ITEX Corporation
PRELIMINARY PROXY MATERIALS
---------------------------
PRESIDENT'S MESSAGE TO SHAREHOLDERS
December 1, 1997
Dear Shareholder:
With this mailing you are once again given the opportunity to be heard
on important issues facing your Company. The enclosed proxy materials describe
several issues on which you are being asked to vote. It is of utmost importance
to ITEX Corporation and I urge you review the materials now and send your proxy
in the enclosed envelope. We at ITEX are excited about the future of your
Company and I wanted to take this opportunity to share some of that excitement
with you.
The last year is one which long will be remembered by me and will, I
believe, prove to be a watershed year for your Company. I took over the helm of
ITEX in September of 1996. At the beginning of 1997 the Company was faced with a
declining stock price, major litigation with ITEX's primary competitor, and
general turmoil in the Company's operations brought about by unprecedented
attacks on the integrity and stability of ITEX Corporation.
As the end of 1997 draws near, your Company has prevailed in its
litigation against BXI. While the matter is on appeal, it appears that we will
be successful in bringing to a positive conclusion an acquisition which
Management and the Board of Directors firmly believed was in the best interests
of the Company. The Courts have now vindicated that position, and I believe our
integrity and judgment have have vindicated as well. As was reported in the
Company's Form 10-K for the fiscal year ended July 31, 1997, we are optimistic
that court ordered mediation will result in a negotiated settlement to the
issues which have divided ITEX and the BXI Trade Exchange.
On the operational front, we reported an increase in earnings per share
of 174% from $0.19 per share in 1996 to $0.52 per share in 1997. Net income
tripled over last year even though revenues were down 5.7% And although the
Company continued to show a negative cash flow from operations, the negative
amount was down to $349,000 from last year's $1,418,000 figure. This year we
have strengthened ourselves financially and positioned your Company for
continued domestic growth and international expansion.
I am most excited about several new initiatives to diversify the
Company's vision for the future. In July we began a partial redeployment or our
assets and investment strategy by acquiring claims to natural resources located
on four industrial mineral properties in the State of Washington. Subsequently
your Company has obtained several additional mineral property claims at nominal
cost by original claim staking.
<PAGE>
In addition, the Company embarked on an exciting new venture through
its wholly owned foreign subsidiary, Associated Reciprocal Traders, to develop
16 acres of improved but undeveloped resort property known as the Villas Punta
Ballena Samana Resort located in the northeast corner of the Dominican Republic.
The resort, with planned condominium and hotel units, fits extremely well with
your Company's already well developed travel related services business. Resort
destination travel is more popular than ever and your Company intends to make
Villas Punta Ballena a first class opportunity both for the Company and for the
members of the ITEX Trade Exchange.
Internationally, the Company has successfully added six new
international licensees bringing the ITEX presence to some seventeen countries
with plans for adding several more in 1998. In addition, the Company formed a
stragegic alliance with the International Business Network for World Commerce
and Industry, Ltd. (IBNET) through which the Company will be able to facilitate
barter transactions which enhance the World Chambers of Commerce mission of
meeting the needs of its international constituents. Your Company's alliance
with IBNET is a significant opportunity to advance the Company's effectiveness
in international marketplaces.
Your Company continues to be in the forefront of technology
applications to domestic and international barter transactions. Among other
initiatives, your Company has made its innovative BarterWire trading technology
available to clients through the internet with "ITEX Online", complete with its
own in-house gateway and web server which can be accessed at www.itex.com.
In short, the future looks bright to all of us here at the ITEX
Headquarters as well as to industry analysts. But for this momentum to continue
it is extremely important that you, the Shareholders, participate in charting
the Company's future through your participation in the Annual Meeting to be held
on January 8, 1998. Please take a moment now to review the proxy materials and,
if you will be unable to attend the Meeting, return your proxy with your vote on
the very important issues to be considered at the Annual Meeting. It takes only
a few minutes to vote and return your proxy and I encourage you to do so.
In the mean time, I and the Company's entire staff are available to
answer any questions you may have concerning your Company and its vision for the
coming years. We are excited and believe that you will be, too.
Sincerely,
GRAHAM H. NORRIS
President and
Chief Executive Officer
<PAGE>
PRELIMINARY PROXY MATERIALS
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December 1, 1997
TO THE SHAREHOLDERS OF ITEX CORPORATION:
You are cordially invited to attend the Annual Meeting of the
Shareholders of ITEX CORPORATION (the "Company"). The meeting will be held on
Thursday, January 8, 1998 at 1:00 p.m., Pacific Standard Time in the Conference
Room, second floor, 2 Lincoln South, at 10220 S.W. Greenburg Road, Portland, OR
97223 for the following purposes:
1. To ratify adoption of Amended and Restated By-Laws for the Company.
2. To elect three directors to serve for a term of one year; three
directors to serve a term of two years; and three directors to serve a term
of three years, or until their successors are elected and qualified. The
Board of Directors has nominated Mary Scherr, Dr. Charles Padbury and Vern
O. Curtis to serve a one year term; Robert Nelson, Dr. Evan Ames and Ronald
P. Erickson to serve a two year term; and Graham Norris, Joseph Morris and
G. Dale Weight to serve a three year term.
3. To adopt an Amendment to the Articles of Incorporation of the Company
changing the authorized capital of the Company from 20 million shares to 50
million shares.
4. To adopt Amended and Restated Articles of Incorporation for the Company.
5. To ratify the 1997 Incentive Stock Option Plan for employees, officers,
directors and consultants of the Company. The details of this Plan are
described in the accompanying Proxy Statement.
6. To ratify the 1998 Incentive Stock Option Plan for employees, officers,
directors and consultants of the Company. The details of this Plan are
described in the accompanying Proxy Statement.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only shareholders of record at the close of
business on November 21, 1997 are entitled to notice of and the opportunity to
vote at the Annual Meeting.
In addition to the formal items of business, shareholders will hear a
presentation by Management on the Company's general state of affairs, including
its current financial and operating condition.
BY ORDER OF THE BOARD OF DIRECTORS:
- ---------------------------------------------------------------
Graham H. Norris, Sr., President, CEO and Chairman of the Board
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER,
TO INSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE ENCLOSED
FOR THAT PURPOSE. THE GIVING OF THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE AT
THE ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT.
<PAGE>
ITEX CORPORATION PROXY STATEMENT
PRELIMINARY PROXY
-----------------
The enclosed proxy is solicited on behalf of the management and Board
of Directors of ITEX CORPORATION (the "Company") for use at the Annual Meeting
of Shareholders to be held on Thursday, January 8, 1998 at 1:00 p.m., Pacific
Standard Time in the Conference Room, second floor, 2 Lincoln South, at 10220
S.W. Greenburg Road, Portland, OR 97223. The Company's principal executive
office is located at One Lincoln Center, 10300 S.W. Greenburg Road, Suite 370,
Portland, OR 97223. The Company will bear the cost of preparing and mailing the
Proxy Form, this Proxy Statement, a copy of the Company's Annual Report for the
fiscal year ended July 31, 1997 and any other material furnished to the
shareholders by the Company in connection with the Annual Meeting.
The Company expects to mail this Proxy Statement, the enclosed Proxy
Form and a copy of the Company's Annual Report for the fiscal year ended July
31, 1997 to shareholders of record as of the close of business on November 21,
1997 on or about December 1, 1997. Only shareholders of record at the close of
business on November 21, 1997 are entitled to notice of and the opportunity to
vote at the Annual Meeting. The number of shares outstanding on November 21,
1997 was shares, each of which is entitled to one vote for each proposal voted
upon at the Annual Meeting. Proxies will be solicited by use of the mails, and
officers and employees of the Company may also solicit proxies by telephone or
personal contact without receiving extra compensation for their services.
Brokers, dealers, banks or other nominees are requested to forward solicitation
materials to their principals to obtain authorization for the execution of the
Proxy Form. All valid proxies will be voted at the Annual Meeting of
Shareholders in accordance with each shareholder's instructions contained in the
Proxy Form. Abstentions and broker non-votes will not be counted either for
against any proposal. Pursuant to the Company's Articles of Incorporation, there
are no cumulative voting rights.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before it is voted. The proxy may be
revoked by filing with the Secretary of the Company at the Company's principal
executive office a written instrument of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person. A
shareholder who attends the meeting need not revoke his or her proxy and vote in
person unless he or she wishes to do so.
PROPOSAL NO. 1 -- TO RATIFY AMENDED AND RESTATED BY-LAWS FOR THE COMPANY
The By-Laws of the Company have not been amended since they were
originally adopted. The original By-Laws were entitled "By-Laws of ITEX Barter
Systems, Inc." (Original By-Laws). The new By-Laws will be entitled "Amended and
Restated By-Laws of ITEX Corporation" (Amended By-Laws). The change is necessary
because the Company has undergone a name change and the By-Laws need to be
updated to fit the needs of the Company. A description of the specific changes
reflected in the Amended and Restated By-Laws is set forth below:
Article II, Section 2 will be altered by the Amended By-Laws. In the
original By-Laws, the date of the annual meeting was scheduled for the second
Friday of November. The Amended By-Laws change the date to the first Thursday in
January. The change was made for the convenience of the Board of Directors and
the Shareholders of the Company and based upon the difficulty in preparing
annual report and proxy materials in time for a November meeting.
Article II, Sections 3 and 7 will be altered by the Amended By-Laws.
The original By-Laws provide the Shareholders with at least ten (10) days
advance notice of the annual meeting, but no more than fifty (50) days notice.
The Amended By-Laws maintain the minimum of ten days notice but increase the
maximum to sixty (60) days notice. The change was made to conform to provisions
of Nevada Law and to provide Shareholders with more advanced notice.
The Amended By-Laws insert a new Section 8 to Article II. The provision
is entitled, "Notice of Specific Purpose." The new provision limits the business
conducted at special meetings to the purposes for which the meeting was called.
Shareholders may make proposals which may be listed on the proxy statement.
However, the Shareholder must comply with Rule 14a-8 of the Securities and
Exchange Act of 1934. This provision has been added to ensure that special
meetings are conducted in an efficient and productive manner.
Article II, Section 9 of the original By-Laws will be altered by the
Amended By-Laws by the addition of the phrase "the Articles of Incorporation, or
the By-Laws." The change was made to increase the number of situations in which
the majority of a quorum may decide a question.
<PAGE>
Article III, Section 1 will be altered by the Amended By-Laws. The
original By-Laws provided for election of all Directors at the annual meeting.
The Amended By-Laws provide for the election of the entire Board of Directors at
the first annual meeting following approval of these By-Laws. The terms of the
Directors will initially be for one, two, and three years. Thereafter, all terms
will be for three years. The provision enables the staggering of Director terms.
At all future meetings, a maximum of three Directors will be elected for full,
three year terms. The change will promote continuity and stability on the Board
while maintaining the accountability of the Directors to the Shareholders. This
provision also has been inserted as a defense to deter attempted acquisitions of
the Company which are not in the best interest of the Company.
This provision will be further discussed below.
Article III, Section 2 will be altered by the Amended By-Laws. The
original By-Laws provided for the filling of vacancies on the Board of Directors
by a simple majority vote by the Board of Directors. The Amended By-Laws require
a two-thirds (2/3) majority vote by the Board of Directors to fill a vacancy.
Any vacancy will be filled by the Board of Directors for the remaining term of
the departing Director. This change will ensure that vacancies will only be
filled by Directors that represent the will of the majority of the Shareholders.
This provision also has been inserted as a defense to deter attempted
acquisitions of the Company which are not in the best interest of the Company.
This provision will be further discussed below.
Article III, Section 3 will be altered by the Amended By-Laws. The
original By-Laws provided that a majority of shareholders may remove a Director
and is not in compliance with Nevada law. The Amended By-Laws alter the
provision in order to conform with Nevada law.
Article III, Section 4 will be added by the Amended By-Laws. The
provision enables the Directors, by a two-thirds vote, to remove another
Director. The provision has been inserted as a defense to deter attempted
acquisitions of the Company which are not in the best interest of the Company.
