As filed with the Securities and
Exchange Commission on August 1, 2005
Registration No. _______________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MachineTalker, Inc.
(Name of small business issuer in its charter)
Commission File Number:
Delaware 3823 01-0592299
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
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incorporation or organization) Classification Code Number) Identification No.)
513 De La Vina Street, Santa Barbara, California 93101
(805) 957-1680
(Address and telephone number of principal executive offices)
513 De La Vina Street, Santa Barbara, California 93101
(Address of principal place of business or intended principal place of business)
Roland F. Bryan, 513 De La Vina Street, Santa Barbara, California 93101
(805) 957-1680
(Name, address and telephone number of agent for service)
Copies to:
RICHARDSON & ASSOCIATES
MARK J. RICHARDSON, Esq.
233 Wilshire Boulevard, Suite 820
Santa Monica, California 90401
(310) 393-9992
Approximate date of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Tile of each Proposed Proposed
class of securities Amount to maximum offering maximum aggregate Amount of
to be registered be registered price per unit offering price registration fee
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Common Stock, par value $0.001 per share 73,367,050 $0.10 $7,336,705 $ 929.56
(1)
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Total 73,367,050 $0.10 $7,336,705 $ 929.56
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
THE INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, Dated August 1, 2005
PROSPECTUS
MachineTalker, Inc.
73,367,050 shares of Common Stock
MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
The Offering
The shares covered by this Prospectus are comprised of an aggregate of 73,367,050 shares of the common stock, par value $0.001 per share, (the "Shares") of MachineTalker, Inc., a Delaware corporation ("MTI"), which are being offered for sale by 135 shareholders of MTI (the "Selling Securityholders"). We will not receive any of the proceeds from the sale of Shares by the Selling Securityholders. This is MTI's initial public offering. No public market currently exists for our common stock. As of July 31, 2005, there are 159,017,050 shares of common stock outstanding. We have concurrently applied to be listed on the OTC Bulletin Board under the symbol "MTKR." A $0.10 per share price for sale of shares has been determined arbitrarily prior to OTC Bulletin Board approval, and prices may thereafter be negotiated variably by each individual Selling Securityholder at the time of any sale, after a public market exists, if ever it does. See "Plan of Distribution."
Selling Securityholders may from time to time sell all or a portion of the securities offered by this Prospectus in transactions in the over-the-counter market, in negotiated transactions, or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, or at negotiated prices. Selling Securityholders may effect such transactions by selling such securities directly to purchasers or through dealers or agents who may receive compensation in the form of discounts, concessions or commissions from Selling Securityholders or the purchasers of the securities for whom they may act as agents.
MTI has developed a new smart security network technology (patent pending) that allows governments, businesses and individuals to deploy wireless security systems rapidly to protect and monitor things, places, and people. Security systems using the wireless MachineTalker(R) technology configure themselves by automatically forming ad hoc mesh networks, linking intelligent nodes, each capable of processing data in real-time and on a local basis.
Anticipated Trading Symbol:
Over the Counter Bulletin Board - MTKR
This investment involves a high degree of risk. You should purchase Shares only if you can afford a complete loss. See "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
TABLE OF CONTENTS
Page
Prospectus Summary Information I-3
Risk Factors I-4
Use of Proceeds I-11
Determination of Offering Price I-11
Capitalization I-11
Dilution I-12
Selling Securityholders I-12
Plan of Distribution I-16
Legal Proceedings I-17
Directors, Executive Officers, and Controlling Persons I-17
Security Ownership of Certain Beneficial Owners and Management I-20
Description of Securities I-22
Interest of Named Experts and Counsel I-23
MachineTalker, Inc. I-23
Management's Discussion and Analysis of Financial
Condition and Results of Operations I-32
Description of Property I-35
Certain Relationships and Related Transactions I-35
Market for Common Equity and Related Stockholder Matters I-36
Executive Compensation I-36
Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure I-37
Glossary I-37
Additional Information I-38
Financial Statements F-1
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PROSPECTUS SUMMARY INFORMATION
The following summary is qualified in its entirety by the more detailed information appearing elsewhere or incorporated by reference in this Memorandum and its Exhibits. Each prospective investor is urged to carefully read this Memorandum and its Exhibits in their entirety including but not limited to the risk factors.
MACHINETALKER, INC.
MachineTalker, Inc. ("MTI" or "we") is a Delaware corporation formed in January 2002 to engage in the business of developing and marketing a wireless control technology. Our patent pending technology allows governments, businesses, and individuals to deploy wireless security systems rapidly to protect and monitor things, places, and people. Most current security systems are static and rely on centralized control over various types of "dumb" detectors or nodes. Our technology is distinguishable as it allows security systems to become dynamic by creating "smart" security networks at the local level. Remote and wireless MachineTalkers(R) contain powerful microprocessors, on-board sensors, detectors, readers, or actuators, and wireless radios. Talkers(R) automatically form an ad hoc wireless mesh network, creating intelligent nodes each capable of processing data in real-time and on a local basis. Once formed, a small community of Talkers(R) can operate independently or collectively to assess local conditions or events and take action accordingly. These cooperating Talkers(R) form redundant and self-healing networks in case of failure; and, one or more individual units can be connected to modems for wireless communication outside of the local community by way of the Internet. We cannot assure that we will be successful in marketing our wireless control technology. See "Risk Factors" beginning on page 4.
Our executive offices are located 513 De La Vina Street, Santa Barbara, California 93101 and our telephone number is (805) 957-1680. Our Internet address is www.machinetalker.com. Information contained on our World Wide Web site is not deemed to be a part of this Prospectus. We have concurrently applied to be listed on the OTC Bulletin Board under the trading symbol "MTKR."
Selling Securityholders
Our Selling Securityholders are offering for sale up to 73,367,050 shares of our common stock, which they previously purchased or were issued for services rendered to us. See "Selling Securityholders" and "Plan of Distribution." The Shares are being registered for a total of 134 shareholders who paid $0.025 per Share and $0.10 per Share for total cash consideration of $2,060,000, and one shareholder who received Shares for services rendered. All the purchases occurred within the last three (3) years.
