees to be so retained, upon and subject
to the terms and conditions hereinafter set forth for the duration of this
Agreement.
<PAGE>
Term
2.2 This Agreement will extend for 36 months unless renewed or terminated as
in the manner provided for under this Agreement. The term of such Agreement
will be renewed, on the same terms and conditions set out herein, for
successive 12 month periods if
(A) 90 days before the expiry of such term the Company has not exercised its
rights under Part 6 to terminate this Agreement, and
(B) 60 days before the expiry of such term the Consultant gives the Company
notice of his desire to renew the term for an additional 12 months.
The initial 36-month term will commence on the date of this Agreement and will
expire on October 1, 2001.
Terms of Reference
2.3 The Company engages the Consultant to perform the following services (the
"Consulting Services")
(A) to advise and assist the Company with the development and operation of the
communications business to be carried on by the Company or any of its direct
or indirect subsidiaries;
(B) to advise the Company on business trends, trade customs and economic,
political and regulatory conditions in Designated Areas;
(C) to assist the Company in identifying and, at the request of the Company,
conducting preliminary research on and negotiating with potential partners in
the Designated Areas;
(D) to provide such other services as may reasonably be requested by the
Company from time to time.
PART 3
COMPENSATION
Fee
3.1 For the first term of this Agreement, the Consultant will receive a
monthly fee of $16,666.66 (the "Fee"). The Consultant shall submit an invoice
covering services rendered during each monthly period, together with other
supporting documents, which
<PAGE>
may be required from time to time by the Company. Upon verification of the
Consultant's invoice, the Company shall make payment in full on a monthly basis
in arrears.
Increase of Fee
3.2 The Fee will be increased, but never decreased, on the first and each
subsequent anniversary date of the commencement of the obligation of the Company
to pay the same by adding to the Fee an amount that is the percentage of the
Fee then being paid which is equal to the percentage increase during the
preceding 12 month period in the Consumer Price Index (all items for the
Greater Vancouver area as published by Industry Canada (or any successor index).
Expenses
3.3 The Company will reimburse The Consultant for all reasonable travel
expenses, including car rentals, food and lodging and sundry expenses, and all
other reasonable expenses incurred in connection with him providing service
hereunder to the Company promptly on receiving all appropriate and complete
vouchers or receipts.
Review
3.4 At the end of the first anniversary of this Agreement and annually
thereafter, the Compensation Committee of the Company will carry out an
objective review of the compensation provided herein with regards to any
developments within the Company provided herein with regards to any
developments within the company and, if warranted, the Fee may be increased
(but not decreased).
PART 4
NEGATIVE COVENANTS
Non-Competition
4.1 Without the consent of the Company, The Consultant will not, during the
term of this Agreement and for a period of one year after the termination of
this Agreement, whether directly or indirectly, either individually or in
partnership or in conjunction with any person or persons, firm, association,
syndicate, joint venture, partnership, company or corporation as principal,
agent, or shareholder or in any other manner whatsoever, (a) engage in any
business (directly or through any kind of ownership or other arrangement other
than ownership of securities of publicly held corporations), (b) accept
employment
<PAGE>
with, (c) provide services to, or (d) carry on, be engaged in,
concerned with or interested in any person or persons, firm, association,
syndicate, joint venture, partnership, company or corporation engaged in,
concerned with or interested in any business primarily involved in similar
activities in any country in which InfoImaging operates, or is actively
considering, or take any other action inconsistent with the relationship of a
senior executive to his corporation.
4.2 Subject to the limitation contained in 4.1, 4.3 and 4.4, the Consultant
may make investments for its own account and in any business or enterprise
whatsoever.
Non-Solicitation of Customers and Employees
4.3 The Consultant shall not, without the specific prior written consent of
the Board, during the term of this Agreement and for a period of one year
after the termination of the Agreement, either on its own behalf or on behalf
of any other person, solicit the services of or entice away any person
employed by or otherwise providing services to the other Company or its direct
or indirect subsidiaries to transfer business to any other person. However,
nothing herein will prevent the Consultant from continuing to carry on
personal activities with employees of the Company to the extent that such
activities were ongoing at the date of the Agreement.
Notice of Conflict
4.4 If the Board determines that The Consultant is engaging in conflicting
activity and causes The Consultant to be so advised in writing, The Consultant
will thereafter discontinue such activity within 90 days after such notice, or
such longer period as the Board agrees, and The Consultant will, within such
90-day period, certify in writing to the Company that he has discontinued such
activity.