This provision will be further discussed below.
Article III, Section 5 will be altered by the Amended By-Laws. The
change allows all Committees of the Board to function after the resignation of a
Director.
Article III, Section 10 will be altered by the Amended By-Laws. The
Amended By-Laws slightly reword the provision to clarify that the Board of
Directors may meet using any and all forms of communication that allow each
Director to hear and be heard by all other Directors.
Article III, Section 11 will be altered by the Amended By-Laws. The
Amended By-Laws allow notice of Board meetings to be given to Directors using a
telefax.
Article III, Section 12 will be altered by the Amended By-Laws. The
Amended By-Laws insert the phrase, "the Articles of Incorporation, or these
By-Laws." after "... provided by statute." The change was made to increase the
number of situations in which the majority of a quorum may act in furtherance of
the interests of the Company.
Article VI will be altered by the Amended By-Laws. The Amended By-Laws
clarify that the Board may declare any dividend, particularly a cash or stock
dividend, that Nevada Law permits. In addition, the Amended By-Laws change
"Certificate of Incorporation" to "Articles of Incorporation" to reflect the
correct terminology used by the State of Nevada.
Article XI will be altered by the Amended By-Laws. The original By-Laws
required a majority vote by the Board to repeal, alter, or amend the By-Laws or
substitute new By-Laws. The Amended By-Laws require a two-thirds majority to
repeal, alter, amend, or substitute By-Laws. The provision promotes stability
and ensures that any change will reflect the will of the Shareholders.
The foregoing amendments to the By-Laws of the Company were adopted by
the Board of Directors on September 3, 1997. As permitted by Nevada law, the
By-Laws as originally adopted by Company as well as the Amended and Restated
By-Law provide that the By-Laws may be amended by a vote of the Board of
Directors of the Company. Management decided that it would submit the Amended
and Restated By-Laws for ratification by the Shareholders of the Company in
order that the Shareholders might be fully informed of the provisions governing
the day-to-day operations of the Company. A copy of the Amended and Restated
By-Laws of ITEX Corporation has been sent with this Proxy Statement.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 1.
<PAGE>
PROPOSAL NO. 2 -- ELECTION OF DIRECTORS
The Company's Board of Directors has nominated the candidates listed
below for election to the Company's Board of Directors for a one, two or three
year term and until their successors are elected and qualified. The change to
staggered elections for directors is a result of a recent amendment to the
bylaws of the Company by the Board of Directors as permitted by the bylaws. The
Board of Directors determined that in order to protect against a hostile
takeover of the Company and to assure continuity, it was advisable to stagger
the terms of the Company's nine directors so that no more than three directors
are elected in any one year.
In order to effect this change in the bylaws, it is necessary to elect
three directors to serve for a term of one year; three directors to serve a term
of two years; and three directors to serve a term of three years, or until their
successors are elected and qualified. As soon as this staggered schedule in
enacted, one-third of the Directors will be elected each year rather that the
entire Board as had previously been the case. If a Director resigns or otherwise
ceases to act as a Director prior to the completion of his or her term of
office, the Board of Directors is empowered to appoint a replacement Director
for the remainder of the term of the departing Director.
The Board of Directors has nominated Mary Scherr, Dr. Charles Padbury
and Vern O. Curtis to serve a one year term; Robert Nelson, Dr. Evan Ames and
Ronald P. Erickson to serve a two year term; and Graham Norris, Joseph Morris
and Dale Weight to serve a three year term.
Dr. Sherry Meinberg, previously a member of the Board resigned on
October 2, 1997 to devote more time to her writing, lecturing and educational
consulting activities. Ronald P. Erickson was elected by the Board of Directors
to serve Dr. Meinberg's unexpired term.
Nominees to the Board of Directors:
Graham H. Norris, Sr., CTB, age 55, President, CEO and Chairman of the Board of
Directors, Director since 1986, nominated to a three year term.
Mr. Norris, who was elected President and Chief Executive Officer of
the Company on September 6, 1996, has over 30 years experience in management and
finance. Prior to his becoming President of the Company, he had been a
consultant providing a variety of management consulting services to small
private and public corporations. After a period of transition in management of
the Company, Mr. Norris was elected Chairman of the Board of Directors in
addition to President and Chief Executive Officer. Mr. Norris has been a pilot
for United Airlines since 1963. He has been a director of the Company since
1986. In 1993, Mr. Norris became an ITEX Broker, operating an independent barter
office in Provo, Utah, in which capacity he earned the credential of Certified
Trade Broker.
Mary Scherr, CTB, age 60, Vice President of Broker Development, Director since
1986, nominated to a one year term.
Ms. Scherr has over fourteen years of experience within the barter
industry. Upon joining ITEX in 1984 as an independent broker, Ms. Scherr was
routinely recognized for outstanding sales performance. In fact, she was honored
with Broker of the Year for distinguishing herself among her Company peers. In
1993, Ms. Scherr was brought into the internal operations of ITEX as Vice
President of Broker Development. Ms. Scherr holds a Masters Degree from the
University of Iowa.
Charles T. Padbury, age 59, Director since 1992, nominated to a one year term.
Dr. Padbury is a Beaverton, Oregon dentist and has been a member of the
ITEX Retail Trade Exchange since 1985. Dr. Padbury has brought a wealth of
experience to the Board in terms of the interests, perceptions, and vantage
point of the ITEX client. During 1996 Dr. Padbury served briefly as Chairman of
the Board of Directors.
Robert Nelson, CPA, age 50, Director since 1995, nominated to a two year term
Mr. Nelson is a Certified Public Accountant in private practice in
Portland, Oregon specializing in tax accounting. He has also been an active
member of the ITEX Retail Trade Exchange, and expects to bring the advantages of
both of these experiences
<PAGE>
to the Board. Mr. Nelson received an MBA from Brigham Young University and is
still active in the BYU Management Society. He is a member of the American
Institute of CPAs and the Oregon Society of CPAs.
Evan B. Ames, age 58, Director since 1995, nominated to a two year term.
Dr. Ames acquired his Ph.D. in 1971 from Princeton University, majoring
in near eastern and Soviet studies. He has served with the Central Intelligence
Agency. In 1985 Mr. Ames became affiliated with R.L. Ball & Associates as an
investment researcher, analyst, and investment strategist. He is currently a
Registered Investment Adviser registered with the Securities & Exchange
Commission.
Joseph Morris, CPA, age 48, Director, Senior Vice President and Chief Financial
Officer, Director since 1995, nominated to a three year term.
Mr. Morris serves as both a Director and Senior Vice President and
Chief Financial Officer of ITEX. With over 15 years experience in and around the
barter industry, Mr. Morris has served as technical liaison between the
Financial Accounting Standards Board (FASB) and International Reciprocal Trading
Association (IRTA). He served as financial officer for Software-Intercomp, Inc.
of Denver Colorado, a publicly traded company on NASDAQ from 1984 through July
1995, except for the period 1988 to 1990. During that period, Mr. Morris was a
technical project manager with FASB. Mr. Morris is an accomplished CPA and
author of seven books on accounting practices. Mr. Morris was appointed Chief
Financial Officer of the Company on January 18, 1996.
Ronald P. Erickson, age 53, Director, nominated to a two year term, Director
since 1997.
Mr. Erickson is Chairman and Chief Executive Officer of GlobalTel
Resources, Inc., a provider of telecommunications services, messaging and
intranet solutions headquartered in Seattle, Washington. Mr. Erickson was
previously Chairman/Vice-Chairman/President and CEO of Egghead Software, Inc., a
software reseller, where he was also one of the company's founders.
He has been involved in various aspects of the microcomputer technology
industry for the past seventeen years. He was co-founder of Microrim, Inc., a
regional database software development company; was Chairman and CEO of NBI,
Inc. a software development and systems integration company; and has been an
investor and active director in a number of other technology companies including
Telecalc (telecommunications), Lone Wolf (multimedia networking), Pantheon
(Internet publishing), I.Q. Technology (computer connectivity), Digital Data
Networks (multimedia advertising) and AEI Music Network (global music sales and
distribution). He has a law degree and was a practicing attorney form 1975 to
the late 1980's. Earlier in his career he worked in Washington, D.C. as a White
House staff member.
Vern O. Curtis, age 63, nominated to a one year term.
Mr. Curtis is a private investor who resides in Portland, Oregon. From
1998 to 1991 he was Dean of the School of Business and Economics of Chapman
College, Orange, Californai. From 1968 to 1987 he was employed by Denny's Inc.
with which he served as Treasurer in 1969, Chief Financial Officer in 1971,
Executive Vice President and Director in 1978 and President and Chief Executive
Officer from 1980 until his retirement in 1987.
Mr. Curtis serves on the Boards of Directors of PIMCO Funds, a group of
mutual funds that manages $19 billionsecurities , primarily fixed income
securities; of PIMCO Commercial Mortgage Trust, Inc. (NYSE) a closed-end fund
specializing in investments in commercial mortgage-backed securities; a group of
Real Estate Investment Trusts (each listed on the ASE); and Fresh Choice, Inc.
(Nasdaq) a restaurant company with approximately 50 units operating primarily in
California.
G. Dale Weight, age , nominated to a three year term.
Dr. Weight is the dean of the Atkinson Graduate School of Management at
Willamette University in Salem, Oregon. Dr. Weight joined the university in 1990
after 20 years of private sector banking leadership including seven years as
chairman and CEO of a $5 billion Oregon-based bank. He has also served in the
public sector as a federal government economist with the federal reserve system
and as a fderal financial institution regulator. He has served as a member and
chairman of the Oregon State Board of Education, as chairman of the Associated
Oregon Industries Foundation, and as a member of the board of The Federal
Reserve Bank of San Francisco (Portland office), the Federal Home Loan Bank of
Seattle, and the Oregon Independent College Foundation. In addition to his
duties as dean and professor of finance at the Atkinson Graduate School of
Management, he currently serves as a
<PAGE>
member of Oregon Governor Kitzhaber's Council of Academic Advisors and as an
abritrator for the National Association of Securities Dealers. He currently is a
member of the board of directors of York Graphics, Inc. of York, Pennsylvania.
The ITEX Board of Directors has a standing audit committee comprised of
Mr. Nelson, Mr. Morris and Dr. Ames and a standing compensation committee
comprised of Dr. Padbury, Mr. Nelson and Dr. Ames. In the last fiscal year
(August 1, 1996 - July 31, 1997) there were five meetings of the Board of
Directors. There were two meetings each of the audit and compensation
committees. None of the Directors attended any less than 75% of the aggregate of
(1) the total number of meetings of the Board of Directors and (2) the total
number of meetings held by committees of the Board on which each such Director
served.
EXECUTIVE COMPENSATION
- ----------------------
Subject to Regulation S-K Item 402(1)(2)1 the only executive officer
for which disclosure is required is the President and CEO, Graham H. Norris. No
other officers received compensation in excess of $100,000 although Paul
Shakeshaft, who works with corporate trade but is not an executive officer,
earned $114,833.19. Table No. 1 lists the compensation paid for Fiscal Year
1996-97.
Table No. 1
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Awards Payouts
-------------------- -------
Name and Annual Compensation Restricted
Principal ------------------------------ Stock Options/ LTIP All Other
Position Year Salary($) Bonus($) Other($) Award($) SARs(#) Payouts Compensation
- ---------------- ---- --------- --------- -------- ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Graham H. Norris 1997 $ $ -0- $ $ -0- -0- $ -0- $ -0-
CEO
Paul Shakeshaft 1997 $ $ -0- $ $ -0- -0- $ -0- $ -0-
</TABLE>
Table No. 2
Option/SAR Grants in Last Fiscal Year
Options Percent of Exercise Expiration
Name Granted(#) Total Options Price Date
Graham H. Norris, CEO
As of August 1, 1996, Outside Directors (i.e., Directors who are not employees
of the Company) have received $500 per Board meeting attended in person or by
telephone and members of Board committees have received $250 per committee
meeting attended. In addition, all Directors serving on January 1, 1997 were
issued 1,000 shares of the Company's restricted common stock and received the
option to acquire a minimum of 2,500 additional shares pursuant to an Employees
Incentive Stock Option Plan with the exercise price being the closing bid price
of the stock on the trading day before the grant is made. No funds were set
aside or accrued by the Company during Fiscal 1996 ending July 31, 1996 to
provide pension, retirement or similar benefits for Directors or Executive
Officers, other than those who are covered by the Company's 401(K) plan as
employees of the Company.
