United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
R-TEC HOLDING, INC.
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(Name of small business issuer in its charter)
IDAHO 82-0515707
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1471 E. Commercial Ave., Meridian, Idaho 83642
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208)-887-0953 Fax: (208) 888-1757
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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Securities registered under 12(g) of the Exchange Act:
COMMON STOCK
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<PAGE>
INFORMATION REQUIRED IN REGISTRATION
STATEMENT
Part I
Item 1. Description of Business
R-Tec Holding, Inc. (the "Company")
On August 18, 1999, the Board of Directors of Biogan International, Inc.
organized R-Tec Holding, Inc., an Idaho corporation, (the "Company") as a wholly
owned subsidiary, and transferred Biogan's 50% stock ownership of IntorCorp,
Inc. in exchange for 4,266,797 shares of Common Stock of Company.
On September 27, 1999, Biogan distributed as a stock dividend its 4,266,797
shares of the Company stock (all of its shares), proportionately to Biogan's
shareholders of record one share of Company for each 20 shares of Biogan stock
outstanding. As a result of the special stock dividend the Company became
independent of Biogan, the shareholders retained the same proportionate interest
in the IntorCorp Motor, and enabled IntorCorp to develop the IntorCorp Motor
independently of Biogan.
On November 3, 1999, the Company issued 4,266,797 shares of Common Stock (50%
ownership) in a private placement transaction, to the two shareholder-owners of
R-Tec Corporation, an engineering company located in Meridian, Idaho, in
exchange for 80% of the outstanding stock of R-Tec Corporation. In addition, the
Company contributed its stock of IntorCorp, Inc. to R-Tec Corporation. Other
material terms of the acquisition transaction are that R-Tec Corporation agreed
to redeem the remaining 20% of R-Tec Corporation stock from the two
shareholder-owners for the price of $100,000. The net effect of the transaction
was that
a. Shareholders descended from Biogan own 50% of the Company and the two
shareholder-owners of R-Tec Corporation own 50%.
b. The Board of directors of the Company has five members, and for a
period of 5 years, the two shareholder-owners from R-Tec Corporation
will have the right (by virtue of a shareholder agreement with certain
shareholders of the Company) to elect 3 members of the board.
c. The Company owns 100% of R-Tec Corporation with the redemption of the
20% outstanding stock by R-Tec Corporation from the
shareholder-owners.
d. R-Tec Corporation owns 50% of the stock of IntorCorp, Inc. (owner of
the intellectual technology for the IntorCorp Motor), which will
enable the development of the Motor under the direction and management
of R-Tec Corporation.
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The Company is the holding company of and will be consolidated with R-Tec
Corporation for tax and reporting purposes. The Company at the present time has
no other business interests.
R-Tec Corporation, a subsidiary of the Company.
R-Tec Corporation was initially organized in 1995 as a small individually
operated company in a modified garage for the purpose of developing and
fabricating High-Tech custom manufacturing equipment, primarily for a single
customer. Most of the contracts during the first 18 months were for the
duplication of manufacturing tools going overseas for Hewlett Packard including
mech-op stations, servo writers, and transfer writers for the disk drive
industry. Presently R-Tec Corporation continues to, under contract from the
respective customers, develop, fabricate and manufacture High-Tech custom
manufacturing equipment, as well as to custom manufacture other types of
manufacturing equipment and/or parts for installation in customer products as an
OEM provider. R-Tec Corporation expertise includes engineering, development of
controls, machine design and tooling, and services include consulting, prototype
development, tooling and manufacturing. Production includes mechanical fixtures,
sub-assemblies, electronic testing devices, automatic robot work cells, and
other similar products all of which incorporate one or more complete disciplines
of mechanical, electrical, software, machine vision, and controls.
R-Tec Corporation developed technology currently includes CAD-based,
Electro-mechanical Devices, Tool Design, PC Board Layout, International
EC-Marked products, Machine Vision, Specialty Tooling, Engineering Design,
Motion Control, robotics, Software Development, and PLC Programming.
Significant clients include Iomega Corporation, Hewlett Packard, Pro-Precision
Machining, Steelhead Metals, SCP Global Technologies, System Integration
(Division of Micron), Intel, TECHNIT Interconnection Products, 3Com Corporation,
Preco, Inc., Motorola, Micron Communications, Inc., Ford Microelectronics, Inc.
and Anadigics.
R-Tec Corporation is presently expanding into the European and Asian markets,
and has expended operating funds in R and D for development of certain products
for the open market, both by special order and some by shelf inventory with
immediate availability.
A significant portion of Company research and development costs are borne by
customers through contract provisions.
R-Tec Corporation presently employs 10 full time employees and 5 part time
employees.
Certain functions of some projects are, when needed, contracted to R-Tec Machine
Tools, Inc., an Idaho corporation, in which Doug Hastings and Gary Clayton own a
combined 50% interest. R-Tec Machine Tools, Inc conducts business as a machine
shop at the same location as R-Tec Corporation (See "Certain Relationships and
Related Transactions "). However, some machine work is also contracted with
other machine shops depending on time of delivery constraints.
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The Company had revenues from services provided to four customers that exceeded
10 percent of total revenues in each of the calendar years of 1998 and 1999,
however, only one of those customers exceeded 10 percent in both years.
Reference is made to the consolidated financial statements "Significant
Customers and Suppliers" on page 8 thereof.
Item 2. Management's Discussion and Analysis or Plan of Operation
This Form 10SB contains certain forward-looking statements which are based on
management's current expectations including, but not limited to, general
economic conditions; changes in interest rates; deposit flows; competition;
changes in accounting principles, policies or guidelines; changes in legislation
or regulations; and other economic, competitive, governmental, regulatory and
technological factors affecting the Company's operations, pricing, products and
services.
The consolidated financial statement of the Company revenues of $1,026,847 in
1998 resulting in a net income of $40,345, and revenues of $1,296,850 in 1999
with a net loss of $317,094. The net loss in 1999 was largely the result of a
change to operations for acquired in-process research and development costs of
$190,000 related to the IntorCorp acquisition. In addition the Company recorded
signing bonuses of $50,000 for the executive officers. The foregoing together
with new facility overhead, additional employees, and a significant effort put
on new product development, which will generate future revenues, the year end
1999 reflects a significant loss notwithstanding the increased revenues.
With the adjustments made in 1999, Management is projecting an increase in
revenues estimated at $2,000,000 for calendar year 2000 and a projected net
income in excess of $200,000. The first quarter revenues and contracts in
process appear to confirm Management's projections.
To realize its goals for 2000, Management has organized the business into three
areas of focus:
1. The first area is custom automation, with a target of several
industries. R-Tec Corporation has excelled in this area of custom
solutions for its customers. Using 3Com as an example, R-Tec
Corporation designed and built approximately 20 automated functional
testers that tests the Palm V hand held organizer. These automated
testers test all of the functions without operator interaction. Other
custom automation include, pick-n-place stations, full robotic work
cells, Electrical/Maniacal test stations, table top testers, and full
automatic assembly lines. This business is based on contracts and has
somewhat of a cyclic model.
2. The second area of focus includes products R-Tec Corporation makes for
OEM and Resale. These products are sold to and are used by more than
one customer. Some examples of this type of product are the RS232
converter boxes that are used to translate communication levels.
Hewlett Packard and Jabil Circuit, Inc. as well as companies overseas
use them. Management is in the process of creating a
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web site to help in the marketing of these products which, in
Management's opinion, will create more opportunities for product
development.
3. The third area of focus is high-tech interconnect devices. R-Tec
Corporation presently has one of the very few sources for two
technologies, each of which gives an edge in the industry for high
frequency component testing. Management anticipates significant growth
and a steady stream of revenues as this area of the business is
developed.
The liquidity of the Company has been presently satisfied with the issuance of
the Series "A" Convertible Preferred stock for $500,000, and the LOC presently
in the amount of $100,000 that as of the date of this From 10SB is available to
the Company. The note payable for the redemption of the 20% common stock is
payable when funds are available from earnings.
Item 3. Description of Property
Description of Property of R-Tec Corporation (Subsidiary)
R-Tec Corporation is a tenant in a single purpose industrial building located at
1471 E. Commercial Avenue, in Meridian, Idaho. The building is owned by H2C2 &
Associates, LLC, an Idaho limited liability company (owned by Mr. and Mrs.
Hastings and Mr. and Mrs. Clayton, shareholders of R-Tec Corporation) and leased
75% to R-Tec Corporation under a 5 year lease expiring November 30, 2004. The
other 25% of the building is leased to R-Tec Machine Tools, Inc., a machine shop
(owned 25% by Hastings and 25% by Claytons) see "Certain Relationships and
Related Transactions" at page 7. The building was constructed in 1998 according
to the applicable commercial building code requirements, on approximately 1.36
acres of land, and includes a parking area of 20 spaces.
R-Tec Corporation office space consists of approximately 1200 square feet, and
includes a reception area, conference room, and 6 individual offices. The
assembly area consists of approximately 1800 square feet and approximately 1500
square feet of warehouse area. The Company pays rent at the rate of $2,950 per
month, subject to Cost of Living Index increases on an annual basis.
R-Tec Corporation owns the furniture and fixtures, office equipment, phone
system and all shop equipment free of any liens or obligations, except that it
serves as collateral for the LOC when funds are drawn.
Company does not have any separate corporate offices, but uses, when required,
the offices of R- Tec Corporation for its purposes, without the payment of any
rent or other obligation, until such time as independent offices may be
required.
IntorCorp, Inc. is an Idaho corporation owned 50% by R-Tec Corporation and 50%
by C.T.
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Corporation an electrical engineering company. Intorcorp owns the intellectual
technology for the IntorCorp Smart Power Motor and Mr. Douglas G. Hastings is
President. Negotiations are presently in process for a consulting agreement
between IntorCorp and C.T. Corporation. Management is currently developing the
business plan, interviewing candidates for project managing of the development
and marketing of the IntorCorp Motor, as well as considering the methods for
financing the project.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the shares of Common Stock
of Company and Preferred Stock that is convertible into common stock, that is
presently held beneficially by (i) each director of the Company, (ii) all
officers and directors as a group, and (iii) each person known by the Company to
beneficially own 5% or more of the outstanding shares of the Company's common
stock.
<TABLE>
<CAPTION>
Name and Address Amount & Nature
of Beneficial Owner of Benef. Owner Percent
------------------- Common -- Preferred Common Preferred
------------------- -----------------
<S> <C> <C> <C> <C>
Gary A. Clayton (1)(3)(4)(5) 2,133,399 -0- 25% -0-
1471 E. Commercial Ave
Meridian, Idaho 83642
Douglas G. Hastings (1)(3)(4)(5) 2,133,398 -0- 25% -0-
1471 E. Commercial Ave
Meridian, Idaho 83642
Rulon L. Tolman (1)(3)(4) 490,417 531,643 5.75% 24.92%
7213 Potomac Drive
Boise, Idaho 83704
Robert C. Montgomery (1)(3) 116,900 108,377 1.37% 5.08%
6940 Ashland Drive
Boise, Idaho 83709
George W. Wadsworth (1)(3) 138,334 67,735 1.62% 3.18%
214 S. Cole Road
Boise, Idaho 83709
John R. Hansen, Jr. (1)(3) 125,000 135,471 1.46% 6.35%
12035 Ginger Creek Dr.
Boise, Idaho 83713
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
L. William Glazier (3) 525,000 568,978 6.15% 26.67%
805 W. Cross Street
Woodland Hills, CA 95695
Ronald J. Tolman (2) 561,164 (2) 599,272 6.58% 28.09%
2326 Bruins Avenue
Boise, Idaho 83704
All Officers and Directors
as a Group (6 persons) 5,137,448 2,011,476
Total Shares Issued and Outstanding 8,533,594 2,133,399 (6) 60.20% 94.29%
</TABLE>
(1) These individuals are the directors and officers of the Company who
are shareholders.
(2) Mr. Ronald J. Tolman owns 377,920 shares of Common Stock and 409,613
shares of Preferred Stock in his own name, and 183,244 shares of
Common Stock and 189,659 shares of Preferred Stock are owned of record
in the name of his wife, Jacque L. Tolman.
(3) These shareholders, along with Keith Cline (56,500 shares of Common
Stock (00.662%) and 54,188 shares of Preferred Stock, with a combined
share ownership and voting percentage of 73.595% have entered into a
voting agreement under which Mssrs. Clayton and Hastings will have the
right to nominate 3 of the 5 directors, and the other participants
will have the right to nominate 2 of the 5 directors, and the combined
ownership would then be voted as a block for the nominated directors.
(4) These individuals are the present directors of R-Tec Corporation, Inc.
with Hastings as president and Clayton as vice-president and
secretary.
(5) These individuals are two of the four directors of IntorCorp, Inc.
with Hastings as president.
(6) If converted to Common Stock at the present conversion ratio, the
Preferred Stock would represent 20% of the after-conversion issued and
outstanding common stock.
Preferred Stock
The Company has amended its Articles of Incorporation to create 2,133,399 shares
of Series "A" Convertible Preferred stock, par value $0.23437 per share, all of
which have been subscribed by nine individuals seven of whom are accounted in
the above "Security Ownership of Certain Beneficial Owners and Management". The
Description of the rights of the Preferred Stock is set forth in Item 8,
Description of Securities.