The Offering
Common stock outstanding (1)............................159,017,050 shares
Common stock outstanding after the offering.............159,017,050 shares
Use of Proceeds.........................................We will not receive
any of the proceeds
from the sale of
securities by the
Selling Securityholders.
Anticipated OTC Symbol..................................MTKR
I-3
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Risk Factors...........................................The Shares offered hereby
involves a high degree
of risk. See "Risk
Factors" on page 4.
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(1) These shares are owned 23,500,000 by the Bryan Family Trust, 23,500,000 by Christopher T. Kleveland, the Vice President of Operations and a director of MTI, 1,000,000 by Brian Altounian, a director of MTI, and 37,971,050 by officers, directors, and employees of and consultants to MTI. See "Security Ownership of Certain Beneficial Owners and Management." Includes 70,000,000 shares of Common Stock which are owned by subscribers for shares of Common Stock sold by MTI as part of a series of private placements from May 2002 to January 2005 for a purchase price of $0.025 per share pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), of which (a) 16,000,000 were acquired by Roland F. Bryan, the Chairman, Chief Executive Officer, and President of MTI through the conversion of $400,000 of a loan made by him to us, (b) 10,000 were purchased by Mr. Bryan, and (c) 1,000,000 were purchased by Gerry Nadler, the Chief Scientist of MTI. Also includes 3,100,000 shares of Common Stock which are owned by subscribers for shares of Common Stock sold by MTI as part of a private placement from February 2005 to June 2005 for a purchase price of $0.10 per share pursuant to Rule 506 of Regulation D of the Securities Act. All shares have been adjusted to reflect the ten for one forward split of our Common Stock which became effective on September 7, 2004.
Summary Financial Data
MachineTalker, Inc.
(A Development Stage Company)
Three Months Ended Fiscal Year Ended
March 31, 2005 December 31, 2004
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STATEMENT OF OPERATIONS:
Revenues.......................... $ 16,000 $ 204,833
(Loss) from Operations............ (301,158) (536,936)
(Net Loss) (305,601) (573,454)
PER COMMON SHARE DATA:
Net Loss.......................... $ (305,601) $ (573,454)
Cash Dividends.................... - 0 - - 0 -
Book Value........................ (53,366) (144,169)
Number of Shares outstanding...... 155,950,000 141,930,000
Basic and diluted loss per share.. (- 0 -) (0.01)
Weighted average shares outstanding 152,240,440 112,436,932
BALANCE SHEET DATA:
Total Assets...................... $ 447,090 $ 333,933
Long-Term Debt.................... 436,000 436,000
Shareholders' Equity.............. (53,366) (144,169)
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RISK FACTORS
Purchasing shares of MTI's common stock ("Common Stock") is risky. You should be able to bear a complete loss of your investment. You should carefully consider the following factors, among others.
WE HAVE A LIMITED OPERATING HISTORY AND CANNOT ASSURE THE ACCEPTANCE OF OUR SMART SECURITY NETWORK TECHNOLOGY.
MTI was recently formed and has a limited operating history. We only recently commenced selling our wireless control smart security system. MTI cannot assure at this time that we will operate profitably or that we will have adequate working capital to meet our obligations as they become due. We believe that our success will depend in large part on governmental, industry, and public acceptance of our smart security network technology as a credible tool for protecting and monitoring things, places, and people. We intend to invest heavily in completing development of and enhancing our smart security network technology. As a result, we may incur operating losses.
WE CANNOT GUARANTEE THAT TALKERS(R) SALES WILL LEAD TO PROFITABILITY.
Our business is speculative and dependent upon the acceptance of our smart security network technology and the effectiveness of our marketing program to convince the government, business, and the public to utilize our Talkers(R) so that MTI will become profitable. We cannot assure that government, business, or the public will accept our Talkers(R) or that MTI will earn any revenues or profit. We cannot assure that we will earn any revenues or that investors will not lose their entire investment.
WE MAY FAIL TO COMPLETE DEVELOPMENT OF OUR SMART SECURITY NETWORK TECHNOLOGY.
Research and development projects are inherently speculative and subject to cost overruns. There is no assurance that we will be able to complete development of our smart security network technology, or that, once developed, smart security network components can be sold profitably. We may not develop any new products or services for sale from our research and development efforts.
WE MAY NOT BE ABLE TO PROTECT OUR TRADEMARKS.
Although we have been issued four service/trademarks for certain products and services, we have also recently filed seven additional applications with the United States Office of Patents and Trademarks for which we have not yet been issued service marks or trademarks. We cannot assure that we will be successful in obtaining the service marks or trademarks, that these applications will not be challenged, that others will not attempt to infringe upon our marks, or that these marks will afford us any protection or competitive advantages. If we are unable to protect our rights to our trademarks or if such marks infringe on the rights of others, our business could be materially adversely affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP OR PROTECT OUR PROPRIETARY RIGHTS.
Our business plan is significantly dependent upon the development of our smart security network technology. While we have filed a patent application for that technology and plan to file for patent and copyright protection whenever warranted, we cannot assure that we will be able to protect our proprietary rights. We have not yet been granted a patent for our smart security network technology. We cannot assure that other companies may not challenge our legal right to utilize the technology, claiming that such use is an infringement of their patents, copyrights, trade secrets, or other proprietary rights. We cannot assure that we will be able to obtain patents for our products or services or that we will develop, own, or successfully sell any proprietary products or services.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND COMPETITIVE PRESSURES COULD PREVENT US FROM COMPETING SUCCESSFULLY IN THE SECURITY PRODUCTS AND SYSTEMS INDUSTRY.
The security products and systems industry in which we compete is extremely competitive. Our principal competitors include Ember Corporation and Savi Technology and companies which have products for remote, wireless sensing.
These competitors may have longer operating histories, greater name recognition, larger installed customer bases, and substantially greater financial and marketing resources than MTI. MTI believes that the principal factors affecting competition in this market include name recognition, United States Government mandates, and consumer confidence. Our ability to compete successfully in the security products systems industry depends in large part upon our ability to market our wireless control smart security system and to respond effectively to changing technology. We cannot assure that we will be able to compete successfully in the security products and systems industry, or that future competition will not have a material adverse effect on our business, operating results, and financial condition. See "MachineTalker, Inc. - Competition."