In order to attract and retain individuals of exceptional qualifications to
serve on the Board of Directors, on September 6, 1997, the Directors adopted a
plan whereby each Outside Director is to be paid $20,000 per annum in equal
monthly installments, will be issued 2,500 shares of common stock on January 2
of each year in which he or she served as a Director and will be granted the
option to acquire 10,000 shares of the Company's common stock at an exercise
price equal to the trading price of the Company's shares on January 2. In
addition, attendance at all committee meetings shall be compensated at the rate
of $750 per meeting with the chairperson of the committee receiving $1,000 per
meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------
<PAGE>
Table No. 3 lists as of November 21, 1997 the shareholdings of all Directors and
Executive Officers and amount of Registrant's voting securities owned by all
officers and directors as a group.
Table No. 3
Shareholdings of Directors and Executive Officers
Title of Name of Amount and Nature % of
Class Beneficial Owner of Beneficial Ownership Class
- --------- ---------------------- ----------------------- ------
Common Graham H. Norris, Sr. 487,106 4.2%
(78,106 shares,
409,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Ronald P. Erickson -0- 0%
- --------- ---------------------- ----------------------- ------
Common Mary Scherr 216,500 1.8%
(13,100 shares,
203,400 stock options)
- --------- ---------------------- ----------------------- ------
Common Dr. Charles Padbury 88,055 0.7%
(15.055 shares,
73,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Robert Nelson, CPA 62,547 0.5%
(2,547 shares,
60,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Dr. Evan B. Ames 62,500 0.5%
(2,500 shares,
60,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Gerald Pitts 50,000 0.4%
(-0- shares,
50,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Joseph Morris, CPA 199,500 1.7%
(3,500 shares,
196,000 stock options)
- --------- ---------------------- ----------------------- ------
Common Sondra Ames 6,505 0.1%
Vice President (5 shares,
6,500 options)
- --------- ---------------------- ----------------------- ------
Common Donovan C. Snyder 38,800 0.3%
(1,000 shares,
37,800 stock options)
- --------- ---------------------- ----------------------- ------
Total Directors and Executive Based upon 11,735,774 shares 10.2%
Officers (7,363,796 shares issued,
4,371,978 stock options)
- --------- ---------------------- ----------------------- -----
As of November 21, 1997 and including the options described in Proposals 5 and
6.
<PAGE>
Table No. 4 lists persons or companies holding over 5% beneficial ownership of
Registrant's outstanding stock as of November 21, 1997:
Table No. 4
5% or Greater Shareholders
Title of Name and address Amount and Nature % of
Class of Beneficial Owner of Beneficial Class
Ownership
- --------- ---------------------- ----------------------- -----
Common Terry Neal 734,088 6.3%
3295 NW 113th Place (275,588 shares owned,
Portland, OR 97229 8,500 shares beneficially
owned, 450,000 options)
- --------- ---------------------- ----------------------- -----
Common Bailey Mutual Fund 750,000 6.4%
C/O Holland Trust (250,000 shares owned,
Financial Services 500,000 warrants)
Haaksbergweg 55 1101 BR
Amsterdam ZO
The Netherlands
- --------- ---------------------- ----------------------- -----
Common Newcastle Services, Ltd 714,625 6.1%
P.O. Box 461 (314,625 shares owned,
Nova Scotia Bldg. 400,000 warrants)
Main Street
Charlestown, Nevis
West Indies
- --------- ---------------------- ----------------------- -----
Total 5%Based upon 11,735,774 shares Outstanding at 18.8%
(7,363,796 shares issued, 11/27/97
4,371,978 stock options and
warrants)
<PAGE>
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH OF THE NOMINEES TO THE BOARD OF
DIRECTORS. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN
PERSON OR BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE ELECTION OF
EACH DIRECTOR NOMINEE.
PROPOSAL NO. 3 -- AMENDING THE CAPITALIZATION PROVISION IN THE ARTICLES OF
INCORPORATION
Paragraph Fourth of the Articles of Incorporation of the Company
provides for a maximum number of share of authorized, voting Common Stock of
twenty million (20,000,000) shares. Under this maximum, the number of
outstanding shares, options, and warrants is greater than half of the maximum
number of authorized, voting Common Stock. Therefore, the Company is precluded
from declaring a stock dividend or a stock split. This proposal will increase
the total capital of the Company to fifty million (50,000,000) shares. The
maximum number of shares of authorized, voting Common Stock shall be forty-five
million (45,000,000) shares. The remaining five million (5,000,000) shares shall
be Preferred Stock. In accordance with Nevada Law, the Board of Directors will
be authorized to make a resolution issuing a series of Preferred Stock
consisting of a number of shares specified in the resolution. The resolution
will also specify the voting powers, preferences, limitations, restrictions,
relative rights and distinguishing designations of the series of Preferred
Stock. The increased number of shares is necessary to preserve flexibility in
possibly declaring a stock dividend, stock split, or conducting any other
business on behalf of the Company. The ability of the Board of Directors to
create a class or classes of Preferred Stock is also considered by Management to
be necessary to give the Company additional flexibility in raising capital by
means of the issuance of securities other than Common Stock.
<PAGE>
This Amendment may be also act as a defense to deter attempted
acquisitions of the Company which are not in the best interest of the Company.
Increasing the maximum number of authorized, voting Common Stock will enable the
Company to issue more outstanding stock which will have the effect of diluting
the control of individual Shareholders and may reduce the stock price. Creating
a class of Preferred Stock will enable the Company to issue stock with increased
voting rights which will have the effect of diluting the control of individual
Shareholders. Although these provisions may also make mergers or the assumption
of control by a principal shareholder more difficult, thus rendering the removal
of management more difficult, management believes that this proposal is
necessary for the continued prosperity of the Company. The Company is a leader
in a unique field which requires a high level of expertise and specialized
skills. However, the pool of knowledgeable management which is capable of
skillfully guiding the Company is small. Therefore, management believes that
efforts to acquire the Company and unilaterally replace management will impair
operation of the Company and the ITEX Retail Trade Exchange, reducing the
profitability of the Company and the stock price. Management believes that this
proposal is to the benefit of the Company and will inure to the benefit of the
Shareholders.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
3. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
PROPOSAL NO. 4 -- ADOPTION OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
The body of the ITEX Corporation Articles of Incorporation has not been
revisited since the Company was called ITEX Barter Systems, Inc. The body of the
Articles of Incorporation have been amended, but remain substantially similar to
the original Articles of Incorporation for The Magneto-Electric Company
(hereafter, "Original Articles"). The Original Articles will be re-entitled
"Amended and Restated Articles of Incorporation of ITEX Corporation" (hereafter,
"Restated Articles").
Paragraph First of the Original Articles recites the name of the
Company and will not be altered by the Restated Articles.
Paragraph Second of the Original Articles will be altered by the
Restated Articles. The Restated Articles list the correct address for the Nevada
registered office of the Company. The Restated Articles also expressly state
that the Company may maintain offices in locations outside the State of Nevada.
Paragraph Third of the Original Articles authorizes the Company to
conduct all lawful business and will not be altered by the Restated Articles.
Changes to Paragraph Fourth of the Original Articles are addressed in,
and will be adopted by the Shareholders by an affirmative vote on, Proposal No.
3 of this Proxy Statement.
Paragraph Fifth of the Original Articles will be altered by the
Restated Articles. The Restated Articles expressly state that the Company will
be governed by Directors and, because Nevada law requires the listing of current
directors when a corporation restates its articles of incorporation, the
Corporation's Restated Articles list the current Board.
Paragraph Sixth of the Original Articles states that the Company will
maintain a perpetual existence and will not be altered by the Restated Articles.
Paragraph Seventh of the Original Articles provides that the
Corporation's business will be conducted by the Corporation's Officers and other
persons as provided in the By-Laws and will not be altered by the Restated
Articles.
Paragraph Eighth of the Original Articles authorizes the Company to
hold real and personal property and will not be altered by the Restated
Articles.
Paragraph Ninth of the Original Articles, which relates to the amount
of debt the Company may incur, will not be altered by the Restated Articles.
Paragraph Tenth of the Original Articles protects the Shareholders from
liability for corporate debts and will not be altered by the Restated Articles.
<PAGE>
Paragraph Eleventh of the Original Articles enumerates the powers of
the Directors and will be altered by the Restated Articles. The Restated
Articles modify the first sentence to expressly state and to clarify
pre-existing language that stated that the list of enumerated powers in
Paragraph Eleventh is neither exclusive nor comprehensive.
The Restated Articles add Paragraph Twelfth to specify the name and
address of the registered agent of the Company. The Paragraph was added to
comply with Nevada law requirements that corporations must meet when restating
their articles of incorporation.
The Restated Articles add Paragraph Thirteenth. The Original Articles
were silent and did not make any provision that granted Shareholders, as a
matter of right, the opportunity to subscribe for or receive additional stock.
Paragraph Thirteenth explicitly states what was understood under the Original
Articles and allows the Board of Directors, in its discretion, to issue
additional stock to Shareholders.
The Restated Articles add Paragraphs Fourteenth and Fifteenth to
promote the attraction of qualified people to serve as Officers and Directors of
the Company and to promote the retention of those qualified people. The
provisions are necessary to protect Directors and Officers from certain
litigation, however, the protections are provided only to the extent authorized
by the Nevada Revised Statutes.
The Restated Articles add Paragraph Sixteenth to preserve the right of
the Company to alter its Articles of Incorporation. The provision is necessary
to give the Company freedom to respond in a manner most beneficial to the
Company.
A copy of the Amended and Restated Articles of Incorporation of ITEX
Corporation has been sent with this Proxy Statement.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
3. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
PROPOSAL NO. 5 -- REQUESTED SHAREHOLDER ACTION ON THE COMPANY'S 1997 INCENTIVE
STOCK OPTION PLAN
Management believes that the Company's long-term growth is dependent
upon the performance and efforts of management and staff. It is considered
appropriate for the Company to provide incentives for superior performance in
the form of options to acquire the Company's stock. For that reason, the Board
of Directors adopted an incentive stock option plan as of December 27, 1996.
Under the Plan, the Company may grant to the Optionee during the period ending
on a date not more than five years from the date of the grant, the option to
purchase common stock of the Company at a price per share equal to the bid price
of the Company's traded common stock on the date of the grant of the option.
Such options vest when they are granted. The Company did not receive nor will it
receive any consideration for the granting of the options.
At the last Annual Meeting of Shareholders, not enough shares held in
street name were voted to approve the plan. By a margin of almost 3 to 1, those
shareholders who voted on the proposal approved it. However, because the holders
of stock in street name are not permitted to vote on proposals such as this one,
and since street name holders of the Company's stock did not vote in sufficient
numbers to constitute a quorum for acting on that proposal, ratification of this
plan was not achieved.
This lack of ratification did not mean that the Option were not
granted. Those options were validly approved by the Board of Directors. The
effect of the Shareholder non-vote on the proposal simply precluded the Company
from filing an S-8 Registration Statement on those shares thus making it
practically impossible for Officers and Directors to exercise those options
without subsequently holding the stock issued on exercise for a period in excess
of one year. This effectively negated the desirablity of the options both as a
method of compensating the Officers and Directors and as a source of additional
income to the Company which is realized on the payment of the exercise price of
the options.