Survival
4.5 The obligations of the Consultant under 4.1 and 4.3 shall, except as
otherwise provided, herein, survive the expiration or termination of this
Agreement and shall terminate one year after the termination of this
Agreement.
PART 5
DUTIES OF THE CONSULTANT
5.1 Unless otherwise agreed to by the Company, the Consultant shall retain Mr.
Altaf Nazerali ("Nazerali") to perform the consulting Services and shall not
delegate
<PAGE>
or subcontract the performance of any Consulting Service to any other
Person (as hereinafter defined). For the purposes of this Agreement, "Person"
includes, without limitation, any individual, firm, corporation, association,
partnership, joint venture, consortium, trust or other entity.
5.2 The Consultant shall cause and direct that Nazerali shall devote such
amount of his time to the Company as may be necessary to enable the Consultant
to properly and efficiently discharge its duties under this Agreement, except
such time required by Nazerali to discharge his existing, commitments to (i)
the Consultant in relation to an agreement between the Consultant and
Multivision Communications Corp. Dated June 30, 1996 and (ii) as a director of
other businesses, and, in discharging such duties, shall direct Nazerali to
use his best efforts at all times on behalf of the Consultant.
5.3 The Consultant agrees to keep the Company informed as to the status and
particulars of its activities under this Agreement. The Consultant shall
provide monthly written reports and such other written and oral reports,
analyses, advice and other information as may be requested from time to time by
the Company.
5.4 The Consultant shall be responsible for the manner in which its work is
completed, for the methods used in completing its work, and for all acts,
omissions and things done or made in the performance (or nonperformance) of
the Consultants obligations, including those of its shareholders and other
persons used by the Consultant. Nothing contained in this Agreement shall
operate or be construed to relieve the Consultant of any duties or obligations
imposed upon it as an independent contractor.
Relationship of Parties
5.5 The Consultant in performing its duties hereunder is acting, as an
independent contractor, and Nazerali, in providing the Consulting Service,
shall not be considered an employee of the Company and, as such, entitled to
any benefit plans to which regular employees of the Company are entitled. The
Consultant hereby acknowledges that it is responsible for remitting, its own
taxes and any contributions required by law to be remitted and the Company
shall have no responsibility in respect of any failure by the Consultant to
properly remit such amounts when due, and the Consultant agrees to indemnify
and save the Company harmless from and against assessments, losses or
penalties actually incurred by the Company in this respect.
5.6 The Consultant shall not, without the prior written consent of the
Corporation, use the name of the Corporation nor the relationship arising out
of this Agreement in any manner during or after the term hereof in any
materials advertising or promoting the Consultant or otherwise.
<PAGE>
Confidential Information.
5.7 The Consultant hereby covenants, agrees and acknowledges as follows:
(A) The Consultant has and will have access to and will participate in the
development of or be acquainted with confidential or proprietary information
and trade secrets related to the business of the Company, its subsidiaries and
affiliates (collectively the "Companies"), including but not limited to
(i) business plans, operating, plans, marketing plans, financial reports,
operating data, budgets, wage and salary rates, pricing strategies and
information, terms of agreements with suppliers or customers and others,
customer lists, patents, devices, software programs, reports, correspondence,
tangible property and specifications owned by or used in the businesses of one
or more of the Companies,
<PAGE>
(ii) information pertaining to future developments such as, but not limited
to, research and development, future marketing, distribution, delivery or
merchandising plans or ideas, and potential new business locations, and
(iii) other tangible and intangible properties, which are used in the business
and operations of the Companies but not made publicly available.
The information and trade secrets relating to the business and operations of
the Companies described hereinabove in this paragraph (a) are hereinafter
referred to as the "Confidential Information", provided that the term
Confidential Information shall not include any information (x) that is or
becomes generally publicly available (other than as a result of violation of
this Agreement by the Consultant) or (y) that the Consultant receives on a
non-confidential basis from a source (other than the Company, its affiliates
or representatives) that is not known by it to be bound by an obligation of
secrecy or confidentiality to the Companies or any of them.