OUR FAILURE TO IMPLEMENT OUR BUSINESS MODEL WILL CAUSE US TO INCUR SUBSTANTIAL OPERATING LOSSES.
Our business model is predicated on our ability to sell smart security network devices, based on our proprietary technology. We anticipate that we will incur substantial operating losses until we are able to generate revenue from the sale of these products. We cannot assure that businesses, government, or the public will adopt our products and technology in the volume that we project, or that businesses, government, and other prospective customers will agree to pay the prices that we propose to charge. In the event our customers resist paying the prices projected in our business plan, our business, financial condition, and results of operations will be materially and adversely affected.
OUR FAILURE TO ACHIEVE BRAND RECOGNITION FOR MACHINETALKERS(R) COULD ADVERSELY EFFECT OUR OPERATING RESULTS.
We believe that establishing and maintaining brand recognition for our smart security network technology is a critical aspect of our efforts to attract and expand our customer base. Promotion and enhancement of the MachineTalker(R) brand will depend largely on our success in providing high quality products and services. In order to attract and retain customers and to promote the MachineTalker(R) brand in response to competitive pressures, we may find it necessary to increase substantially our financial commitment to creating and maintaining the MachineTalker(R) brand. We cannot assure that we will obtain brand recognition for MachineTalker(R). Our failure to provide high quality services and products or to obtain and maintain brand recognition could have a material adverse effect on our business, results of operations, and financial condition.
IF WE ARE UNABLE TO RESPOND TO CHANGES IN TECHNOLOGY RAPIDLY, WE WILL NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE SECURITY PRODUCT AND SYSTEMS INDUSTRY.
Wireless control is a rapidly evolving technology. To be successful we believe that we must be able to respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. To do so, we must continually improve the performance, features, and reliability of our wireless control products. We cannot assure that will be able to utilize new technologies effectively or successfully or adapt our products in a timely manner to a competitive standard. If we fail to maintain a competitive level of technological expertise or are unable to adapt in a timely manner to changing technology, market conditions, or customer requirements, we will not be able to compete in our market successfully.
OUR LACK OF DIVERSIFICATION MAY MAKE US MORE VULNERABLE TO ECONOMIC FLUCTUATIONS WITHIN OUR INDUSTRY.
Because we have limited financial resources, we will unlikely be able to diversify our operations. Our inability to diversify our activities into more than one area will subject us to economic fluctuations within the particular industry in which we operate and therefore increase the risks associated with our operations.
WE ARE SUBJECT TO NUMEROUS REGULATIONS AFFECTING WIRELESS COMMUNICATION AND SECURITY BUSINESSES. IF WE ARE REQUIRED TO INCUR COMPLIANCE OR REMEDIATION COSTS THAT ARE NOT CURRENTLY ANTICIPATED OUR OPERATING RESULTS COULD BE HURT.
Our business is subject to various federal, state, and local laws affecting wireless communication and security businesses. The Federal Trade Commission and equivalent state agencies regulate advertising and representations made by businesses in the sale of their products, which apply to us. Our business is also subject to government laws and regulations governing health, safety, working conditions, employee relations, wrongful termination, wages, taxes and other matters applicable to businesses in general. Failure of MTI to comply with applicable government rules or regulations could have a material adverse effect on our financial condition and business operations.
THE COSTS INCURRED BY US TO DEVELOP, ENHANCE, AND MARKET OUR SMART SECURITY NETWORK TECHNOLOGY MAY BE HIGHER THAN ANTICIPATED WHICH COULD HURT OUR ABILITY TO EARN A PROFIT.
We may incur substantial cost overruns in the development, enhancement, and marketing of our smart security network technology. Such unanticipated costs may force us to obtain additional capital or financing from other sources, or may cause us to lose our entire investment in our smart security network technology if we are unable to obtain the additional funds necessary. Management is not obligated to contribute capital to MTI. There is no assurance that we will be able to obtain sufficient capital to implement our business plan successfully. If a greater investment is required in the business because of cost overruns, the probability of earning a profit or a return of the Shareholders' investment in MTI is diminished.
WE MAY INCUR LIABILITIES WHICH WE ARE UNABLE TO PAY.
MTI may have liabilities to affiliated or unaffiliated lenders. These liabilities would represent fixed costs which would be required to be paid regardless of the level of business or profitability experienced by us. We cannot assure that we will be able to pay all of our liabilities. Furthermore, we are always subject to the risk of litigation from licensees, suppliers, employees, and others because of the nature of our business. Litigation can cause us to incur substantial expenses and, if cases are lost, judgments, and awards can add to our costs.
OUR SECURITY NETWORK PRODUCTS AND SERVICES MAY NOT BE PROFITABLE.
Our business is speculative and dependent upon the development and acceptance of our smart security network products and services. We cannot assure whether we will be successful or that our business will result in revenue or profit, or that we will develop any commercial products. We cannot assure that we will earn significant revenues or that investors will not lose their entire investment.
WE ARE EXPOSED TO VARIOUS POSSIBLE CLAIMS RELATING TO OUR BUSINESS AND OUR INSURANCE MAY NOT FULLY PROTECT US.
We cannot assure that we will not incur uninsured liabilities and losses as a result of the conduct of our business. We maintain modest theft, casualty, liability, and property insurance coverage, along with workmen's compensation and related insurance. However, should uninsured losses occur, the Shareholders could lose their invested capital.
OUR FAILURE TO MEET OUR FINANCIAL OBLIGATIONS COULD SUBJECT OUR BUSINESS TO LIENS.
If we fail to pay for materials and services for our business on a timely basis, our assets could be subject to materialmen's and workmen's liens. We may also be subject to bank liens in the event that we default on loans from banks, if any.
WE WILL NOT RECEIVE ANY PROCEEDS FROM THIS OFFERING AND MAY NOT HAVE ENOUGH CAPITAL TO CONTINUE OUR OPERATIONS.