Item 5. Directors, Executive Officers, Promoters and Control Persons of Company,
Inc.
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Name Age Position Date Appointed
----- --- -------- --------------
Douglas G. Hastings 41 Director, President Nov.3, 99
Gary A. Clayton 41 Director, V-P Engineering Nov.3, 99
Rulon L. Tolman 49 Director, VP Finance Original
John R. Hansen, Jr. 69 Director Original
David R. Stewart 46 Director Nov.3, 99
Robert C. Montgomery 47 Secretary Nov. 3, 99
George W. Wadsworth 54 Treasurer Nov. 3, 99
The directors of the Company are elected to serve until the next annual
shareholder's meeting or until their respective successors are elected and
qualified. Officers hold office until the meeting of the Board of Directors
after the next annual shareholders's meeting or until removal by the Board of
Directors. There are no arrangements or understandings among the Officers and
Directors pursuant to which any of them were elected as Officers and Directors.
Family Relationships: Douglas G. Hastings is married to Rena Clayton Hastings, a
sister of Gary A. Clayton. Rulon L. Tolman and Ronald J. Tolman are cousins.
Business Experience of Officers and Directors:
Douglas G. Hastings, 1471 E. Commercial Ave, Meridian, Idaho 83642. Mr.
Hastings received a Micro M.B.A. in May of 1999. Mr. Hastings received special
training in Robotics, Machine Vision and software controls. Prior to starting
R-Tec Corporation in 1995, Mr. Hastings was employed by Hewlett Packard from
1981 to 1995 specializing in electrical and mechanical tool design and controls.
Gary C. Clayton, 1471 E. Commercial Ave, Meridian, Idaho 83642. Mr. Clayton
received a BS degree in Mechanical Engineering from BYU in 1983. He received
training in Robotics and Industrial Controls in 1987 (with honors), and a
Masters Degree in Mechanical Engineering in 1993 from the University of Utah.
Prior to 1995 (when joined R-Tec Corporation), Mr. Clayton was the Engineering
Manager for Lynn Industries of Boise, Idaho for a year, and prior thereto was
Project Engineer at Thiokol Corporation in Brigham City, Utah, for design,
implementation and project management of HVAC system, process equipment, CNC
type machine tools, and plant automation.
Rulon L. Tolman, was appointed Director August , and is currently a Vice
President of the Company. Mr. Tolman has been with Mutual of New York since 1978
and has been Account Executive, Field Underwriter and Sales Manager. Previously
Mr. Tolman was a Production Supervisor with Boise Cascade Container Division
managing 80 employees.
John R. Hansen, Jr., 12035 Ginger Creek Dr., Boise, Id. 83713. Mr. Hansen
received his J.D. degree from UCLA in 1956, and has practiced law from 1957 to
1968 in California and from 1968 to the present in Idaho, primarily in
securities and business practice. Mr. Hansen is
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presently outside counsel to the Company.
David R. Stewart, 9486 Fairview Ave, Boise, Idaho. Mr. Stewart is a
Certified Public Accountant with Stewart, Harding & Co with 20 years experience,
and as President of the company for the past 6 years. He obtained his BS degree
in Accounting in 1979 from the University of Utah.
Robert C. Montgomery, is presently Secretary of the Company. He received
his JD Degree from the University of Idaho in 1974, and is a member of the bar
in Idaho, Oregon and Washington. He was a former adjunct professor of Business
Law and Ethics at Boise State University, and has practiced law in Idaho since
1974.
George W. Wadsworth has been a partner in the accounting firm of Wadsworth
and Smith, Chartered, for the past 23 years. He is the treasurer and consulting
accountant for the Company.
Item 6. Executive Compensation.
R-Tec Corporation paid executive compensation for the years ended December 31,
1998 and 1999 to the following, plus an employment agreement signing bonus of
$25,000 to each in the calendar year 1999:
Douglas G. Hastings, President. $53,175 and 78,912 respectively.
Gary C. Clayton, Vice President. $56,100 and 78,912 respectively.
On December 1, 1999, R-Tec entered into five year employment agreements with
Douglas G. Hastings to be the CEO and President of R-Tec, and with Gary C.
Clayton to be Vice President of Engineering, each with an annual salary of
$81,120 with a bonus of $25,000 to be paid during the first year, provided
certain goals are attained. In addition, each of the employees will receive the
standard benefits package for employees, including medical, sick leave and
vacation time. The above employees each have a company automobile.
There is no agreement for the payment of any salary or compensation at this time
for the directors of R-Tec Corporation, or for the executive officers or
directors of the Company. However, the Company anticipates that any out of
pocket expenses of directors will be paid, and that directors who are not
employed by either the Company or R-Tec Corporation will receive compensation
for attendance and other duties performed as directors.
Item 7. Certain Relationships and Related Transactions.
R-Tec Corporation currently leases 75% of the building it presently occupies at
1471 E. Commercial Ave, Meridian, Idaho 83642 from H2C2 & Associates, LLC, an
Idaho limited liability company owned by Mr. and Mrs. Hastings and Mr. and Mrs.
Clayton under a five year
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lease ending November 30, 2004, with an option to extend the lease for an
additional five years. The rental rate is $2,950 per month subject to annual
Cost of Living Index increases.
In addition, the other 25% of the building is presently leased by R-Tec Machine
Tools, an Idaho "S" corporation, which is owned 25% by each of Mr. Hastings and
25% by Mr. Clayton. R-Tec frequently contracts machine work to R-Tec Machine
Tools at competitive prices, as well as contract work to other machine shops,
the selection of which is based on competitive pricing as well as speed of work
completion.. R-Tec Machine Tools, also contracts work with other manufacturers.
The Company has machine tooling performed by R-Tec Machine Tool, Inc. which is
owned 25% each by Douglas Hastings and Gary Clayton. Purchases from Machine Tool
for 1999 and 1998 were $188,643 and $77,680, respectively. During 1998, R-Tec
Corporation purchased equipment which was financed for 100% of the purchase
price. The equipment was leased to Machine Tool and the lease payments received
in 1999 and 1998 were $20,580 and $33,535, respectively. In 1999, Machine Tool
acquired the equipment from the Company by assuming the underlying debt of
$138,675 at the time of transfer.
Item 8. Description of Securities.
The Company presently has two classes of capital stock authorized consisting of
30,000,000 shares of voting Common stock, without par value, and 5,000,000
shares of Preferred Stock, of which 2,133,399 shares have been designated Series
"A" Convertible Preferred shares, as hereinafter described, and with authority
vested in the board of directors to prescribe the classes, series, and the
number of each class or series of the remaining Preferred Stock, and the voting
powers, designations, preferences, limitations, restrictions and relative rights
of each class or series of Preferred Stock as authorized in ss.30-1-602, Idaho
Code.
As of the date of this registration there are issued and outstanding 8,533,594
shares of Common Stock, and, either issued or subscribed, 2,133,399 shares of
Series "A" Convertible Preferred stock.
A. Common stock:
The holders of the Company's Common Stock are entitled to one vote per share on
each matter submitted to vote at any meeting of shareholders. The shares of
Common Stock do not have cumulative voting rights in the election of Directors.
Shareholders of the Company have no pre-emptive rights to acquire additional
shares of Common Stock or other securities. The Common Stock is not subject to
redemption rights and has no subscription or conversions rights. In the event of
liquidation of the Company, the share of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities and after
distributions to the preferred stock. All shares of the Common Stock now
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outstanding are fully paid for and non-assessable.
Dividends:
Holders of Common Stock are entitled to receive such dividends as the Board of
Directors may from time to time declare out of funds legally available for the
payment of dividends. The Company has never paid a dividend, and the present
focus of Management is for growth and expansion of its business through the
reinvestment of profits, if any, and does not anticipate that it will pay
dividends in the foreseeable future.
Holders of Common Stock:
The number of holders of record of the Company's Common Stock is approximately
776 as reported by the Company's transfer agent. The Common Stock of all
holders, except for two (Hastings and Clayton), is currently held in escrow by
the transfer agent until either the registration of the Common Stock is
effective, or until June 30, 2000, whichever is earlier.
B. Series "A" Convertible Preferred stock:
Voting: Series "A" Convertible Preferred shareholders vote at shareholder
meetings as if they had converted their stock, provided, if the
Company defaulted in its obligation to redeem the stock for two
redemption dates, then the Series "A" Convertible Preferred
shareholders, as a class, have the right to elect the majority of
the directors of the Company.
Dividends: The Series "A" Convertible Preferred Stock is entitled to an
annual dividend of $0.0222 per share (9%), cumulative if not
paid, but does not bear interest. No dividends can be paid on
Common Stock unless all dividends are paid on Preferred Stock. If
the Corporation pays more than the equivalent rate on the Common
Stock in any year, then Series "A" Convertible Preferred
shareholders participate with the Common Stock proportionately
for any additional dividends.
Liquidation: Series "A" Convertible Preferred Stock get first preference to
receive their par value back on liquidation. Then assets are
distributed to Common Stock until they get an equivalent amount
per share. If any assets are left, the Preferred and Common
shares participate proportionately.
Conversion: Series "A" Convertible Preferred shares convert at their par
value, share for share, for Common Stock, provided, that the
conversion price is subject to adjustment on a full ratchet basis
for any dilutionary distributions or recapitalization. Preferred
shares may be converted up to 5 days before any "redemption
date", before any public offering, and any time after three
years. They will automatically convert to Common Stock (i) on a
vote of 2/3 of the Preferred Stock; (ii) on the closing of a
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firm commitment of public offering netting to the Corporation $1M
or more at a price of $5.00 or more per share.
Redemption: At the option of the Series "A" Convertible Preferred Stock
holder, starting in January of 2006, the Preferred Stock is to be
redeemed 1/3 each year for three years.
There are currently nine shareholders who have either subscribed or have paid
for the Preferred Stock. Reference is made to the attached exhibit "Preferred
Stock Amendment to the Articles of Incorporation for a more detailed description
of the Preferred Stock.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
There presently is no market for either the Common Stock or Preferred Stock.
Item 2. Legal Proceedings.
There are no legal proceedings presently existing or threatened against either
the Company or any subsidiary.
Item 3. Changes in and Disagreements with Accountants.
The principal accountant for the Company is Wadsworth & Smith, Certified Public
Accountants. The auditor for the Company is Balukoff Lindstrom & Co., PA. There
have been no changes nor disagreements with accountants.
Item 4. Recent Sales of Unregistered Securities.
On November 3, 1999, the Company closed an Agreement and Plan of Reorganization
pursuant to which Company issued 4,266,798 shares of "restricted" Common Stock
to two individuals in a Private Placement in exchange for 80% of the stock of
R-Tec Corporation as described in Item 1 hereof at page 2. The issuer is of the
opinion that said stock was issued in compliance with Section 4(2) exemption
from registration under the Securities Act of 1933.
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The Series "A" Convertible Preferred shares herein described under the heading
of "Preferred Stock" was issued for cash at the par value to nine individuals
(shareholders of Common Stock) in a what the issuer believes was a Private
Placement under the provisions of Section 4(2) of the Securities Act.
Item 5. Indemnification of Directors and Officers.
The Company and its affiliates may not be liable to its shareholders for errors
in judgment or other acts or omissions not amounting to intentional misconduct,
fraud or a knowing violation of the law, since provisions have been made in the
Articles of Incorporation and By Laws limiting such liability. The Articles of
Incorporation and By Laws also provide for indemnification of the officers and
directors of the Company in most cases for any liability suffered by them or
arising out of their activities as officers and directors of the Company if they
were not engage in intentional misconduct, fraud or a knowing violation of the
law.
Insofar as indemnification for liabilities arising under the federal securities
laws may be permitted to directors and controlling persons of the Registrant,
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 law and is, therefore, unenforceable. In the event a demand for
indemnification is made, 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 questions whether such indemnification by it is
against public policy as expressed in the law and will be governed by the final
adjudication of such issue.
PART F/S
Included herewith is the audited consolidated statement of R-Tec Holding, Inc.
and Subsidiaries as of December 31, 1999 and 1998.
PART III
Item 1. Index to Exhibits
The exhibits listed and described below in Item 2 are filed as part of this
Registration Statement.
Item 2. Description of Exhibits
Exhibit 2. Charter, Charter Amendments and By Laws.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
R-TEC HOLDING, INC.
(Registrant)
By /s/
--------------------------------
Douglas G. Hastings, President
Date: April 24, 2000
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Consolidated Financial Statements
R-TEC HOLDING, INC.
AND SUBSIDIARY
December 31, 1999 and 1998
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT ........................................... 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet ........................................... 2
Consolidated Statements of Operations ................................ 3
Consolidated Statements of Cash Flows................................. 4
Consolidated Statements of Changes in Shareholders' Equity (Deficit).. 5
Notes to Consolidated Financial Statements ........................... 6
<PAGE>
[LOGO]
BALUKOFF LINDSTROM & Co., P.A.
Certified Public Accountants
877 West Main Street, Suite 805
Boise, Idaho 83702
(208) 344-7150
FAX: (208) 344-7435
www.blco.com
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
R-Tec Holding, Inc.
