United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________ to __________
Commission file number: 33-23489
BIOGAN INTERNATIONAL, INC. (Formerly Biogan Medical International, Inc.)
(Exact name of business issuer in its charter)
DELAWARE 58-1832055
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7213 Potomac Drive, Boise, Idaho 83704
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number: (208)-376-8500 Fax: (208) 376-4663
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
------------------- -----------------------------------------
Securities registered under 12(g) of the Exchange Act:
Common Stock $.001 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) Yes |X|,
No |_|, and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997)
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State issuer's revenues for its most recent fiscal year. $225
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. As of March 1, 1998, $4,843,210.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_| No |_|.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the Issuers's classes of
common equity, as of the latest practicable date. December 31, 1997: 87,854,455
shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the documents is incorporated; (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format. Yes |_|, No |X|.
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
History and Business Development.
Biogan International, Inc. (formerly Biogan Medical International, Inc.) is
a Delaware corporation with principal and executive offices at 7213 Potomac
Drive, Boise, Idaho 83704, phone (208) 376-8500, FAX (208) 376-4663. Biogan is
currently in the business of developing a new concept design in electrical
motors called "IntorCorp Motor" which Registrant has previously referred to as
the "Smart-Power Motor", and which management presently intends to develop and
market for commercial purposes. During calendar years 1995 and 1996 Biogan also
initiated a business to provide medical supplies internationally, however, this
activity was discontinued at the end of 1996 in order that the full efforts and
activities of management could be devoted to the development of the "IntorCorp
Motor". The discontinuance of the medical supply business precipitated the
change of name from "Biogan Medical International, Inc." to "Biogan
International, Inc." in September of 1997.
Biogan initiated its pursuit of a new concept in electrical motors in 1995
when it entered into a joint venture with Magnetronics, Inc. for the development
of an electrical magnetic motor referred to as the "Magna Motor" under patents
available to Magnetronics, Inc. During calendar year 1996 and after consultation
with Technical Development Consultants, Inc. an independent firm of consulting
electrical engineers and principally Mr. Scott Anderson, management of Biogan
determined that a different technology was required to accomplish the
development of the new concept in electrical motors. In the 1st quarter of 1997
management of Biogan made the decision to table further activity with
Magnetronics and to continue with its consulting agreement with Technical
Development Consultants, Inc. and Mr. Scott Anderson, to develop the "IntorCorp
Motor".
During calendar year 1997, and as part of the research and development
process, the respective consultants who had, or were expected to perform,
consulting services on the IntorCorp Motor, including Mr. Scott Anderson, were
assembled and formed a company called Collective Technologies, L.L.C. Collective
Technologies acquired from Technical Development Consultants, Inc. and Mr. Scott
Anderson as well as the other individual shareholders of Collective Technologies
any rights to the intellectual technology with respect to the "IntorCorp Motor".
During the calendar year 1997 Biogan and Collective Technologies completed and
demonstrated the development of the proof of concept and feasibility prototype
of a 5 HP "IntorCorp Motor" with a modular design, 72 volt DC motor and
controller system which meets the National Electrical Manufacturers Association
(NEMA) configuration for 5HP motors.
Joint Venture Development: IntorCorp, Inc.
By the end of 1997 Biogan and Collective Technologies negotiated a joint
venture Preincorporation Agreement which became effective February 25, 1998,
(See "Preincorporation Agreement" Exhibit "1" hereto) in which Biogan and
Collective Technologies each agreed
(i) to transfer to "IntorCorp, Inc." (a new Idaho corporation) their
respective rights to all of the intellectual technology of the
"IntorCorp Motor", each
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 3
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in exchange for a 50% ownership interest, and
(ii) that a consulting agreement will be entered into with Collective
Technologies, Inc. providing for compensation compatible with industry
standards in the locality, for the continued development and testing
of the "IntorCorp Motor".
The Business Plan incorporated in the Preincorporation Agreement
acknowledges that
(i) the 5HP DC Feasibility Prototype has been developed and tested, and
(ii) management is currently considering the options of developing (a) a
large power (40HP) motor or (b) a dual development of a 5/10HP motor.
Under either of the options the cost to develop support functions, conduct
the laboratory prototype phase development and testing, complete production
prototype phase development, and field test the motors will take approximately
two years and will cost approximately $6,000,000 (See Item 6.B pages 9 and 10).
Management is currently of the opinion that the risks are lower and the market
potential higher with the 5/10 HP motors, however the final decision will be
made at such time as financing is located and committed.
Pursuant to the Preincorporation Agreement IntorCorp Inc. was incorporated
in the state of Idaho on March 11, 1998, and named as the initial directors
Scott DeHart, Wayne Stewart, George Wadsworth, CPA, and John R. Hansen, Jr.,
attorney. See Section 9.6 Management and Key Personnel of IntorCorp, Inc. page
12, for resumes of the Directors and Key Consultants of of Collective
Technologies, L.L.C. who will be responsible for the continued development of
the "IntorCorp Motor".
The capitalization of IntorCorp under the terms of the Preincorporation
Agreement is the issuance of 1,400,000 shares of common stock, par value $5.00
per share, to each of Biogan and Collective Technologies in exchange for all
rights to the intellectual technology of each in the IntorCorp Motor at a total
aggregate value as determined by the Board of Directors, of $14,000,000.
Management anticipates the issuance of additional common stock of IntorCorp Inc.
to investing parties at such time as development funding is committed.
IntorCorp Motor Characteristics.
The present prototype of the motor is a 5 horsepower motor and integrated
electronic controller. The combination of the motor and controller enables
modular configurations from fractional horsepower to high multiple-horsepower
ratings by modifying the configuration for larger size motors. Some primary
advantages of the motor and controller are:
o It has no inrush current spike at startup.
o It can not burn out under locked rotor operation (stalled condition).
o It can (but does not have to) apply full torque to a locked rotor
indefinitely without burning out (hold power against a load).
o It is highly efficient, and maintains very high efficiency over a
broad RPM band.
o It requires less maintenance and is easily serviced when necessary.
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 4
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The basic motor architecture is that of a stacked axial-gap, permanent
magnet, brushless motor utilizing high field strength neodymium-iron boron
magnets. The high magnetic fields produced by this material allow smaller
architectures that are inherently low in hysteresis, eddy current, and winding
resistance losses. A specifically designed controller, which is incorporated in
the IntorCorp Motor design, is required for operation as well as to maximize its
performance advantages. Although the proof of concept prototype runs on 72 volt
DC current, the 2nd stage prototype now being developed will run automatically
on either AC or DC current and over a relatively wide range of voltages while
maintaining highly efficient use of amperage draws.
The controller is quite compact, and will be enclosed in the motor housing
in production models. The motor/controller package can be made smaller and
lighter than an equivalent rated horsepower induction motor. The IntorCorp
Motoer is more flexible and efficient. The prototype's control is by an external
computer through a standard serial port for maximum operating flexibility. In
production, this will remain an option, or a control program will be loaded onto
the on-board microprocessor for simpler "plug in" operating regimes.
The control program, whether on-board or remote, can control speed,
acceleration, torque, power, direction of rotation, and index to any position
(like a stepper motor). It can provide feedback to the controller (and user) on
torque provided, horsepower delivered to the load, speed, angular position, and
rotation direction.
The controller forms the interface between the power source and the motor
windings. Its heart is the microprocessor chip that continuously monitors the
motor's speed, direction, applied voltage, back emf (voltage generated by the
motor), and user/control inputs. From all these inputs the controller calculates
and delivers to the windings a series of variable high-energy pulses. The result
is smooth, efficient, and highly responsive operation.
The controller effectively conditions its power inputs, giving unique
advantages such as:
o The power current draw from an AC source can be shaped by the
controller to be sinusoidal and precisely mapped onto the source
waveform, achieving a unity power factor. This is not true of
conventional low frequency silicon controlled rectifier starters.
o The motor can be used in relatively large horsepower applications on
single-phase lines. Inrush current spike limits conventional motors to
about 7.5 horsepower on single-phase lines.
o The motor can be operated over a wide range of torque and speed
conditions in either direction and maintains high efficiency use of
the power source.
Many new and exciting applications for the IntorCorp high-efficiency,
flexible motor are being generated by the market forces driving the rapid growth
of conventional variable speed high efficiency motor/controller combinations.
Those forces are primarily utility companies and the government's continuing
drive for electric power and environmental conservation evidenced by the EPAct
legislation, the Motor Challenge Program, and other initiatives combined with
continually increasing efforts by industry to reduce life-cycle operating costs.
Strong interests and support has been expressed by state and federal
government engineers, electric power utility engineers and officials, and other
industrial executives for
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 5
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various applications of the motor.
Intellectual Technology.
Collective Technologies, Inc. has filed a Provisional Patent with respect
to the intellectual technology encompassed in the IntorCorp Motor, and is in the
process of preparing for filing the formal application for patent. Under the
terms of the Preincorporation Agreement the rights to any patents on
Intellectual Technology are to be assigned to IntorCorp, Inc.
Competition.
Management of Biogan is aware that competition in the electrical motor
industry is very competitive, with several very large companies who have
extensive financial resources. Management is not, however, at this time aware of
any company that has the same or similar product as the IntorCorp Motor.
Management is of the opinion that there are several established companies that
can provide other electrical motors for the same or similar functions that the
IntorCorp Motor is expected to perform. Management is of the opinion that the
IntorCorp Motor will, however, be substantially more efficient and able to
successfully compete at such time as production of the IntorCorp Motor is
commenced.
Estimate on Costs of Research and Development.
During calendar year 1996 Registrant expended $132,127 cash in research and
development of the Magna Motor with Magnetronics, and $25,583 in cash and 78,550
shares of restricted common stock (which Registrant values on its books at
$29,933) in development of the IntorCorp Motor.
During calendar year 1997 Registrant expended $57,358 in cash and 309,558
shares of common stock (which Registrant values on its books at $71,507) in
development of the IntorCorp Motor.
Employees.
Effective the date of this report, Registrant has four full time paid
employees all of whom are working from the corporate office in Boise, Idaho.
ITEM 2. DESCRIPTION OF PROPERTY.
Registrant operates from office space at 7213 Potomac Drive, Boise, Idaho
83704, under a lease which expires in May of 1998. Negotiations are now in
process with representatives of the landlord to renew the lease on the same
office space or in the same office complex. Registrant owns the office furniture
and equipment which consists of 5 executive desks with swivel chairs and side
pieces, 3 secretarial desks, AT&T 25 phone system with hardware, 4 computers
with computer software, and miscellaneous other office equipment.
ITEM 3. LEGAL PROCEEDINGS.
There is no pending litigation involving the Registrant, and to the best
knowledge of
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 6
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management there is no threatened litigation, the unfavorable resolution of
which would have a material adverse effect on the business, the financial
position or results of operations of Registrant.
As previously reported in the September 30, 1997, Form 10-Q.B., on June 11,
1997, the Company filed a Complaint in the United States District Court for the
District of Idaho against Frank Wright, Defendant, to enjoin Wright from
transferring 6,000,000 shares of Biogan common stock, and for the return of said
6,000,000 shares to the Company. The action is based on an earlier default
judgement in favor of Biogan against Tower Enterprises International, Inc. for
cancellation of some 17,500,000 shares of common stock for failure to pay the
subscription consideration. The subject 6,000,000 shares are allegedly part of
the said 21,150,000 shares previously owned by Tower. The defendant has filed an
answer denying the allegations, raised several affirmative defenses to the
complaint, and has requested a jury trial.
The matter has been set for trial on September 14, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
A. Market for Common Stock. Registrant's common stock is traded on the
NASDAQ over-the-counter Bulletin Board under the symbol "BIGM". The following
table shows the trading price data for the common stock as reported by NASDAQ as
the range of representative bid prices for the common stock for 1996 and 1997.