(B) The Consultant hereby assigns to the Company, in consideration of its
engagements, all Confidential Information developed by or otherwise in
possession of the Consultant at any time during the term of this Agreement,
whether or not made or conceived during working hours, alone or with others,
which relates to businesses or proposed businesses of any of the Companies,
and the Consultant agrees that all such Confidential Information shall be the
exclusive property of the Companies. Upon request of the Board of Directors
of the company, the Consultant shall execute and deliver to the Companies any
specific assignments or other documents appropriate to vest title in such
Confidential Information.
(C) The Consultant shall not disclose, use or continue to make known for his
or another's
<PAGE>
benefit any Confidential Information or use such Confidential
Information in any way except in the best interests of the Companies in the
performance of the Consultant's duties under this Agreement. The Consultant
may disclose Confidential Information when required by applicable law or
judicial process, but only after notice to the Company of the Consultant's
intention to do so and opportunity for the Company to challenge or limit the
scope of the disclosure.
(D) The Consultant acknowledges and agrees that a remedy at law for any breach
or threatened breach of the provisions of this s5.7 would be inadequate and,
therefore, agrees that the Companies shall be entitled to injunctive relief in
addition to any other available rights and remedies in case of any such breach
or threatened breach; provided, however, that nothing contained herein shall
be construed as prohibiting the Companies from pursuing any other rights and
remedies available for such breach or threatened breach.
(E) The Consultant agrees that upon termination of its engagement by the
Company for any reason, the Consultant shall forthwith return to the Company all
Confidential Information, documents, correspondence, notebooks, reports,
computer programs and all other materials and copies thereof (including computer
discs and other electronic media) relating in any way to the business of the
Companies in any way developed or obtained by the Consultant during, the period
of its engagement with the Company.
(F) The Consultant agrees that for a period of one year after the termination
of this Agreement not to pursue any business opportunities that were developed
or evaluated at the Company during his tenure with the Company, except such
business opportunities which have been declined by the Company.
(G) The obligations of the Consultant under this s5.7 shall, except as
otherwise provided, herein, survive the expiration or termination of this
Agreement and shall terminate one year after the termination of this
Agreement.
(H) The Consultant hereby expressly agrees that the foregoing provisions of
this s5.7 shall be binding upon the Consultant's heirs, successors and legal
representatives.
PART 6
TERMINATION
Termination by Either Party
6.1 Either party may terminate this Agreement on notice given not less than,
in the case of the Company, 90 days or, in the case of the Consultant, 60 days
before the end of the
<PAGE>
initial 24 month term or any renewal term, in which case, the consultant will
have no benefit of the provisions under this Part 6. Notwithstanding any
provision herein, the Company will be entitled to terminate this Agreement for
cause or for any breach by the Consultant of any material covenant of this
Agreement, in which case, the Consultant will have no benefit of the provisions
under this Part 6.
Termination Allowance
6.2 If this Agreement is terminated by the Company other than as provided for
in s6.1, on the effective date of such termination the Consultant will be paid
an amount equal to the total of all payments that would have been made to the
Consultant as Fees from such effective date of termination to the end of the
current term or renewal term, as the case may be, of this Agreement
6.3 The obligation of the Company to make payment as provided in s6.2, win not
be affected by, and the amount of any such payment will not be reduced by
virtue of, the Consultant engaging in business on its own behalf or with
others (except to the extent same is in conflict with s4.1 or 4.3), at any
time after termination hereunder.
Election by the Consultant
6.4 The Consultant may by notice to the Company elect to take the termination
allowance to which it is entitled under s6.2 in a lump sum payment, or in
installments over such period as it may specify.
Rights of the Consultant Cumulative
6.5 The rights, powers and remedies of the Consultant provided in this
Agreement are cumulative and do not affect any right, power of remedy
otherwise available to the Consultant at law or in equity.
Return of Property
6.6 On the effective date of termination the Consultant will deliver up to the
Company, in a reasonable state of repair, all property, both real and
personal, including documents and copies thereof, owned, leased or bailed to
the Company and used by or in the possession of the Consultant.
<PAGE>
PART 7
GENERAL
Reasonableness of Restrictions and Covenants
7.1 The Consultant confirms and agrees that the covenants and restrictions
pertaining to the Consultant contained in this Agreement, including, without
limitation, those contained in s4.1 and 4.3 are reasonable and valid and
hereby further acknowledge and agrees that the Company would suffer
irreparable injury in the event of any breach by the Consultant of its
obligations under any such covenant or restriction. Accordingly, the
Consultant hereby acknowledges and agrees that damages would be an inadequate
remedy at law in connection with any such breach and that the Company shall be
entitled, in addition to any other right or remedy which it may have at law,
in equity or otherwise to temporary and permanent injunctive relief enjoining
and restraining the Consultant from any such breach.