Boise, Idaho
We have audited the accompanying consolidated balance sheet of R-Tec Holding,
Inc. and Subsidiary as of December 31, 1999, and the related consolidated
statements of operations, changes in shareholders' equity (deficit), and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of R-Tec Holding, Inc.
and Subsidiary as of December 31, 1999, and the results of their operations and
their cash flows for the years ended December 31, 1999 and 1998, in conformity
with generally accepted accounting principles.
/s/ Balukoff, Lindstrom & Co., P.A.
February 3, 2000
-1-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
1999
--------------
Current assets
Cash $ 3,609
Accounts receivable (net of $4,975 allowance
for doubtful accounts) 105,480
Costs and estimated earnings in excess
of billings on uncompleted contracts 63,205
Prepaid expenses 3,330
Notes receivable, current portion 6,091
--------------
Total current assets 181,715
Equipment, at cost, net of accumulated depreciation 54,432
Notes receivable, less current portion 21,045
--------------
Total assets $ 257,192
==============
Current Liabilities
Accounts payable $ 87,839
Accrued expenses 54,900
Line of credit 64,000
Income taxes payable 4,204
Deferred income taxes 8,197
Billings in excess of costs and estimated
earnings on uncompleted contracts 25,978
--------------
Total current liabilities 245,118
Long-term debt 100,000
--------------
Total liabilities 345,118
Shareholders' deficit
Preferred stock, no par value per share,
5,000,000 authorized, no shares
issued and outstanding
Common stock, no par value per share,
30,000,000 authorized, 8,533,594 shares
issued and outstanding 221,729
Accumulated deficit (309,655)
--------------
Total shareholders' deficit (87,926)
--------------
Total liabilities and shareholders' deficit $ 257,192
==============
See accompanying notes
-2-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
1999 1999
------------ -------------
Revenues $ 1,296,850 $ 1,026,847
Operating costs 1,103,719 865,645
------------ -------------
Goss profit 193,131 161,202
Selling, general and administrative expenses 310,920 113,199
Acquired in-process research and development 190,000 --
------------ -------------
Operating income (loss) (307,789) 48,003
Interest expense (14,423) (14,239)
Gain on disposition of assets 16,495 --
Other 1,024 6,581
------------ -------------
3,096 (7,658)
------------ -------------
Income (loss) before income taxes (304,693) 40,345
Income taxes 12,401 --
------------ -------------
Net income (loss) $ (317,094) $ 40,345
============ =============
Net income (loss) per common share $ (0.04) $ --
Weighted average shares outstanding 8,533,594 8,533,594
See accompanying notes
-3-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
1999 1999
------------ -------------
Cash flows from operating activities
Net income (loss) $ (317,094) $ 40,345
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities
Depreciation 32,298 29,823
Gain on asset dispositions (16,495) --
Acquired in-process research and development 190,000 --
Changes in assets and liabilities
Accounts receivable 5,447 (37,662)
Costs and estimated earnigns in excess
of billings on uncompleted contracts 93,884 (136,838)
Prepaid expenses (1,670) (1,660)
Accounts payable (11,166) 97,989
Accrued expense 23,198 8,582
Income taxes payable 4,204 --
Deferred income taxes 8,197 --
Billings in excess of costs and estimated
earnings on uncompleted contracts (26,999) 29,812
------------ -------------
Net cash provided (used) by
operating activities (16,196) 30,391
Cash flows from investing activities
Purchase of equipment (27,489) (185,885)
Purchase of investment -- (100)
------------ -------------
Net cash used by investing
activities (27,489) (185,985)
------------ -------------
Cash flows from financing activities
Collectioins on loans 70,970 13,000
Loans made -- (98,106)
Dividends paid (6,813) (15,400)
Borrowings on line of credit 64,000 --
Proceeds from debt -- 247,868
Payments on debt (84,201) (24,992)
------------ -------------
Net cash provided by financing
activities 43,956 122,370
------------ -------------
Net increase (decrease)
in cash 271 (33,224)
Cash at beginning of year 3,338 36,562
------------ -------------
Cash at end of year $ 3,609 $ 3,338
============ =============
Supplemental disclosures of cash flow
information
Interest paid $ 15,008 $ 13,654
Noncash investing and financing activities
Dividend paid through investment
distribution $ 57,631 $ --
Sale of equipment with debt assumption $ 138,675 $ --
Stock redumption with debt issuance $ 100,000 $ --
See accompanying notes
-4-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehen-
Stock Earnings sive Income Total
----- -------- ----------- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 31,729 $ 146,938 $ -- $ 178,667
Net income -- 40,345 -- 40,345
Unrealized losses on securities
net of reclassification adjustment -- -- (4,542) (4,542)
---------
Comprehensive income 35,803
Dividends -- (15,400) -- (15,400)
--------- --------- --------- ---------
Balance at December 31, 1998 31,729 171,883 (4,542) 199,070
Net loss -- (317,094) -- (317,094)
Unrealized gain on securities
net of reclassification adjustment -- -- 4,542 4,542
---------
Comprehensive income (312,552)
Dividends -- (64,444) -- (64,444)
Issuance of stock for IntorCorp acquisition 190,000 -- -- 190,000
Stock redemption -- (100,000) -- (100,000)
--------- --------- --------- ---------
Balance at December 31, 1999 $ 221,729 $(309,655) $ -- $ (87,926)
========= ========= ========= =========
</TABLE>
See accompanying notes
-5-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Company Operations
R-Tec Holding, Inc., (the Company), is a system integrator, designer, and
manufacturer of automation and manufacturing equipment, primarily to the
high-tech industry.
Entity
R-Tec Holding, Inc. was formed as a wholly owned subsidiary of Biogan
International, Inc. (Biogan) on August 18, 1999. Biogan is a development stage
company which is publicly held and is traded in the over the counter market.
Biogan transferred its 50 % ownership in IntorCorp, Inc. (IntorCorp) to R-Tec
Holding, Inc. IntorCorp was formed in 1998 for the purpose of completing the
research and design on motor technology. The technology was developed within
Biogan and all rights to the technology were transferred to IntorCorp. There
have been no operations or activities in IntorCorp since its formation. Biogan
paid a stock dividend to shareholders on September 15, 1999, consisting of one
share of R-Tec Holding, Inc. stock for 20 each shares of Biogan stock. The
dividend resulted in the shareholders of Biogan receiving 4,266,797 shares of
R-Tec Holding, Inc. common stock.
R-Tec Corporation (R-Tec) has been in existence since 1995. On September 27,
1999, R-Tec Holding, Inc. and R-Tec Corporation entered into a definitive
agreement under which the shareholders of R-Tec transferred 80% of their common
stock holdings of R-Tec Corporation in exchange for 4,266,797 shares of R-Tec
Holding, Inc. R- Tec Holding also agreed to contribute its investment of
IntorCorp to R-Tec Corporation. The transaction closed on November 3, 1999. On
November 4, 1999, R-Tec Corporation redeemed the remaining 20% ownership from
the shareholders. The redemption resulted in recording a $100,000 note payable
to the former shareholders. The stock redemption resulted in R-Tec Corporation
being a wholly owned subsidiary of R-Tec Holding, Inc.
The financial statements for the Company have been prepared in accordance with
reverse purchase accounting. The newly formed holding company, R-Tec Holding,
Inc. had no activity prior to the acquisition, and accordingly, is considered to
be the acquired entity. R-Tec Corporation is considered the acquirer on the
basis that it had previous operations.
Valuation of the technology, considered to be in-process research and
development, received by R-Tec Corporation in its acquisition of R-Tec Holding,
Inc. and its 50% investment in IntorCorp was determined by external appraisal.
The appraisal value was based on a determination of the value of stock given up
by the shareholders of R-Tec Corporation to complete the exchange. Management
determined the shareholders gave up 40% of their holdings in the exchange which
they estimated the value at $190,000. The technology rights received have not
yet reached technical feasibility and
-6-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
had no alternative future use. The entire $190,000 acquisition price was
allocated to in-process research and development and was expensed as a charge to
operations.
Principles of Consolidation
The consolidated financial statements include the accounts of R-Tec Holding,
Inc. and subsidiary, after elimination of significant intercompany items and
transactions.
Revenue Recognition
The Company recognizes revenues on the percentage-of-completion method, measured
by the percentage of cost incurred to date to estimated total cost for each
contract. Management considers total cost to be the best available measure of
progress on the contracts.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation. Selling, general and administrative costs are charged
to expense as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes in job
performance, job conditions and estimated profitability may result in revisions
to costs and income, which are recognized in the period in which the revisions
are determined.
The assets and liabilities relating to the "costs and estimated earnings in
excess of billings on uncompleted contracts" and the "billings in excess of
costs and estimated earnings on uncompleted contracts" on these contracts are
recorded as current assets and current liabilities on the balance sheet as they
will be liquidated in the normal course of contract completion.
Credit Risk
The Company grants credit to customers primarily in the Western states. These
customers are primarily in the high-tech industry. The accounting loss incurred
if all parties failed entirely to perform on their obligation is equal to the
balance outstanding for trade accounts receivable.
Cash Equivalents
The Company considers all highly liquid investments maturing in three months or
less as cash equivalents.
Marketable Securities
Management determines the appropriate classifications of its investments in
equity securities at the time of purchase and reevaluates such determination at
each balance sheet date. The Company uses
-7-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
the specific identification method for valuing investments. The Company's
investments in equity securities are classified as available for sale at
December 31, 1998. Securities classified as available for sale are carried at
fair value, with the unrealized gains and losses, reported as a separate
component of shareholders' equity. At December 31, 1999 and 1998 the Company had
no investments that qualified as trading or held to maturity.
Equipment
Capital additions are classified as equipment and are recorded at cost.
Depreciation is recorded by use of the straight-line method. The book value of
each asset is reduced by equal amounts over its estimated useful life.
Maintenance and repairs are charged to operations as incurred. When an asset is
disposed of, accumulated depreciation is deducted from the original cost, and
any gain or loss arising from its disposal is credited or charged to operations.
Significant Customers and Suppliers
The Company recorded revenue from services provided to customers that exceeded
10 percent of total revenue as follows:
1999 1998
--------------- ----------------
Company A $ 158,682 $ --
Company B -- 177,830
Company C -- 88,650
Company D -- 153,472
Company E 204,725 --
Company F 167,524 160,741
Company G 146,245 --
---------------- ----------------
$ 677,176 $ 580,693
================ ================
The Company has no vendors that supplied 10% or more of Company purchases,
however; the Company does contract with Browand, LaMeire & Associates to provide
marketing services. Amounts paid to this entity in 1999 and 1998 were $174,240
and $67,995, respectively.
Income Taxes
Prior to January 1, 1999, the Company elected to be taxed as an "S" Corporation
as defined by the Internal Revenue Code, wherein the shareholder reports net
earnings of the Corporation on his personal tax return. Accordingly, no
provision or liability for income taxes has been included in the
-8-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
financial statements for periods prior to 1999. Previously taxed earnings were
distributed to the shareholders during 1999.
Effective January 1, 1999, the shareholders elected to have the Company taxed as
a "C" Corporation as defined by the Internal Revenue Code. Effective December
31, 1998 the Company elected to change its method of reporting taxable income
from the cash basis to the accrual basis. The election requires amortizing the
cash to accrual difference into income over a period not to exceed four years.
The remaining unamortized balance at December 31, 1999 and 1998, was $41,968 and
$62,952, respectively.
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due or recoverable and
deferred taxes related primarily to differences between the bases of assets and
liabilities for financial and income tax reporting.
Value of Financial Instruments
The Company has a number of financial instruments. The Company estimates that
the fair value of all financial instruments, at December 31, 1999, do not differ
materially from the aggregate carrying values of its financial instruments
recorded in the accompanying balance sheet. The estimated fair value amounts
have been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and reported
revenues and expenses. Significant estimates used in preparing these financial
statements include those assumed in determining the collectibility of
receivables, computing profit percentages under the percentage-of-completion
revenue recognition method, and determining the value assigned to the
acquisition of IntorCorp technology. It is at least reasonably possible that the
significant estimates used will change within the next year.
Earnings Per Share
Earnings per share is computed by dividing net income applicable to common
shareholders by the weighted average number of shares outstanding.
-9-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE B - MARKETABLE SECURITIES
Investments in marketable securities classified as available for sale are as
follows:
Market Unrealized
Cost Value (Loss)
------------- ------------- ----------
December 31, 1998
Common Stocks $ 35,968 $ 31,426 $ (4,542)
The Company had realized gains of $21,663 and $-- on the sale of securities
classified as available for sale for the years ended December 31, 1999 and 1998,
respectively. The Company had a reclassification adjustment of $4,542 during
1999.
NOTE C - UNCOMPLETED CONTRACTS
Costs, estimated earnings and billings on uncompleted contracts consist of:
1999
----------------
Costs incurred on uncompleted contracts $ 143,641
Estimated earnings 26,860
----------------
170,501
Billings to date 133,274
----------------
$ 37,227
================
1999
----------------
Balance sheet captions are:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 63,205
Billings in excess of costs and estimated
earnings on uncompleted contracts (25,978)
----------------
$ 37,227
================
-10-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE D - EQUIPMENT
Equipment consists of:
1999
----------
Equipment $ 42,242
Vehicles 31,172
Software 18,143
Office equipment and furnishings 13,691
----------
105,248
Accumulated depreciation and amortization (50,816)
----------
$ 54,432
==========
NOTE E - REVOLVING LINE OF CREDIT
The Company has available for borrowing a line of credit of $100,000 of which
$64,000 was outstanding at December 31, 1999. The line bears interest at a
variable interest rate of 2% over the published Wall Street Journal prime rate,
and is secured by accounts receivable and equipment.