The Registrant's stock is quoted in the National Quotation Bureau's Pink Sheets
and listed on the NASD's Electronic Bulletin Board. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Bid Price
-----------------------
High Low
------- -------
1996
First Quarter $0.3000 $0.1860
Second Quarter $0.7800 $0.4500
Third Quarter $0.6400 $0.3300
Fourth Quarter $0.62 $0.2900
1997
First Quarter $0.3600 $0.2400
Second Quarter $0.2500 $0.1150
Third Quarter $0.1975 $0.1600
Fourth Quarter $0.2500 $0.1200
B. Holders of Common Stock. The approximate number of holders of
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 7
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record of the Registrant's was 707 as of December 31, 1997. A number of the
Company's record shareholders are broker/dealers who are holding record title
for other customers, and accordingly management believes the actual number of
beneficial holders of its common stock is greater than the number of
shareholders of record.
C. Dividends. There have been no cash or other distributions or dividends.
D. Unregistered Equity Securities Sold by Registrant During 1997.
During 1997 Registrant issued common stock of Registrant without
registration under the Securities Act in private transactions (Section 4(2)
exemption) to the class of persons indicated, without discounts or commissions,
for cash and services rendered. (The list does not include securities issued
under Regulation S). In addition Securities issued for cash in the United States
from August to the end of the year were pursuant to an offering under Regulation
D, Rule 506. With the consent of the Department of Finance in the State of
Idaho, the offering was made to residents of Idaho who were either accredited,
or were existing shareholders who were sophisticated. Reference is made to the
"Statement of Stockholders' Equity" in the Financial Statements for more detail
with respects to the shares issued by Registrant during 1997, as well as
previously issued shares.
Date Shares Price Cash Identity of Purchasers
- ---- ------ ----- ---- ----------------------
12/97 640,000 0.25 $160,000 Accredited Investors or "Sophisticated"
Existing Shareholders (Rule 506 Offering)
Date Shares Price Value Consideration Purchasers
- ---- ------ ----- ----- ------------- ----------
1/97-12/97 800,746 0.1465- Professionals, legal,
0.2600 $151,359 Services Rendered Accounting,
Engineers.
8/97-12/97 405,958 0.15- Two Long Term
0.26 $ 93,416 Loan Payments Lenders
1/97-10/97 75,600 0.25 $ 18,900 Restitution Shares Pre 1990 Investors
ITEM 6. MANAGEMENT'S PLAN OF OPERATION.
A. IntorCorp Motor Development - IntorCorp, Inc.
During calendar year 1997 Registrant devoted essentially all of its time,
efforts and expenditures and Collective Technologies, L.L.C. devoted substantial
time and effort to refine the new concepts in electro-magnetic motor and
controller design and technology, and to produce the proof of concept and
feasibility prototype of the IntorCorp Motor, which was accomplished. To resolve
issues related to rights to intellectual technology and to assemble the desired
personnel to expeditiously proceed with the further development of the IntorCorp
Motor, all material parties agreed to form IntorCorp, Inc., a subsidiary owned
50% by Biogan and 50% by Collective Technologies, L.L.C. (a consolidation of
personnel and intellectual technology material to the development of the
IntorCorp Motor), (See "Joint Venture Development:
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 8
<PAGE>
IntorCorp, Inc. page 3). IntorCorp Inc. intends to develop a consulting
agreement with Collective Technologies to continue the research and development
of the IntorCorp Motor to reach production design, and a consulting agreement
with Biogan to accomplish marketing research and other functions to facilitate
commercial marketing of the IntorCorp Motor.
The Business Plan of IntorCorp is essentially as follows (time estimates
run from the date of available funds):
1. Present Status: A 5 HP Feasibility Prototype has been developed
and tested. Presently considering the development
of a high HP motor, or a dual development of 5/10
HP motors.
2. Support Functions: Site preparation for high voltage and high power
working and testing environment, intellectual
technology filings and procurement, and general
workplace setup. (Estimated 6 months and
$1,000,000 cost)
3. Lab Prototype: Scale the design to size of motor, include AC
front end option, extensive stress testing and
reliability development, meet all design
objectives including full environmental
requirements. Deliver 5 test units and 5
demonstration units. (Estimated 71/2months and
$2,300,000 cost)
4. Production Prototype: Include design improvements from reliability
tests, finalize intellectual property filings,
obtain regulatory agency approvals, and first unit
application testing, prepare 5 units for internal
destructive testing and 10 demonstration units
including units for regulatory approval.
(Estimated 5 months and $1,400,000 cost)
5. Field Test: Beta test site application testing, 20
demonstration sales units, 10 Beta field
application test units. (Estimated 5 months and
$1,300,000 cost)
6. Production Start: During the field testing period the manufacturing
facilities, line and tooling can be set up such
that when the field testing is completed the
manufacturing can begin . The cost of
manufacturing is variable depending on the
approach developed, the line capacity and the
degree of development of the tooling involved.
Management estimates that an investment of $7,000,000 will take the project
through the development phases and field test which includes a contingency of
approximately $1,000,000 to cover unforeseen expenses and potential delays.
Management of both Biogan, Collective Technologies, Inc. and IntorCorp, Inc. are
presently exploring and seeking sources of financing for the IntorCorp Motor
project.
B. Biogan Business Activities.
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 9
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The primary focus of management will be the funding and marketing of the
IntorCorp Motor as a consultant to IntorCorp, Inc., described in the preceding
section. In addition, management is presently seeking other business
opportunities to develop and/or joint venture.
In order to continue with the business of IntorCorp and/or Biogan, it will
be necessary to raise additional capital which Management intends to obtain
through private placements of common stock or other securities, with qualified
investors.
Management does not now have any basis for projecting revenues from any
operations.
Management does not now have any plans for the purchase or acquisition of
any plant or significant other equipment, or to make any significant change in
the number of employees currently employed by Registrant.
ITEM 7. FINANCIAL STATEMENTS.
Included herewith are the audited Financial Statements of Registrant for
the year ended December 31, 1997, and from inception February 5, 1988 through
December 31, 1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
The Management of Biogan is under the direct control of a board of
directors consisting of three directors who are elected at the annual meeting of
shareholders. Following the annual meeting of shareholders after the election of
the directors, the board of directors is to hold the organizational meeting at
which time the officers are appointed. In addition the Board of Directors has
established an Advisory Board, on a non-compensation basis (however, see Item
11.c pages 14 & 15), to assist the Directors in directing business policy of the
Company.
9.1 Directors and Officers.
The current directors and executive officers of Biogan are as follows:
Name Age Position Date of Appointment
---- --- -------- -------------------
L. William Glazier 68 President, Director May, 1994
Ronald J. Tolman 46 Executive VP, Director May, 1994
Rulon L. Tolman 48 VP, Treasurer, Director *
Robert C. Montgomery 46 Secretary **
* Mr. Rulon L. Tolman was appointed Sec.-Treas, and Director in
September of 1994. He was appointed Vice President in February 1997,
and remained as secretary-Treasurer until September, 1997, when he was
released as Secretary.
** Mr. Montgomery was appointed corporate Secretary in September, 1997.
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 10
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9.2 Business Experience.
L. William Glazier, was appointed Director and President in May of 1994, and has
since continued in the offices. Mr. Glazier retired from Chevron Oil Corporation
in 1989 as an executive having supervised five offices and a $600,000,000
operating budget. Since his appointment as Director and President, he has been
primarily responsible for assisting in the restructure of Registrant and
development of new business.
Ronald J. Tolman, was appointed Director and acting Vice President in May of
1994, and has been Executive Vice President in charge of operations since
December of 1994. Mr. Tolman was National Training & Marketing Director for
Weather Master Architectural Coatings from 1988 to 1994. Previously he served in
business related government positions including Administrator of Operations for
the State of Idaho Department of Insurance and Business Development Specialist
for the Small Business Administration.
Rulon L. Tolman, was appointed Director September 1994, 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.
Robert C. Montgomery, 6940 Ashland Drive, Boise, Id. 83709, is presently
Secretary-Treasurer and house legal counsel for the Company. Mr. Montgomery
received his J.D. degree from the University of Idaho in 1974. Mr. Montgomery is
a member of the bar in Idaho, Oregon and Washington. He was a former adjunct
professor of Business Laws and Ethics at Boise State University, and has
practiced law in Idaho since 1974.
9.3 Advisory Board.
The Advisory Board consists of 5 members who meet as requested by the
directors, generally twice per month. The Advisory Board Members are:
Robert C. Montgomery, see resume above.
Keith Cline, 1252 E. Victory Rd., Meridian, Id. 83642, investor and advisor
to the company. Mr. Cline is presently retired, but was a graduate in
engineering from U.C. Berkely in 1951, and was the owner-operator of Universal
Wood Products, Inc. and in the construction business in Meridian.
John R. Hansen, Jr., 1419 W. Washington, Boise, Id. 83702. 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 presently outside counsel to the
Company.
Jacque L. Tolman, Executive Secretary for the company. Mrs. Tolman received
her
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 11
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accounting degree from Boise State University in 1975. She has acted as the
administrative assistant for the Company for the past three years. Her
experience includes 4 years as the Medical Staff Coordinator for St. Luke's
Regional Hospital, and one year with the St. Luke's Mountain States Tumor
Institute.
George W. Wadsworth, 214 S. Cole Road, Boise, Id. 83709, has been a partner
in the accounting firm Wadsworth & Smith, Chartered for the last 23 years. He is
also the CPA for the Company.
9.4 Family Relationships.
Mr. Ron Tolman and Mr. Rulon Tolman are cousins, and Mr. Ron Tolman and
Jacque Tolman are husband and wife.
9.5 Compliance with Section 16(a) of the Exchange Act:
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Registrant's officers and directors, and persons
who own more than 10% of a registered class of the Registrant's equity
securities, to file initial reports of ownership and reports of changes in
ownership (Forms 3,4 an 5) of common stock of the Registrant with the Securities
and Exchange Commission ("SEC"). Officers and directors and greater than 10%
beneficial holders are required by SEC regulation to furnish the Registrant with
copies of all such forms that they file.
To the Registrant's knowledge, based solely on the Registrant's failure to
receive any copies of such reports, the Registrant believes that during the
fiscal year ended December 31, 1997, none of the Section 16(a) filing
requirements applicable of its officers, directors and greater and 10%
beneficial owners was complied with.
9.6 Resumes of Management and Key Consultants of IntorCorp Inc.
Directors of IntorCorp Inc. are Scott DeHart, Wayne Stewart, George
Wadsworth and John R. Hansen, Jr. See Advisory Board for resumes of George
Wadsworth and John R. Hansen, Jr.
Scott DeHart is 50 years of age, and received Bachelors and Masters Degrees
from Brigham Young University in Electrical Engineering. From 1975 to 1997 Mr.
DeHart was employed with Hewlett Packard and included 4 years experience as
Section Manager of the Greeley Division in Greeley, Colorado; 4 years as Section
Manager of Disk Storage Systems Division in Boise, Idaho; and 2 years as Project
Manager, Firmware Development and Firmware Development Manager. The assignments
included planning, development and managing conceptualized projects to market
production.
Wayne Stewart is 52 years of age, is a graduate of Brigham Young University
and attended graduate school at Purdue. From 1983 to 1995 he was the
Manufacturing Manager for the disk memory division of Hewlett Packard, located
in Boise, Idaho. From 1995 to 1997 he was VP over world manufacturing for
Whirlpool, and in 1997 he accepted the position of VP of operations at Iomega.