7.2 The Consultant hereby authorizes the Company to set off against any
amounts payable to the Consultant hereunder any bona fide indebtedness of the
Consultant to the Company with respect to this Agreement that has been
recorded on the books and records of the Company and of which the Consultant
has been given written notice of and to make deductions and to retain any
portions of such payments to satisfy any such indebtedness, to the extent
permitted by law.
PART 8
GENERAL
Reasonableness of Restrictions and Covenants
8.1 The Consultant confirms and agrees that the covenants and restrictions
pertaining to the Consultant contained in this Agreement, including, without
limitation, those contained in s4.1 and s4.3, are reasonable and valid and
hereby further acknowledges and agrees that the Company would suffer irraparable
injury in the event of any breach of the Consultant of its obligations under
such covenant or restriction. Accordingly, the Consultant hereby acknowledge
and agrees that damages would be an inadequate remedy at law in connection
with any such breach and that the Company shall be entitled, in addition to any
other right or remedy which it may have at law, in equity or otherwise, to
temporary and permanent injunctive relief enjoining and restraining the
Consultant from any such breach.
Set-off
8.2 The Consultant hereby authorizes the Company to set off against any amounts
payable to the Consultant hereunder any bona fide indebtedness of the
Consultant to the Company with respect to this Agreement that has been recorded
on the books and records of the Company and of which the Consultant has been
given written notice of and to make deductions and to retain any portions of
such payments to satisfy any such indebtedness, to the extend permitted by law.
Further Assurances
8.3 Each party will, at its own expense and without expense to any other
party, execute and deliver such further agreements and other documents and do
such further acts and things as any other party reasonably request to evidence,
carry out or give full force and effect to the intent of this Agreement.
Assignment
8.4 Neither of the parties may assign any right, benefit or interest in this
Agreement without the written consent of the other, and any purported assignment
without such consent will be void.
Severability
8.5 If any provision of this Agreement is unenforceable or invalid for any
reason it will be severable from the remainder of this Agreement and, in its
applications at that time, this Agreement will be construed as though such
provision was not contained herein and the remainder will continue in full
force and effect and be construed as if this Agreement had been executed without
the invalid or unenforceable provision.
Waiver and Consent
8.6 No consent or waiver, express or implied, by any party to or of any breach
or default by any other parry of any or all of its obligations under this
Agreement will
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section,
(b) be relied upon as a consent to or waiver of any other breach or default
of the same or any other obligation,
(c) constitute a general waiver under this Agreement, or
(d) eliminate or modify the need for a specific consent or waiver pursuant to
this section in any other or subsequent instance.
<PAGE>
Notice
8.7 Every notice, request, demand or direction (each, for the purposes of this
section, a "notice") to be given pursuant to this Agreement by any party to
another will be in writing and will be delivered or sent by registered or
certified mail postage prepaid and mailed in any government post office or by
telex, telegram, cable, or other similar form of written communication, in
each case, addressed as applicable as follows:
<PAGE>
If to the Consultant at:
Chancery House
High Street
Bridgetown, Barbados
Telecopier: (604) 684-4691
Attention: Corporate Secretary
If to the Company at:
1408 Pawnee Drive
Las Vegas, Nevada USA 89109
Telecopier:
Attention: Corporate Secretary
or to such other address as is specified by the particular party by notice to
the other.
8.8 Any notice delivered or sent in accordance with s8.6 will be deemed to have
been given and received
(a) if delivered, on the day of delivery,
(b) if mailed, on the earlier of the day of receipt and the sixth business day
after the day of mailing, or
(c) if sent by telex, telegram cable or other similar form of written
communication, on the first business day following the day of transmittal.
8.9 If a notice is sent by mail and mail service is interrupted between the
point of mailing and the destination by strike, slowdown, force majeure or
other cause within two days before or after the time of mailing, the notice
will not be deemed to be received until actually received, and the party
sending the notice will use any other service which has not been so interrupted
or will deliver the notice in order to ensure prompt receipt.
Binding Effect
8.10 This Agreement will ensure to the benefit of and be binding upon the
respective legal representatives, successors and permitted assigns of the
parties.