NOTE F - LONG-TERM DEBT
R-Tec redeemed stock from the shareholders on November 4, 1999 by issuing a note
for $100,000. The redemption represented the 20% minority interest as of that
date. The note is payable only from available earnings of R-Tec and is not
scheduled to commence until January 1, 2001. Interest accrues at the prime
lending rate.
NOTE G - LEASES
The Company leases its office and manufacturing space from a related party,
H2C2. H2C2 is owned by Doug and Rena Hastings and Gary and Patricia Clayton. The
lease term expires in December 2004, but may be extended, subject to cost of
living increases, for a five year term at the option of the Company. Doug
Hastings and Gary Clayton are Executive Officers of the Company.
-11-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Future minimum payments under the operating lease agreement at December 31, 1999
are:
2000 $ 35,400
2001 35,400
2002 35,400
2003 35,400
2004 32,450
-----------
$ 174,050
===========
Rent expense for 1999 and 1998 was $38,219 and $14,250, respectively.
NOTE H - PENSION PLANS
The Company has a Simplified Employees Pension Plan covering all employees who
are at least 21 years of age and worked at the Company for a minimum of 2 years.
The Plan allows the Company to make contributions up to 15% of compensation
subject to Federal maximum contribution limits. During the years ended December
31, 1999 and 1998, the Company recorded $3,644 and $--, respectively, in
contributions.
NOTE I - INCOME TAXES
Income taxes are provided for temporary differences between financial and tax
basis income. The components of net deferred taxes are as follows at December 31
using a combined deferred tax rate of 23%:
1999
----------
Deferred tax liability from:
Fixed assets $ (5,806)
Change in method of accounting (9,653)
Net overbillings on uncompleted contracts (5,112)
---------
Deferred tax liability 20,571)
Deferred tax asset from:
Accrued expenses 12,374
---------
Net deferred liability $ (8,197)
==========
-12-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
The components of income tax expense at December 31, are:
1999 1998
---------- --------
Current
Federal $ 2,661 $ --
State 1,543 --
---------- --------
4,204 --
Deferred
Federal 5,346 --
State 2,851 --
---------- --------
8,197 --
---------- --------
$ 12,401 $ --
========== ========
The following reconciles the federal tax provisions with the expected provisions
by applying statutory rates (34%) to income before income taxes as of December
31, 1999:
1999
----------
Federal tax benefit $ (103,596)
In-process research and development 64,600
Effect of graduated tax rates (10,320)
Effect of revocation of S-election 57,323
----------
Federal income tax $ 8,007
==========
As discussed in Note A, the Company changed its tax status from an S-Corporation
to a C-Corporation effective January 1, 1999. Accordingly, the net deferred tax
liability at the date the termination election was filed of approximately
$39,000, based on a combined tax rate of 23%, has been included in the current
year deferred tax provision.
NOTE J - RELATED PARTY TRANSACTIONS
The Company conducts business with other entities affiliated through common
ownership or control.
As described in Note G, the Company leases office and manufacturing space from
H2C2. Amounts paid during 1999 and 1998 for rent was $38,219, and $9,750. The
Company also pays H2C2 for utilities, which amounted to $2,450 and $443 for 1999
and 1998, respectively. During 1998, the Company leased a facility from Doug
Hastings. Total rental expense in 1998 for this rental was $4,500.
-13-
<PAGE>
R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
The Company occasionally provides loans to affiliated entities. The notes are
unsecured. As of December 31, 1999, H2C2 owed the Company $27,136 on a note
receivable.
The Company has machine tooling performed by R-Tec Machine Tool, Inc. (Machine
Tool), which is owned 25% each by Doug Hastings and Gary Clayton. Purchases from
Machine Tool for 1999 and 1998 were $188,643 and $77,680, respectively. During
1998, R-Tec purchased equipment, which was leased to Machine Tool. Financing of
the equipment was provided through two lending institutions for 100% of the
purchase price. The lease payments received in 1999 and 1998 were $20,580 and
$33,535, respectively. In 1999, Machine Tool acquired the equipment by assuming
the underlying debt, $138,675, at the time of transfer. The Company has accounts
payable due to Machine Tool at December 31, 1999 and 1998 in the amount of
$21,390 and $3,634, respectively.
The Company owes Doug Hastings and Gary Clayton $25,000 each for signing bonuses
as of December 31, 1999. The amounts are included in accrued expenses.
NOTE K - COMMITMENTS
The Company has entered into five-year employment agreements with Doug Hastings
and Gary Clayton. The agreements provide for minimum base salaries of $81,120 to
each of them with bonuses determined in relationship to Company profits.
NOTE L - GOING CONCERN CONTINGENCY
The Company incurred an operating loss during 1999 of approximately $308,000.
This loss coupled with the excess of current liabilities over current assets of
approximately $64,000 and deficit equity of approximately $87,000 suggest that
the Company may not be able to continue as a going concern. The operating loss
was largely the result of recording the charge to operations for in-process
research and development cost related to IntorCorp for $190,000, and the $50,000
signing bonuses. The Company's ability to continue as a going concern is
primarily dependent upon three factors: minimizing unusual expenditures,
maximizing contract profits, and obtaining investor contributions. Management
does not anticipate additional unusual expenses and expects the profitability on
contracts to increase. The Company has issued $500,000 of stock subscriptions
for preferred stock subsequent to December 31, 1999. The Company has received
$108,050 of investor contributions related to these subscriptions subsequent to
December 31, 1999. The Board of Directors adopted an amendment to the Articles
of Incorporation in January 2000 to provide for the original preferred stock to
be divided into series, with the first series consisting of 2,133,399 shares of
convertible preferred stock with a par value of $.23437. The remaining preferred
shares outstanding, 2,866,601, shall be designated, as the Board of Directors
shall determine into classes, series, and preferences, limitations, restrictions
and relative rights of each class or series of preferred stock.
-14-
<PAGE>
ARTICLES OF INCORPORATION
FOR
R-TEC HOLDING, INC.
The undersigned hereby establishes a Corporation pursuant to the Idaho
Business Corporation Act, as amended ("the Act"), and adopts the following
Articles of Incorporation.
First: The name of the corporation is R-Tec Holding, Inc.
Second: The aggregate number of shares that the Corporation shall have
authority to issue is 30,000,000 shares of voting Common stock, par value $1.00
per share, and 5,000,000 shares of Preferred stock, with authority vested in the
board of directors to prescribe the classes, series, and the number of each
class or series of Preferred stock and the voting powers, designations,
preferences, limitations, restrictions and relative rights of each class or
series of Preferred stock as authorized in ss.30-1-602, Idaho Code.
Third: The registered office of the corporation is 1471 E. Commercial
Ave, Meridian, Idaho, and its registered agent at that address is Douglas G.
Hastings.
Fourth: A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for any action taken, or
any failure to take any action, as a director, except liability for:
a. The amount of financial benefit received by a director to
which he is not entitled;
b. An intentional infliction of harm on the corporation or the
shareholders;
c. A violation of ss.30-1-833, Idaho Code; or
d. An intentional violation of criminal law.
Fifth: The initial members of the board of directors shall be:
Rulon L. Tolman, 7272 S. Glenridge View, Boise, Idaho 83709
John R. Hansen, Jr., 12035 Ginger Creek Dr., Boise, Idaho 83713
Incorporator: The name of the incorporator is John R. Hansen, Jr., and the
incorporator's address is 12035 Ginger Creek Drive, Boise, ID 83713.
In Witness Whereof:
Date: August ___, 1999.
/s/
---------------------------------
Incorporator: John R. Hansen, Jr.
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF R-TEC HOLDING, INC.
Pursuant to the Idaho Business Corporation Act, the following Articles of
Amendment to its Articles of Incorporation are adopted by R-Tec Holding, Inc.
I.
The name of the corporation is R-Tec Holding, Inc.
II.
The following amendment to the second paragraph of the Articles of
Incorporation was adopted by the shareholders of the Corporation on April 4,
2000, in the manner prescribed by the Idaho Business Corporation Act and the
bylaws of the corporation so that the second paragraph shall read as follows:
Second: The aggregate number of shares that the Corporation shall have
authority to issue is 30,000,000 shares of voting Common stock, all of
which shares shall be of non par value, and 5,000,000 shares of Preferred
stock, with authority in the board of directors to prescribe the classes,
series, and the number of each class or series of Preferred stock and the
voting powers, designations, preferences, limitations, restrictions and
relative rights of each class or series of Preferred stock as authorized in
ss.30-1-602, Idaho Code.
III.
The number of shares of common stock of the corporation outstanding at the
time of the adoption of the above amendment was 8,533,594 and the number of
shares entitled to vote on the amendment was the same.
IV.
The number of shares of common stock that voted for the above amendment was
5,668,632 and the number of shares of common stock that voted against the
amendment was 0.
<PAGE>
V.
The designation, number of shares, and voting results of each class of
stock of the corporation entitled to vote on the above amendment as a class were
as follows: None.
VI.
Any exchange, reclassification, or cancellation of issued shares provided
for in the amendment shall be affected in the following manner: None.
Dated this ____ day of April, 2000.
R-TEC HOLDING, INC.
By /s/
----------------------------------
Robert C. Montgomery Its Secretary
<PAGE>
PREFERRED STOCK AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
R-TEC HOLDING, INC.
R-Tec Holding, Inc., an Idaho corporation (the "Corporation"), pursuant to
Article Second of the Articles of Incorporation and ss.30-1-602 of the Idaho
Business Corporation Act certifies that the Board of Directors of the
Corporation duly adopted at a meeting held April 12, 2000, the following
resolution amending the Articles of Incorporation and providing for the
designations, preferences and issuance of a series of Preferred Stock to be
designated the Series "A" Convertible Preferred, par value $0.23437 per share,
and to consist of 2,133,399 shares:
Resolved, that Article "Second" of the Articles of Incorporation is hereby
amended to read as follows:
"Second: The aggregate number of shares that the Corporation shall have
authority to issue is 30,000,000 shares of voting Common Stock, all of which
shares shall be of non par value, and 5,000,000 shares of Preferred Stock. The
Preferred Stock shall be divided into series. The first series consists of
2,133,399 shares with a par value of $0.23437 per share, and is designated
"Series "A" Convertible Preferred". The remaining one or more series shall
consist of such number of shares and shall be designated as the Board of
Directors shall determine into classes, series, and preferences, limitations,
restrictions and relative rights of each class or series of Preferred Stock as
authorized in ss.30-1-602 of the Idaho Business Corporation Act.
Further Resolved, that the powers, designations, preferences, rights,
qualifications, limitations, and restrictions on all of the Series "A"
Convertible Preferred stock shall be as follows:
1. Issuance: The series of Preferred Stock designated as the Series "A"
Convertible Preferred shall consist of 2,133,399 shares, par value $0.23437
per share.
2. Dividends:
(a) The holders of the Series "A" Convertible Preferred shall be entitled
to receive dividends at the rate of $0.0222, per share (as adjusted for any
stock dividends, combinations, or splits with respect to such shares) per
annum, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared by the Board of Directors,
and shall accumulate beginning from the date of issue, payable annually.
No dividends (other than those payable solely in the Common Stock of the
Corporation) shall be paid on any Common Stock of the Corporation during
any fiscal year of the
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Corporation until dividends (as adjusted for any stock dividends,
combinations or splits with respect to such shares) on the Series "A"
Convertible Preferred shall have been paid or declared and set apart during
that fiscal year and any prior year in which dividends accumulated but
remain unpaid. Any dividend paid on Common Stock during any fiscal year may
not exceed the dividend rate paid on each share of Series "A" Convertible
Preferred, attributable to the Common Stock into which the Series "A"
Convertible Preferred is convertible, i.e. if a dividend is paid on Common
Stock in the amount of $0.05, and each share of the Series "A" Convertible
Preferred is convertible into one share of Common Stock, the Corporation
would be required to pay $0.05 per share to the holders of Series "A"
Convertible Preferred, $0.0222 per share as the preferred stock dividend
and an additional $0.0278 per share to take into account the dividend to
the holders of the Common Stock.
An undeclared or unpaid dividend shall not bear or accrue any interest.
(b) If the Corporation declares a distribution, other than a liquidation or
redemption distribution covered by the provisions of Sections 3 or 4
hereof, payable other than in cash, the holders of Series "A" Convertible
Preferred shall be entitled to a proportionate share of any such
distribution as though they held the number of shares of Common Stock of
the Corporation into which their shares of Series "A" Convertible Preferred
are convertible as of the record date fixed to determine the holders of
Common Stock of the Corporation entitle to the distribution.