Scott K. Anderson is 57 years of age, and is a principal key consultant
with Collective Technologies, L.L.C. Mr. Anderson received his Bachelor and
Master Degrees in Electrical Engineering from Brigham Young University and
participated in Stanford University
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 12
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HP Honors Co-op Program 1967-68 in Studies in Solid State Physics. in Since 1992
Mr. Anderson has been an electrical engineer consultant and is the founder of
Technical Development Consultants, Inc. incorporated in 1996. From 1983 to 1991
Mr. Anderson was the R&D Manager, Member of Division Staff of Hewlett Packard,
Boise, Idaho, responsible for the direction of HP's Mass Storage Mechanisms
development effort, and from 1990 to 1992 was the Russian Joint Venture
Operations Manager.
ITEM 10. EXECUTIVE COMPENSATION.
The 1997 cash and stock remuneration paid by Biogan to the officers and
directors and other benefits received by each of them are set forth below:
Annual Restricted Stock
Name & Position Year Compensation Shares Date
L. William Glazier, Pres. 1997 -0- -0-
Ronald J. Tolman, V-Pres 1997 $34,500 -0-
Rulon L. Tolman, 1997 $29,000 -0-
Robert C. Montgomery 1997 $ 2,718 -0-
The compensation in calendar year 1998 for Mr. Glazier, Mr. Ronald J.
Tolman and Mr. Rulon L. Tolman will continue the same as 1997. Mr. Montgomery is
paid on billed hours at his legal rate of compensation.
Both in 1996 and in 1997 each of the management members are reimbursed for
their out of pocket expenses relating to company business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT:
The following table reflects the ownership by the persons indicated as of
December 31, 1997.
a: Beneficial Owners, known to Registrant, owning more than 5% of voting
securities:
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
L. William Glazier 10,500,000 11.9%
805 W. Cross Street
Woodland Hills, CA 95695
Ronald J. Tolman 9,493,400 10.76%
2326 Bruins Avenue
Boise, Idaho 83704
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 13
<PAGE>
Rulon L. Tolman 9,900,000 11.22%
7272 Glenridge View
Boise, Idaho 83709
b. Security Ownership of Management:
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
L. William Glazier 10,500,000 11.9%
805 W. Cross Street
Woodland Hills, CA 95695
Ronald J. Tolman 9,493,400 10.76%
2326 Bruins Avenue
Boise, Idaho 83704
Rulon L. Tolman 9,900,000 11.22%
7272 Glenridge View
Boise, Idaho 83709
Robert C. Montgomery 2,338,000 2.65%
6940 Ashland
Boise, Idaho 83709
Jacque L. Tolman 3,664,867 4.15%
2326 Bruins Avenue
Boise, Idaho 83704
c. Security Ownership of Advisory Board Members
Keith Cline 1,130,000 1.28%
1252 E. Victory Rd.
Meridian, Idaho 83642
John R. Hansen, Jr. 2,500.000 2.83%
1419 W. Washington
Boise, Idaho 83702
Robert C. Montgomery 2,338,000* 2.65%
6940 Ashland Drive
Boise, Idaho 83709
Jacque L. Tolman 3,664,867* 4.15%
2326 Bruins Avenue
Boise, Idaho 83704
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 14
<PAGE>
George W. Wadsworth 2,604,021 2.95%
214 S. Cole Road
Boise, Idaho 83709
* Also listed under 12 (b) above.
Robert C. Montgomery and George W. Wadsworth are issued stock from time to
time for services rendered to the Company.
During fiscal year 1997 individual members of Management gifted Company
stock to members of the Advisory Board, from their personal holdings, (with
certain transfer restrictions), 10,500,000 shares of common stock as follows:
From L. William Glazier and Ronald J. Tolman, 4,500,000 shares each and from
Rulon L. Tolman 2,500,000 shares, to: Keith Cline, 1,000,000, John R. Hansen,
Jr., 2,500,000, Robert C. Montgomery, 2,000,000, Jacque L. Tolman, 2,500,000,
George W. Wadsworth, 2,500,000, with an additional 1,000,000 shares held for
future incentive purposes.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit "1" Princorporation Agreement between Biogan International,
Inc., and Collective Technologies, L.L.C., an Idaho limited
liability company.
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOGAN INTERNATIONAL, INC.
(formerly known as Biogan Medical
International, Inc.)
(Registrant)
By /s/ RONALD J. TOLMAN
--------------------------------
(Signature and Title)
Executive Vice President
(Printed name and Title)
Date: March 31, 1998
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 15
<PAGE>
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By /s/ RONALD J. TOLMAN Executive VP & Director March 31, 1998
------------------------
Ronald J. Tolman
By /s/ RULON L. TOLMAN VP, Treasurer & Director March 31, 1998
------------------------
Rulon L. Tolman
BIOGAN INTERNATIONAL, INC.
Form 10-KSB (December 1997) 16
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT - STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT - STAGE COMPANY)
DECEMBER 31, 1997
CONTENTS
Independent Auditor's Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-12
<PAGE>
George Brenner
CERTIFIED PUBLIC ACCOUNTANT
9300 WILSHIRE BOULEVARD, SUITE 480
BEVERLY HILLS, CALIFORNIA 90212
310-276-5545 FAX 310-276-5933
REPORT OF INDEPENENT AUDITOR
Board of Directors
Biogan International, Inc. formerly Biogan Medical International, Inc.
Boise, Idaho
I have audited the accompanying balance sheet of Biogan International, Inc. (a
development stage company) as of December 31, 1997 and related statements of
operations, stockholders' deficiency and cash flows for the years ended December
31, 1996 and 1997 and the period from February 5, 1988 through December 31,
1997. These financial statements are the responsibility of the COmpany's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with the generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, such financial statements referred to above present fairly, in
all material respects, the financial condition of Biogan International, Inc. as
of December 31, 1997 and the results of its operations, stockholders' deficiency
and cash flows for the years ended December 31, 1996, 1997 and the period
February 5, 1988 through December 31, 1997 in conformity with the generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As more fully described in Note 1 to the
financial statements, the Company's recurring losses from development stage
activities raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
/s/ GEORGE BRENNER
George Brenner, C.P.A.
Beverly Hills, California
March 27, 1998
1
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
As of DECEMBER 31, 1997
ASSETS
CASH $ 100,517
-----------
TOTAL CURRENT ASSETS $ 100,517
FURNITURE/EQUIPMENT 35,113
ACCUMULATED DEPRECIATION (7,837)
-----------
TOTAL FIXED ASSETS $ 27,276
INVESTMENT IN BIOMAGNETRONICS 0
INVESTMENT IN BIOLINK 0
-----------
TOTAL OTHER ASSETS 0
-----------
TOTAL ASSETS $ 127,793
===========
LIABILITIES & STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 25,772
NOTE PAYABLE-STOCKHOLDERS 80,000
NOTES PAYABLE - OTHER 43,680
ACCRUED EXPENSES 108,270
-----------
TOTAL CURRENT LIABILITIES $ 257,722
STOCKHOLDERS' EQUITY
PREFERRED STOCK $.001 PAR VALUE,
10,000,000 SHARES AUTHORIZED NO SHARES ISSUED
COMMON STOCK $.001 PAR VALUE 300,000,000
SHARES AUTHORIZED, 87,854,455 ISSUED 87,854
ADDITIONAL PAID IN CAPITAL 5,150,518
DEVELOPMENT STAGE LOSS (5,368,301)
-----------
TOTAL EQUITY $ (129,929)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 127,793
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
2
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM INCEPTION
FEBRUARY 5, 1988
YEAR ENDING YEAR ENDING THROUGH
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31,1997
<S> <C> <C> <C>
SALES
REVENUE - FEES $ 3,500 $ 225 $ 7,150
RENTAL INCOME 750 -- 750
----------- --------- -----------
TOTAL SALES 4,250 225 7,900
EXPENSES
WAGES $ 169,676 $ 197,070 $ 362,746
INCENTIVE BONUS 108,561 40,803 149,364
STOCK SUBSCRIPTION LOSS 101,006 -- 101,006
DEPRECIATION EXPENSE 3,367 5,570 7,837
CONTRACT LABOR -- 32,991 247,227
INTEREST EXPENSE 6,160 16,798 23,158
LEGAL & ACCOUNTING FEES 123,720 80,475 219,199
RENT 6,160 12,823 23,056
START UP COSTS -- -- 127,441
RESEARCH AND DEVELOPMENT 197,643 128,865 343,101
STOCK RESTITUTION EXPENSE 401,986 18,900 3,564,659
OTHER OPERATING EXPENSES 94,371 98,584 298,464
SUBSIDIARIES LOSSES 74,902 77,461 158,521
----------- --------- -----------
TOTAL EXPENSES $ 1,273,490 $ 677,349 $ 5,378,552
----------- --------- -----------
NET OPERATING INCOME (LOSS) (1,269,240) (677,124) (5,370,652)
INTEREST INCOME 4,519 334 5,069
TAX PENALTIES/FINES -- (1,926) (2,718)
----------- --------- -----------
TOTAL OTHER $ 3,797 $ (1,592) $ 2,351
----------- --------- -----------
NET INCOME (LOSS) $(1,247,813) $(678,716) $(5,368,301)
=========== ========= ===========
PRIMARY LOSS PER SHARE ($ 0.0156) ($ 0.0079) ($ 0.1451)
=========== ========= ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
3
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK AMOUNT ADDITIONAL DURING THE
- ------------------------------------------------------------- PER PAID-IN DEVELOPMENT STOCKHOLDERS'
ISSUED: SHARES AMOUNT SHARE CAPITAL STAGE EQUITY (DEFICIENCY)
- ------------------------------------------------------------- ------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
July 27, 1988 2,250,000 2,250 0.0111 22,750 -- 25,000
January 25, 1989 17,750,000 17,750 0.0060 88,750 -- 106,500
January 29, 1989 3,637,347 3,637 0.0309 108,602 -- 112,239
To management:
September 14, 1995 41,955,173 41,955 0.0010 -- -- 41,955
September 14, 1995 906,667 907 0.0030 1,813 -- 2,720
September 14, 1995 452,600 453 0.0100 4,073 -- 4,526
October 4, 1995 61,980 62 0.1000 6,136 -- 6,198
December 8, 1995 23,580 24 0.2500 5,871 -- 5,895
For professional services:
September 14, 1995 120,000 120 0.0100 1,080 -- 1,200
October 4, 1995 100,000 100 0.0100 900 -- 1,000
December 8, 1995 100,000 100 0.0100 900 -- 1,000
February 23, 1996 115,222 115 0.2149 24,643 -- 24,759
July 29, 1996 493,034 493 0.2149 105,448 -- 105,941
December 2, 1996 417,893 418 0.3691 153,835 -- 154,253
January 31, 1997 250,774 251 0.2460 61,436 -- 61,687
February 28, 1997 56,621 57 0.2600 14,665 -- 14,721
March 15, 1997 76,173 76 0.2600 19,729 -- 19,805
March 29, 1997 15,400 15 0.2600 3,989 -- 4,004
June 2, 1997 225,597 226 0.1492 33,441 -- 33,667
August 12, 1997 224,269 224 0.1465 32,626 -- 32,851
October 31, 1997 304,546 305 0.1892 57,322 -- 57,626
December 31, 1997 (352,634) (353) 0.2070 (72,650) -- (73,003)
For loan payments:
September 14, 1995 61,000 61 0.1000 6,039 -- 6,100
November 1, 1995 50,000 50 0.1000 4,950 -- 5,000
December 8, 1995 10,000 10 0.1000 990 -- 1,000
August 12, 1997 41,600 42 0.2000 8,278 -- 8,320
August 31, 1997 66,666 67 0.1500 9,933 -- 10,000
October 1, 1997 57,692 58 0.2600 14,942 -- 15,000
December 30, 1997 240,000 240 0.2504 59,856 -- 60,096
For restitution:
September 14, 1995 2,668,967 2,669 0.2500 664,573 -- 667,242
October 4, 1995 2,180,600 2,181 0.2500 542,969 -- 545,150
November 1, 1995 372,270 372 0.2500 92,695 -- 93,068
December 8, 1995 7,353,248 7,353 0.2500 1,830,959 -- 1,838,312
February 23, 1996 744,444 744 0.2500 185,367 -- 186,111
May 3, 1996 125,929 126 0.2500 31,356 -- 31,482
June 21, 1996 350,863 351 0.2500 87,365 -- 87,716
July 29, 1996 310,567 311 0.2500 77,331 -- 77,642
September 11, 1996 2,667 3 0.2500 664 -- 667
December 2, 1996 73,480 73 0.2500 18,297 -- 18,370
January 31, 1997 4,000 4 0.2500 996 -- 1,000
February 28, 1997 38,000 38 0.2500 9,462 -- 9,500
June 2, 1997 18,000 18 0.2500 4,482 -- 4,500
August 12, 1997 11,200 11 0.2500 2,789 -- 2,800
October 31, 1997 4,400 4 0.2500 1,096 -- 1,100
For dispute settlement:
October 4, 1995 25,000 25 0.1000 2,475 -- 2,500
November 1, 1995 31,030 31 0.1000 3,072 -- 3,103
December 8, 1995 50,000 50 0.1000 4,950 -- 5,000
For private offering:
September 14, 1995 75,000 75 0.1000 7,425 -- 7,500
November 1, 1995 5,000 5 0.2500 1,245 -- 1,250
December 8, 1995 256,000 256 0.2500 63,744 -- 64,000
February 23, 1996 672,923 673 0.2208 147,875 -- 148,549
May 3, 1996 353,667 354 0.2208 77,718 -- 78,072
June 21, 1996 606,900 607 0.2208 133,366 -- 133,973
July 29, 1996 252,000 252 0.2201 55,206 -- 55,457
December 31, 1996 54,350 54 0.4600 24,946 -- 25,000
March 29, 1997 154,000 154 0.2500 38,346 -- 38,500
December 4, 1997 640,000 640 0.2500 159,360 -- 160,000
December 31, 1997 708,750 709 0.1422 100,041 -- 100,750
NET LOSS -- -- -- (5,368,301) (5,368,301)
----------- ----------- ---------- ---------- ----------
87,854,455 87,854 5,150,518 (5,368,301) (129,929)
=========== =========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT.