Time of Essence
8.11 Time is of the essence in the performance of each obligation under this
Agreement.
<PAGE>
Governing Law
8.12 This Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada.
Counterparts
This Agreement may be executed in any number of counterparts with the same
effect as if all parties to this agreement had sined the same document and
all counterparts will be construed together and will constitute one and the
same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement effective
as of the say and year first above-written.
PENSBREIGH HOLDINGS LTD.
Per: /s/ Altaf Nazerali
Altaf Nazerali
President and CEO
INFOIMAGING TECHNOLOGIES INC.
Per: /s/ Ross Wilmot
Ross Wilmot
Vice-President, Finance
September 30, 1998
Dr. Marco Genoni
2075 Rue University
Suite 930
Montreal, PQ H3A 2L1
Canada
Dear Dr. Genoni,
I am writing to confirm our recent discussions about your joining our Company
and assisting us in developing market for existing products as well as those
now under development.
Effective September 1, you have been named Vice President - Marketing
reporting to me. Your primary focus initially will be to help me develop a
functional marketing and business plan for the company. Included in this task
will be the determination of where to locate our permanent North American
offices, identification of key potential target customers, and developing and
implementing strategies to sell our product range to them. You will also be
responsible for revamping our web-site and web based sales.
In October, we intend to use the business plan as a selling tool to raise
additional financing for the company through an institutional private
placement. You will assist me in this respect as required in making
presentations to potential investors.
We have initially identified the following key commercial sectors on which the
Company will concentrate its initial efforts:
1. OEM for PFP, and CE based fax applications
2. Long distance telephony resellers and large corporate users of
telecommunications
3. Secured printing applications
4. Government and other institutions requiring secure communications
Over the next few months we will be looking to hire specialists in each of
these fields to develop sales in their respective areas of expertise. We will
work together in identifying candidates, and in developing strategies to
support our commercial endeavors in each segment.
As a "start-up" company, I do not believe it is necessary to try and
exhaustively define your job function. Rather, it will evolve in accordance
with the direction our business takes through our joint efforts.
<PAGE>
Your compensation will be primarily success driven. We have agreed on the
following elements:
1. A monthly fee of Cdn. $7,500 paid each month in arrears. No GST would
apply as ITI Nevada is a US corporation. You will be responsible for your own
office overheads. We will reimburse you reasonable out of pocket expenses
such as long distance calls, travel etc. upon submission of appropriate
documentation. Please provide us a monthly invoice for your services and
expenses.
2. You will be granted 30,00 share purchase options at US$1.50 per share.
These options will vest pro-rata temporis over a three year period unless the
Company changes control or is acquired in which case all unearned options will
vest immediately. A separate agreement on the share options is being
forwarded to you.
3. A success fee in accordance with your memo of September 11, a copy of
which is enclosed herewith.
It is understood that you will have the status of a private contractor and
will be responsible for your own withholding taxes, social security and other
contributions.
Either party may at anytime cancel this agreement by giving the other three
months written notice of termination. In case of termination, the provisions
of the Confidentiality Agreement you previously signed will survive.
It is understood that in case of termination, any commissions due you for
sales initiated by you will continue to be honored in accordance with the
attached schedule.
I very much look forward to working with you, and ask that you sign and return
the enclosed copy of this letter confirming your acceptance of the terms
contained herein.
Sincerely yours, Read and accepted
"Altaf Nazerali" "Marco Genoni"
- ---------------- -----------------
Altaf S. Nazerali Marco Genoni
President & CEO
CONFIDENTIAL
AGREEMENT
The following outlines the terms of employment agreed between Noel R.
Bambrough (NRB) and Altaf Nazerali on behalf of InfoImaging Technologies, Inc.
(ITI), a Nevada corporation listed on the OTCBB under the symbol ZFAX, agreed
to this 31st day of March, 1999.
A. COMPENSATION
1. For the month of March 1999, NRB will be paid at his daily rate of
$1,500.00 US for the time he spends on ITI business. NRB will submit invoices
for his time and expenses on a weekly basis and they will be payable on
receipt.
NRB will be reimbursed for travel and other appropriate expenses supported by
proper documentation.
2. For the month of April 1999, and each and every month thereafter until the
current effort to raise money is successfully concluded, (anticipated in June
or July 1999) NRB will be paid $12,500.00 U.S. per month. The amount of
$6,250.00 U.S. will be payable on the 15th and 30th of each month. If the
15th and/or 30th falls on a weekend or holiday, the payment will be made on
the prior business day.