3. Liquidation Preference.
(a) If the Corporation is liquidated, dissolved, or wound up, the holders
of the Series "A" Convertible Preferred shall be entitled to be paid
$0.23437 per share (as adjusted for any stock dividends, combinations or
splits) plus all cumulative and unpaid dividends on such shares, before and
in preference to any distributions of the Corporation's assets to the
holders of Common Stock. If the Corporation's assets available for
distribution to its shareholders are insufficient to pay the holders of
Series "A" Convertible Preferred the full amount to which they are
entitled, then all assets of the Corporation legally available for
distribution shall be distributed among the holders of Series "A"
Convertible Preferred in proportion to the preferential amount that each
such holder is otherwise entitled to receive.
(b) If the Corporation is liquidated, dissolved, or wound up, after the
payment in full of the liquidation preferences to the holders of Series "A"
Convertible Preferred as set forth in 3.(a), the holders of the Common
Stock shall be entitled to be paid $0.23437 per share ( as adjusted for any
stock dividends, combinations or splits) before and in preference to any
further distribution of any assets of the Corporation to the holders of the
Series "A" Convertible Preferred . After payment in full of the liquidation
preference to the holders of Series "A" Convertible Preferred, if the
assets distributed to the holders of
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the Common Stock are insufficient to pay the full preferential amount, then
all remaining assets of the Corporation legally available for distribution
shall be distributed among the holders of the Common Stock in proportion to
their shares.
(c) After the holders of the Series "A" Convertible Preferred and the
Common Stock are paid the amounts set forth in Sections 3.(a) and (b)
hereof, any and all remaining assets of the Corporation legally available
for distribution shall be distributed among the holders of the Common Stock
and the Series "A" Convertible Preferred in proportion to the shares of
Common Stock then held by them, determined as though all shares of Series
"A" Convertible Preferred were converted as provided herein.
(d) For purposes of this Section 3, (i) any acquisition of the Corporation
by means of merger or other form of corporate reorganization in which
outstanding shares of the Corporation are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a
sale, transfer or lease of all or substantially all of the assets of the
Corporation (but not including a transfer or lease by or to a bona fide
lender) shall be deemed a liquidation, dissolution or winding up of the
Corporation and shall entitle the holders of Series "A" Convertible
Preferred and Common Stock to receive at the closing in cash, securities or
other property (valued as provided in Paragraph 3 (e) below) amounts as
specified in Sections 3. (a) through (c) above, provided, however, that if
the consideration to be paid in respect of the Series "A" Convertible
Preferred, assuming conversion of such shares to Common Stock, is valued at
greater than $0.23437 per share, then such merger or sale of assets shall
not be deemed a liquidation, dissolution or winding up of the Corporation.
(e) If the distribution provided for in this Section 3 is payable other
than in cash, the value of such distribution shall be its fair market value
as determined in the good faith of the Board of Directors.
4. Conversion. The holders of the Series "A" Convertible Preferred shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each outstanding share of Series "A" Convertible
Preferred shall be convertible, at the option of the holder, (i) at any
time on or before the fifth day before any Redemption Date, if any, fixed
in any Redemption Notice to the holder with respect to such share; (ii) at
any time on or before the fifth day before the closing date for the public
offering of any securities of the Corporation; (iii) at any time on or
after December 31, 2002. A conversion of shares shall be at the office of
the Corporation or any transfer agent for such stock, into fully paid and
nonassessable shares of Common Stock. The price at which shares of Common
Stock are deliverable on conversion of shares of the Series "A" Convertible
Preferred, the "Conversion Price", shall initially be $0.23437 per share of
Common Stock. The initial Conversion Price shall be adjusted as
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hereinafter provided. The number of shares of Common Stock into which each
share of the Series "A" Convertible Preferred may be converted shall be
determined by dividing $0.23437 by the Conversion price determined as
hereinafter provided in effect at the time of the conversion.
(b) Automatic Conversion. Each share of Series "A" Convertible Preferred
shall automatically be converted into shares of Common Stock on the earlier
of (i) the date specified by vote or written consent or agreement of
holders of at least two-thirds of the outstanding shares of such series, or
(ii) immediately on the closing of the sale of the Corporation's Common
Stock in a firm commitment, underwritten public offering registered under
the Securities Act of 1933, as amended (the "Securities Act"), at a price
to the public (before underwriter's discounts and expenses) of $5.00 or
more per share of Common Stock (as adjusted for any stock dividends,
combinations or splits) and the total proceeds to the Corporation of which
exceed $1,000,000 (after deducting underwriter's discounts and expenses
relating to the issuance, including without limitation fees of the
Corporation's counsel). The number of shares of Common Stock into which
each share of the Series "A" Convertible Preferred may be converted shall
be determined by dividing $0.23437 by the Conversion Price determined as
herein after provided in effect at the time of the conversion.
(c) Mechanics of Conversion.
(i) Before any holder of Series "A" Convertible Preferred stock may
convert to Common Stock, he shall surrender the certificate(s)
therefor, duly endorsed, at the office of the Corporation or transfer
agent for such stock, together with written notice to the Corporation
at such office that he elects to convert the same and shall state
therein the name or names in which he wishes the certificate(s) for
the number of full shares of Common Stock to which such holder is
entitled and a check for cash with respect to any fractional interest
in a share of Common Stock as provided herein. The Corporation shall,
as soon as practicable thereafter, issue and deliver to such holder of
Series "A" Convertible Preferred stock, certificates for the number of
shares of Common Stock to be issued on conversion. The conversion
shall be deemed to have been made immediately before the close of
business on the date of surrender for conversion of the Series "A"
Convertible Preferred (the "Conversion Date"). The holder shall be
deemed to have become a shareholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are
closed on such date, in which event he shall be deemed to have become
a shareholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in
effect on the Conversion Date.
(ii) No fractional shares of Common Stock shall be issued on
conversion of Series "A" Convertible Preferred stock. If more than one
share of Series "A"
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Convertible Preferred stock is surrendered for conversion at any one
time by the same holder, the number of full shares of Common Stock
issuable on conversion thereof shall be computed on the basis of the
total number of shares of Series "A" Convertible Preferred stock so
surrendered. Instead of any fractional shares of Common Stock, the
Corporation shall pay a cash adjustment in respect of any fractional
interest that would be issuable equal to the fair market value of such
fractional interest as determined by the Corporation's Board of
Directors.
(iii) If the conversion is in connection with an underwritten public
offering of securities, the conversion may, at the option of any
holder tendering shares of Series "A" Convertible Preferred stock for
conversion, be conditioned on the close of the offering, in which
event the person(s) entitled to receive the Common Stock on conversion
of the Series "A" Convertible Preferred stock shall not be deemed to
have converted such Series "A" Convertible Preferred stock until
immediately before the close of such offering.
d. The Corporation shall at all times reserve and keep available, out of
its authorized but unissued Common Stock, solely for the purpose of
effecting the conversion of the Series "A" Convertible Preferred , the full
number of shares of Common Stock deliverable on the conversion of all
outstanding shares of Series "A" Convertible Preferred . The Corporation
shall from time to time (subject to obtaining necessary director and
shareholders action), in accordance with the laws of the state of Idaho,
increase its authorized Common Stock if at any time the authorized number
of shares of its Common Stock remaining unissued is insufficient to permit
the conversion of all outstanding shares of Series "A" Convertible
Preferred.
5. Adjustments for Antidilution:
The amount of Common Stock which the holders of the Series "A" Convertible
Preferred stock shall be entitled to receive upon conversion shall be subject to
adjustments for "diluting issuances" based upon the initial Conversion Price of
$0.23437 per share. The Conversion Price shall be subject to adjustment, and the
number of shares of Common Stock issuable upon conversion shall be subject to
adjustment, to prevent dilution in certain events including (a) any
subdivisions, combinations or reclassifications of the Corporation's Common
Stock or (b) any payment, issuance or distribution by the Corporation to its
stockholders of (i) a stock dividend, (ii) debt securities of the Corporation,
or (iii) assets (other than cash dividends payable out of earnings or surplus in
the ordinary course of business, to holders of Common Stock. The Conversion
Price shall also be subject to adjustment, and the number of shares subject to
issuance upon conversion shall be subject to adjustment, on a "full-rachet"
(reduced to the same purchase price) basis upon the Corporation's issuance of
Common Stock, warrants or rights to purchase Common Stock or securities
convertible into Common Stock for a consideration per share which is less than
the then-applicable conversion price of the Series "A" Convertible Preferred
stock, as it may have been adjusted as a result of prior diluting issuances.
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On each adjustment of the Conversion Price, the Corporation at its expense
shall promptly compute such adjustment in accordance with these terms, and send
to all holders of Series "A" Convertible Preferred stock a certificate setting
forth such adjustment and showing in detail the basis for the adjustment.
6. Redemption.
(a) At the option of each holder of shares of Series "A" Convertible
Preferred stock, the Corporation shall redeem, on January 31 of each year
starting with the year 2006 and continuing thereafter (each "Redemption
Date"), the number of shares of Series "A" Convertible Preferred stock held
by such holder that is specified in a written request for redemption
delivered to the Corporation by the holder at least 30 days before the
applicable Redemption Date, by paying in cash therefore $0.23437 per share
of Series "A" Convertible Preferred stock (as adjusted for any stock
dividends, combinations or splits) plus all declared but unpaid dividends
on such shares (the "Redemption Price"). However, the Corporation shall not
be required under this paragraph to redeem from any particular holder (i)
on the first redemption date a number of shares of Series "A" Convertible
Preferred stock greater than one-third of the total number of shares held
by such holder immediately before the redemption, and (ii) in connection
with the next Redemption Date, a number of shares greater than two-thirds
of the total number of shares of Series "A" Convertible Preferred stock
held by such holder prior to the first redemption date, and (iii) in
connection with the third Redemption Date the remainder of the shares of
Series "A" Convertible Preferred stock held by such holder.
(b) At least 15 but no more than 25 days before each Redemption Date the
Corporation shall send written notice by first class mail, postage prepaid,
to each holder of record (at the close of business on the business day
immediately before notice is given) of the Series "A" Convertible Preferred
stock requested to be redeemed, at the holder's address last shown on the
records of the Corporation, specifying the number of shares to be redeemed
from such holder, the Redemption Date, the Redemption Price, and the place
at which payment may be obtained (the "Redemption Notice"). Except as
provided in paragraph 6.(c), on or after the Redemption Date, each holder
of Series "A" Convertible Preferred stock to be redeemed shall surrender to
the Corporation the certificates for such shares, as directed in the
Redemption Notice, and thereon the Redemption Price of such shares shall be
payable to the order of the registered owner of such certificates and all
surrendered certificates shall be canceled. If less than all the shares
represented by any such certificates are redeemed, the Corporation shall
issue to the holder a new certificate for the unredeemed shares.
(c) After the Redemption Date, unless the Corporation fails to pay the
Redemption Price (in which case all the rights of the holders of such
shares shall continue) the holders of the shares of the Series "A"
Convertible Preferred stock designated in the Notice of Redemption shall
not have any rights as shareholders of the Corporation except the right
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to receive, without interest, the Redemption Price thereof upon surrender
of certificates for the redeemed shares, or to exercise, on or before the
fifth day before the Redemption Date, the right to convert the shares so
designated, and such shares shall not thereafter be transferred (except
with the consent of the Corporation ) on the books of the Corporation and
shall not be deemed outstanding for any purpose whatsoever. If the funds of
the Corporation legally available for redemption of shares of Series "A"
Convertible Preferred stock on any Redemption Date are insufficient to
redeem the total number of shares of Series "A" Convertible Preferred stock
requested to be redeemed on such date, those funds that are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares requested to be redeemed based on
their ownership of shares so requested to be redeemed. If funds of the
Corporation thereafter become legally available for the redemption of
Series "A" Convertible Preferred such funds will immediately be used to
redeem the remainder of the shares that the Corporation has been requested
to redeem on any Redemption Date, but which has not redeemed.
(d) On or before each Redemption Date, the Corporation shall deposit the
Redemption Price of all shares of Series "A" Convertible Preferred stock
designated for redemption in the Redemption Notice and not yet redeemed
with a bank as a trust fund for the holders of the shares to be redeemed,
with irrevocable instructions to the depositary to pay the Redemption Price
for such shares to their respective holders on or after the Redemption Date
on receipt of notice from the Corporation that such holder has surrendered
his share certificate to the Corporation . Funds deposited by the
Corporation pursuant to this paragraph as the Redemption Price for shares
thereafter converted to Common Stock before the Redemption Date shall be
promptly returned to the Corporation.
7. Voting Rights.
Holders of shares of Series "A" Convertible Preferred stock shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock at any annual or special meeting of shareholders of the Corporation , or
may act by written consent in the same manner as the Common Stock, voting
together with the Common Stock as a single class, and shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
shares of Series "A" Convertible Preferred stock could be converted at the close
of business on the record date fixed for such meeting, or on the effective date
of any written consent. Holders of shares of Series "A" Convertible Preferred
stock shall be entitled to notice of any shareholders' meeting in accordance
with the By Laws of the Corporation. Fractional votes shall be rounded to the
nearest whole number (with one-half being rounded upward). Holders of Common
Stock shall be entitled to one vote per share.