4
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM INCEPTION
YEAR ENDING FEBRUARY 5, 1988
DECEMBER 31, 1997 DECEMBER 31, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $(678,716) $(5,368,301)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED FROM OPERATING ACTIVITIES:
ADD BACK STOCK ISSUED FOR:
MANAGEMENT 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT 151,358 439,510
RESTITUTION 18,900 3,564,659
REPAYMENT OF LOANS 81,320 81,320
INTEREST EXPENSE 12,096 24,196
DISPUTE SETTLEMENTS 0 10,603
OTHER ADJUSTMENTS:
INVESTMENT LOSSES 77,460 158,521
STOCK SUBSCRIPTION LOSS 0 101,006
FIRST DEVELOPMENT STAGE LOSS 0 142,733
NOTES PAYABLE - OTHER PAID WITH STOCK (81,320) (81,320)
DEPRECIATION AND AMORTIZATION 5,570 7,837
--------- -----------
TOTAL ADJUSTMENTS 265,384 4,510,359
ACCOUNTS PAYABLE 1,239 25,772
ACCRUED LIABILITIES 89,242 108,270
--------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $(322,851) $ (723,900)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
FURNITURE/EQUIPMENT (2,396) (35,113)
INVESTMENT IN BIOMAGNETRONICS (195) (104,077)
INVESTMENT IN BIOLINK (2,588) (54,443)
--------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ (5,179) $ (193,633)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER 0 80,000
NOTES PAYABLE - OTHER 75,000 125,000
ISSUANCE OF COMMON STOCK 299,250 813,050
--------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ 374,250 $ 1,018,050
--------- -----------
NET INCREASE(DECREASE) IN CASH $ 46,220 $ 100,517
--------- -----------
BEGINNING CASH BALANCE $ 54,297 $ 0
--------- -----------
CASH ENDING BALANCE $ 100,517 $ 100,517
========= ===========
CASH PAYMENTS FOR INTEREST EXPENSE $ 0 $ 0
CASH PAYMENTS FOR INCOME TAXES $ 0 $ 0
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
5
<PAGE>
BIOGAN INTERNATIONAL, INC
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BUSINESS AND ABILITY TO CONTINUE IN EXISTENCE
Biogan International, Inc. (Biogan International), is a development-stage
company. See Note 5 "Stockholders' Equity" for a history of Biogan
International's securities issuance and accumulated deficit. Management
presently intends to focus aggressively on the continued further
development and prototype testing of the Motor/Controller system as well as
entering into strategic alliances for both manufacturing and marketing of
the motor. Additional capital will be required to fund the growth and
expansion and provide working capital for continued operations.
Management presently does not have any plans for the purchase or
acquisition of any significant plant or other equipment. It is anticipated
that additional employees will be required by the Registrant as the
acquired operations meet their expected growth. Since it is uncertain
whether Biogan International will be successful in these ventures and
whether it can obtain sufficient capital to finance these ventures, it is
uncertain whether the Company will be capable of continuing in existence.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A PRESENTATION
The accompanying financial statements have been prepared in accordance with
the Statement of Financial Accounting Standards No. 7 "Accounting and
Reporting by Development-stage Enterprises". A development stage enterprise
is one in which planned principal operations have not commenced or if its
operations have commenced there has been no significant revenue there from.
Development-stage companies report cumulative costs from the enterprise's
inception. Biogan International has had two stages of development (Note
5G).
B INVESTMENT IN SUBSIDIARIES
Biogan International owns 50% of the voting stock of BioMagnetronics, Inc.
and Biolink , Inc. Biomagnetronics, Inc. and Biolink, Inc. are both
development-stage enterprises and neither company had any operating
activities during the current quarter of operations. The investments are
accounted for by the equity method whereby the purchase of stock shares are
recorded at cost and increased and decreased by 50% of any profits or
losses respectively. Biogan International has invested $104,078 in
Biomagnetronics. Inc. and $54,443 in Biolink, Inc. The carrying amount of
the investments have been reduced to $0 for each company since the both
companies have had no operating activities during the past two quarters and
there are no plans for future operations. Neither company has assets of any
value.
See Accountants' Compilation Report
-6-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT- STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
B INVESTMENT IN SUBSIDIARIES (CONTINUED)
BioMagnetronics, Inc.'s accumulated losses from inception (June 1995) to
December 31, 1997 were $154,078. Biolink, Inc.'s accumulated losses from
inception (June 1996) to December 31, 1997 were $78,800.
C STOCK VALUATION
Stock issued for non cash consideration has been valued at market value or
above from $.001 to $.25 per share. (see Statement of Stockholders' Equity
"To Management" Note 5D) Stock issued for restitution (Note 5F) is valued
at $.25 per share.
D NET LOSS PER SHARE
The net loss per share has been calculated using the weighted average
number of shares of common stock outstanding during the development stage
period. The weighted average number of shares of common stock outstanding
for the three month period ended December 31, 1997 and the period from
February 5, 1988 (inception) through December 31 1997 was 85,957,910 and
36,998,001 respectively. Stock options have not been considered in the
calculation of loss per share because they are antidilutive. Of the
87,854,455 shares outstanding, 61,258,377 are restricted and 26,596,078
shares are unrestricted.
E INCOME TAXES
At December 31, 1997 Biogan International had net operating losses (NOL)
carryforwards as follows:
YEAR NOL YEAR EXPIRES
Feb 5, 1988
to Dec. 31, 1993 $ 142,733 2008
1994 11,782 2009
1995 3,251,790 2010
1996 1,134,736 2011
1997 678,716 2012
----------
$5,219,757
No deferred asset will be recognized on the tax benefit resulting from the
NOL until the Company becomes profitable. While management believes the
loss recorded due to the stock restitution loss ($3,560,760) is a tax
deductible expense, it could be subject to an IRS disallowance.
F CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
See Accountants' Compilation Report
-7-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
G FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost. Depreciation of furniture and
equipment is provided using the straight-line method of depreciation and
the accelerated cost recovery method for federal income tax purposes.
3. NOTES PAYABLE AT DECEMBER 31, 1997 CONSISTED OF THE FOLLOWING:
Notes Payable - Other:
Notes payable to Gillingham Construction, Inc. with interest
at 12% per annum from September 19, 1997, note is secured by
personal residence of Ron Tolman and is payable on March 19,
1998. 20,000 shares of Biogan International stock given as
additional consideration 43,680
-------
Total Notes Payable - Other $43,680
=======
Notes Payable - Stockholder:
Notes payable to Ronald J. Tolman with interest at 10% per
annum from November 13, 1996, note is unsecured and is
payable on demand. Payments are applied first to any unpaid
interest. $40,000
Notes payable to Rulon L. Tolman with interest at 10% per
annum from November 13, 1996, note is unsecured and is
payable on demand. Payments are applied first to any unpaid
interest. 40,000
-------
Total Notes Payable - Stockholder $80,000
=======
4. STOCK OPTIONS
On December 8, 1988, the board of directors of Biogan International
allocated 2,000,000 shares of the Company's authorized common stock shares
for a stock incentive plan to be issued as determined by the board at an
option price of not less than placement offering of any private placement
offering of the Company's common stock. No options have been granted or
exercised under this stock incentive plan.
See Accountants' Compilation Report
-8-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
5. STOCKHOLDERS' EQUITY
Following is a table of Biogan International Inc.'s stock and equity
transactions:
<TABLE>
<CAPTION>
In (000)
Common .001/share Paid-In Accumulated Total
Shares Amount Capital Deficit Equity
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A) Ronney shares 2,250 $ 2,250 $ 22,750 $ $ 25,000
B) Biogan International merger 17,750 17,750 88,750 106,500
C) Stock Subscriptions 3,637 3,637 108,602 112,239
D) Expenses/Service Mgmt Grp 43,400 43,400 17,894 61,294
E) Shares for Cash 6,453 6,453 1,351,624 1,358,077
F) Shares for Restitution 14,364 14,364 3,560,898 3,575,262
G) Deficit:
2/5/88 - 6/26/94 (142,733) (142,733)
6/27/94 - 9/30/97 (5,225,568) (5,225,568)
------ ------- ---------- ----------- -----------
Totals 87,854 $87,854 $5,150,518 $(5,368,301) $ (129,929)
====== ======= ========== =========== ===========
</TABLE>
A. Issuance of 2,250,000 shares of Ronney, a Delaware Corporation.
B. Exchange of Biogan (an Oregon Corporation), 5,000,000 shares for 17,750,000
shares of Ronney. Ronney and Biogan merged and changed its name to Biogan
International, Inc.
C. Issuance of a stock subscription to Tower Enterprises International, Inc.
(a European Corporation), a former 84% shareholder in Biogan International,
Inc. 11,417,653 of the 15,150,000 original stock subscription has been
canceled as of September 30, 1996.
D. Shares issued to new management for expenses/services incurred in
re-starting Biogan International, Inc. were valued at or above the market
value of the common stock listed on NASDAQ BB at $.001 to $.25 per share at
the time the expenses were incurred; the services were rendered; and the
Board of Directors' resolution approving the issuance was made. See
"Statement of Stockholders' Equity" and Note 7.
E. Cash Shares and shares issued for services rendered and for loan payments
by parties other than management.
F. From 1990 through May 1994, Biogan International, Inc. was under the
control of prior management and affiliates. Effective December 31, 1996,
the Company completed its review and has issued 14,289,065 shares of common
stock as restitution to investors who substantiated their claims. In
addition, the Company has obtained a court judgment canceling 15,150,000
shares of common stock issued in "C" above, and 4,117,653 shares issued to
Tower Enterprises International, Inc. in "B" above. The company is
continuing its litigation to recover damages as a result of questionable
stock transactions.