In order to solve the problems arising from the non-votes on the issue,
Management is again presenting the identical 1997 Employee Incentive Stock
Option Plan for Shareholder action along with Proposal No. 5 which involves the
1998 Employee Incentive Stock Option Plan.
<PAGE>
The following options were granted on December 27, 1996 at an exercise
price of $3.75 per share, the price at which the Company's stock was trading on
that date:
a. Members of the Board of Directors each received an option to
purchase 10,000 shares.
b. Vice Presidents and vice president level managers each received
the option to acquire 25,000 shares.
c. Graham H. Norris received an option to purchase 200,000 shares
in connection with his acceptance of the position of Chief
Executive Officer of the Company.
d. Mr. Norris was granted the authority to award up to a total of
100,000 options to employees or brokers of the Company.
e. Consultants to the Company Peter Grandich (Peter Grandich
Company), Mary Martin (Hamilton-Martin Group) and Jim Schilling
(West Coast Consultants) each received an option to acquire 50,000
shares for 1997.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS TABLE
Class of stock Name and Position Number of Securities Underlying
underlying Options of Optionee Options Granted
- -------------------- -------------------------------------------------- -------------------------------
<S> <C> <C>
Common Graham H. Norris, President, CEO and Director 210,000
- -------------------- -------------------------------------------------- -------------------------------
Common Each Director serving on 12/27/96 (8 persons) 10,000
- -------------------- -------------------------------------------------- -------------------------------
Common Vice Presidents and vice president level 25,000
managers (5 persons)
- -------------------- -------------------------------------------------- -------------------------------
Executive Group (6 persons) 415,000
- -------------------- -------------------------------------------------- -------------------------------
Non-Executive Director Group (5 persons) 50,000
- -------------------- -------------------------------------------------- -------------------------------
</TABLE>
Federal Income Tax Consequences
The Company intends that options granted under the plan will qualify
as "incentive stock options" ("ISO") under section 422 ("section 422") of the
Internal Revenue Code. The following discussion of the federal income tax
consequences of participation in the Plan therefore assumes that: the Plan
satisfies the requirements of section 422; that all options granted will, when
granted, qualify under section 422 as ISOs and will continue to so qualify at
all times until exercise; and that optionees are, at all times beginning with
the Date of Grant and ending on the day three months before the date of
exercise, be "employees" within the meaning of section 422(a)(2). This
discussion is only a summary, does not purport to be complete, and does not
cover, among other things, state and local tax consequences. Differences in
participants' financial situations may cause federal, state, and local tax
consequences of participation in the Plan to vary and no assurances are or will
be given to any participant regarding the tax consequences of participating in
the Plan. Accordingly, the Company urges each participant in the Plan to consult
his or her own accountant, legal counsel or other financial advisor regarding
the tax consequences of participation in the Plan. This discussion is based on
the provisions of the Code and applicable regulations thereto, as presently in
effect.
Incentive Stock Options
Under the current provisions of the Code, the optionees in an incentive
stock option plan will not recognize income at the time of the grant of the ISO.
In addition, the optionee will generally not recognize income upon exercise of
the ISO and receipt of the stock subject thereto (the "option stock"). However,
the Company will not be entitled to a deduction for compensation expense in
connection with granting the ISO. Also, unless the holder disposes of the option
stock in a disqualifying disposition, as described below, the Company will not
be entitled to a deduction in connection with issuing the option stock.
<PAGE>
The tax consequences to the holder upon disposition of the option stock
will depend on whether the disposition occurred within the statutory holding
period. The holding period is the later of two years from the Date of Grant or
one year from the transfer of the option stock to the optionee on exercise. If
the employee-holder disposes of the option stock after the holding period
expires, then the disposition is considered a qualifying disposition and the
employee will be entitled to capital gain treatment on the difference between
the amount he or she receives from the disposition of the option stock and his
or her tax basis in the option stock. In a qualifying disposition, the holder's
basis is the amount paid on exercise of the option.
A disposition during the holding period is a disqualifying disposition.
When a disqualifying disposition occurs the employee must recognize compensation
income in the amount of the bargain purchase element of the option stock the
holder disposes of. The bargain purchase element is the difference between the
exercise price and the fair market value of the option stock on the date of
exercise. The gain attributable to the bargain purchase element is then added to
the holder's basis in the option stock to determine gain or loss on the
disposition. The gain (or loss) resulting from the disqualifying disposition
(i.e. the difference between the proceeds received on disposition and the tax
basis) is a capital gain (or loss). The shareholder must recognize the income
attributable to the bargain purchase element and the capital gain or loss in the
year when the disqualifying disposition occurs. From the Company's perspective,
the Company may deduct, as compensation expense, an amount equal to the
compensation income the employee recognizes on the bargain purchase element. The
Company would be entitled to such a deduction during the year in which the
disqualifying disposition occurs.
The foregoing discussion assumes the fair market value of option stock
exercisable by an optionee does not exceed the value limitation of section
422(d) of the Code. Section 422(d) limits the aggregate fair market value of ISO
stock exercisable in any calendar year to $100,000, based on the fair market
value of the option stock on the Date of Grant. The aggregate fair market value
of option stock first exercisable in any one year that exceeds $100,000 is not
ISO stock and is treated as stock subject to a non-qualified option. Generally,
on exercise of a non-qualified stock option the holder will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price. The Company will be entitled to expense as
compensation the amount of ordinary income which the holder thus recognizes.
Upon the sale of the non-qualified option stock, the holder will recognize short
term or long term capital gain, or loss, as the case may be, in an amount equal
to the difference between the amount he or she receives from the sale of those
shares and his or her tax basis. The holder's tax basis will generally be the
exercise price paid plus the amount of ordinary income recognized.
In order for this plan to qualify, shareholder approval is necessary. A
total of 1,000,000 shares of the Company's common stock will be set aside for
grants under the plan, both those made as of December 27, 1996 and those which
may be made in the future.
Interests of Directors and Executive Officers in this Proposal. Those
Directors and Executive Officers listed above have a substantial interest in
this matter to be acted upon by the shareholders.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
5. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
PROPOSAL NO. 6 -- REQUESTED SHAREHOLDER ACTION ON THE COMPANY'S 1998 INCENTIVE
STOCK OPTION PLAN
Judging especially by the practice in other successful companies,
Management remains committed to the belief that the Company's long-term growth
is dependent upon the performance and efforts of management and staff. The
Company is a leader in a unique industry which requires a high level of
expertise and specialized management skills. However, the pool of knowledgeable
management which is capable of skillfully guiding the Company is small.
Therefore, Management believes that the recruitment and retention of individuals
highly skilled in the operation of a Retail Trade Exchange and similarly skilled
in corporate trade transactions requires incentive compensation in the form of
stock options.
Conversely, the inability of the Company to retain and recruit skilled
Management would be expected to impair operation of the Company and the ITEX
Retail Trade Exchange, reducing the profitability of the Company and the value
of the Company to its shareholders. Management believes that the grant of
incentive stock options is to the benefit of the Company and will help to ensure
the continued viability of the Company as the leader in a specialized industry
to the benefit of the Shareholders.
<PAGE>
It is considered appropriate for the Company to provide incentives for
superior performance in the form of options to acquire the Company's stock. For
that reason, the Board of Directors adopted an incentive stock option plan as of
September 3, 1997. Under the Plan, the Company may grant to the Optionee during
the period ending on a date not more than ten years from the date of the grant,
the option to purchase common stock of the Company at a price per share equal to
the bid price of the Company's traded common stock on the date of the grant of
the option. Such options vest when they are granted. The Company did not receive
nor will it receive any consideration for the granting of the options. Hoever,
the Company will received the exercise price on these option, $3.1875 per share,
upon exercised of the options.
If this Plan is not approved by Shareholders it will not mean that the
Option were not granted. Those options were validly approved by the Board of
Directors. The effect of a Shareholder no vote or non-vote on the proposal would
simply preclude the Company from filing an S-8 Registration Statement on those
shares thus making it practically impossible for Officers and Directors to
exercise those options without subsequently holding the stock issued on exercise
for a period in excess of one year. The effective of a Shareholder no vote or
non-vote would be to negate the desirablity of the options as a method of
compensating the Officers and Directors and to deprive the Company of a source
of additional cash which is realized on the payment of the exercise price of the
options.
The following options were granted on September 3, 1997 at an exercise
price of $3.1875 per share, the price at which the Company's stock was trading
on that date:
a. Members of the Board of Directors each received an option to
purchase 50,000 shares.
b. Vice President Gerald Pitts was granted the option to acquire
75,000 shares and, based upon her several years of service as a
vice president, Mary Scherr was granted the option to acquire
90,000 shares. In addition, Senior Vice President and CFO Joseph
Morris was granted the option to acquire 125,000 shares and
President and CEO Graham Norris was granted the right to acquire
175,000 shares.
c. In recognition of extraordinary service to the Company, ITEX
USA, Inc. received an option to purchase 50,000 shares and Edward
Wittman was granted the right to acquire 50,000 shares in
connection with his acceptance of the position of Director of
Business Development for the Company.
d. Mr. Norris was granted the authority, with the concurrence of
the Board of Directors to award up to a total of 200,000 additonal
options to employees or brokers of the Company.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS TABLE
- -------------------- -------------------------------------------------- -------------------------------
Class of stock Name and Position Number of Securities Underlying
underlying Options of Optionee Options Granted
- -------------------- -------------------------------------------------- -------------------------------
<S> <C> <C>
Common Graham H. Norris, President, CEO 175,000
- -------------------- -------------------------------------------------- -------------------------------
Common Each Outside Director serving on 09/03/97, 200,000
50,000 shares (4 persons)
- -------------------- -------------------------------------------------- -------------------------------
Common Vice President Mary Scherr (90,000), Vice 315,000
President Gerald Pitts (70,000) and Senior Vice
President Joseph Morris (125,000)
- -------------------- -------------------------------------------------- -------------------------------
Executive Group (6 persons) 465,000
- -------------------- -------------------------------------------------- -------------------------------
Non-Executive, Director Group (4 persons) 200,000
- -------------------- -------------------------------------------------- -------------------------------
</TABLE>
<PAGE>
Federal Income Tax Consequences
The Company intends that options granted under the plan will qualify
as "incentive stock options" ("ISO") under section 422 ("section 422") of the
Internal Revenue Code. The following discussion of the federal income tax
consequences of participation in the Plan therefore assumes that: the Plan
satisfies the requirements of section 422; that all options granted will, when
granted, qualify under section 422 as ISOs and will continue to so qualify at
all times until exercise; and that optionees are, at all times beginning with
the Date of Grant and ending on the day three months before the date of
exercise, be "employees" within the meaning of section 422(a)(2). This
discussion is only a summary, does not purport to be complete, and does not
cover, among other things, state and local tax consequences. Differences in
participants' financial situations may cause federal, state, and local tax
consequences of participation in the Plan to vary and no assurances are or will
be given to any participant regarding the tax consequences of participating in
the Plan. Accordingly, the Company urges each participant in the Plan to consult
his or her own accountant, legal counsel or other financial advisor regarding
the tax consequences of participation in the Plan. This discussion is based on
the provisions of the Code and applicable regulations thereto, as presently in
effect.
Incentive Stock Options
Under the current provisions of the Code, the optionees in an incentive
stock option plan will not recognize income at the time of the grant of the ISO.
In addition, the optionee will generally not recognize income upon exercise of
the ISO and receipt of the stock subject thereto (the "option stock"). However,
the Company will not be entitled to a deduction for compensation expense in
connection with granting the ISO. Also, unless the holder disposes of the option
stock in a disqualifying disposition, as described below, the Company will not
be entitled to a deduction in connection with issuing the option stock.
The tax consequences to the holder upon disposition of the option stock
will depend on whether the disposition occurred within the statutory holding
period. The holding period is the later of two years from the Date of Grant or
one year from the transfer of the option stock to the optionee on exercise. If
the employee-holder disposes of the option stock after the holding period
expires, then the disposition is considered a qualifying disposition and the
employee will be entitled to capital gain treatment on the difference between
the amount he or she receives from the disposition of the option stock and his
or her tax basis in the option stock. In a qualifying disposition, the holder's
basis is the amount paid on exercise of the option.
A disposition during the holding period is a disqualifying disposition.