If the Corporation fails to redeem shares tendered for redemption for two
or more consecutive Redemption Dates after such shares are tendered, the holders
of the Series "A"
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Convertible Preferred stock, voting as a class, shall be entitled to elect the
smallest number of directors that, will constitute a majority of the total
number of directors, and the other holders of Common Stock shall be entitled to
elect the remaining members of the Board of Directors. At such time as the
shares of Series "A" Convertible Preferred stock are redeemed so that the
Corporation is current with respect to its Redemption Notices, the contingent
rights of the holders of the Series "A" Convertible Preferred stock to elect a
majority of the Board as provided in this subsection shall cease, subject to
renewal from time to time upon the same terms and conditions.
At any time after the voting power to elect a majority of the directors has
vested in the holders of the Series "A" Convertible Preferred stock as provided
above, the president or any vice president of the Corporation shall, at the
request of the record holders of at least twenty percent (20%) of the Series "A"
Convertible Preferred stock then outstanding call a special meeting of the
holders of the Series "A" Convertible Preferred stock and such other of the
Corporation 's stock as shall then have the right to vote for the election of
directors, to be held at the place and on the notice provided in the By Laws of
the Corporation for the holding of meetings. If the meeting is not so called
within two days after the request is delivered to the offices of the
Corporation, then the record holders of at least ten percent of the Series "A"
Convertible Preferred stock, as a class, may designate in writing one of their
number to call such meeting, and the person so designated may call such meeting
at the place and on the notice above provided, and for that purpose shall have
access to the stock books of the Corporation. At any meeting so called or at any
annual meeting held while the holders of the Series "A" Convertible Preferred
stock, as a class, have the voting power to elect a majority of the Board of
Directors, the holders of a majority of the then outstanding Series "A"
Convertible Preferred stock, as a class, present in person or by proxy, shall be
sufficient to constitute a quorum for the election of directors the holders of
Series "A" Convertible Preferred stock are entitled to elect, and the persons so
elected as directors, together with such persons, if any, as may be elected as
directors by the holders of Common Stock and such other of the Corporation's
stock as shall then have the right to vote for directors, shall be the duly
elected directors of the Corporation
When the rights of the holders of Series "A" Convertible Preferred stock to
vote as provided in this section have ceased, the terms of office of the persons
so elected by them as directors shall end and the vacancies shall be filled by
the remaining directors elected by the holders of the outstanding stock,
regardless of class, of the Corporation then having the right to vote for
directors.
8. Restrictive Covenants:
The Corporation may not, without the consent of the holders of 67% of the
Series "A" Convertible Preferred Stock (i) issue any class or series of equity
security other than Common Stock; (ii) enter into any agreement that would
restrict the Corporations's right to perform under the obligations of the Series
"A" Convertible Preferred Stock; (iii) amend the charter or bylaws in any manner
which would impair or reduce the rights of the Series "A" Convertible Preferred
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Stock; (iv) effect a merger or consolidation or share exchange or sell
substantially all of the Corporations's assets; (v) liquidate or dissolve; (vi)
redeem or repurchase any outstanding stock, except for the redemption of the 20%
of stock held by Hastings and Clayton previously agreed to by the Corporation;
(vii) commence or amend any employee stock plan or employee benefit or
compensation arrangements in a material manner; (viii) enter into any material
transaction with affiliated persons or entities; (ix) enter into any other line
of business other than business substantially similar or related to the existing
business; (x) acquire the stock, assets or business of any other entity in any
form of transaction or engage in a joint venture with any other entity, other
than plans for IntorCorp; or (xi) incur or create indebtedness other than
institutional indebtedness for operating purposes.
9. Rights of First Refusal and Co-Sale:
The holders of Series "A" Convertible Preferred Stock shall have (i) the
Right of First Refusal to purchase any shares of Common Stock held by Clayton or
Hastings in the event that such holders seek to sell any of their Common Stock,
and (ii) the right of co-sale of an equal percentage of their holdings, in the
event Clayton and/or Hastings transfer 15% or more of their Common Stock in the
Company to a third party.
10. Preemptive Right:
Holders of Series "A" Preferred Stock (or shares of Common Stock issued
upon conversion thereof) shall have a contractual preemptive right to purchase
shares offered in future private offerings of equity securities (or warrants or
securities convertible into equity securities) of the Corporation, each in a
proportion equal to the percentage derived by dividing the number of shares of
Common Stock issued or issuable upon conversion of Series "A" Convertible
Preferred Stock held by each holder by the total number of shares of Common
Stock issued or issuable upon conversion thereof outstanding. This right shall
terminate upon the occurrence of a public offering.
The foregoing amendment was adopted by the Board of Directors of R-Tec
Holding, Inc. without shareholder action, which is not required.
Dated this 24th day of April, 2000.
R-TEC HOLDING, INC.
By /s/
--------------------------------
Robert C. Montgomery, Secretary
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BYLAWS
OF
R-TEC HOLDING, INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office of the corporation
may, but need not, be the same as any of its principal places of business in the
state of Idaho. In any case, the corporation's registered office shall be the
business office of the registered agent. The address of the registered office
may be changed from time to time by the Board of Directors or the President of
the corporation.
Section 1.2 Principal Office; Other Offices. The corporation may also have
and maintain an office or principal place of business in Meridian, Idaho or at
such other place as may be fixed by the Board of Directors, and may also have
offices at such other places, both within and without the state of Idaho, as the
Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
CORPORATE SEAL
Section 2.1 Corporate Seal. The corporation may have a corporate seal,
which may be altered at will by the Board of Directors. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE III
SHAREHOLDERS' MEETINGS
Section 3.1 Place of Meetings. The Board of Directors may designate any
place, either within or without the state of Idaho, as the place of meeting for
any annual meeting or for any special meeting of shareholders called by or at
the direction of the Board of Directors. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place, either
within or without the state of Idaho, as the place for the holding of such
meeting. If no place is designated by the Board of Directors or if a special
meeting be called otherwise than by or at the direction of the Board of
Directors, the place of meeting shall be the principal office of the
corporation.
Section 3.2 Annual Meetings. The annual meeting of the shareholders of the
corporation shall be held on the __________ in the month of _____________ in
each year at the hour of _______
<PAGE>
__.m., or on such other date and at such other time which may from time to time
be designated by the Board of Directors, for the purpose of electing directors
and for the transaction of such other business as may properly come before the
meeting. The failure to hold an annual meeting at the time stated or otherwise
designated as provided herein shall not affect the validity of any corporate
action.
Section 3.3 Special Meetings. Special meetings of the shareholders of the
corporation may be called at any time, for any purpose or purposes, by the Board
of Directors or the president of the corporation or by the holders of at least
twenty percent (20%) of the votes entitled to be cast on any issue proposed to
be considered at the meeting (provided that such holders sign, date and deliver
to the corporation's secretary one or more written demands for the meeting
describing the purpose(s) for which it is to be held).
Section 3.4 Notice of Meetings. The corporation shall notify shareholders
of the date, time and place of each annual and special shareholders' meeting
and, in case of a special meeting, a description of the purpose or purposes for
which the meeting is called, no fewer than ten (10) nor more than sixty (60)
days before the meeting date. Only business within the purpose(s) described in
the special meeting notice may be conducted at such special meeting.
Section 3.5 Waiver of Notice. Notice of any meeting of shareholders may be
waived in writing, signed by the person entitled to notice thereof and delivered
to the corporation for inclusion in the corporate minutes or filing with the
corporate records, either before or after the date and time stated in the
notice, and, absent objection made in accordance with the Idaho Business
Corporation Act ("IBCA"), will be waived by any shareholder by his attendance
thereat in person or by proxy. Any shareholder so waiving notice of such meeting
shall be bound by the proceedings of any such meeting in all respects as if due
notice hereof had been given.
Section 3.6 Quorum. Unless the IBCA or the Articles of Incorporation impose
a greater requirement, a majority of the votes, represented in person or by
proxy, entitled to be cast on a matter shall constitute a quorum of that voting
group for action on that matter. Once a share is represented for any purpose at
a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and any adjournment thereof unless a new record date is or must be set
for that adjourned meeting.
Section 3.7 Adjournment and Notice of Adjourned Meetings. Any meeting of
shareholders at which a quorum is present, whether annual or special, may be
adjourned from time to time by the vote of a majority of the votes entitled to
be cast at the meeting. If an annual or special shareholders' meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time or place if the new date, time or place is announced at the
meeting before adjournment. At the adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
Section 3.8 Proxies. At all meetings of shareholders, a shareholder may
vote either in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An appointment of proxy is effective upon receipt, before
or at the time of the meeting, by the secretary of the corporation or other
officer or agent authorized to tabulate votes.
<PAGE>
Section 3.9 Voting Rights (Non-cumulative Voting). Only shares are entitled
to vote. Except as otherwise provided by law, only persons in whose names shares
stand on the stock records of the corporation on the record date, as provided in
Sections 3.11 and 7.4 of these Bylaws, shall be entitled to vote on any matter.
Unless the Articles of Incorporation provide otherwise, each outstanding share,
regardless of class, is entitled to one (1) vote on each matter voted on at a
shareholders' meeting. If a quorum exists, action on a matter, other than the
election of directors, is approved if the votes cast favoring the action exceed
the votes cast opposing the action, unless the Articles of Incorporation or the
IBCA require a greater number of affirmative votes. Unless otherwise provided in
the Articles of Incorporation, directors are elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present. Shareholders shall have no right to cumulate their votes for
directors.
Section 3.10 Corporation's Acceptance of Votes .
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent, waiver, or proxy appointment and
give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if so
entitled by provisions of the IBCA.
(3) The corporation is entitled to reject a vote, consent, waiver, or proxy
appointment if the secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
(4) The corporation is not entitled to vote treasury shares. Absent special
circumstances, the corporation's shares are not entitled to vote if they are
owned, directly or indirectly, by a second corporation, domestic or foreign, and
if this corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation; provided, however,
that this provision does not limit the power of the corporation to vote any
shares, including its own shares, held by it in a fiduciary capacity.
Section 3.11 List of Shareholders. After fixing a record date for a
meeting, the corporation shall prepare an alphabetical list of the names of all
its shareholders who are entitled to notice of such meeting. The shareholders'
list must show the address and number of shares registered in the name of each
shareholder and be available for inspection by any shareholder, at least ten
(10) days before the meeting for which the list was prepared and continuing
through the meeting, at the corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, his agent, or attorney is entitled on written demand to inspect
and, subject to the requirements of Idaho Code ss.30-1-1602(3), to copy the
list, during regular business hours and at his expense, during the period it is
available for inspection. The corporation shall make the shareholders' list
available at the meeting; and any shareholder, his agent, or attorney is
entitled to inspect the list at any
<PAGE>
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders list does not affect the validity of action
taken at the meeting.
Section 3.12 Conduct of Meeting. At every meeting of shareholders, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the president, or, if the president is absent, the most senior vice
president present, or in the absence of any such officer, a chairman of the
meeting chosen by a majority in interest of the shareholders entitled to vote,
present in person or by proxy, shall act as chairman. The secretary or, in his
absence, an assistant secretary directed to do so by the president, shall act as
secretary of the meeting.
Section 3.13 Action Without Meeting. Action required or permitted by IBCA
to be taken at a shareholders' meeting may be taken without a meeting if the
action is taken by all the shareholders entitled to vote on the action. The
action must be evidenced by one (1) or more written consents describing the
action taken, signed by all the shareholders entitled to vote on the action, and
delivered to the corporation for inclusion in the minutes or filing with the
corporate records. A consent signed under this Section has the effect of a
meeting vote and may be described as such in any document.
ARTICLE IV
DIRECTORS
Section 4.1 Powers. All corporate powers shall be exercised by and under
the authority, and the business and affairs of the corporation shall be managed
under the direction, of the Board of Directors, subject to any limitations set
forth in the Articles of Incorporation or any shareholder agreement authorized
under the IBCA.
Section 4.2 Variable Range-Size Board; Qualifications. The number of
directors presently authorized is seven (7). The authorized number of directors
of the corporation may range between three and seven, and may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or the Board of Directors. After shares are issued, only the shareholders may
change the range for the size of the Board or change from a variable-range size
Board to a fixed size Board. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director. A
director need not be a resident of the state of Idaho or a shareholder of the
corporation unless so required by the Articles of Incorporation. If for any
cause the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
shareholders called for that purpose in the manner provided by law or in these
Bylaws.
Section 4.3 Term. The terms of the initial directors shall expire at the
first shareholders meeting at which directors are elected. Directors are elected
at the first annual meeting of shareholders and at each annual meeting
thereafter. Each director shall serve until the next annual meeting of
shareholders and thereafter, despite the expiration of his term, until his
successor is duly elected and qualifies, or until there is a decrease in the
number of directors, or until his earlier death, resignation or removal.
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Section 4.4 Resignation. A director may resign at any time by delivering
written notice to the Board of Directors, its chairman, or the corporation.
Section 4.5 Removal. The shareholders may remove one (1) or more directors
with or without cause unless the Articles of Incorporation provide that
directors may be removed only for cause. If cumulative voting is authorized, a
director may not be removed if the number of votes sufficient to elect him under
cumulative voting is voted against his removal. If cumulative voting is not
authorized, a director may be removed only if the number of votes cast to remove
him exceeds the number of votes cast not to remove him. A director may be
removed by the shareholders only at a meeting called for the purpose of removing
him; and the meeting notice must state that the purposes, or one of the
purposes, of the meeting is removal of the director.