G. Biogan International has effectively had two development stages:
(1) From February 5, 1988 through June 27, 1994. During this period the
company was dormant for approximately four years.
(2) The second development stage (June 27, 1994 through December 31, 1997)
is and continues under the new management group set forth in D above.
See Accountants' Compilation Report
-9-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
6. COMMITMENTS AND CONTINGENCIES
A SHARES FOR RESTITUTION
As set forth in Note 5F "Shareholders' Equity" Biogan International is
committed through December 31, 1997 to issue shares to replace shares sold
by Tower International's US agent, Tower Holdings, Ltd.
B BIOMAGNETRONICS, INC.
On May 4, 1995, Biogan International, Inc. entered into an agreement to
purchase a fifty percent interest in BioMagnetronics, Inc. for $50,000.
Biogan International, Inc. received 1,000,000 shares of common stock dated
September 20, 1995 in BioMagnetronics, Inc. This agreement obligates Biogan
International, Inc. to provide future funding of $250,000 to $350,000 or
facilities within two years from the date of the agreement or it may be
terminated. Biomagnetronics, Inc. has not transacted any business during
the last two quarters of 1997and has no assets of any value. This agreement
has been terminated.
C OTHER
In connection with the Company's plans to become operational, various
verbal commitments and a letter of intent has been issued and they are in
the negotiation stage with various manufacturers and distributors as of
December 31, 1997. However, as discussed in Note 1, the Company remains a
development stage company.
7. RELATED PARTY TRANSACTIONS
Pursuant to a board of directors meeting held in July 1995, the Company
issued common stock to the following related parties in exchange for
expenses incurred on behalf of the Company and for services rendered: (The
schedule below has been adjusted to reflect shares issued to the Advisory
Board from each of the related parties listed below - see Note 12)
Date Numbered of Market Issue Expense/
Expense/Service shares Price Price Service
Name Rendered issued per share per share Amount
- ---- -------- ------ --------- --------- ------
Glazier Family Trust
during 1994 10,079,178 $.001 $.001 $ 10,079
during first quarter of 1995 245,000 .001 .003 735
during second quarter of 1995 148,300 .010 .010 1,483
during third quarter of 1995 20,830 .100 .100 2,083
during fouth quarter of 1995 6,692 .125 .250 1,673
------------------------------------------------------------------------------
10,500,000 $ 16,053
Ronald J. Tolman Family Trust
during 1994 8,982,729 $.001 $.001 $ 8,983
during first quarter of 1995 328,333 .001 .003 985
during second quarter of 1995 154,300 .010 .010 1,543
during third quarter of 1995 21,150 .100 .100 2,115
during fourth quarter of 1995 6,888 .125 .250 1,722
------------------------------------------------------------------------------
9,493,400 $ 15,348
See Accountants' Compilation Report
-10-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Rulon L. Tolman
during 1994 9,386,667 $.001 $.001 $9,387
during first quarter of 1995 333,333 .001 .003 1,000
during second quarter of 1995 150,000 .010 .010 1,500
during third quarter of 1995 20,000 .100 .100 2,000
during fourth quarter of 1995 10,000 .125 .250 2,500
------------------------------------------------------------------------------
9,900,000 $16,387
Biogan International sub-leased office space (month to month) from a
company owned by Ronald J. Tolman until December 31, 1996. Total rental
expense for the period from inception February 5, 1998 until December 31,
1996 amounted to $10,233. See Note 3 for details on notes payable due
stockholders. Ron Tolman, Rulon Tolman, and Jacque Tolman have accrued
wages for the period ending December 31, 1997 of $48,300, $40,600, and
$6,750 respectively.
8. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
9. LEASES
The Company conducts its operations from facilities that are leased under a
noncancelable operating lease expiring May 31, 1998. The following is a
schedule of future minimum rental payments required under the above
operating lease as of December 31, 1997:
Year Ending
December 31 Amount
----------- ------
1998 $5.370
------
Total $5,370
======
Rental expense for the year ending December 31, 1997 amounted to $12,823.
Rental expense for the period from inception February 5, 1988 through
December 31, 1997 amounted to $23,056. See Note 7 for related party rental
transactions.
10. PRIVATE PLACEMENT OFFERING
On August 5, 1997, the Company commenced a Private Placement offering of
8,000,000 shares of its common stock at $.25 per share the proceeds of
which are expected to be used primarily for furthering research and
development on the 5HP prototype motor, for development of 5HP motor to
irrigation pump application, for developing larger size motors, and for
working capital of the Company. Consent was received from the Idaho
Department of Finance to proceed with the offering to residents of Idaho
who qualify as accredited investors or other investors who are both
sophisticated and existing shareholders of the Company.
See Accountants' Compilation Report
-11-
<PAGE>
BIOGAN INTERNATIONAL, INC.
FORMERLY BIOGAN MEDICAL INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1997
11. CORPORATE NAME CHANGE
The Board of Directors consented to change the name of the corporation from
Biogan Medical International, Inc. to Biogan International, Inc. This
action was deemed necessary to avoid the confusion that has developed from
the word "medical" in the name when the main emphasis of the company is to
promote the development of the electro-magnetic motor. The name change was
recorded by the state of Delaware on September 5, 1997.
12. ADVISORY BOARD - STOCK
Biogan International, Inc. created an Advisory Board composed of five
individuals. Glazier Family Trust, Rulon L. Tolman and Ronald J. Tolman
Family Trust gave 4,500,000, 2,500,000, and 4,500,000 shares respectively
from their personal shares of Biogan International, Inc. to members of the
Advisory Board members.
13. SUBSEQUENT EVENTS
The Board of Directors signed a preincorporation agreement to form a new
corporation. Biogan International, Inc. will own 50% of the voting stock of
the new Corporation. The other investor in the new corporation is
Collective Technologies, LLC, an engineering group. The two groups are
forming the new corporation in order to continue further development of the
motor. The new corporation will be a development stage company.
On March 3, 1998 Biogan International was released from all its obligations
relating to services performed and paid for with 352,634 shares of common
stock valued at $73,003 and accounts payable due of $47,080 due from an
engineering group providing research and development of the motor. The
stock had already been issued and will be canceled. This transactions is
recorded on the Statement of Stockholders Equity as a negative transaction
under "for professional services" as of December 31, 1997.
See Accountants' Compilation Report
-12-
PREINCORPORATION AGREEMENT
This Agreement is entered into this 25th day of February, 1998, by Biogan
International, Inc., a Delaware corporation, and Collective Technologies,
L.L.C., an Idaho limited liability company, to forthwith form an Idaho
corporation by the name of IntorCorp, Inc., or such other name as may
subsequently be agreed between the parties, to (i) receive from each of the
parties hereto all of the rights to certain intellectual technology for the
development of what the parties shall refer to as the IntorCorp Motor, and (ii)
develop the said Motor for commercial exploitation.
1. Articles of Incorporation: IntorCorp shall be formed with Articles of
Incorporation in the form attached hereto as Exhibit "A" and with By Laws in the
form attached hereto as Exhibit "B".
2. Capital: The parties agree to forthwith transfer to IntorCorp all of their
respective rights and interest to the intellectual technology of what the
parties have referred to as the IntorCorp Motor, of whatever nature and form. In
exchange therefore each of Biogan and Collective Technologies will receive 50%
of the common stock issued for such property.
2.1 The parties agree that IntorCorp shall issue a total of 2,800,000
shares of common stock (1,400,000 shares to each of Biogan and
Collective Technologies) subject to the terms of this Agreement, at a
valuation of $5.00 per share or an aggregate of $14,000,000 for the
intellectual technology.
2.2 Each of the parties hereby represents and warrants that to the best
knowledge of each member of Management of Biogan, and of each Member
of Collective Technologies, that (i) Biogan and Collective
Technologies as entities have acquired from their respective
shareholders and Members all of the rights and interest to the
intellectual technology of the said IntorCorp Motor, and (ii) that no
individual shareholder or Member, or any other party, has any rights
or interest to any of the intellectual technology of the said
IntorCorp Motor, or the right to receive any such rights or interest,
except the right to participate in the benefits of such technology as
a shareholder or Member of the respective entity.
2.3 The common stock issued by IntorCorp to each of Biogan and Collective
Technologies shall bear a legend restricting transfer and shall be
held by each of such entities until the earlier to occur of (i) the
Board of Directors giving approval for the release and transfer of
such stock to the respective shareholders and Members of each of the
entities, or (ii) 12 months following the signing of a manufacturing
contract for the first commercial motor. Furthermore, until such time
as the shares of IntorCorp are publicly traded, the By Laws of
IntorCorp shall contain a provision for restricting a sale of any
stock until a right of first refusal
PREINCORPORATION AGREEMENT 1
<PAGE>
has been extended first to IntorCorp, and thereafter to the then
existing shareholders.
2.4 The parties acknowledge that some members and participants of
Collective Technologies, and affiliates, were developing some of the
intellectual technology under a consulting agreement with Biogan. At
the time the parties commenced the negotiations for organizing
IntorCorp there had been some Biogan stock issued as well as cash
payments made, and billings for cash payments yet to be made. The
parties agree that all payments made and delivered in the form of cash
and/or stock shall be effective, however, any billings or other
compensation that has not been paid, shall be nullified with no
further liability on the part of Biogan.
3. Board of Directors: The Board of Directors of IntorCorp shall consist of 4
members, 2 of which shall be selected by each of Biogan and Collective
Technologies, provided, however, that each of the named initial directors shall
be unanimously approved by both Biogan and Collective Technologies.
3.1 The parties agree that Scott DeHart and Wayne Stewart shall be the
initial directors appointed by Collective Technologies, and George
Wadsworth and John R. Hansen, Jr. shall be the initial directors
appointed by Biogan, each of whom shall serve as a Board Member until
his successor is appointed and qualified in the annual meeting of
shareholders for the calendar year 1999. If for any reason any of the
initial directors is unable to continue to serve in office, his
successor shall be selected by the entity originally appointing such
director with the approval of the appointment by the other entity.
After the annual shareholders meeting of 1999 the selection of
directors shall follow customary corporate governance.
3.2 The Board of Directors shall be empowered, upon the super-majority
vote of the members of the Board, to increase the number of Directors
to not more than 7 and select the Members who are to fill such newly
appointed offices until their respective successors are elected and
qualified.
3.3 The Board of Directors shall appoint the officers of Management of
IntorCorp, who shall initially consist of a President, Vice-President,
and Secretary-Treasurer. The Board of Directors shall appoint such
other officers as it may deem expedient.
3.4 Until such time as IntorCorp is adequately funded for conducting its
business, the parties anticipate that the members of the Board of
Directors and Management will look to their sponsoring entity for any
compensation, to be reimbursed by IntorCorp at such time as funding is
available.
4. Development Funding: Following the formation of IntorCorp Management and the
Board of Directors, with the assistance of the respective shareholders, shall
forthwith seek
PREINCORPORATION AGREEMENT
2
<PAGE>
funding for IntorCorp to develop the IntorCorp Motor, consistent with the
Business Plan developed and approved by Biogan and Collective Technologies dated
January __, 1998, which Business Plan in incorporated herein as part of this
Agreement. The funding will be on such terms and conditions as may be negotiated
by Management and approved by the Board of Directors.
5. Consulting Agreements:
5.1 The parties intend that the development of the Motor will be
engineered by Collective Technologies under a consulting agreement
negotiated and approved by the Board of Directors which will define
the performance expected of Collective Technologies consistent with
the Business Plan.
A. Compensation payable under the consulting agreement to Collective
Technologies shall be compatible with industry standards in the
area.