When a disqualifying disposition occurs the employee must recognize compensation
income in the amount of the bargain purchase element of the option stock the
holder disposes of. The bargain purchase element is the difference between the
exercise price and the fair market value of the option stock on the date of
exercise. The gain attributable to the bargain purchase element is then added to
the holder's basis in the option stock to determine gain or loss on the
disposition. The gain (or loss) resulting from the disqualifying disposition
(i.e. the difference between the proceeds received on disposition and the tax
basis) is a capital gain (or loss). The shareholder must recognize the income
attributable to the bargain purchase element and the capital gain or loss in the
year when the disqualifying disposition occurs. From the Company's perspective,
the Company may deduct, as compensation expense, an amount equal to the
compensation income the employee recognizes on the bargain purchase element. The
Company would be entitled to such a deduction during the year in which the
disqualifying disposition occurs.
The foregoing discussion assumes the fair market value of option stock
exercisable by an optionee does not exceed the value limitation of section
422(d) of the Code. Section 422(d) limits the aggregate fair market value of ISO
stock exercisable in any calendar year to $100,000, based on the fair market
value of the option stock on the Date of Grant. The aggregate fair market value
of option stock first exercisable in any one year that exceeds $100,000 is not
ISO stock and is treated as stock subject to a non-qualified option. Generally,
on exercise of a non-qualified stock option the holder will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price. The Company will be entitled to expense as
compensation the amount of ordinary income which the holder thus recognizes.
Upon the sale of the non-qualified option stock, the holder will recognize short
term or long term capital gain, or loss, as the case may be, in an amount equal
to the difference between the amount he or she receives from the sale of those
shares and his or her tax basis. The holder's tax basis will generally be the
exercise price paid plus the amount of ordinary income recognized.
In order for this plan to qualify, shareholder approval is necessary. A
total of 965,000 shares of the Company's common stock will be set aside for
grants under the plan, both those made as of September 3, 1997 and those which
may be made in the future.
<PAGE>
Interests of Directors and Executive Officers in this Proposal. Those
Directors and Executive Officers listed above have a substantial interest in
this matter to be acted upon by the shareholders.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO.
6. A MAJORITY OF THE VOTES CAST BY A QUORUM OF SHARES IN ATTENDANCE IN PERSON OR
BY PROXY AT THE ANNUAL MEETING WILL BE REQUIRED FOR THE APPROVAL OF THIS
PROPOSAL.
NOTICE CONCERNING NEXT YEAR'S ANNUAL MEETING: The date by which proposals of
security holders intended to be presented at the next Annual Meeting must be
received by the Company for inclusion in its proxy statement and form of proxy
relating to that Meeting is September 10, 1998.
OTHER BUSINESS
While the Notice of Annual Meeting of Shareholders provides for
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any other matters to be presented at the
meeting other than those referred to in this Proxy Statement. If any other
business requiring a vote of the shareholders should come before the meeting,
the persons designated as your proxies will vote or refrain from voting in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS:
Graham H. Norris, Sr., President, CEO and Chairman of the Board
<PAGE>
EXHIBIT
Stock Option Plan
ITEX CORPORATION
1996-97 KEY EMPLOYEES' INCENTIVE
STOCK OPTION PLAN
SECTION 1. PURPOSE
The continued growth and success of ITEX CORPORATION (the
"Corporation") depend in part on its ability to obtain and retain the services
of key employees of the highest competence, and to provide incentives for the
effective service of high-level performance. The purposes of this Key Employees'
Incentive Stock Option Plan (the "Plan") are to provide a means whereby the
Corporation can continue to attract, motivate, and retain key employees who can
contribute materially to the Corporation's growth and success, and to facilitate
the acquisition of shares of the Corporation's common stock, par value $0.01 per
share (the "Stock") by key employees pursuant to the options meeting the
requirements of IRC ss. 422, so that such key employees will more closely
identify their interests with those of the Corporation and its shareholders.
SECTION 2. STOCK
The Stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Stock. Subject to the
adjustments described in Section 6 of the Plan, the aggregate number of shares
that may be issued pursuant the to the Plan shall not exceed 1,000,000 shares.
In the event that any outstanding option granted under the Plan for any reason
expires or is terminated, the shares of Stock allocable to the unexercised
portion of such option may again be subjected to the grant of options under the
Plan.
SECTION 3. ELIGIBILITY
The individuals who may participate in this Plan are employees of the
Corporation and its subsidiaries, including officers and directors, non-employee
directors and other individuals who are not employees of the Corporation,
including consultants and advisors; provided however, consultants and advisors
may participate only if they render bona fide services to the Corporation that
are not in connection with the offer or sale of securities in a capital-raising
transaction. The stock option committee (the "Committee") of the Corporation's
board of directors (the "Board") or the non-employee directors of the Board (if
no such committee is in place) may determine from time to time which eligible
individuals will participate in the Plan. No otherwise eligible individual shall
have any right to participate in this Plan unless designated by the Committee or
the Board. Participants shall receive options to purchase Stock subject to the
provisions of this Plan and, to the extent not inconsistent with this Plan, the
terms of his or her stock option agreement.
SECTION 4. EMPLOYEE AND CONSULTANTS OPTIONS
Employees of the Corporation and its subsidiaries, including officers
and directors and other individuals who are not employees of the Corporation,
including consultants and advisors shall be granted such options as may be
determined by the Committee or the non-employee directors of the Board if no
such committee is in place. Consultants and advisors may participate only if
they render bona fide services to the Corporation that are not in connection
with the offer or sale of securities in a capital-raising transaction.
SECTION 5. NON-EMPLOYEE DIRECTORS OPTIONS
Awards of stock options to Non-Employee Directors shall be made only
under this Section 5. No perosn, including the members of the Board or the
Committee, shall have any discretion as to the selection of eligible recipients
or the determination of the amount or terms of such awards pursuant to this
Section 5.
5.1 Initial Director Options. Upon the effective date of the Plan the
Non-Employee Directors shall each receive an Initial Option to acquire 10,000
Shares at an exercise price of $3.75 per share which is the Fair Market Value of
a share of the common stock of the Corporation on the Effective Date hereof.
Each person who becomes a Non-Employee Director after the Effective Date shall
be granted an Initial Option to purchase 10,000 Shares, with an exercise price
equal to the Fair Market Value of the Corporation's common stock on the date of
grant.
<PAGE>
5.2 Renewal Director Options. Each Non-Employee Director shall be
granted an option to purchase 1,000 Shares for each year of service as a
Non-Employee Director on the December 15 prior to the Annual Meeting of
Shareholders, with an exercise price equal to the Fair Market Value of the
Corporation's common stock on such date.
SECTION 6. ADMINISTRATION
The Board shall administer the Plan. Subject to compliance with
applicable provisions of the governing law, the Board may delegate
administration of the Plan, or specific administrative duties on such terms as
the Board deems proper, to the Committee. The Committee shall be composed of not
less than three members of the Board. The term the "Board" shall be deemed to
replace the term "Committee" until a Committee is duly appointed or, if there is
a vacancy on the Committee, until a replacement or successor director is
appointed and qualified. The Committee shall have full power and authority,
subject to the provisions of the Plan, to:
(1) To determine eligibility to participate in the Plan and
designate participants;
(2) Determine the number of options to be granted to each
participant;
(3) Determine the terms of option agreements for each option;
(4) Supervise administration of the Plan;
(5) Interpret the provisions of the Plan and option agreements
granted under it; and
(6) Take all action in connection with the Plan as it deems
necessary or advisable.
Decisions of the Committee shall be final. More than one option may be
granted to the same individual. No member of the Committee or the Board shall be
liable for any action or determination made in good faith with respects to the
Plan or any option granted under it.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
Options under the Plan granted by the Committee shall be evidenced by
stock option agreements in such form as the Committee shall from time to time
approve, and shall comply with and be subject to the following terms and
conditions.
7.1 Number of Shares. Each option agreement shall state the number of
shares of Stock subject to the option.
7.2 Option Price. Each option agreement shall state the option price,
which shall be not less than 100% (110% for 10% Shareholders, as defined below)
of the fair market value, on the date the option is granted, of the shares of
Stock subject to the option. A "10% Shareholder" is any person who, at the time
an option is granted, owns stock of the Corporation possessing more than 10% of
the combined voting power of all classes of stock of the Corporation or any
affiliate.
7.3 Determination of Fair Market Value. The fair market value per share
of Stock shall be determined by the Committee in good faith at the time the
option is granted.
7.4 Option Period and Limitations on Exercise. Each option shall expire
and shall not be exercisable after the expiration of 10 years (five years for
10% Shareholders) from the date the option is granted, or such lesser period as
may be established by the Committee at the time the option is granted. Each
option shall be exercisable by the optionee either immediately or after such
period, and according to such schedule for exercise, or in such other manner as
the Committee shall provide in the option agreement at the time the option is
granted.
Notwithstanding any other provision of the Plan, and unless otherwise
resolved by the Committee, options granted to employees of the Corporation under
the Plan shall be exercisable only while the optionee remains an employee of the
Corporation, except that in the event of (1) an optionee's termination of
employment with the Corporation by reason of disability (within the meaning of
IRC ss.22(e)(3), or (2) an optionee's death while an employee of the
Corporation, the option agreement may allow the option to remain exercisable, to
the extent it was exercisable on the date of termination or the date of death,
by the optionee or the estate or devisee of the decedent, until the expiration
date of the term of the option or one year after the date of the optionee's
termination of employment or death, whichever date is earlier.
<PAGE>
7.5 Securities Restrictions. All option agreements evidencing options
granted under the Plan shall provide that:
(1) If the Committee at any time determines that registration or
qualification of the Stock or any option under state or
federal law or the consent or approval of any governmental
regulatory body, is necessary or desirable, then the option
may be not be exercised, in whole or in part, until that
registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not
acceptable to the Committee.
(2) Any person exercising an option to purchase shares of Stock
may be required by the Corporation to give a written
representation that he or she is acquiring the shares for his
or her own account for investment and not with a view to the
distribution of the shares.
7.6 Payment of Purchase Price. The option price upon exercise of an
option under the plan shall be payable to the Corporation in cash or, in the
discretion of the Committee, in installments or terms and over periods as the
Committee shall determine.
7.7 Nontransferability. Options shall not be transferable except by
testamentary will or the laws of descent and distribution, and shall be
exercisable during an optionee's lifetime only be the optionee.
7.8 Other Provisions. Any option agreement may contain other or
additional terms and provisions as may be determined by the Committee to be
consistent with the Plan, or necessary or desirable to comply with the
provisions of applicable laws, rules, or regulations.
SECTION 8. ADJUSTMENT
In the event of any stock split or payment of a dividend on Stock
payable in shares of Stock after or at the same time the Plan is approved by the
Corporation's shareholders, the shares of Stock then subject to each option (and
the number of such shares which, pursuant to Section 2 of the Plan, may be
issued under the Plan) shall be increased proportionately without any change in
their aggregate purchase price. In the event all the outstanding shares of Stock
shall be changed into or exchanged for a different number or class of shares of
the corporation, or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger, consolidation,
or otherwise, then there shall be substituted for each share of Stock then
subject to each option (and if the Corporation is the surviving corporation in
such transaction, for the number of shares which, pursuant to Section 2 of the
Plan, may be issued under the Plan), the number and class of shares into which
each outstanding share of Stock shall be so exchanged, all without any change in
the aggregate option price for the shares then subject to option. In connection
with any adjustment under this Section 8 resulting in a fractional share
interest, the interest may be rounded down to the nearest whole share if the
interest is less than 0.5 share; otherwise, the fractional share interest may be
rounded up to the nearest whole share.
SECTION 9. PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to the Plan will be used for general corporate purposes.
SECTION 10. OBLIGATION TO EXERCISE; RIGHT TO CONTINUED EMPLOYMENT
The granting of an option shall impose no obligation on the optionee to
exercise the option. The granting of an option does not confer any right to be
continued in the employment of the Corporation.
SECTION 11. AMENDMENT AND DISCONTINUANCE
The Board may alter, amend, suspend, or terminate the Plan, provided
that the Board may not, without further approval by the holders of a majority of
the outstanding shares of stock of the Corporation entitled to vote:
(1) Increase the aggregate number of shares of Stock for which
options may be granted under the Plan (except for adjustments
pursuant to Section 6);
(2) Decrease the option price at which stock may be offered;
(3) Materially modify the requirements as to eligibility for
participation in the Plan; or (4) Alter or impair, without the
optionee's consent, the rights or obligations under any option
previously granted pursuant to the Plan.