Section 4.6 Newly Created Directorships and Vacancies. Unless the Articles
of Incorporation provide otherwise, newly created directorships resulting from
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause may be filled by the affirmative vote of a majority of the remaining
directors then in office even if they constitute fewer than a quorum of the
authorized Board of Directors, or may be filled by the shareholders. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
Section 4.7 Meetings.
(1) Annual Meetings. The annual meeting of the Board of Directors shall be
held immediately after the annual meeting of shareholders and at the place where
such meeting is held. No notice of an annual meeting of the Board of Directors
shall be necessary; and such meeting shall be held for the purpose of electing
officers and transacting such other business as may lawfully come before it.
(2) Place of Meetings. Regular and special meetings of the Board of
Directors, or of any committee designated by the Board, may be held at any place
within or without the state of Idaho.
(3) Telephone Meetings. Unless the Articles of Incorporation provide
otherwise, any member of the Board of Directors, or of any committee thereof,
may participate in a regular or special meeting by, or conduct the meeting
through the uses of, any means of conference telephone or similar communications
equipment by which all directors participating in the meeting may simultaneously
hear each other during the meeting. A director participating in a meeting by
such means is deemed to be present in person at such meeting.
(4) Notice of Meetings. Notice of the date, time and place of any regular
or special meeting of the Board of Directors shall be delivered at least two (2)
days prior to the meeting; provided that the Board of Directors may provide, by
resolution, the date, time and place, either within or without the state of
Idaho, for the holding of regular meetings without notice other than such
resolution. Neither the business to be transacted at, nor the purpose(s) of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
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(5) Waiver of Notice. A director may waive any notice required by the IBCA,
the Articles of Incorporation or these Bylaws at any time before or after the
date and time stated in the notice. Except as otherwise provided below in this
Section 4.7(5), such waiver must be signed by the director and filed with the
minutes or corporate records. The attendance of a director at or participation
in a meeting shall constitute a waiver of notice of such meeting unless the
director, at the beginning of the meeting, or promptly upon his arrival, objects
to holding the meeting or transacting any business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting.
Section 4.8 Quorum and Voting.
(1) Quorum. Unless the Articles of Incorporation or these Bylaws require a
greater number or unless otherwise specifically provided by the IBCA, a quorum
of the Board of Directors consists of (a) a majority of the fixed number of
directors if the corporation has a fixed board size or (b) a majority of the
number of directors prescribed, or if no number is prescribed the number in
office immediately before the meeting begins, if the corporation has a
variable-range size board.
(2) Majority Vote. If a quorum is present when a vote is taken, the
affirmative vote of the majority of the directors present shall be the act of
the Board of Directors, unless the Articles of Incorporation or these Bylaws
require the vote of a greater number of directors.
(3) Deemed Assent. A director of the corporation who is present at a
meeting of the Board of Directors (or any committee thereof) at which action on
any corporate matter is taken is deemed to have assented to the action taken
unless: he objects at the beginning of the meeting, or promptly upon his
arrival, to holding it or transacting business at the meeting; his dissent or
abstention from the action taken is entered in the minutes of the meeting; or he
delivers written notice of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the corporation immediately after the
adjournment of the meeting. Such right to dissent is not available to a director
who voted in favor of the action taken.
Section 4.9 Action Without a Meeting. Unless otherwise provided by the
Articles of Incorporation, any action required or permitted by the IBCA to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if the action is taken by all members of the Board.
The action must be evidenced by one or more written consents describing the
action taken, signed by each member of the Board of Directors or of the
committee, as the case may be, and included in the minutes or filed with the
corporate records reflecting the action taken.
Section 4.10 Fees and Compensation. Unless the Articles of Incorporation
provide otherwise, the Board of Directors may fix the compensation of directors.
Section 4.11 General Standards for Directors. A director shall discharge
his duties as director, including his duties as a member of any committee of the
Board of Directors on which he may serve, in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner he reasonably believes to be in the best
interests of the corporation. In discharging his duties, a director shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, if prepared or presented by:
<PAGE>
(a) One (1) or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants or other persons as to matters
the director reasonably believes are within such person's professional or
expert competence; or
(c) A committee of the Board of which he is not a member if the
director reasonably believes the committee merits confidence.
A director is not acting in good faith if he has knowledge concerning the
matter in question that makes such reliance otherwise permitted by this Section
4.11 unwarranted.
Section 4.12 Committees.
(1) Unless the Articles of Incorporation provide otherwise, the Board of
Directors may create one or more committees and appoint members of the Board of
Directors to serve on them. Each committee must have two or more members, each
of whom shall serve at the pleasure of the Board of Directors.
(2) The creation of, delegation of authority to, or action by a committee
does not alone constitute compliance of a director with the standards of conduct
described in the IBCA or Section 4.11 of these Bylaws.
ARTICLE V
DIRECTOR CONFLICTS OF INTEREST
Section 5.1 Permissible Transactions. The corporation may enter into a
director's conflict of interest transaction (as defined in the IBCA) if either
directors' action or shareholders' action respecting the transaction is taken at
any time in compliance with Sections 5.2 or 5.3, respectively.
Section 5.2 Directors' Action.
(1) For purposes of Section 5.1, directors' action respecting a transaction
is effective if the transaction received the affirmative vote of a majority, but
no fewer than two (2), of those qualified directors on the Board of Directors or
on a duly empowered committee of the Board who voted on the transaction after
either required disclosure to them, to the extent the information was not known
by them, or compliance with subsection (2) of this Section; provided that action
by a committee is so effective only if:
(a) All its members are qualified directors; and
(b) Its members are either all the qualified directors on the Board or
are appointed by the affirmative vote of a majority of the qualified
directors on the Board.
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(2) If a director has a conflicting interest respecting a transaction, but
neither he nor a related person of the director is a party to the transaction,
and if the director has a duty under law or professional canon, or a duty of
confidentiality to another person, respecting information relating to the
transaction such that the director may not make the disclosure required by the
IBCA, then disclosure is sufficient for purposes of subsection (1) of this
Section if the director:
(a) Discloses to the directors voting on the transaction on the
existence and nature of his conflicting interest and informs them of the
character and limitations imposed by that duty before their vote on the
transaction, and
(b) Plays no part, directly or indirectly, in their deliberations or
vote.
(3) A majority, but no fewer than two (2), of all the qualified directors
on the Board of Directors, or on the committee, constitutes a quorum for
purposes of action that complies with this Section. Directors' action that
otherwise complies with this Section is not affected by the presence or vote of
a director who is not a qualified director.
(4) For purposes of this Section, "qualified director" means, with respect
to a director's conflicting interest transaction, any director who does not have
either:
(a) A conflicting interest respecting the transaction, or
(b) A familial, financial, professional, or employment relationship
with a second director who does have a conflicting interest respecting the
transaction, which relationship would, in the circumstances, reasonably be
expected to exert an influence on the first director's judgment when voting
on the transaction.
Section 5.3 Shareholders' Action.
(1) For purposes of Section 5.1, shareholders' action respecting a
transaction is effective if a majority of the votes entitled to be cast by the
holders of all qualified shares were cast in favor of the transaction after:
(a) Notice to shareholders describing the director's conflicting
interest transaction,
(b) Provision of the information referenced in subsection (4) of this
Section, and
(c) Required disclosure to the shareholders who voted on the
transaction, to the extent the information was not known by them.
(2) For purposes of this Section, "qualified shares" means any shares
entitled to vote with respect to the director's conflicting interest transaction
except shares that, to the knowledge, before the vote, of the secretary, or
other officer or agent of the corporation authorized to tabulate votes, are
beneficially owned, or the voting of which is controlled, by a director who has
a conflicting interest respecting the transaction or by a related person of the
director or both.
<PAGE>
(3) A majority of the votes entitled to be cast by the holders of all
qualified shares constitutes a quorum for purposes of action that complies with
this Section. Subject to the provisions of subsection (4) of this Section,
shareholders' action that otherwise complies with this Section is not affected
by the presence of holders, or the voting, of shares that are not qualified
shares.
(4) For purposes of compliance with subsection (1) of this Section, a
director who has a conflicting interest respecting the transaction shall, before
the shareholders' vote, inform the secretary, or other office or agent of the
corporation authorized to tabulate votes, of the number, and the identity of
persons holding or controlling the vote, of all shares that the director knows
are beneficially owned, or the voting of which is controlled, by the director or
by a related person of the director or both.
ARTICLE VI
OFFICERS
Section 6.1 Officers Designated. The officers of the corporation consist of
a president, a vice president, a secretary and a treasurer, each of whom shall
be appointed by the Board of Directors. The Board of Directors or the President
may appoint such other officers or assistant officers as may be deemed necessary
or desirable. The same individual may simultaneously hold more than one office.
Section 6.2 Tenure and Duties of Officers.
(1) Term of Office. Each officer shall hold office at the pleasure of the
Board of Directors or until death, resignation or removal. If the office of any
officer becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
(2) The President. The president shall be the principal executive officer
of the corporation and, subject to the control of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
corporation. If so authorized by the Board of Directors, he may appoint such
other officers or assistant officers as he deems appropriate to the conduct of
the corporation's business. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
Bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general the president shall
perform all duties commonly incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
(3) The Vice President. In the absence of the president or in the event of
his removal, resignation, death, or inability or refusal to act, the vice
president (or in the event there is more than one vice president, the vice
presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. Any vice president
may sign, with the secretary or an assistant secretary, certificates for shares
of the corporation; and the vice president shall perform other duties commonly
incident to the office of vice president and
<PAGE>
such other duties as from time to time may be assigned to him by the president
or by the Board of Directors.
(4) The Secretary. The secretary shall: (i) attend all meetings and keep
the minutes of the meetings and other proceedings of the shareholders and of the
Board of Directors in one or more books provided for that purpose; (ii) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (iii) be custodian of and responsible for authentication of
the corporate records, and be custodian of the seal of the corporation and see
that seal of the corporation is affixed to all documents the execution of which
on behalf of the corporation under its seal is duly authorized; (iv) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (v) sign, with the president, or a vice
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the Board of Directors; (vi) have
general charge of the stock transfer books of the corporation; and (vii) in
general perform all duties commonly incident to the office of secretary and such
other duties as from time to time may be assigned to him by the president or by
the Board of Directors.
(5) The Treasurer. The treasurer shall: (i) have charge and custody of and
be responsible for all funds and securities of the corporation; (ii) receive and
give receipts for monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; and (iii) in general perform
all of the duties commonly incident to the office of treasurer and such other
duties as from time to time may be assigned to him by the president or by the
Board of Directors. If required by the Board of Directors, the treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
(6) Assistant Secretaries and Assistant Treasurers. The assistant
secretaries, when authorized by the Board of Directors, may sign with the
president or a vice president certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The assistant treasurers shall respectively, if required by the Board
of Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The assistant
secretaries and treasurers, in general, shall perform such duties as shall be
assigned to them by the secretary or the treasurer, or by the president or the
Board of Directors.
Section 6.3 Resignations. Any officer may resign at any time by delivering
written notice to the corporation. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date, in which event the
resignation shall become effective at such later time. Unless otherwise
specified in such notice, the acceptance of any such resignation shall not be
necessary to make it effective.
Section 6.4 Removal. The Board of Directors may remove any officer at any
time without or without cause.
Section 6.5 Contract Rights. An officer's removal does not affect the
officer's contract rights, if any, with the corporation. An officer's
resignation does not affect the corporation's contracts, if any, with the
officer.
<PAGE>
Section 6.6 Compensation. The compensation of the officers shall be fixed
from time to time by the Board of Directors. No officer shall be prevented from
receiving such compensation by reason of the fact that such officer is also a
director of the corporation.
Section 6.7 Standards of Conduct.
(1) An officer with discretionary authority shall discharge his duties
under that authority:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best interests of
the corporation.
(2) In discharging his duties an officer is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the
officer reasonably believes to be reliable and competent in the matters
presented; or
(b) Legal counsel, public accountants, or other persons as to matters
the officer reasonably believes are within the person's professional or
expert competence.
(3) An officer is not acting in good faith if he has knowledge concerning
the matter in question that makes reliance otherwise permitted by subsection (2)
of this Section unwarranted.
ARTICLE VII
SHARES OF STOCK AND OTHER SECURITIES
Section 7.1 Form and Execution of Certificates. Certificates representing
shares of the corporation shall be in such form as shall be determined by the
Board of Directors. At a minimum each share certificate must state on its face:
(a) the name of the corporation and that it is organized under the law of the
state of Idaho; (b) the name of the person to whom the certificate is issued;
and (c) the number and class of shares and the designation of the series, if
any, the certificate represents. If the corporation is authorized to issue
different classes of shares or different series within a class, the
designations, relative rights, preferences, and limitations determined for each
series, and the authority of the Board of Directors to determine variations for
future series, must be summarized on the front or back of each certificate.
Alternatively, each certificate may state conspicuously on its front or back
that the corporation will furnish the shareholder this information on request in
writing and without charge. Share certificates shall be signed by the president
or a vice president and by the secretary or an assistant secretary and may be
sealed with the corporate seal or a facsimile thereof. The signatures of such
any officer upon a share certificate may be a facsimile. If the person who
signed, either manually or in facsimile, a share certificate no longer holds
office when the certificate is issued, the certificate is nevertheless valid.