B. The parties anticipate that the equity participation for the
funding, depending on the terms negotiated, may approximate 35%
of IntorCorp and "incentive" stock that may be issued to
Collective Technologies may be as high as 25% equity
participation, which percentages of stock would dilute equally
the initial issuance of stock to Biogan and Collective
Technologies. The parties recognize
(i) that the percentage of equity stock to be issued to any
investor(s) is presently unpredictable, and will depend on
the amount of money invested as well as other factors to be
negotiated,
(ii) that any investor(s) of such magnitude will be represented
on the Board of Directors and will participate in the
decisions with respect to the issuance of any stock to any
other persons, including "incentive" stock to Collective
Technologies, and
(iii) that a substantial part of the compensation package to
Collective Technologies may be based on receipt of such
"incentive" stock in lieu of cash payment.
5.2 The parties intend that Biogan will continue to participate in
financing IntorCorp under a consulting agreement approved by the Board
of Directors of IntorCorp, with the understanding that all
shareholders of IntorCorp, and their respective individual
constituents, shall participate and cooperate in locating and
negotiating the best source of funding for the overall project of the
IntorCorp Motor.
6. Public Information: The parties agree that proper corporate procedures will
be established so as to prevent the publication or release of any information
about IntorCorp's
PREINCORPORATION AGREEMENT
3
<PAGE>
activities to any person or shareholder without clearance from the Board of
Directors or Management of IntorCorp. Such information when approved shall be
only in written format, and with due regard for the legal protection of all
intellectual technology and trade secrets related thereto, including the market
potential, market penetration strategy and project schedules.
7. Insider Trading Restriction: Any insider (any person who has access to inside
information about IntorCorp or the IntorCorp Motor) will be expected to sign an
agreement that he or she will not trade in the market with Biogan stock, or any
security derived therefrom, without the consent of the Board of Directors and/or
Management of IntorCorp, or until such time as IntorCorp stock, or any security
derived therefrom, becomes publicly traded.
8. Shareholder Representative: Each entity party to this Agreement agrees that
at all times it will provide a named representative to speak for and on behalf
of such entity party, and be authorized on their signature alone, to bind such
party. Unless and until a new representative is appointed by a notice in a
writing directed to the Board of Directors of IntorCorp by the respective Board
of Directors of a party hereto, the representative and only person who has
authority to represent such entity party shall be as follows:
Biogan shall be Rulon Tolman, and
Collective Technologies shall be Ralph Tenbrink.
9. Legal Expenses: The legal expenses and any other necessary expenses incurred
in the preparation of this Agreement and the incorporation of IntorCorp shall be
divided evenly between Biogan and Collective Technologies.
IN WITNESS WHEREOF each of the undersigned execute this Agreement.
Biogan International, Inc.
By /s/ Rulon Tolman
----------------------------
Collective Technologies, L.L.C.
By /s/ Ralph Tenbrink
----------------------------
APPROVED:
/s/ Scott DeHart /s/ Scott K. Anderson
------------------------------- -------------------------------
Scott DeHart Scott K. Anderson
PREINCORPORATION AGREEMENT
4
<PAGE>
PREINCORPORATION AGREEMENT
INTORCORP, INC.
EXHIBIT "A"
"ARTICLES OF INCORPORATION"
<PAGE>
ARTICLES OF INCORPORATION
OF
INTORCORP, INC.
1. Name: The name of the Corporation is IntorCorp, Inc.
2. Authorized Shares: The total number of shares the Corporation is authorized
to issue is 16,000,000 divided into two classes. The designation of each
class, the number of shares of each class are as follows:
Class Par Value Number of Shares
----- --------- ----------------
Common $5.00 8,000,000
Preferred No Par Value 8,000,000
The Preferred Shares may be issued in one or more series. The designation
and total number of shares of any series may be fixed by the board of directors
of this Corporation. As to any such series, the board of directors may, within
the limits and restrictions stated in the resolution(s) originally fixing the
number of shares, increase or decrease the number subsequent to the issue of
shares of that series; provided, however, that in no event shall the board of
directors decrease the number of shares of such series below the number then
outstanding If the number of shares of any series is so decreased, the shares
constituting such decrease shall resume the status they had prior to the
adoption of the resolution(s) originally fixing the number os shares of such
series.
The board of directors of this Corporation is hereby authorized to fix or
alter the dividend rights, dividend rates, conversion rights, voting rights,
rights and terms of redemption, the redemption price or prices, and the
liquidation preference of any wholly unissued class of Preferred Shares or any
wholly unissued series of Preferred Shares.
Before issuing any Preferred Shares of a class or series created under this
Article, the Corporation must file articles of amendment adopted by the board of
directors that sets forth all of the terms of the class or series in compliance
with Section 30-1-602 of the Idaho Code.
3. Registered Office and Agent: The registered office of the Corporation is 1419
W. Washington, Boise, Idaho, 83702, and the registered agent at that location is
John R. Hansen, Jr.
4. Initial Directors: Until changed by the directors or the shareholders as
provided in the By Laws of the Corporation, there shall be four directors. The
initial directors of the Corporation, who are to serve until their successors
are duly elected and qualify, are:
ARTICLES OF INCORPORATION
INTORCORP, INC. (2/24/98) 1
<PAGE>
i. George W. Wadsworth, 214 S. Cole, Boise, Idaho 83709.
ii. John R. Hansen, Jr., 1419 W. Washington, Boise, Idaho 83702.
iii. Scott DeHart, 209 W. Ashbourne Dr., Eagle, Idaho 83616.
iv. Wayne Stewart, 2500 East 62 South, Layton, Utah 84040.
5. Cumulative Voting: Shareholders of voting stock are entitled to cumulate
their votes for directors.
6. Liability and Indemnification of Directors: A director shall not be liable to
the Corporation or any of its shareholders for money damages, and the
Corporation shall indemnify each director for any liability (as defined in
Section 30-1-850(5)), for any action taken, or any failure to take any action,
as a director, except liability for:
a. The amount of a 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 Section 30-1-833, Idaho Code (Liability for Unlawful
Distributions);
d. An intentional violation of criminal law
7. Incorporator: The name of the incorporator is John R. Hansen, Jr. and the
incorporator's address is 1419 W. Washington, Boise, Idaho, 83702.
----------------------------
John R. Hansen, Jr., Incorporator
ARTICLES OF INCORPORATION
2
<PAGE>
PREINCORPORATION AGREEMENT
INTORCORP, INC.
EXHIBIT "B"
"BY LAWS"
<PAGE>
BY LAWS
OF
INTORCORP, INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered office of the corporation
required by the Idaho Business Corporation Act ("IBCA") to be continuously
maintained in the state of Idaho may, but need to, 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 required by the IBCA to be continuously maintained in the state of Idaho.
The address of the registered office may be changed from time to time by the
Board of Directors or the President of the corporation by delivering a statement
to the Idaho Secretary of State containing the information acquired by the IBCA
or by indicating such change in the annual report required by the IBCA to be
filed with the Secretary of State.
Section 1.2 Principal Office; Other Offices. The corporation shall also
have and maintain an office or principal place of business in Boise, 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' MEETING
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
1
<PAGE>
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 Director, 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 first Monday in the month of April in each year
at the hour of 10:00 a.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. Special meetings of the
shareholders of the corporation may not be called by any other person or
persons.
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. The corporation is required to give notice of a
meeting only to shareholders entitled to vote at the meeting. The notice of an
annual meeting need not include a description for the purpose or purposes for
which the meeting is called. 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 will be waived by any shareholder by his attendance thereat in
person or by proxy. A shareholder's attendance at a meeting (i) waives objection
to lack of notice or defective notice of the meeting unless the shareholder at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) waives objection to consideration of a
particular matter at the meeting that is not within the purpose of purposes
described in the meeting notice unless the shareholder objects to considering
the matter when it is presented. 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. Shares entitled to vote, either collectively or as a
separate voting group, may take action at a meeting only if a quorum of those
shares exists with respect
2
<PAGE>
to that matter. Unless the IBCA or the Articles of Incorporation impose a
greater requirement, a majority of the votes entitled to be cast on a matter at
a meeting, pursuant to outstanding shares of the corporation represented in
person or by proxy, shall constitute a quorum for action on that matter at a
meeting of shareholders. In the absence of a quorum any meeting of shareholders
may be adjourned, from time to time, by vote of the holders of a majority of the
votes represented thereat; but no other business shall be transacted at such
meeting. 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. If a new record date for the adjourned meeting is or
must be fixed under Section 7.4, however, notice of adjourned meeting must be
given under this Section to persons who are shareholders as of the new record
date. 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. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy. An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest as defined in the IBCA. The death or incapacity of
the shareholder appointing a proxy does not affect the right of the corporation
to accept the proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. An irrevocable
proxy is revoked when the interest with which it is coupled is extinguished.
Subject to Section 3.10 and to any express limitation on the proxy's authority
appearing on the face of the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 3.9 Voting Rights. If a quorum exists, action on a matter, other
than the election of directors, by a voting group is approved if the votes cast
within the voting group 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. At each election for
3
<PAGE>
directors each shareholder entitled to vote at such election shall have the
right to cumulate his votes by multiplying the number of votes he is entitled to
cast by the number of directors for whom he is entitled to vote and cast the
product for a single candidate or distribute the product among two or more
candidates.
For the purpose of determining those shareholders entitled to vote at any
meeting of the shareholders, 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 at any meeting of shareholders.
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:
(a) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(b) The name signed purports to be that of an administrator, executor,
guardian, or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
or proxy appointment;
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment;
(d) The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's
authority to sign for the shareholder has been presented with respect to
the vote, consent, waiver, or proxy appointment;
(e) Two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
the co-owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or proxy
appointment
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if the secretary or the 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 list must be
arranged by voting group, and within each voting group by class or series of
shares, and show the address and the number of shares registered in the name of
each shareholder. The shareholders' list must 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.
30-1-602(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 time during the meeting or any
adjournment.
Section 3.12 Organization. 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 Nomination of Directors. Nominations of persons for election
to the Board of Directors of this corporation at the annual meeting of
shareholders may be made at such meeting by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors, or by any shareholder of the corporation entitled to vote for the
election of directors at the meeting who timely complies with the notice
procedures herein set forth. To be timely, a shareholder's notice must be
delivered to, or mailed to and received by, the secretary of the corporation at
the corporation's principal executive offices not later than the December 31
immediately preceding the annual meeting.
Section 3.14 Business Introduced by Shareholders at Annual Meetings. Where
business introduced by a shareholder is not specified in the notice of annual
meeting, then (in
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addition to any other applicable requirements) for business to be properly
introduced by a shareholder at an annual meeting of shareholders, the
shareholder must have given timely notice thereof in writing to the secretary of
the corporation. To be timely, a shareholder's notice must be delivered to, or
mailed to and received by, the secretary of the corporation in the same manner
and subject to the same time requirements provided in Section 3.13 of these
Bylaws for shareholder notice of nominations to the Board of Directors. A
shareholder's notice must set forth, as to each matter the shareholder proposes
to bring before the meeting, (a) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting, (b) the name and record address of the shareholder proposing such
business, (c) the class, series and number of shares of the corporation's stock
which are beneficially owned by the shareholder, and (d) any material interest
of the shareholder in such business.
Section 3.15 Informal Action by Shareholder. 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. If the IBCA requires
that notice of proposed action be given to nonvoting shareholders and the action
is to be taken by unanimous consent of the voting shareholders, the corporation
must give its nonvoting shareholders written notice of the proposed action at
least ten (10) days before the action is taken. The notice must contain or be
accompanied by the same material that, under the IBCA, would have been required
to be sent to nonvoting shareholder in a notice of meeting at which the proposed
action would have been submitted to the shareholders for action.
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 Number; Qualifications. The number of directors presently
authorized is four (4 ). The authorized number of directors of the corporation
may range between four and seven; and the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by 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
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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.