We will not raise capital from this offering. If our entire original capital is fully expended and additional costs cannot be funded from borrowings or capital from other sources, then our financial condition, results of operations and business performance would be materially adversely effected. There is no assurance that we will have adequate capital to conduct our business.
THE CONTROL OF MTI BY OUR PRINCIPAL STOCKHOLDERS MAY IMPEDE US FROM ENGAGING IN CERTAIN TRANSACTIONS.
As the owners of 113,060,000 shares of MTI's Common Stock, our principal shareholders own approximately 71.10% of our capital stock. Accordingly, our principal shareholders are able to elect a majority of our directors and are in a position to control MTI. Such control by the principal shareholders may have the effect of discouraging certain types of transactions involving an actual or potential change of control of MTI. See "Security Ownership of Certain Beneficial Owners and Management."
IF WE LOSE ANY MEMBER OF OUR SENIOR MANAGEMENT TEAM AND ARE UNABLE TO FIND A SUITABLE REPLACEMENT, WE MAY NOT HAVE THE DEPTH OF SENIOR MANAGEMENT RESOURCES REQUIRED TO EFFICIENTLY MANAGE OUR BUSINESS AND EXECUTE OUR GROWTH STRATEGY.
Under applicable state corporations law and the Bylaws of MTI, the officers and directors of MTI have the power and authority to manage all aspects of MTI's business. Shareholders must be willing to entrust all aspects of MTI's business to its directors and executive officers. MTI's success is substantially dependent on the performance of its executive officers and key employees. Given MTI's early stage of development, MTI is dependent on its ability to retain and motivate high quality personnel. Although we believe we will be able to engage qualified personnel for such purposes, an inability to do so could materially adversely affect our ability to develop and market our products. The loss of one or more of our key employees or our inability to hire and retain other qualified employees could have a material adverse effect on our business. See "Directors, Executive Officers, and Controlling Persons."
THE CONSIDERATION BEING PAID TO MANAGEMENT HAS NOT BEEN DETERMINED BASED ON ARMS LENGTH NEGOTIATION.
The Common Stock and cash consideration being paid by MTI to management have not been determined based on arms length negotiation. While management believes that the consideration is fair for the work being performed, there is no assurance that the consideration to management reflects the true market value of its services.
THE RELATIONSHIP OF OUR MANAGEMENT TEAM AND OUR AFFILIATES TO US COULD CREATE CONFLICTS OF INTEREST.
The relationship of management and our affiliates to MTI could create conflicts of interest. While management has a fiduciary duty to MTI, it also determines its compensation from MTI. Management's compensation from MTI has not been determined pursuant to arm's-length negotiation.
WE WILL INDEMNIFY AND HOLD HARMLESS OUR OFFICERS AND DIRECTORS TO THE MAXIMUM EXTENT PERMITTED BY DELAWARE LAW.
Our Bylaws provide that we will indemnify and hold harmless our officers and directors against claims arising from Company activities, to the maximum extent permitted by Delaware law. If we were called upon to perform under our indemnification agreement, then the portion of our assets expended for such purpose would reduce the amount otherwise available for our business.
WE DETERMINED THE PRICE OF THE SHARES ARBITRARILY.
The offering price of the Shares was arbitrarily determined by us and does not bear any relationship to our assets, results of operations or book value, or to any other historically-based criteria of value.
WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON THE SHARES IN THE FORESEEABLE FUTURE.
We do not anticipate that we will pay dividends on our Common Stock in the foreseeable future. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and marketing. Prospective investors seeking or needing dividend income or liquidity should therefore not purchase the Shares. We cannot assure that we will ever have sufficient earnings to declare and pay dividends to the holders of our Common Stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our Board of Directors.
IF WE ISSUE ADDITIONAL SHARES OF OUR STOCK, SHAREHOLDERS WILL EXPERIENCE
DILUTION IN THEIR OWNERSHIP OF MTI.
We are authorized to issue up to 500,000,000 shares of Common Stock, par value $0.001 per share. The Board of Directors has the authority to cause MTI to issue more shares of Common Stock, and to determine the rights, preferences and privileges of such stock, without the consent of any of our stockholders. Consequently, the Shareholders may experience more dilution in their ownership of MTI in the future.
IF WE BECOME SUBJECT TO PENNY STOCK REGULATION, SHAREHOLDERS MAY EXPERIENCE MORE DIFFICULTY SELLING THEIR SHARES.
Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $3.00 (other than securities registered on certain national securities exchanges or quoted on NASDAQ provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The rules require that a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in connection with the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the liquidity of penny stocks. If, as expected, our securities become subject to the penny stock rules, purchasers of the Shares may find it more difficult to sell their securities.
POSSIBLE RISKS OF FRAUD AND ABUSE IN THE MARKET FOR PENNY STOCKS
We want Shareholders to be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. We will not be able to control any of such patterns.
CAUTIONARY STATEMENTS
This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the risk factors below and elsewhere in this Prospectus. Important factors that may cause actual results to differ from projections include, for example:
o adverse economic conditions,
o volatility and/or decline of MTI's stock price,
o potential fluctuation in quarterly results,
o intense competition, including entry of new competitors and products,
o changes in demand for MTI's smart security network products and services,
o insufficient revenues to cover operating costs,
o intense competition, including entry of new competitors,
o increased or adverse federal, state and local government regulation,
o inadequate capital,
o unexpected costs,
o lower revenues and net income than forecast,
o price increases for supplies,
o inability to raise prices,
o failure to protect our proprietary rights or challenges to our rights to our technology
o the risk of litigation and administrative proceedings involving MTI and its employees,
o higher than anticipated labor costs,
o the possible fluctuation and volatility of MTI's operating results and financial condition,
o adverse publicity and news coverage,
o inability to carry out marketing and sales plans,
o loss of key executives, changes in interest rates, inflationary factors, and
o other specific risks that may be alluded to in this Prospectus or in other reports issued by MTI.
MTI does not promise to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.