<PAGE>
SECTION 12. TERM OF PLAN AND EFFECTIVE DATE
The Plan shall become effective on the date the Plan is approved by the
Board.
Options may be granted pursuant to the Plan from time to time within 10
years after the plan becomes effective.
AS ADOPTED BY THE BOARD OF DIRECTORS OF ITEX CORPORATION EFFECTIVE THE 27th DAY
OF DECEMBER, 1996 PURSUANT TO SECTION 12 HEREOF, AND AS APPROVED BY THE
SHAREHOLDERS OF ITEX CORPORATION ON THE 8TH DAY OF JANUARY, 1998.
- -----------------------------------------
Graham H. Norris, President and CEO
<PAGE>
EXHIBIT
Stock Option Plan
ITEX CORPORATION
1997-98 KEY EMPLOYEES' INCENTIVE
STOCK OPTION PLAN
SECTION 1. PURPOSE
The continued growth and success of ITEX CORPORATION (the
"Corporation") depend in part on its ability to obtain and retain the services
of key employees of the highest competence, and to provide incentives for the
effective service of high-level performance. The purposes of this Key Employees'
Incentive Stock Option Plan (the "Plan") are to provide a means whereby the
Corporation can continue to attract, motivate, and retain key employees who can
contribute materially to the Corporation's growth and success, and to facilitate
the acquisition of shares of the Corporation's common stock, par value $0.01 per
share (the "Stock") by key employees pursuant to the options meeting the
requirements of IRC ss. 422, so that such key employees will more closely
identify their interests with those of the Corporation and its shareholders.
SECTION 2. STOCK
The Stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Stock. Subject to the
adjustments described in Section 6 of the Plan, the aggregate number of shares
that may be issued pursuant the to the Plan shall not exceed 965,000 shares. In
the event that any outstanding option granted under the Plan for any reason
expires or is terminated, the shares of Stock allocable to the unexercised
portion of such option may again be subjected to the grant of options under the
Plan.
SECTION 3. ELIGIBILITY
The individuals who may participate in this Plan are employees of the
Corporation and its subsidiaries, including officers and directors, non-employee
directors and other individuals who are not employees of the Corporation,
including consultants and advisors; provided however, consultants and advisors
may participate only if they render bona fide services to the Corporation that
are not in connection with the offer or sale of securities in a capital-raising
transaction. The stock option committee (the "Committee") of the Corporation's
board of directors (the "Board") or the non-employee directors of the Board (if
no such committee is in place) may determine from time to time which eligible
individuals will participate in the Plan. No otherwise eligible individual shall
have any right to participate in this Plan unless designated by the Committee or
the Board. Participants shall receive options to purchase Stock subject to the
provisions of this Plan and, to the extent not inconsistent with this Plan, the
terms of his or her stock option agreement.
SECTION 4. EMPLOYEE AND CONSULTANTS OPTIONS
Employees of the Corporation and its subsidiaries, including officers
and directors and other individuals who are not employees of the Corporation,
including consultants and advisors shall be granted such options as may be
determined by the Committee or the non-employee directors of the Board if no
such committee is in place. Consultants and advisors may participate only if
they render bona fide services to the Corporation that are not in connection
with the offer or sale of securities in a capital-raising transaction.
SECTION 5. NON-EMPLOYEE DIRECTORS OPTIONS
Awards of stock options to Non-Employee Directors shall be made only
under this Section 5. No person, including the members of the Board or the
Committee, shall have any discretion as to the selection of eligible recipients
or the determination of the amount or terms of such awards pursuant to this
Section 5.
5.1 Initial Director Options. Upon the effective date of the Plan the
Non-Employee Directors shall each receive an Initial Option to acquire 50,000
Shares at an exercise price of $3.1875 per share which is the Fair Market Value
of a share of the common stock of the Corporation on the Effective Date hereof.
Each person who becomes a Non-Employee Director after the Effective Date shall
be granted an Initial Option to purchase 50,000 Shares, with an exercise price
equal to the Fair Market Value of the Corporation's common stock on the date of
grant.
<PAGE>
5.2 Renewal Director Options. Each Non-Employee Director shall be
granted an option to purchase 1,000 Shares for each year of service as a
Non-Employee Director on the December 15 prior to the Annual Meeting of
Shareholders, with an exercise price equal to the Fair Market Value of the
Corporation's common stock on such date.
SECTION 6. ADMINISTRATION
The Board shall administer the Plan. Subject to compliance with
applicable provisions of the governing law, the Board may delegate
administration of the Plan, or specific administrative duties on such terms as
the Board deems proper, to the Committee. The Committee shall be composed of not
less than three members of the Board. The term the "Board" shall be deemed to
replace the term "Committee" until a Committee is duly appointed or, if there is
a vacancy on the Committee, until a replacement or successor director is
appointed and qualified. The Committee shall have full power and authority,
subject to the provisions of the Plan, to:
(1) To determine eligibility to participate in the Plan and
designate participants;
(2) Determine the number of options to be granted to each
participant;
(3) Determine the terms of option agreements for each option;
(4) Supervise administration of the Plan;
(5) Interpret the provisions of the Plan and option agreements
granted under it; and
(6) Take all action in connection with the Plan as it deems
necessary or advisable.
Decisions of the Committee shall be final. More than one option may be
granted to the same individual. No member of the Committee or the Board shall be
liable for any action or determination made in good faith with respects to the
Plan or any option granted under it.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
Options under the Plan granted by the Committee shall be evidenced by
stock option agreements in such form as the Committee shall from time to time
approve, and shall comply with and be subject to the following terms and
conditions.
7.1 Number of Shares. Each option agreement shall state the number of
shares of Stock subject to the option.
7.2 Option Price. Each option agreement shall state the option price,
which shall be not less than 100% (110% for 10% Shareholders, as defined below)
of the fair market value, on the date the option is granted, of the shares of
Stock subject to the option. A "10% Shareholder" is any person who, at the time
an option is granted, owns stock of the Corporation possessing more than 10% of
the combined voting power of all classes of stock of the Corporation or any
affiliate.
7.3 Determination of Fair Market Value. The fair market value per share
of Stock shall be determined by the Committee in good faith at the time the
option is granted.
7.4 Option Period and Limitations on Exercise. Each option shall expire
and shall not be exercisable after the expiration of 10 years (five years for
10% Shareholders) from the date the option is granted, or such lesser period as
may be established by the Committee at the time the option is granted. Each
option shall be exercisable by the optionee either immediately or after such
period, and according to such schedule for exercise, or in such other manner as
the Committee shall provide in the option agreement at the time the option is
granted.
Notwithstanding any other provision of the Plan, and unless otherwise
resolved by the Committee, options granted to employees of the Corporation under
the Plan shall be exercisable only while the optionee remains an employee of the
Corporation, except that in the event of (1) an optionee's termination of
employment with the Corporation by reason of disability (within the meaning of
IRC ss.22(e)(3), or (2) an optionee's death while an employee of the
Corporation, the option agreement may allow the option to remain exercisable, to
the extent it was exercisable on the date of termination or the date of death,
by the optionee or the estate or devisee of the decedent, until the expiration
date of the term of the option or one year after the date of the optionee's
termination of employment or death, whichever date is earlier.
7.5 Securities Restrictions. All option agreements evidencing options
granted under the Plan shall provide that:
<PAGE>
(1) If the Committee at any time determines that registration or
qualification of the Stock or any option under state or
federal law or the consent or approval of any governmental
regulatory body, is necessary or desirable, then the option
may be not be exercised, in whole or in part, until that
registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not
acceptable to the Committee.
(2) Any person exercising an option to purchase shares of Stock
may be required by the Corporation to give a written
representation that he or she is acquiring the shares for his
or her own account for investment and not with a view to the
distribution of the shares.
7.6 Payment of Purchase Price. The option price upon exercise of an
option under the plan shall be payable to the Corporation in cash or, in the
discretion of the Committee, in installments or terms and over periods as the
Committee shall determine.
7.7 Nontransferability. Options shall not be transferable except by
testamentary will or the laws of descent and distribution, and shall be
exercisable during an optionee's lifetime only be the optionee.
7.8 Other Provisions. Any option agreement may contain other or
additional terms and provisions as may be determined by the Committee to be
consistent with the Plan, or necessary or desirable to comply with the
provisions of applicable laws, rules, or regulations.
SECTION 8. ADJUSTMENT
In the event of any stock split or payment of a dividend on Stock
payable in shares of Stock after or at the same time the Plan is approved by the
Corporation's shareholders, the shares of Stock then subject to each option (and
the number of such shares which, pursuant to Section 2 of the Plan, may be
issued under the Plan) shall be increased proportionately without any change in
their aggregate purchase price. In the event all the outstanding shares of Stock
shall be changed into or exchanged for a different number or class of shares of
the corporation, or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger, consolidation,
or otherwise, then there shall be substituted for each share of Stock then
subject to each option (and if the Corporation is the surviving corporation in
such transaction, for the number of shares which, pursuant to Section 2 of the
Plan, may be issued under the Plan), the number and class of shares into which
each outstanding share of Stock shall be so exchanged, all without any change in
the aggregate option price for the shares then subject to option. In connection
with any adjustment under this Section 8 resulting in a fractional share
interest, the interest may be rounded down to the nearest whole share if the
interest is less than 0.5 share; otherwise, the fractional share interest may be
rounded up to the nearest whole share.
SECTION 9. PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to the Plan will be used for general corporate purposes.
SECTION 10. OBLIGATION TO EXERCISE; RIGHT TO CONTINUED EMPLOYMENT
The granting of an option shall impose no obligation on the optionee to
exercise the option. The granting of an option does not confer any right to be
continued in the employment of the Corporation.
SECTION 11. AMENDMENT AND DISCONTINUANCE
The Board may alter, amend, suspend, or terminate the Plan, provided
that the Board may not, without further approval by the holders of a majority of
the outstanding shares of stock of the Corporation entitled to vote:
(1) Increase the aggregate number of shares of Stock for which
options may be granted under the Plan (except for adjustments
pursuant to Section 6);
(2) Decrease the option price at which stock may be offered;
(3) Materially modify the requirements as to eligibility for
participation in the Plan; or
(4) Alter or impair, without the optionee's consent, the rights or
obligations under any option previously granted pursuant to
the Plan.
<PAGE>
SECTION 12. TERM OF PLAN AND EFFECTIVE DATE
The Plan shall become effective on the date the Plan is approved by the
Board.
Options may be granted pursuant to the Plan from time to time within 10
years after the plan becomes effective.
AS ADOPTED BY THE BOARD OF DIRECTORS OF ITEX CORPORATION EFFECTIVE THE 3rd DAY
OF SEPTEMBER, 1997 PURSUANT TO SECTION 12 HEREOF, AND AS APPROVED BY THE
SHAREHOLDERS OF ITEX CORPORATION ON THE 8th DAY OF JANUARY, 1998.
- -----------------------------------------
Graham H. Norris, President and CEO
<PAGE>
AMENDED AND RESTATED
BY-LAWS OF
ITEX CORPORATION
(A Nevada Corporation)
ARTICLE I
OFFICES AND CORPORATE SEAL.
1. Offices. The Corporation may maintain offices at such places, either
within or without the State of Nevada, as may be designated from time to time by
the Board of Directors.
2. Corporate Seal. A corporate seal need not be affixed to any
instrument executed by or on behalf of the Corporation. Nevertheless, if a seal
is used, it will contain the name of the Corporation, the year of its
organization and words "Corporate Seal, Nevada".
ARTICLE II
MEETINGS OF SHAREHOLDERS.
1. Shareholders Meeting. All meetings of shareholders will be held at
such place as may be fixed from time to time by the Board of Directors, or in
the absence of direction by the Board of Directors, by the President or
Secretary of the Corporation, either within or without the State of Nevada, as
will be stated in the notice of the meeting or in a duly executed waiver of
notice.