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. 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 specified in such notice, the acceptance of
any such resignation shall not be necessary to make it effective.
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. 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
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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 purposes(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.
(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 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. 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. If less than such majority is
present at any meeting, a majority of the directors present may adjourn the
meeting from time to time until the time fixed for the next regular meeting of
the Board of Directors, without further notice other than by announcement at the
meeting.
(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
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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, and 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. Action taken under this Section
is effective when the last director signed the consent, unless the consent
specifies an earlier or later effective date. A consent signed under this
Section has the effect of a meeting vote and may be described as such in any
document.
Section 4.10 Fees and Compensation. Unless the Articles of Incorporation
provided otherwise the Board of Directors may fix the compensation of directors.
Such compensation may include a fixed fee or salary payable in cash or the
corporation's stock or any combination thereof, with or without expenses of
attendance, for serving on the Board of Directors and/or attendance at each
meeting of the Board of Directors and at each meeting of any committee of the
Board of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, consultant, employee, or otherwise and receiving compensation therefor.
Section 4.11 Performance of Duties. 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 opinions,
reports or statements, including financial statements and other financial data,
if prepared or presented by:
(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
which 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.
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A director is not acting in good faith if he has knowledge concerning the
matter in question that makes such otherwise permitted reliance 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, who
serve at the pleasure of the Board of Directors.
(2) The creation of a committee and appointment of members to it must be
approved by the greater of:
(a) A majority of all the directors in office when the action is
taken; or
(b) The number of directors required by the Articles of Incorporation
or Section 4.8(2) of these Bylaws to take action.
(3) Sections 4.7 through 4.9 of these Bylaws, which govern meetings, notice
and waiver of notice, action without meetings, and quorum and voting
requirements of the Board of Directors, apply to committees and their members as
well.
(4) To the extent specified by the Board of Directors or in the Articles of
Incorporation or these Bylaws, each committee may exercise the authority of the
Board of Directors under Section 4.1.
(5) A committee may not, however:
(a) Authorize distributions;
(b) Approve or propose to shareholders action that the IBCA requires
be approved by shareholders;
(c) Fill vacancies on the Board of Directors or on any of its
committees;
(d) Amend the Articles of Incorporation in circumstances in which the
Board of Director is permitted by the IBCA to amend such articles
without shareholder action;
(e) Adopt, amend, or repeal the Bylaws;
(f) Approve a plan of merger not requiring shareholder approval;
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(g) Authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the Board of Directors; or
(h) Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences,
and limitations of a class or series of shares, except that the Board
of Directors may authorize a committee, or a senior executive officer
of the corporation, to do so within limits specifically prescribed by
the Board of Directors.
(6) 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 Definitions. In Sections 5.1 through 5.4:
(1) "Conflicting interest" with respect to a corporation means the interest
a director of the corporation has respecting a transaction effected or proposed
to be effected by the corporation, or by a subsidiary of the corporation or any
other entity in which the corporation has a controlling interest, if
(a) the director knows at the time of commitment that he or a related
person is a party to the transaction or has a beneficial financial interest
in or so closely linked to the transaction and of such financial
significance to the director or a related person that the interest would
reasonably be expected to exert an influence on the director's judgment if
he were called upon to vote on the action, whether or not the transaction
is brought before the Board of Directors of the corporation for action; or
(b) The transaction is brought, or is of such character and
significance to the corporation that it would in the normal course be
brought, before the Board of Directors of the corporation for action, and
the director knows at the time of commitment that any of the following
persons is either a party to the transaction or has a beneficial financial
interest in or so closely liked to the transaction and of such financial
significance to the person that the interest would reasonably be expected
to exert an influence on the director's judgment if he were called upon to
vote on the transaction:
(i) An entity, other than the corporation, of which the director is a
director, general partner, agent, or employee;
(ii) A person that controls one or more of the entities specified in
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subclause (i) of this subsection or an entity that is controlled by,
or is under common control with, one or more of the entities specified
in subclause (i) of this subsection; or
(iii) An individual who is a general partner, principal, or employer
of the director.
(2) "Director's conflicting interest transaction" with respect to a
corporation means a transaction effected or proposed to be effected by the
corporation, or by a subsidiary of the corporation or any other entity in which
the corporation has a controlling interest, respecting which a director of the
corporation has a conflicting interest.
(3) "Related person" of a director means:
(a) The spouse, or a parent or sibling thereof, of the director, or a
child, grandchild, sibling, parent, or spouse of any thereof, of the
director, or an individual having the same home as a director, or a trust
or estate of which an individual specified in this clause (a) is a
substantial beneficiary; or
(b) A trust, estate, incompetent, conservatee or minor of which the
director is a fiduciary.
(4) "Required disclosure" means disclosure by the director who has a
conflicting interest of:
(a) The existence and nature of his conflicting interest, and
(b) All facts known to him respecting the subject matter of the
transaction that an ordinarily prudent person would reasonably believe to
be material to a judgment about whether or not to proceed with the
transaction.
(5) "Time of commitment" respecting a transaction means the time when the
transaction is consummated or, if made pursuant to contract, the time when the
corporation, or its subsidiary or the entity in which it has a controlling
interest, becomes contractually obligated so that its unilateral withdrawal from
the transaction would entail significant loss, liability, or other damage.
Section 5.2 Permissible Transactions. The corporation may enter into a
director's conflict of interest transaction if either directors' action or
shareholders' action respecting the transaction is taken at any time in
compliance with Sections 5.3 or 5.4, respectively.
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Section 5.3 Directors' Action.
(1) Directors' action respecting a transaction is effective for purposes of
Section 5.2 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.
(2) If a director has a conflicting interest respecting a transaction, but
neither he nor a related person of the director specified in Section 15.1(3)
(a), 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 described in Section 15.1(4)(b), 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
transactions, 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 familiar, 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.
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Section 5.4 Shareholders' Action.
(1) Shareholders' action respecting a transaction is effective for purposes
of Section 5.2 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 or which is controlled, by a director who has
a conflicting interest respecting the transaction or by a related person of the
director or both.
(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 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 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.
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Section 6.2 Tenure and Duties of Officers.
(1) Term of Office. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly appointed and
qualified, or until their 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 Director, 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 the president and such
other 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 death, 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 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 proper proceedings of the shareholders and 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 By-laws 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 the 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
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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, with the president
or a vice president, sign 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 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.
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:
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(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 of 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. 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.
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,
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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 an affidavit of the facts, and 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 canceled; 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 canceled. 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 or 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 numbers 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. If no
record date is fixed by the Board of Directors:
(a) the record date for determining shareholders entitled to notice of
and to vote at an annual or special meeting of shareholder is the day
before the first notice is delivered to shareholders;
(b) the record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting shall be the day
on which the first shareholder signs the consent;
(c) the record date for determining shareholders entitled to demand a
special meeting is the date the first shareholder signs the demand;
(d) the record date for determining shareholders entitled to a
distribution, other than one involving a purchase, redemption, or other
acquisition of the corporation's shares, is the date of Board of directors
authorizes the distribution; and
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(e) the record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
shareholders 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 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 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 wether or not it shall have express or
other notice thereof, except as otherwise provided by Idaho law.
Section 7.7 Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than share certificates, may be
signed by the president or any vice president, or such other person as may be
authorized by the Board of Directors; and the corporate seal may be impressed
thereon or a facsimile of such seal imprinted thereon and attested by the
signature of the secretary or an assistant secretary; provided, however, that
where any such bond, debenture or other corporate security shall be
authenticated by the manual signature of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprint facsimile
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of the signature of such persons. Interest coupons appertaining to any such
bond, debenture or other corporate security, authenticated by a trustee as
aforesaid, shall be signed by the treasurer or an assistant treasurer of the
corporation or such other person as may be authorized by the Board of Directors,
or be imprinted thereon the facsimile signature of such person. In case any
officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
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.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and certificates of shares of
stock owned by the corporation shall be executed, signed or endorsed by the
president or any vice president and by the secretary or treasurer or any
assistant secretary or assistant treasurer. All other instruments and documents
requiring the corporate signature may be executed as aforesaid or in such manner
as may be directed by the Board of Directors.
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 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
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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
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.
Section 9.2 Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors may from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation; and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 10.1 Scope of Indemnification. The corporation shall indemnify the
directors and officers of the corporation to the full 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 Permissible Indemnification of Directors.
(1) Except as otherwise provided in this Section, a corporation shall
indemnify an individual who is a party to a proceeding because he is a director
against liability incurred in the proceeding if:
(a) (i) He conducted himself in good faith; and
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(ii) He reasonably believed:
(A) In case of conduct in his official capacity, that his
conduct was in the best interests of the corporation; and
(B) In all cases, that his conduct was at least not opposed
to the best interest of the corporation; and
(iii) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful; or
(b) He engaged in conduct for which broader indemnification has been
made permissible or obligatory under a provision of the Articles of
Incorporation, as authorized by Idaho Code ss.30-1-202(2)(e).
(2) A director's conduct with respect to an employee plan for a purpose he
reasonably believed to be in the best interests of the participants in, and the
beneficiaries of, the plan is conduct that satisfies the requirement of
subsection (1)(a)(ii)(B) of this Section.
(3) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea or nolo contendere or its equivalent, is not, of
itself, determinative that the director did not meet the relevant standard of
conduct described in this Section.
(4) Unless ordered by a court under Idaho Code ss. 30-1-854(1)(c), a
corporation may not indemnify a director:
(a) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceedings if it is determined that the director has met the relevant
standard of conduct under subsection (1) of this Section; or
(b) In connection with any proceeding with respect to conduct for
which he was adjudged liable on the basis that he received a financial
benefit to which he was not entitled, whether or not involving action in
his official capacity.
Section 10.3 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 10.4 Advance for Expenses.
(1) The corporation shall, before final disposition of a proceeding,
advance funds to pay for or reimburse the reasonable expenses incurred by a
director who is a party to a
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proceeding before he is a director if he delivers to the corporation:
(a) A written affirmative of his good faith belief that he has met
with relevant standard of conduct described in Section 10.2, or that the
proceeding involves conduct for which liability has been eliminated under a
provision of the Articles of Incorporation as authorized by Idaho Code ss.
30-1-202(2) (d); and
(b) His written undertaking to repay any funds advanced if he is not
entitled to mandatory indemnification under Section 10.3, and it is
ultimately determined under Idaho Code ss. 30-1-854 or Section 10.5 of
these Bylaws that he has not met the relevant standard of conduct described
in Section 10.2.
(2) The undertaking required by subsection (1)(b) of this Section must be
an unlimited general obligation of the director but need not be secured and may
be accepted without reference to the financial ability of the director to make
repayment.
Section 10.5 Determination of Indemnification.
(1) The corporation may not indemnify a director under Section 10.2, unless
a determination has been made that indemnification of the director is
permissible because he has met the relevant standard of conduct set forth in
Section 10.2
(2) The determination shall be made:
(a) If there are two (2) or more disinterested directors, the Board of
Directors by a majority vote of all the disinterested directors (a majority
of whom shall for such purpose constitute a quorum), or by a majority of
the members of a committee of two (2) or more disinterested directors
appointed by such vote;
(b) By special legal counsel:
(i) Selected in the manner prescribed in subdivision (a) of this
subsection; or
(ii) If there are fewer than two (2) disinterested directors,
selected by the Board of Directors (in which selection directors
who do not qualify as disinterested directors may participate);
or
(c) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
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Section 10.6 Permissible Indemnification of Officers.
(1) The corporation may indemnify and advance expenses under this part to
an officer of the corporation who is a party to a proceeding because he is an
officer of the corporation.