<PAGE>
Section 7.2 Lost Certificates. The corporation may issue a new share
certificate in place of any certificate theretofore issued by the corporation
alleged to have been lost, stolen, destroyed or mutilated; and the corporation
may require the owner of such lost, stolen destroyed or mutilated certificate,
or his legal representative, to give the corporation a bond sufficient to
indemnify it against any claim that may be made against the corporation on
account of the alleged loss, theft, destruction or mutilation of any such
certificate or the issuance of such new certificate.
Section 7.3 Transfers. Each share certificate shall be consecutively
numbered or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled;
and, except as provided in Section 7.2 or as authorized by the Board of
Directors, no new certificate shall be issued until the former certificate for a
like number of shares shall have been surrendered and cancelled. Transfer of
record of shares of stock of the corporation shall be made only on the stock
transfer books of the corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the secretary of the corporation, and (except as
provided in Section 7.2) on surrender for cancellation of a properly endorsed
certificate or certificates for a like number of shares.
Section 7.4 Fixing Record Dates. In order that the corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights or to exercise any rights in
respect of any change, conversion or exchange of stock, or to demand a special
meeting, or to take any other action, the Board of Directors may fix a future
date as a record date. A record date may not be more than seventy (70) days
before the meeting or action requiring a determination of shareholders. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting, unless
the Board of Directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than one hundred twenty (120) days after the date
fixed for the original meeting.
Section 7.5 Issuance, Transfer and Registration of Shares.
(1) The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property, including cash,
promissory notes, services performed or other securities of the corporation.
(2) Before the corporation issues shares, the Board of Directors must
determine that the consideration received or to be received for shares to be
issued is adequate.
(3) The corporation may place in escrow shares issued for a promissory
note, or make other arrangements to restrict the transfer of the shares, and may
credit distributions in respect of the shares against their purchase price,
until the note is paid. If the note is not paid, the shares escrowed or
restricted and the distributions credited may be canceled in whole or part.
(4) The Board of Directors may make such rules and regulations, not
inconsistent with law or with these Bylaws, as it may deem advisable concerning
the issuance, transfer and registration of
<PAGE>
certificates for shares of stock of the corporation. The Board of Directors may
appoint a transfer agent or registrar of transfers, or both, and may require all
certificates for shares of the corporation to bear the signature of either or
both.
Section 7.6 Registered Shareholders. The corporation shall be entitled to
recognize the exclusive right of a person duly registered in its books as the
owner of its shares to receive dividends and to vote as such owner, to receive
notice, and for all other purposes incident to ownership of such shares, and
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 Idaho law.
ARTICLE VIII
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 8.1 Execution of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign the corporation's name on
behalf of the corporation, or to enter into contracts on behalf of the
corporation, except where otherwise provided by law or these Bylaws; and such
execution or signature shall be binding upon the corporation. Authorization
granted to any person hereunder may be general or confined to specific
instances.
Section 8.2 Loans. No loan shall be contracted on behalf of the corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
resolution of the Board of Directors. Such authorization may be general or
confined to specific instances.
Section 8.3 Deposits and Checks. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, securities brokerage firms or other depositories
as the Board of Directors may select. All checks and drafts drawn on banks or
other depositories on funds to the credit of the corporation or in special
accounts of the corporation shall be signed by such person or persons as the
Board of Directors shall authorize to do so. Such authorization may be general
or confined to specific instances.
Section 8.4 Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized to do so by
resolution of the Board of Directors, or, in the absence of such authorization,
by the president or any vice president.
ARTICLE IX
DIVIDENDS
<PAGE>
Section 9.1 Declaration and Payment of Dividends. Dividends upon the
capital stock of the corporation, subject to restriction by the Articles of
Incorporation and the limitations in Idaho Code ss.30-1-640(3), may be declared
by the Board of Directors pursuant to law at any regular or special meeting.
Dividends may be paid by the corporation in cash, property or, subject to
restriction by the Articles of Incorporation and the IBCA, in shares of its
stock.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 10.1 Scope of Indemnification. The corporation shall indemnify and
advance funds to or on behalf of the directors and officers of the corporation
to the fullest extent permitted by the IBCA, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
the IBCA permitted the corporation to provide prior to such amendment).
Section 10.2 Mandatory Indemnification of Directors. The corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he was a party because he was a director
of the corporation against reasonable expenses incurred by him in connection
with the proceeding.
Section 10.3 Insurance. The corporation may purchase and maintain insurance
on behalf of an individual who is a director or officer of the corporation, or
who, while a director or officer of the corporation, serves at the corporation's
request as a director, officer, partner, trustee, employee, or agent of another
domestic or foreign corporation, partnership, joint venture, trust, employee
benefit plan, or other entity, against liability asserted against or incurred by
him in that capacity or arising from his status as a director or officer,
whether or not the corporation would have power to indemnify or advance expenses
to him against such liability.
Section 10.4 Amendments. Any repeal or modification of this Article X shall
only be prospective and shall not affect the rights under this Article X in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any director or officer.
Section 10.5 Saving Clause. If this Article X of these Bylaws or any
portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify each director
and may nevertheless indemnify each officer to the full extent permitted by any
applicable portion of this Article X that shall not have been invalidated, or by
any other applicable law.
ARTICLE XI
NOTICES
Section 11.1 Methods of Notice. Any notice under the IBCA or these Bylaws
must be in writing unless oral notice is reasonable under circumstances. Notice
by electronic transmission is written notice.
<PAGE>
Section 11.2 Notice to Corporation. Written notice to the corporation may
be addressed to its registered agent at its registered office or to the
corporation or its secretary at its principal office shown in its most recent
annual report filed with the Idaho Secretary of State.
ARTICLE XII
SALE OF STOCK
Section 12.1 Right of First Refusal. Until such time as the shares are
publicly traded, no sale of stock shall be made by any shareholder or the heirs,
executors, administrators or assigns of any shareholder to any person(s) or
entity ("prospective purchaser"), except pursuant to the following terms and
conditions:
(1) In the event any shareholder desires to sell his stock, or any portion
thereof, to any prospective purchaser, he shall first submit to the shareholders
of the corporation, reasonable written evidence of the agreement to purchase
said stock by such third person and the price and complete terms agreed to be
paid therefor.
(2) In the event the remaining shareholders agree to purchase such stock at
the same price and upon the same terms which the shareholder is to receive from
said third party, then the stock shall be sold to the shareholders of the
corporation in such proportionate amounts as their respective stock bears to the
entire stock held by the shareholders of the corporation, exclusive of the
shares owned by the selling shareholder, or in such proportion as such
shareholders may agree.
(3) In the event that any of the remaining shareholders do not desire to
purchase such stock, then such stock shall be sold at the price aforesaid to
such of the shareholders who may desire to purchase the same, and in the same
proportion as above specified.
(4) No stock shall be sold to any person other than the shareholders of the
corporation until each of the shareholders shall have been afforded an
opportunity to purchase such stock at the price and terms as aforesaid, and
shall have declined to do so.
(5) Notice in writing to the shareholders of the corporation of the desire
of any shareholder to sell his stock shall be given by such shareholder; and, at
the same time, reasonable evidence shall be furnished to the shareholders as to
the price and terms as hereinbefore set forth. Shareholders shall have thirty
(30) days' time after the receipt of said notice within which to elect in
writing to purchase such stock or to decline to do so. If at the end of such
30-day period all remaining shareholders have declined in writing, or have not
taken any action, then the shareholder desiring to sell his stock shall sell
such stock to the prospective purchaser named in the agreement to purchase such
stock, and to that prospective purchaser only; and such stock shall be sold in
precise accordance with the price and terms set forth in such agreement to
purchase. Satisfactory evidence of compliance with the terms of the foregoing
restriction upon the transfer of stock of this corporation shall be submitted to
the Board of Directors, and accepted by them, before any such transfer shall be
effective.]
<PAGE>
Section 12.2 Subchapter "S" Corporation. If an election to be treated as an
"S" Corporation under the Internal Revenue Code of 1986 or any amendment thereof
("Code") shall then be in effect, no shares of the corporation's stock may be
sold to any person or entity which, at such time, would not be a qualified
shareholder of an "S" Corporation under such Code.
Section 12.3 Stock Transfer Restrictions. Each certificate of stock of the
corporation shall have the following legends conspicuously typewritten or
printed upon its face:
"The stock represented by this certificate is subject to restrictions
on transferability under Article XII of the Bylaws of the
corporation."
"The securities represented hereby have not been registered under the
Securities Act of 1933 or any State Securities Act. Any transfer of
such securities will be invalid unless a registration statement under
said Act(s) is in effect as to such transfer or in the opinion of
counsel for the company such registration is unnecessary in order for
such transfer to comply with said Act(s)."
ARTICLE XIII
RECORDS AND REPORTS
Section 13.1 Corporate Records.
(1) The corporation shall keep as permanent records minutes of all meetings
of its shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors in place of the Board of
Directors on behalf of the corporation.
(2) The corporation shall maintain appropriate accounting records.
(3) The corporation or its agent shall maintain a record of its
shareholders, in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class of shares showing
the number and class of shares held by each.
Section 13.2 Inspection of Records by Shareholders. In addition to the
rights of a shareholder under Section 3.11 of these Bylaws:
(1) A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, any of the
records of the corporation described in Section 13.1(5), if he gives the
corporation written notice of his demand at least five (5) business days before
the date on which he wishes to inspect and copy.
(2) A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation
<PAGE>
if the shareholder meets the requirements of subsection (3) of this Section and
gives the corporation written notice of his demand at least five (5) days before
the date on which he wishes to inspect and copy:
(a) Excerpts from minutes of any meeting of the Board of Directors,
records of any action of a committee of the Board of Directors while acting
in place of the Board of Directors on behalf of the corporation, minutes of
any meeting of the shareholders, and records of action taken by the
shareholders or Board of Directors without a meeting, to the extent not
subject to inspection under Section 13.1;
(b) Accounting records of the corporation; and
(c) The record of shareholders.
(3) A shareholder may inspect and copy the records described in subsection
(2) of this Section only if:
(a) He has been a holder of record of shares or of voting trust
certificates for at least six (6) months immediately preceding his demand
or shall be the holder of record of, or the holder of record of voting
trust certificates for, at least five percent (5%) of all the outstanding
shares of the corporation;
(b) His demand is made in good faith and for a proper purpose;
(c) He describes with reasonable particularity his purpose and the
records he desires to inspect; and
(d) The records are directly connected with his purpose.
(4) For purposes of this Section, "shareholder" includes a beneficial owner
whose shares are held in a voting trust or by a nominee on his behalf.
Section 13.3 Financial Statements to Shareholders.
(1) The corporation upon written shareholder request shall furnish its
shareholders annual financial statements or, if annual financial statements are
not available, other appropriate accounting records, which may be consolidated
or combined statements of the corporation and one or more of its subsidiaries,
as appropriate, that include a balance sheet as of the end of the fiscal year,
an income statement for that year, and a statement of changes in shareholders'
equity for the year unless that information appears elsewhere in the financial
statements. If financial statements are prepared for the corporation on the
basis of generally accepted accounting principles, the annual financial
statements must also be prepared on that basis.
(2) If any financial statements furnished pursuant to subsection (1) of
this Section are reported upon by a public accountant, his report must accompany
them. If not, the statements must be accompanied by a statement of the president
or the person responsible for the corporation's accounting records:
<PAGE>
(a) Stating his reasonable belief whether the statements were prepared
on the basis of generally accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not prepared
on a basis of accounting consistent with the statements prepared for the
preceding year.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1 Amendment by Board of Directors or Shareholders.
(1) The Board of Directors may amend or repeal these Bylaws unless:
<PAGE>
(a) The Articles of Incorporation or the IBCA reserve this power
exclusively to the shareholders in whole or part, or
(b) The shareholders in amending or repealing a particular Bylaw
provide expressly that the Board of Directors may not amend or repeal that
Bylaw.
(2) The shareholders may amend or repeal these Bylaws even though the
Bylaws may also be amended or repealed by the Board of Directors.
Section 14.2 Interpretation; Severability. These Bylaws may contain any
provision for managing the business and regulating the affairs of the
corporation that is not inconsistent with law or the Articles of Incorporation.
In the event any provision of these Bylaws is inconsistent with law or the
Articles of Incorporation, such law or Articles of Incorporation shall govern.
If any one or more of the provisions contained in these Bylaws, or any
application thereof, shall be invalid, illegal or unenforceable in any respect,
the validity, legality or enforceability of the remaining provisions contained
herein and any other application thereof shall not in any way be affected or
impaired thereby. (Idaho Code ss.ss.30-1-206(2); 30-1-302(3)).
Section 14.3 Fiscal Year. The fiscal year of the corporation shall begin on
the _____ day of _______________ and end on the ____ day of ________________ in
each year.
The foregoing Bylaws of R-Tec Holding, Inc., an Idaho corporation, were
adopted by the Board of Directors of the corporation effective on the ____ day
of ___________________, 1999.
/s/
-------------------------------
Robert C. Montgomery, Secretary
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