During the above interim period it is understood by ITI that NRB will continue
working on existing projects unrelated to ITI. However, ITI requirements will
receive priority attention and the majority of NRB's time. NRB will continue
to be reimbursed for expenses incurred on ITI business as outlined in
Paragraph 1.
3. During this interim period, NRB will be appointed Executive Vice President
and Chief Operating Officer or ITI and President of ITI's subsidiary
incorporated in Delaware.
NRB will also be appointed to the Board of Directors of each company.
4. In the month following the successful completion of the money raise
identified in Paragraph 2, NRB will become a permanent full-time employee of
ITI. His compensation will be as follows:
a. Salary: $20,833.00 U.S. per month
Incentive Bonus: An amount of up to $100,000 U.S. per year based on the
achievement of agreed-on goals and targets. The parties will agree on the
goals and targets by April 30, 1999 as a result of the business plan now being
prepared.
<PAGE>
b. In addition, ITI will pay NRB's benefits consisting of health and dental
insurance plus any other benefits provided to the officers or employees of
ITI.
C. The compensation package will be reviewed annually.
5. Share Option.
A. NRB will be granted the option to purchase 200,000 common shares at a
price of $4.00 U.S. each.
B. The options will vest as follows:
i) 50,000 will vest on the successful completion of the money raise.
ii) Thereafter, 10,000 options will vest each and every month until the
remaining 150,000 options are fully vested.
C. In the event of a sale of the company or a substantial investment in the
equity of the company by a strategic partner resulting in a significant change
of the majority of the company's board of directors, any options not fully
vested will immediately vest.
D. Subject to the approval of ITI's board of directors, a minimum of 10% of
the options created in any new or additional option pools will be allocated to
NRB at the prevailing market price at the time such new options may be granted
and will vest at the rate of 10,00 options per month in addition to any
options then vesting under Paragraph 5.b.
6. At the time NRB becomes a permanent employee he will be appointed
President and Chief Executive Officer of the parent company.
7. It is understood and agreed that NRB will relocate the permanent offices
of the company to the area of Atlanta, Georgia, USA.
8. A. In the event that ITI is not successful raising the money, ITI and NRB
agree that all terms of this agreement are null and void. Any further
relationship will be re-negotiated except that;
B. ITI will give NRB two (2) months notice or will pay NRB $25,000.00 U.S. in
lieu of notice.
At that point neither party shall have any further obligation to the other.
9. In the event that NRB becomes a permanent employee, and subsequently
circumstances change such that either of the parties wishes to terminate the
relationship, the following terms shall apply:
<PAGE>
a. In the event ITI wishes to terminate this agreement, the ITI will give NRB
six (6) months notice in writing that ITI wishes to terminate the agreement or
will pay six (6) months full compensation in lieu of notice,
(i) NRB will continue to be paid at his then current salary along with all
existing benefits.
(ii) Any earned incentive bonus will be paid.
(iii) Any unvested options will continue to vest during the six-month period
as
outlined in Paragraph 5.b and 5.d.
(iv) Any expenses incurred to date or during the six-month period will be
reimbursed promptly.
b. In the event NRB wishes to terminate the agreement, then NRB will give
ITI six (6) months notice in writing that NRB wishes to terminate the
agreement.
(i) NRB will continue to be paid at his then current salary along with all
existing benefits.
(ii) Any earned incentive bonus will be paid.
(iii) Any unvested options will continue to vest during the six-month period
as
outlined in Paragraph 5.b and 5.d.
(iv) Any expenses incurred to date or during the six-month period will be
reimbursed promptly.
This letter agreement will be interpreted according to the laws of the State
of Georgia.
"Altaf Nazerali" "Noel R. Bambrough"
- --------------------- ----------------------
Altaf Nazerali Noel R. Bambrough
President & CEO
InfoImaging Technologies Inc.
Subsidiaries of InfoImaging Technologies Inc.
ITI InfoImaging Technologies Inc., a Delaware corporation (formerly Intacta)
Fontech Ltd., an Israeli corporation (formerly Intacta Labs Ltd.)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Intacta Technologies Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated April 2, 1999, relating to the
consolidated in that Prospectus. Our report contains an explanatory paragraph
regarding the Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
San Jose, California
February 9, 2000
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