USE OF PROCEEDS
We will not receive the proceeds of sales of Shares by Selling Securityholders.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for the Common Stock. The initial public offering price has been determined by us and may not be indicative of the market price of the Common Stock following this offering. Among the factors we considered in our determination were prevailing market conditions, certain financial information of MTI, market valuations of other companies that we believe to be comparable to us, estimates of our business potential, the present state of our development, and other factors deemed relevant.
CAPITALIZATION
The following table sets forth as of March 31, 2005 the capitalization of MTI.
As of March 31, 2005
(Audited)(1)
Indebtedness:
Long-term indebtedness......................... $ 436,000(2)
Stockholders' Equity:
Common Stock, par value $0.001 per share
500,000,000 shares authorized, 155,950,000 issued
and outstanding (3)........................... $2,072,404
Retained Earnings (Deficit).................... ($2,125,770)
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Total Shareholders' Equity (Deficit)........... ($ 53,366)
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Total Capitalization........................... $ 382,634
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(1) See "Financial Statements." Does not include 2,800,000 shares of MTI's
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Common Stock owned by subscribers for shares of Common Stock sold by MTI as part of a private placement from April 1, 2005 to June 14, 2005 for a purchase price of $0.10 per share pursuant to Rule 506 of Regulation D of the Securities Act from which MTI raised approximately $280,000 of gross proceeds.
(2) Reflects a related party debt owed by us to Roland Bryan, our Chairman and Chief Executive Officer, bearing simple interest at 6% per annum and due July 2009, payable interest only annually, and convertible into 17,440,000 shares of our Common Stock at any time.
(3) Reflects the ten for one forward split of our Common Stock which became effective on September 7, 2004. Does not include the exercise of any outstanding stock options or warrants.
DILUTION
The difference between the public offering price per share of Common Stock and the net tangible book value per share of Common Stock constitutes the dilution to investors in this offering. Net tangible book value is determined by dividing the net tangible book value (stockholders' equity adjusted for the retained earnings (deficit)) by the number of outstanding shares of Common Stock.
As of March 31, 2005, the net tangible book value of MTI was ($53,666) or approximately ($0.00034) per share of Common Stock. Net tangible book value per share consists of stockholders' equity adjusted for the retained earnings (deficit), divided by the total number of shares of Common Stock outstanding. As of March 31, 2005, the purchasers of Common Stock will incur an immediate dilution of approximately $0.09966 per share from the purchase price. "Dilution" means the difference between the offering price and the net tangible book value per share after giving effect to the offering. Holders of Common Stock may be subjected to additional dilution if any additional securities are issued as compensation or to raise additional financing. The following table illustrates the dilution which purchasers of Shares will incur and the benefit to current stockholders as a result of this offering:
Price per share(1)............................................... $ 0.10 Pro forma net tangible book value per share as of March 31, 2005..... ($0.00034) Increase per share attributable to this offering..................... $0.05034 Dilution per share to new investors.................................. $0.09966 ----------------- (1) Assumes that all 73,367,050 shares of Common Stock are sold. |
SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Securityholders, the number of shares of Common Stock beneficially owned by each Selling Securityholder as of July 31, 2005, and the number of Shares being offered by each Selling Securityholder. The Shares being offered hereby are being registered to permit public secondary trading, and the Selling Securityholders may offer all or part of the Shares for resale from time to time. The Selling Securityholders are under no obligation to sell all or any portion of the Shares nor are the Selling Securityholders obligated to sell any Shares immediately under this Prospectus. All information with respect to share ownership has been furnished by our transfer agent of record. The Selling Securityholders may own additional shares held in street name which are not reflected in the following table. Because the Selling Securityholders may sell all or part of their Shares, no estimates can be given as to the number of Shares that will be held by any Selling Securityholder upon termination of any offering made by this Prospectus. See "Plan of Distribution."
Shares Shares Owned
Beneficially Owned Shares to Be After the
Prior to the Sold in the Offering
Name of Selling Stockholder Offering(1)(3) Offering(2) (1)(2)
--------------------------- -------------- ----------- ------
Michael Allaire 200,000 200,000 0
Carolyn and Richard Andrews 200,000 200,000 0
Mark Barker 50,000 50,000 0
Steven Bartling 1,000,000 1,000,000 0
William E., Jr. and Alice Beifuss 7,120,000 7,120,000 0
Jacqueline Belusa 40,000 40,000 0
Liselle Belusa 40,000 40,000 0
Eric Belusa 190,000 190,000 0
Ronald Belusa 200,000 200,000 0
Larry Benson 500,000 500,000 0
Andrew Berk 200,000 200,000 0