(a) to the same extent as a director; and
(b) If he is an officer but not a director, to such further extent as
may be provided by the Articles of Incorporation, a resolution of the Board
of Directors, or contract except for:
(i) Liability in connection with a proceeding by or in the right of
the corporation other than for reasonable expenses incurred in
connection with the proceeding, or
(ii) Liability arising out of conduct that constitutes
(A) Receipt by him of a financial benefit to which he is not
entitled,
(B) An intentional infliction of harm on the corporation or the
shareholders, or
(C) An intentional violation of criminal law.
(2) The provisions of subsection (1)(b) of this Section shall apply to an
officer who is also a director if the basis on which he is made a party to the
proceeding is an act or omission solely as an officer.
(3) An officer of a corporation who is not a director is entitled to
mandatory indemnification under Section 10.3 and may apply to a court under
Idaho Code ss. 30-1-854 for indemnification or an advance for expenses, in each
case to the same extent to which a director may be entitled to indemnification
or advance for expenses under those provisions.
Section 10.7 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.
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Section 10.8 Definitions. In Sections 10.1 through 10.8 of these Bylaws:
(1) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger.
(2) "Director" or "officer" means an individual who is or was a director or
officer, respectively, of the corporation or who, while a director or officer of
the corporation, is or was serving 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. A director or officer is considered to be serving an employee benefit
plan at the corporation's request if his duties to the corporation also impose
duties on, or otherwise involve services by, him to the plan or to participants
in or beneficiaries of the plan. "Director" or "officer" includes, unless the
context requires otherwise, the estate or personal representative of a director
or officer.
(3) "Disinterested director" means a director who, at the time of a vote or
selection referenced in Section 10.5(2) is not:
(a) A party to the proceeding, or
(b) An individual having a familiar, financial, professional or
employment relationship with the director whose indemnification or advance
for expenses is the subject of the decision being made, which relationship
would, in the circumstances, reasonably be expected to exert an influence
on the director's judgment when voting on the decision being made.
(4) "Expenses" include counsel fees.
(5) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to employee benefit
plan, or reasonable expenses incurred with respect to a proceeding.
(6) "Official capacity" means:
(a) When used with respect to a director, the office of director in
the corporation; and
(b) When used with respect to an officer, as contemplated in Section
10.6, the office in the corporation held by the officer.
"Official capacity" does not include service for any other domestic or foreign
corporation or any partnership, joint venture, trust, employee benefit plan, or
other entity.
(7) "Party" means an individual who was, is, or is threatened to be made a
defendant
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or respondent in a proceeding.
(8) "Proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal.
Section 10.9 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 10.10 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.
(1) 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.
(2) Notice may be communicated in person; by mail or other method of
delivery; or by telephone, voice mail or other electronic means. If these forms
of personal notice are impracticable, notice may be communicated by newspaper of
general circulation in the area where published, or by radio, television or
other form of public broadcast communication.
(3) It shall not be necessary that the same method of giving notice be
employed in respect of all directors or shareholders: One permissible method may
be employed in respect of any one or more directors or shareholders; and any
other permissible method or methods may be employed in respect of any other or
others.
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.
Section 11.3 Effective Date of Notice.
(1) Written notice by the corporation to its shareholder, if in a
comprehensible form,
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is effective:
(a) Upon deposit in the United States mail, if mailed postpaid and
correctly addressed to the shareholder's address shown in the corporation's
current record of shareholders, or
(b) When electronically transmitted to the shareholder in a manner
authorized by the shareholder.
(2) Except as provided in Section 11.3(1) of this Section, written notice,
if in a comprehensible form,, is effective at the earliest of the following:
(a) When received;
(b) Five (5) days after its deposit in the United States mail, if
mailed postpaid and correctly addressed;
(c) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or
on behalf of the addressee.
(3) Oral notice is effective when communicated if communicated in a
comprehensible manner.
Section 11.4 Address Unknown. If no address of a shareholder or director be
known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 11.2 hereof.
Section 11.5 Affidavit of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the shareholder or shareholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
Section 11.6 Failure to Receive Notice. The period or limitation of time
within which any shareholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him, in the manner above provided, shall not be affected or extended in any
manner by the failure of such shareholder or such director to receive such
notice.
Section 11.7 Notice to Person with Whom Communication is Unlawful. Whenever
notice is required to be given under any provision of law or of the Articles of
Incorporation or Bylaws of the corporation, to any person with whom
communication is
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unlawful, the giving of such notice to such person shall not be required and
there shall be no duty to apply to any governmental authority or agency for a
license or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the Idaho
Business Corporation Act, the certificate shall state, if such is the fact and
if notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communications is unlawful.
ARTICLE XII
SALE OF STOCK
Section 12.1 Right of First Refusal. 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 in
pursuance of 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 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) The corporation shall have 10 days to elect to purchase such stock at
the same price and upon the same terms which the selling shareholder is to
receive from said purchasing party. If the corporation elects not to purchase
such stock, it will forthwith give notice to the shareholders of the corporation
of the potential sale including the price and complete terms agreed to be paid
therefor.
(3) 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.
(4) 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.
(5) 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.
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(6) 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 by the corporation 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.
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
restriction on transferability under Article XII of the Bylaws of
the Corporation."
"The securities represented hereby have not ben 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 action 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.
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(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.
(4) The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records as its
principal office:
(a) Its Articles or Restated Articles of Incorporation and all
amendments to then currently in effect;
(b) Its Bylaws or Restated Bylaws and all amendments to them currently
in effect;
(c) Resolutions adopted by its Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences,
and limitations, if shares issued pursuant to those resolutions are
outstanding;
(d) The minutes of all shareholders' meetings, and records of all
action taken by shareholders without a meeting, for the past three (3)
years;
(e) All written communications to shareholders generally within the
past three (3) years, including the financial statements furnished for the
past three (3) years under Section 13.4;
(f) A list of the names and business addresses of its current
directors and officers.
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 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:
30
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(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 shareholder, 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 form, 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 Scope of Inspection Right.
(1) A shareholder's agent or attorney has the same inspection and copying
rights as the shareholder he represents.
(2) The right to copy records under Section 13.2 includes, if reasonable,
the right to receive copies made by photographic, xerographic or other means.
(3) The corporation may impose a reasonable charge, covering the costs of
labor and material, for copies of any documents provided to the shareholder. The
charge may not exceed the estimated cost of production or reproduction of the
records.
(4) The corporation may comply with a shareholder's demand to inspect the
record of shareholders under Section 13.2(2)(c) by providing him with a list of
shareholders that was compiled no earlier than the date of the shareholder's
demand.
31
<PAGE>
Section 13.4 Financial Statements for Shareholders.
(1) Upon written shareholder request The corporation 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 corporations accounting records:
(a) Stating his reasonable belief whether the statement 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.
Section 13.5 Other Reports to Shareholders.
(1) If the corporation indemnifies or advances expenses to a director under
the IBCA or Article X of these Bylaws, in connection with a proceeding by or in
the right of the corporation, the corporation shall report the indemnification
or advance in writing to the shareholders with or before the notice of the next
shareholders' meeting.
(2) If the corporation issues or authorizes the issuance of shares for
promissory notes, the corporation shall report in writing to the shareholders
the number of shares authorized or issued, and the consideration received by the
corporation, with or before the notice of the next shareholders' meeting.
Section 13.6 Annual Report for Secretary of State.
(1) The corporation shall deliver to the Secretary of State for filing an
annual report that sets forth:
(a) The name of the corporation and the state or country under whose
law it is incorporated;
32
<PAGE>
(b) The address of its registered office and the name of its
registered agent at that office in this state;
(c) The address to which correspondence to the corporation's officers
may be mailed; and
(d) The names and business addresses of its directors and its
president and secretary.
(2) Information in the annual report must be current as of the date the
annual report is executed on behalf of the corporation.
(3) The first annual report must be delivered to the Idaho Secretary of
State between July 1 and November 30 of the state fiscal year, July 1 - July 20,
following the state fiscal year in which the corporation was incorporated.
Subsequent annual reports must be delivered to the Secretary of State between
July 1 and November 30 of succeeding state fiscal years.
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:
(a) The Articles of Incorporation or the IBCA reserve this power
exclusively to the shareholders in whole or part, or
(b) The shareholders may amend or repeal these Bylaws even though the
Bylaws may also be amended or repealed by the Board of Directors.
(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.
33
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Section 14.3 Fiscal year. The fiscal year of the corporation shall begin on
the 1st day of January and end on the 31st day of December in each year.
The foregoing Bylaws of IntorCorp, Inc., an Idaho corporation, were adopted
by the Board of Directors of the corporation effective on the _____day of
______, 1998.
----------------------
Secretary
34
<PAGE>
PREINCORPORATION AGREEMENT
INTORCORP, INC.
EXHIBIT "C"
"BUSINESS PLAN"
<PAGE>
Development Summary:
Present Status: A 5 HP Feasibility Prototype has been developed and
tested. The AC option on the front end was not included.
Major Development Objectives:
Development Support Functions and Services:
Objective:
Site preparation for a high voltage high power working and testing
environment.
Intellectual property filings and procurement.
General workplace setup
Timing
Dependent on motor or motors chosen.
Cost
$0.5m to $1.0m
Rigorous Lab Prototype Phase Development:
Objectives:
1. Scale the design to 5 to 10 HP
2. Include AC front end option
3. Extensive stress testing and reliability development
4. Meet all design objectives including development
5. Time Required: 7.5 months
Deliverables - Units
1. Five test units
2. Five demo units
Cost of Phase:
1. $2.5 million development cost
Production Prototype Phase Development:
Objectives:
1. Include design improvements from reliability development efforts
in lab prototype phase
2. Finalize intellectual property filings
3. Get Regulatory Agency approvals
4. First unit application testing
5. Time Required: 5 months
Deliverables - Units
1. Five test units -- internal destructive testing
2. Ten demo units -- including units for regulatory approval.
================================================================================
IntorCorp -- Company Confidential -- Do Not Copy
<PAGE>
3. Five field application test units -- limited testing.
Cost of Phase:
1. $1.2 million development cost +
2. $0.2 million share of support cost
3. Total -- $1.4 million
Field Test:
Objectives:
1. Include design improvements from reliability development efforts
in lab prototype
2. Beta test site application testing
3. Time required: 5 months
Deliverables - Units:
1. Five test units -- internal destructive testing
2. Twenty demo units -- Sales units.
3. 10 Beta field application test units -- limited testing.
Cost of Phase:
1. $1.1 million development cost
2. $0.2 million share of support cost
3. Total = $1.3 million
Production Startup:
During the field testing period the manufacturing facilities, line and
tooling can be set up such that when field testing is completed the
manufacturing ramp can begin. The cost of setting up manufacturing is
variable depending upon the approach chosen, the line capacity and the
degree of development of the tooling involved. The estimates we have given
assume a very modest approach with a setup cost of about $5.0 million in an
existing facility.
We are seeking a total investor commitment of $7 million to take the
project through the development phases and field test. This allows a $1
million contingency beyond the above plan to cover unforeseen expenses and
potential delays.
================================================================================
IntorCorp -- Company Confidential -- Do Not Copy
<PAGE>
[PROJECT GANT CHART OMITTED]
<PAGE>
[PROJECT GANT CHART OMITTED]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DECEMBER 31, 1997 ANNUAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 100,517
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,517
<PP&E> 35,113
<DEPRECIATION> 7,837
<TOTAL-ASSETS> 127,793
<CURRENT-LIABILITIES> 257,722
<BONDS> 0
0
0
<COMMON> 5,238,372
<OTHER-SE> (5,368,301)
<TOTAL-LIABILITY-AND-EQUITY> 127,793
<SALES> 225
<TOTAL-REVENUES> 559
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 662,477
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,798
<INCOME-PRETAX> (678,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> (678,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (678,716)
<EPS-PRIMARY> (.008)
<EPS-DILUTED> (.008)
</TABLE>