2. Annual Meetings. Annual meetings of the shareholders will be held on
the first Thursday of December if not a legal holiday, and if a legal holiday,
then on the next business day following, or at such other date and time as will
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. At the annual meeting, shareholders will elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.
3. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date, and hour of the meeting will be given to each
shareholder of record entitled to vote at such meeting no less than ten (10) nor
more than sixty (60) days before the date of the meeting. Notice shall be deemed
given on the date of mailing to the address of the shareholder on the records of
the Corporation.
4. Record Date. For the determination of shareholders entitled to
notice of or to vote at any meeting the Board of Directors may fix, in advance,
a record date, which will be no more than sixty (60) days nor less than ten (10)
days before the date of the meeting.
5. List of Shareholders. The Officer who has charge of the stock ledger
of the Corporation will prepare and make, at least ten (10) days before every
meeting of shareholders, a complete list of the shareholders entitled to vote at
the meeting, showing the address and the number of shares registered in the name
of each shareholder. Such list will be considered confidential and shall not be
available for copying or reproduction. Individual shareholders may examine such
list to verify personal information during normal business hours, for a period
of at least ten (10) days prior to the meeting. The examination will be at a
place within the city where the meeting is to be held, which place will be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list will also be produced and kept at the
time and place of the meeting and may be inspected by any shareholder present.
<PAGE>
6. Special Meeting of Shareholders. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise proscribed by
statute, may be called by the President. A special meeting will be called by the
President or Secretary at the request, in writing, of a majority of the Board of
Directors, or at the request, in writing, of a shareholder owning a majority
amount of the entire capital stock of the Corporation, which is issued,
outstanding, and entitled to vote. Such request will state the purpose or
purposes of the proposed meeting.
7. Notice of Special Meetings. Written notice of a special meeting
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called will be given not less than ten (10) or more than
sixty (60) days before the date of the meeting to each shareholder of record
entitled to vote at such meeting. Business transacted at any special meeting of
shareholders will be limited to the purposes stated in the notice. Notice shall
be deemed given on the date of mailing to the address of the shareholder on the
records of the Corporation.
8. Notice of Specific Purpose. Business transacted at a special meeting
shall be limited to the purposes stated in the notice of the annual meeting or a
special meeting with the exception of shareholder proposals made pursuant to
Rule 14a-8 of the Securities Exchange Act of 1934 which provides for shareholder
proposals to be included in proxy statements.
9. Quorum and Adjournment. The holders of a majority of the shares
issued, outstanding, and entitled to vote at the meeting, present in person or
represented by proxy, will constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute. If, however, such quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote at the meeting, present
in person or represented by proxy, have the power to adjourn the meeting to
another time or place, without notice other than announcement at the meeting at
which adjournment is taken, until a quorum is present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting will be given to each shareholder of record
entitled to vote at the meeting.
10. Majority Required. When a quorum is present at any meeting, the
vote of the holders of a majority of voting power present, whether in person or
represented by proxy, will decide any questions brought before such meeting,
unless the question is one upon which a different vote is required by statute,
the Articles of Incorporation, or these By-Laws.
11. Voting. At every meeting of the shareholders, each shareholder will
be entitled to one (1) vote in person or by proxy for each share of the capital
stock having voting power held by such shareholder.
12. Proxies. Every proxy must be dated and signed by the shareholder or
by his or her attorney-in-fact. No proxy will be valid after eleven (11) months
from its date, unless the proxy provides for a longer period.
13. Cumulative Voting. There shall not be cumulative voting in this
Corporation.
14. Action Without Meeting. Any action required or permitted to be
taken at any annual or special meeting of shareholders may be taken without
meeting, without prior notice, and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of a majority of the
voting power of all the outstanding shares entitled to vote with respect to the
subject matter of the action.
15. Waiver of Notice. Attendance of a shareholder at a meeting will
constitute waiver of notice of such meeting, except when such attendance at the
meeting is for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Any shareholder
may waive notice of any annual or special meeting of shareholders by executing a
written notice of waiver either before or after the time of the meeting.
ARTICLE III
DIRECTORS.
1. Number and Qualifications of Classified Directors. The number of
Directors which will constitute the whole Board will be not fewer than two (2)
nor more than nine (9). The Directors need not be shareholders or residents of
any particular state.
<PAGE>
The Directors shall be classified with respect to the time for which they hold
office by dividing them into three (3) classes, each consisting of three (3)
Directors, and each Director of the Corporation shall hold office until his
successor shall be elected and shall qualify. At the first annual meeting of
shareholders following the adoption of these By-Laws, the Directors of the first
class shall be elected for a term of one (1) year; the Directors of the second
class shall be elected for a term of two (2) years; the Directors of the third
class shall be elected for a term of three (3) years; and at each annual
election thereafter the successors to the class of Directors whose terms shall
expire that year shall be elected to hold office for the term of three years, so
that the term of office of one class of Directors shall expire in each year.
2. Vacancies. Vacancies and newly created Directorships resulting from
any increase in the authorized number of Directors may be filled by the
affirmative vote of an affirmative vote of two-thirds (2/3) of the remaining
Directors then in office, though not less than a quorum, or by a sole remaining
Director, and the Directors so chosen will hold office until the next annual
election and until their successors are duly elected and qualified, unless
sooner displaced. If there are no Directors in office, then an election of
Directors may be held in the manner provided by statute.
3. Removal of Directors by Shareholders. Any Director may be removed in
accordance with Nevada law.
4. Removal of Directors by Directors. A Director may be removed by a
two-thirds vote of the Board of Directors and may only be removed for cause. A
director whose removal is sought shall be entitled to a notice of the charges
against him and a reasonable opportunity to respond to such charges.
5. Resignation. Any Director may resign his or her office at any time.
The resignation will be made in writing and will take effect immediately without
acceptance. Such resignation shall not affect the legality of any action taken
by the Board of Directors or any Committee of the Board between the effective
time of the resignation and receipt of notice thereof by the Board or Executive
Committee.
6. Powers. The business and affairs of the Corporation will be managed
by its Board of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts as are not by statute, the Articles of
Incorporation, or these By-Laws directed or required to be exercised or done by
the shareholders.
7. Annual Meetings. The first meeting of each newly elected Board of
Directors will be held immediately following the annual meeting of shareholders
and in the same place as the annual meeting of shareholders. No notice to the
newly elected Directors of such meeting will be necessary in order legally to
hold the meeting, provided a quorum is present. In the event such meeting is not
held, the meeting may be held at such time and place as will be specified in a
notice given as provided for special meetings of the Board of Directors, or as
will be specified in a written waiver by all of the Directors.
8. Place of Meeting. The Board of Directors of the Corporation may hold
meetings, both regular and special, within or without the State of Nevada.
9. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as will from time to time be
determined by the Board.
10. Meetings by Telephone Conference Call. Members of the Board of
Directors may participate in a meeting of the Board of Directors by means of
conference call by telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at such
meeting.
11. Special Meetings. Special meetings of the Board may be called by
the President or the Secretary on two (2) days notice to each Director either
personally, by mail, by telegram or telefax, or by telephone. Special meetings
will be called by the President or Secretary in like manner and on like notice
on the written request of two (2) Directors.
12. Quorum. A majority of the membership of the Board of Directors will
constitute a quorum and the concurrence of a majority of those present will be
sufficient to conduct the business of the Board, except as may be otherwise
specifically provided by statute, the Articles of Incorporation, or these
By-Laws. If a quorum is not present at any meeting of the Board of Directors,
the Directors then present may adjourn the meeting to another time or place,
without notice other than announcements at the meeting, until a quorum is
present.
<PAGE>
13. Action Without Meeting. Unless otherwise restricted by these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors or any committee may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
14. Executive Committee. The Board of Directors may appoint, from among
its members, an Executive Committee of not less than two (2) Directors. Such
committee will have the power to exercise all of the functions of the Board of
Directors between regular and special meetings of the Board of Directors.
Special meetings of the Executive Committee will be called, and notice given or
waived, in the same manners as is provided in these By-Laws for the call,
notice, and waiver of notice of special meetings of the Board of Directors.
15. Compensation. The Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as a
Director. No such payment will preclude any Director from serving the
Corporation in any other capacity and receiving compensation. Members of special
or standing committees may be allowed compensation for attending committee
meetings. The amount or rate of such compensation of members of the Board of
Directors or of committees will be established by the Board of Directors and
will be set forth in the minutes of the Board.
16. Waiver of Notice. Attendance as a Director at a meeting will
constitute waiver of notice of such meeting, except when the person attends the
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Any Director may waive
notice of any annual, regular, or special meeting of Directors of the Executive
Committee by executing a written notice of waiver either before or after the
time of the meeting.
17. Presumption of Assent. A Director of the Corporation who is present
at a meeting of the Directors at which action on any corporate matter is taken
shall be presumed to have assented to the action taken unless his or her dissent
shall be entered in the minutes of the meeting or unless s/he shall file his or
her written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
ARTICLE IV
OFFICERS.
1. Officers and Qualifications. The Officers of the Corporation will be
a President, a Secretary, a treasurer, and such other Officers, including one
(1) or more Vice-Presidents as the Board of Directors may determine. Any two (2)
offices, except the offices of President and Secretary, may be held by the same
person.
2. Other Officers and Agents. The Board of Directors may appoint such
Officers and agents as it may deem advisable, who shall hold their offices for
such terms and shall exercise such power and perform such duties as shall be
determined from time to time by the Board of Directors.
3. Election. All Officers of the Corporation will be chosen annually by
the Board of Directors at its meeting held immediately after the annual meeting
of shareholders, unless an employment agreement with such Officer is for a
longer period than one (1) year.
4. Term of Office. All Officers will hold office at the pleasure of the
Board of Directors. Any Officer may be removed either with or without cause by a
vote of a majority of the Board of Directors.
<PAGE>
5. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise may be filled by the Board of Directors
at any time.
6. Salaries. The salaries of the Officers will be fixed from time to
time by the Board of Directors. No Officer will be prevented from receiving such
salary by reason of the fact that such person is also a Director of the
Corporation.
7. Duties.
(A) President: The President will preside at all meetings of the
shareholders and of the Board of Directors. He or she will
cause to be called regular and special meetings of the
shareholders and Directors in accordance with the requirements
of the statute and these By-Laws. He or she will present at
each annual meeting of the shareholders and Directors a report
of the condition of the business of the Corporation. He or she
will cause all books, reports, statements, and certificates to
be properly kept and filed as required by law and will sign
all certificates and conveyances, all contracts and
agreements, and all other instruments requiring execution on
behalf of the Corporation. He or she will act as operating and
directing head of the Corporation, subject to policies
established by the Board of Directors.
(B) Vice-President: There will be as many Vice-Presidents as the
Board of Directors from time to time may choose, and they will
perform duties as from time to time may be assigned to them.
Any one of the Vice-Presidents, as authorized by the Board,
will have all the powers and perform all the duties of the
President in case of a temporary absence of the President or
in case of his or her temporary inability to act.
(C) Secretary: The Secretary will keep the minutes of all meetings
of shareholders, of the Board of Directors, and of any
standing committees. He or she will be the custodian of the
Corporation seal and will affix it to all proper instruments
when deemed advisable by him or her. He or she will have
charge of the stock ledger of the Corporation and will give or
cause to be given required notices of all meetings of the
shareholders and of the Board of Directors. He or she will
have charge of all the books and records of the Corporation
except the books of account, and in general will perform all
the duties incident to the office of Secretary of a
Corporation and such other duties as may be assigned to him or
her.
(D) Treasurer: The Treasurer will have general custody of all the
funds and securities of the Corporation except such as may be
required by law to be deposited with any state official. He or
she will see to the deposit of the funds of the Corporation in
such bank or banks as the Board of Directors may designate.