Roy Bethel 100,000 100,000 0
Thomas Blackburn 200,000 200,000 0
Mark W. and Deborah H. Blackman 400,000 400,000 0
Erik Bloomquist 50,000 50,000 0
Frances Bolle 50,000 50,000 0
Ted J., Sr. and Mary K. Bowersox 100,000 100,000 0
William Boyd 800,000 800,000 0
Bernard Brandstater 250,000 250,000 0
Karl Brown 350,000 350,000 0
Robert L. Brunker Trust Dated 11/15/02 50,000 50,000 0
Kathleen Bryan 50,000 50,000 0
Kenneth Bryan 50,000 50,000 0
Jon Bryan 100,000 100,000 0
Roger and Deborah Bryan 600,000 600,000 0
Roland Bryan 39,510,000(4) 16,010,000 23,500,000
Blair Capital. 2,000,000 2,000,000 0
Fred Carpenter 50,000 50,000 0
Glenn Catron 50,000 50,000 0
Alex Cavus 400,000 400,000 0
Eloy R. and Ellen P. Corona 50,000 50,000 0
Kauai Credit. 1,000,000 1,000,000 0
Chris Crossley 200,000 200,000 0
Robert Currie 50,000 50,000 0
Ron DenBoer 200,000 200,000 0
Virinder Dhillon 200,000 200,000 0
Harinder Dhillon 400,000 400,000 0
Dave Dobrin 50,000 50,000 0
David Dobrin 50,000 50,000 0
Lauren Doko 200,000 200,000 0
Kristi Dryden 200,000 200,000 0
Thomas Dwyer 100,000 100,000 0
BRP Enterprises 50,000 50,000 0
Sterling Trust FBO Gyula Etter 50,000 50,000 0
Michael Evans 200,000 200,000 0
Duwayne Evenson 50,000 50,000 0
Barry Ewing 400,000 400,000 0
Laura Fairbanks 200,000 200,000 0
I-13
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Mary Falso 200,000 200,000 0
Fiserv Securities FBO Steven M. Bathgate 1,000,000 1,000,000 0
Scott Foley 50,000 50,000 0
Jesse Fowler 50,000 50,000 0
Frank and Amy Frazer 600,000 600,000 0
Patrick E. and Marianne P. Gillespie 50,000 50,000 0
Steve Gillespie 50,000 50,000 0
Leni Gillis 50,000 50,000 0
Steven W. and Mary G. Gordon 200,000 200,000 0
William L., Sr. and Nancy A. Guggemos 200,000 200,000 0
Halkett Family Trust 1,500,000 1,500,000 0
Halprin Family Trust, Dated March 28, 1985 50,000 50,000 0
Sterling Trust FBO James A. Hammann 1,000,000 1,000,000 0
James Hammann 1,000,000 1,000,000 0
Harold Havekotte 50,000 50,000 0
Shining Star 09-13-2000 Trust FBO Phyllis Janet Holmes 500,000 500,000 0
Phyllis Janice Holmes Living Trust 500,000 500,000 0
Richard Johnson 200,000 200,000 0
Tim Kaiser 400,000 400,000 0
Larry Kaufman 100,000 100,000 0
Holly Killion 200,000 200,000 0
Robert D. and Pamela M. King 400,000 400,000 0
Kolanowski Family Trust, Dated December 2, 2003 50,000 50,000 0
Matt Kramer 100,000 100,000 0
Melvin A. and Barbara L. Lahmann 50,000 50,000 0
David Lee 1,080,000 1,080,000 0
Esther Lee 1,600,000 1,600,000 0
Dennis and Nancy LePon 200,000 200,000 0
Private Life 800,000 800,000 0
Kimberly Long 200,000 200,000 0
Juliet E. and Ronald C. Long 250,000 250,000 0
Thomas Lutz 50,000 50,000 0
Jennifer Mandel 50,000 50,000 0
Thomas Mason 1,000,000 1,000,000 0
Dana and Karen Matsunaga 200,000 200,000 0
Brian and Robin McMahon 400,000 400,000 0
Carolyn Miller 300,000 300,000 0
Ross Munro 200,000 200,000 0
Donald G. and Norma I. Nachtegaele 100,000 100,000 0
Gerald Nadler 1,000,000 1,000,000 0
Roy Neumann 50,000 50,000 0
Oliver Family Trust 200,000 200,000 0
Julie-Ann O'Rear 14,250,000 14,250,000 0
Wade Pedrotti 200,000 200,000 0
John Pulliam 200,000 200,000 0
Tim Raney 200,000 200,000 0
Paul Ronan 100,000 100,000 0
Lloyd Rutherford 50,000 50,000 0
Ghanim Sabeh 50,000 50,000 0
Bassel Salloum 50,000 50,000 0
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James Salloum 50,000 50,000 0 Michael and Hoda Salloum 50,000 50,000 0 Oscar G. and Susan A. Sanchez 100,000 100,000 0 Raffi Sarkissian 200,000 200,000 0 Fred Schwartz 100,000 100,000 0 Brian Schwartz 200,000 200,000 0 Edward Shen 100,000 100,000 0 Andrew Slonka 267,050 267,050 0 Brent Smith 200,000 200,000 0 Gary Smith 200,000 200,000 0 Leroy Solt 50,000 50,000 0 Lisa Song 100,000 100,000 0 Sterling Trust FBO Edward W. Stoll 50,000 50,000 0 Southwest Securities FBO Kent E. Stone 400,000 400,000 0 Samuel R. and Nancy B. Spear 200,000 200,000 0 Warren Spencer 200,000 200,000 0 Russell Spencer 400,000 400,000 0 James Standaert 760,000 760,000 0 Paul Summers. 50,000 50,000 0 Kenneth Tam 200,000 200,000 0 Laurie and Walter Tayenaka 50,000 50,000 0 Charles E. Tronson and Mary Revocable Trust 200,000 200,000 Jane Tronson 0 David Tronson 200,000 200,000 0 Joseph Tucker 50,000 50,000 0 Mohammadali Vaghar 400,000 400,000 0 Van Burkleo Grantor Trust Dated 1/10/92 50,000 50,000 0 David Van Middlesworth 200,000 200,000 0 David and Deborah Van Zuidam 500,000 500,000 0 Scott Wagner 50,000 50,000 0 Carol Warfield 200,000 200,000 0 Jerry Webb 50,000 50,000 0 Gary Werner 200,000 200,000 0 Scott Widmer 10,000 10,000 0 Lisa Wong 100,000 100,000 0 Russell D. Wong Trust 800,000 800,000 0 Kent Zimmer 50,000 50,000 0 |
(2) Assumes all Shares offered hereby are sold in the offering.
(3) Some of these Shares may have been sold by the Selling Stockholder prior to the date of this Registration Statement.
(4) 23,500,000 of these shares are owned by the Bryan Family Trust. None of shares owned by the Bryan Family Trust shares will be registered.
(5) Effective September 19, 2002, Mr. Nadler was granted 7,000,000 incentive stock options to purchase 7,000,000 shares of Common Stock pursuant to MIT's Option Plan. These Options vest as follows: 25% on September 19,
2003, and 1/36 every 30 days thereafter until the remaining Options have vested. These Options are exercisable for a period of ten years from the date of grant at an exercise price of $0.05 per share. As of July 31, 2005, 5,015,068 of these Options were vested.
All the Shares offered by this prospectus are being offered for the account of the Selling Securityholders. Accordingly, we will not receive any proceeds of any sales. See "Use of Proceeds."