Regular books of account will be kept under his or her
direction and supervision, and he or she will at all
reasonable hours exhibit books and accounts to any Director at
the office of the Corporation during business hours. He or she
will render a report of the condition of the finances of the
Corporation at each regular meeting of the Board of Directors
and at such other times as will be required of him or her, and
he or she will make a full financial report at the annual
meeting of the shareholders. He or she will have charge of the
preparation and filing of such reports, financial statements,
and returns as may be required by law. He or she will give the
Corporation such fidelity bond as may be required. The premium
will be paid by the Corporation as operating expense.
ARTICLE V
STOCK.
1. Certificate of Stock. Every holder of stock in the Corporation shall
be entitled to have a certificate, signed by, or in the name of the Corporation
by, the President or a Vice-President and the treasurer or an assistant
treasurer, or the Secretary of the Corporation, certifying the number of shares
owned. If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, referenced and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations, or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in the
General Corporation Law of Nevada, in lieu of the foregoing requirements, there
<PAGE>
may be set forth on the face or back of the certificate which the Corporation
shall issue to represent such class or series of stock., a statement that the
Corporation will furnish without charge to each shareholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Where a
certificate is countersigned (1) by a transfer agent other than the Corporation
or its employee; or (2) by a registrar other than the Corporation or its
employees, the signatures of such Officers may be facsimiles.
2. Lost Certificates. New certificates of stock may be issued in the
place of any certificate theretofore issued by the Corporation, alleged to have
been lost or destroyed, and the Directors may, in their discretion, require the
owner of the lost or destroyed certificate, or his or her legal representative,
to give the Corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the Corporation against it on
account of the alleged loss of any such new certificate.
3. Transfer of Shares. The shares of stock of the Corporation shall be
transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to such
other persons as the Directors may designate, by whom they shall be canceled,
and new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
4. Shareholders 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 entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of shareholders of record entitled to
notice of or to vote a meeting of shareholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE VI
DIVIDENDS.
Subject to the provisions of the Articles of Incorporation, the Board
of Directors may, in accordance with statute, at any regular or special meeting,
declare a cash or stock dividends upon the capital stock of the Corporation as
and when they deem expedient. Before declaring any dividends there may be set
apart out of any funds of the Corporation available for dividends, such sums or
sums as the Directors from time to time in their discretion deem proper working
capital or as a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the Directors shall deem conducive to the
interests of the Corporation.
ARTICLE VII
FISCAL YEAR.
The fiscal year of the Corporation will be the year ending July 31.
ARTICLE VIII
LOANS TO DIRECTORS, OFFICERS, OR EMPLOYEES.
The Board of Directors may authorize the Corporation to make a loan to
any Officer or employee of the Corporation (including any Director who is also
an Officer or employee), or to guarantee indebtedness of or otherwise use its
credit to assist such Officer or employee, if the Board determines that the loan
may reasonably be expected to benefit the Corporation. Any resolution
<PAGE>
properly adopted by the Board authorizing a loan to any Officer or employee of
the Corporation (or authorizing any such guarantee or use of credit) will
conclusively evidence such a determination by the Board, whether or not
specifically expressed.
ARTICLE IX
CHECKS.
All checks, drafts, or other orders for the payment of money, notes or
other evidence of indebtedness issued in the name of the Corporation shall be
signed by an Officer or Officers, agent or agents of the Corporation, and in
such manner as shall be determined from time to time by resolution of the Board
of Directors.
ARTICLE X
NOTICE AND WAIVER OF NOTICE.
(A) Whenever any notice is required by these By-Laws to be given,
personal notice is not meant unless expressly stated, and any
notice so required shall be deemed to be sufficient if given
by depositing the same in the United States mail, postage
prepaid, addressed to the person entitled thereto at his or
her address as it appears on the records of the Corporation,
and such notice shall be deemed to have been given on the day
of such mailing. Shareholders not entitled to vote shall not
be entitled to receive notice of any meetings except as
otherwise provided by statute.
(B) Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the
Certificate of Incorporation of the Corporation or these
By-Laws, a waiver thereof in writing by the person or persons
entitled to said notice, whether before or after the time
stated therein, shall be deemed proper notice.
ARTICLE XI
REPEAL, ALTERATION OR AMENDMENT.
These By-Laws may be repealed, altered, or amended or substitute
By-Laws may be adopted at any time only by the affirmative vote of two-thirds
(2/3) of the Board of Directors.
ARTICLE XII
INDEMNIFICATION.
The Corporation may, upon determination of the Board of Directors, in
its sole discretion, indemnify any and all of its Directors or former Directors,
their personal representatives and heirs, and any and all of the Officers,
agents, and employees or former Officers, agents, and employees of the
Corporation, their personal representatives and heirs, against expenses incurred
by them or judgments or penalties rendered or levied against any such person in
a legal action (whether civil, criminal, administrative, or other) brought
against any such person for actions or omissions alleged to have been committed
by any such person while acting within the scope of his or her employment as a
Director, Officer, agent, or employee of the Corporation, provided that in all
cases, the Board of Directors determines, in good faith, that such person did
not act, fail to act, or refuse to act willfully or with gross negligence, with
fraudulent intent, or with criminal intent with regard to the matter involved in
the action. The term "expenses" as used herein, shall include all obligations
incurred by such person for payment of money, including, without limitation,
legal fees and amounts paid in settlement of any such action. A judgment or
conviction (whether based on a plea of guilty or nolo contenders or its
equivalent, or after trial) shall not be conclusive as to whether the person
against whom a judgment is rendered acted, or failed to act, or refused to act
willfully or with gross negligence or with fraudulent or criminal intent with
respect to the matter involved in the action. Any determination with respect to
indemnity shall be made by resolution adopted by a majority and quorum of the
Board of Directors, excluding from such majority and quorum of the Board of
Directors who have incurred expenses, judgments, or penalties in connection with
such action; and if there is no quorum of Directors who are not so excluded,
then by resolution adopted by a majority of a committee of non-excluded
Directors and/or shareholders appointed by the Board of Directors (all Directors
being eligible to participate in such appointment). The right of indemnification
provided in these Articles shall not be exclusive of any
<PAGE>
other right which such Directors, Officers, and employees of the Corporation and
other persons above-mentioned, may have or hereafter acquire. A member of any
committee appointed by the Board of Directors shall have the same right to
indemnification as a Director with respect to alleged acts or omissions by him
or her as a member of such committee.
Adopted this 3rd day of September , 1997.
/s/ Graham H. Norris /s/ Donovan C. Snyder
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President Secretary
<PAGE>
AMENDED AND RESTATED
--------------------
ARTICLES OF INCORPORATION
-------------------------
OF
--
ITEX CORPORATION
----------------
FIRST. The name of the Corporation is:
ITEX CORPORATION
SECOND. Its registered office in the State of Nevada is
located at 2533 North Carson Street, Carson City, Nevada 89706. The Corporation
may maintain an office, or offices, in such other place within or without the
State of Nevada as may be from time to time designated by the Board of
Directors, or by the By-Laws of said Corporation, and the Corporation may
conduct all Corporation business of every kind and nature, including the holding
of all meetings of Directors and Shareholders, outside the State of Nevada as
well as within the State of Nevada.
THIRD. The object for which the Corporation is formed is
to engage in any lawful activity.
FOURTH. The total capital of the Corporation shall be
50,000,000 shares. Of these, 45,000,000 shares shall be voting Common Stock. The
balance of 5,000,000 shares shall be Preferred Stock in such series, in such
number of shares of each series, with such voting powers, preferences,
limitations, restrictions, relative rights and distinguishing designations as
described in a resolution of the Board of Directors before the issuance of
shares of such series. Shares may be issued by the Corporation from time to time
for such consideration as may be fixed by the Board of Directors.
FIFTH. The governing board of the Corporation shall be
known as directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the By-Laws of the
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
NAME BUSINESS ADDRESS
Graham H. Norris P.O. Box 2309
Portland, OR 97208-2309
Mary J. Scherr P.O. Box 2309
Portland, OR 97208-2309
Joseph Morris 18306 E. Wesley Place
Aurora, CO 80013
Charles Padbury 1585 SW Marlow, #100
Portland, OR 97225
Ronald P. Erickson 1520 Eastlake Ave. E., Suite 210
Seattle, WA 98102
Evan Ames 15200 NW Acorn Place
Beaverton, OR 97006
Robert Nelson 1130 SW Morrison St., #408
Portland, OR 97205
SIXTH. The existence of the Corporation is to be
perpetual.
SEVENTH. The affairs of the Corporation are to be
conducted by the Officers and persons fixed by the By-Laws; and such persons are
to be chosen at the times and places and in the manner fixed by the By-Laws.
EIGHTH. The Corporation may become seized and possessed
of either real or personal estate, or both, to an unlimited extent, but a limit
to the value of the property so held may be fixed by the By-Laws.
NINTH. The amount of indebtedness or liability which the
Corporation may at any time incur shall be unlimited, unless a limit thereto be
fixed by the By-Laws.
TENTH. The private property of the Shareholders shall
not be subject to the payment of corporate debts to any extent whatever.
ELEVENTH. In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized to
make and to alter the By-Laws; to fix the amount to be reserved as working
capital, and to authorize, and cause to be executed, mortgages and liens,
without limit as to amount, upon the property and franchises of the Corporation,
and, in general, to exercise all powers and authorities not expressly withheld
from them by the law, or these Articles of Incorporation or the action of the
Shareholders.
With the consent in writing, and pursuant to a vote of the
holders of Sixty percent (60%) of the Capital Stock issued and outstanding, the
Directors shall have authority to dispose, in any manner of the whole property
of this Corporation.
The By-Laws shall determine whether and to what extent the
accounts and books of this Corporation, or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right of
inspecting any account, or book, or document of this Corporation, except as
conferred by law or the By-Laws, or by resolution of the Shareholders.
The Shareholders and Directors shall have power to hold their
meetings, and keep the books, outside of the State of Nevada, at such places as
may be from time to time designated.
TWELFTH. The resident agent for the Corporation shall
be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and the registered or statutory address of the
Corporation in the State of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
THIRTEENTH. No Shareholder shall be entitled as a matter
of right to subscribe for or receive additional shares of any class of stock of
the Corporation, whether now or hereafter authorized, or any bonds, debentures
or securities convertible into stock, but such additional shares of stock or
other securities convertible into stock may be issued or disposed of by the
Board of Directors to such persons and on such terms as in its discretion it
shall deem advisable.
FOURTEENTH. No Director or Officer of the Corporation
shall be personally liable to the Corporation or any of its Shareholders for
damages for breach of fiduciary duty as a Director or Officer involving any act
or omission of any such Director or Officer; provided, however, that the
foregoing provision shall not eliminate or limit the liability of a Director or
Officer (i) for acts or omissions which involve intentional misconduct, fraud,
or a knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of
this Article by the Shareholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
Director or Officer of the Corporation for acts or omissions prior to such
repeal or modification.
FIFTEENTH. The Corporation shall indemnify any person by
reason of the fact that s/he is or was a Director or Officer of the Corporation
to the fullest extent allowed by Nevada Revised Statute 78.751.
<PAGE>
SIXTEENTH. The Corporation reserves the right to amend,
alter, change, or repeal any provision contained in the Articles of
Incorporation, in the manner now or hereafter prescribed by statute, or by the
Articles of Incorporation, and all rights conferred upon Shareholders herein are
granted subject to this reservation.
SEVENTEENTH. The amendment was adopted on
1997 at the annual meeting of the Shareholders. There were present in person or
by proxy at this meeting common shares, out of a total
of shares of common stock held of record at the close of
business on . votes were cast, in person and
by proxy on the resolution to approve the proposed Restated Articles of
Incorporation of the Corporation. We certify that common shares were
voted for the resolution; common shares were voted against the
resolution; and common shares abstained.
EIGHTEENTH. The proposal for the amendment was
unanimously adopted by the Board of Directors of the Corporation following
Nevada Revised Statute 78.390 on December ,1997. ----------
NINETEENTH. We certify that we have executed this
Certificate to Restate the Articles of Incorporation of ITEX Corporation as
originally filed on October 1, 1985, and as amended by filings on October 1,
1985, May 19, 1986, April 12, 1991, and May 5, 1995.
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President & CEO Secretary