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Securityholders or by pledgee, donees or transferees of, or successors in
interest to, the Selling Securityholder, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or who may acquire Shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the Shares may be effected in one or more of the following
methods: (i) ordinary brokers transactions, which may include long or short
sales, (ii) purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this Prospectus,
(iii) "at the market" to or through market makers or into an existing market for
the Common Stock, (iv) in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales effected through
agents, (v) through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or (vi) any combination of the foregoing, or by
any other legally available means. In addition, the Selling Securityholders may
enter hedging transactions with broker-dealers who may engage in short sales of
Shares of Common Stock in the course of hedging the positions they assume with
the Selling Securityholders. The Selling Securityholders may also enter into
options or other transactions with broker-dealers that require delivery by such
broker-dealers of the Shares, which Shares may be resold thereafter pursuant to
this Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of the Shares may receive compensation in the form of discounts, concessions or commissions from the Selling Securityholders or the purchasers of Shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commission). Any broker-dealer acting in connection with the sale of the Shares hereunder may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit realized by them on the resale of Shares as principals may be deemed underwriting compensation under the Securities Act. Neither the Company nor any Selling Securityholder can presently estimate the amount of such compensation. The Company knows of no existing arrangements between any Selling Securityholder and any such stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the Shares.
Each Selling Securityholder and any other person participating in a distribution of securities will be subject to applicable provisions of the Exchange Act and its rules and regulations, including Regulation M, which may limit the timing of purchases and sales of securities by the Selling Securityholders and other persons participating in a distribution of securities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specific period of time prior to the commencement of such distribution, subject to specified exceptions. These rules may affect the marketability of the securities offered by this Prospectus.
Any securities covered by this Prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under that Rule rather than pursuant to this Prospectus.
There can be no assurance that the Selling Securityholders will sell any of the Shares of Common Stock offered by them under this Prospectus.
LEGAL PROCEEDINGS
MTI is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
Executive Officers and Directors
The following lists MTI's executive officers, directors, and key employees as of July 31, 2005:
Name Position
---------------------------- -------------------------
Roland F. Bryan President, Chief Executive Officer,
and Chairman of the Board of
Directors
Christopher T. Kleveland Vice President of Operations,
Secretary, and Director
Gerald A. Nadler Chief Scientist
Brian Altounian Director
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ROLAND F. BRYAN, age 70, has been the President, Chief Executive Officer, and Chairman of the Board of Directors of MTI since our inception in January 2002. For the six years prior to founding MTI, Mr. Bryan was self employed as an independent advisor to several high-tech companies on corporate organization, management, marketing and product development. Mr. Bryan's professional background is in the areas computer science research and process control through computer automation. During the last 25 years he has built up and sold several high-tech companies in the fields of telecommunications networking, military computer systems and commercial equipment for network access. In 1974, he founded Associated Computer Consultants, Inc. ("ACC"), a company that implemented interconnections to the first packet network for many United States government agencies. In 1983 the name of the company was changed to Advanced Computer Communications, Inc. and continued to produce networking products for both military and commercial applications. ACC made the Inc. 500 List of Fastest Growing Companies in 1984. In 1991 the company was split into two separate businesses, one to concentrate on military products, the other to concentrate on commercial products. ACC was acquired by Ericsson in 1998 for $265 million. In September 1994, Wired Magazine honored Mr. Bryan and 18 others, as the "Creators of the Internet."
CHRISTOPHER T. KLEVELAND, age 54, has been the Vice President of Operations, Secretary, and a director of MTI since our inception in January 2002. From June 1998 until the incorporation of MTI, Mr. Kleveland served as Vice President of Operations for SecureCoin, Inc. From October 1994 to December 2003, he served as President and Chief Executive Officer of Interforce Information Inc., an information technologies consulting firm. From June 1996 to June 1997, Mr. Kleveland served as Chief Technical Officer for PersonAlarm Corporation. From August 1979 to May 1996, he was the Vice President of Operations of Advanced Computer Communications, where he established and operated a $20 million manufacturing facility supplying both military and commercial network electronics hardware.
GERALD A. NADLER, age 62, has been the Chief Scientist of MTI since our inception in January 2002. From 1998 to January 2002, Mr. Nadler was self employed as an independent advisor consulting on designs of networking products for Cratos Networks, Nortel/Aptis, Lucent/Ascend, Openroute, Shiva, and Data General. In 1992, Mr. Nadler founded and from 1992 to 1995 was the President of Elettra Systems, a data communications company. From 1987 to 1991, he designed the spread spectrum wireless meter-reading system for Metricom. In 1985, he founded and from 1985 to 1987 was the President of Token Automation, a data communications company. In 1979, he founded and from 1979 to 1985 was the President of Distributed Computer Systems, a computer and data communications company. From 1976 to 1979, he was a computer architect at Wang Laboratories.
BRIAN ALTOUNIAN, age 41, has been a director of MIT since June 2004. Mr. Altounian has over 16 years of experience in the areas of business development, finance, operations and administration. Since October 2003, he has been the Chairman of the Board of XsunX, Inc., a publicly traded technology company (OTCBB:XSNX). Since January 2003, Mr. Altounian has been an independent consultant, advising companies in the areas of marketing and business development. From January 2000 to December 2002, Mr. Altounian served as Executive Vice President of Plyent, Inc., a provider of a proprietary software solution that allows dynamic wireless Web access by Web enabled wireless thin devices, such as cell phones and personal digital assistants. Prior to working for Plyent, Inc. Mr. Altounian spent 12 years in the entertainment industry. From January 1998 to December 1999, he was the Vice President of Finance of Lynch Entertainment, a producer of family television series for the Nickelodeon and Disney Channels. While at Lynch, he established subsidiary corporations, purchased and oversaw the construction of a state-of-the-art television studio facility, and built the infrastructure of the company. From June 1995 to June 1996, he was the Director of Finance and Administration of Time Warner Interactive. From January 1994 to June 1995, he was the Finance Manager of National Geographic Television. From January 1991 to January 1993, Mr. Altounian, owned an operated his own consulting company, BKA Enterprises, advising small companies in the entertainment industry, including but not limited to Two Oceans Entertainment Group, Papazian-Hirsch Entertainment, The Santa Barbara Grand Opera Association, International Documentary Association and In-Finn-Ity Productions, in the areas of finance, administration and operations. Mr. Altounian received a Masters degree in Business Administration from Pepperdine University in 1992 and a Bachelor degree in psychology from the University of California, Los Angeles in 1987.
BOARD OF DIRECTORS AND COMMITTEES
Our Board of Directors presently consists of three members: Roland F. Bryan, Christopher T. Kleveland, and Brian Altounian. Our Bylaws generally provide for majority approval of directors in order to adopt resolutions. The Board of Directors may be expanded in the future. All executive officer compensation, including payroll expenditures, salaries, stock options, stock incentives, and bonuses, must be approved by the unanimous consent of the Board of Directors. The Board of Directors maintains an Audit Committee, of which Brian Altounian is the sole member. We are currently preparing the Charter for our Audit Committee and the Code of Ethics for our business operations and information disclosures.
The Audit Committee is authorized by the Board of Directors to review, with our independent accountants, our annual financial statements prior to publication, and to review the work of, and approve non-audit services performed by, such independent accountants. The Audit Committee makes annual recommendations to the Board for the appointment of independent public accountants for the ensuing year. The Audit Committee also reviews the effectiveness of the financial and accounting functions and the organization, operation and management of MTI.
MTI'S 2002 STOCK OPTION PLAN
On February 15, 2002, the Board of Directors and a majority of shareholders adopted MTI's 2002 Stock Option Plan (the "Option Plan") under
which a total of 20,000,000 shares of Common Stock has been reserved for issuance. The Option Plan terminates on February 15, 2012, unless sooner terminated by the Board of Directors.
Options granted under the Option Plan may be either "incentive stock options" as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or nonstatutory stock options and become exercisable in accordance with terms approved at the time of grant. Incentive stock options may be granted to any officer or other employee of MTI or any parent or subsidiary of MTI, including members of the Board of Directors who are also employees of MTI or any parent or subsidiary of MTI. Nonstatutory stock options may be granted to officers or other employees of MTI or any parent or subsidiary of MTI, to members of the Board of Directors or the board of directors of any parent or subsidiary of MTI whether or not employees of MTI or any parent or subsidiary of MTI, and to certain other individuals providing services to MTI or any parent or subsidiary of MTI. The Option Plan is currently administered by the Board of Directors which has the authority to determine optionees, the number of shares covered by each option, the type of option (i.e., incentive or nonstatutory), the applicable vesting schedule, the exercise price, the method of payment and certain other option terms. The Board of Directors from time to time, in its absolute discretion, may also (a) award Restricted Stock (in lieu of Options) to employees of, consultants to, and directors of MTI and (b) permit Option holders to exercise their Options prior to full vesting and hold the Common Stock issued upon exercise of the Option as Restricted Stock.
The exercise price of an option granted under the Option Plan may not be less than 100%, in the case of an incentive stock option, but may be may be less than, equal to or greater than 100%, in the case of a nonstatutory stock option, of the fair market value of the Common Stock subject to the option on the date of the option grant. To the extent that the aggregate fair market value of the stock subject to incentive stock options that become exercisable for the first time during any one calendar year exceeds $100,000 (as determined at the grant date) plus fifty percent (50%) of any unused limit carryover from prior years, the options in excess of such limit shall be treated as nonstatutory stock options. Options may be granted under the Option Plan for terms of up to ten years and will typically be exercisable in installments in accordance with a vesting schedule approved by the Board of Directors at the time an option is granted. Options are not transferable other than upon death or between spouses incident to divorce. Options may be exercised at various periods up to 180 days after the death of the optionee or up to 90 days after the termination of employment of the optionee not for "cause," as that term in defined in the Option Plan, to the extent the option was then exercisable.
To date we have granted a total of 8,000,000 incentive stock options to officers and employees of MTI, all of which vest as follows: 25% on the Vesting Commencement Date, as defined in each stock option agreement, and 1/36 every 30 days thereafter until the remaining Options have vested. These Options are exercisable for a period of ten years from the date of grant and 7,000,000 are exercisable at an exercise price of $0.05 per share and 1,000,000 are exercisable at an exercise price of $0.025 per share. We are generally permitted to issue additional shares of our capital stock with the approval of our Board of Directors and without the consent of MTI's shareholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Under Delaware General Corporation Law and our Articles of Incorporation, our directors will have no personal liability to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his "duty of care." This provision does not apply to the directors' (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director's duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.
The effect of this provision in our Articles of Incorporation is to eliminate the rights of MTI and our stockholders (through stockholder's derivative suits on behalf of MTI) to recover monetary damages against a director for breach of his fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (vi) above. This provision does not limit nor eliminate the rights of MTI or any stockholder to seek non-monetary relief such as an injunction or rescission in the event of a breach of a director's duty of care. In addition, our Articles of Incorporation provide that if Delaware law is amended to authorize the future elimination or limitation of the liability of a director, then the liability of the directors will be eliminated or limited to the fullest extent permitted by the law, as amended. Delaware General Corporation Law grants corporations the right to indemnify their directors, officers, employees and agents in accordance with applicable law. Our Bylaws provide for indemnification of such persons to the full extent allowable under applicable law. These provisions will not alter the liability of the directors under federal securities laws.
We intend to enter into agreements to indemnify our directors and officers, in addition to the indemnification provided for in our Bylaws. These agreements, among other things, indemnify our directors and officers for certain expenses (including attorneys' fees), judgments, fines, and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of MTI, arising out of such person's services as a director or officer of MTI, any subsidiary of MTI or any other company or enterprise to which the person provides services at the request of MTI. We believe that these provisions and agreements are necessary to attract and retain qualified directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling MTI pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The following table lists the security ownership of management and stockholders of MTI who beneficially own 5% or more of the outstanding stock of MTI and their respective holdings of Common Stock in MTI as of July 31, 2005. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities, subject to community property laws, where applicable. The percentage of beneficial ownership is based on 159,017,050 shares of Common Stock outstanding as of July 31, 2005.
Number of Shares Owned Percentage of Ownership
Name and Address
of Stockholder Before Offering After Offering Before Offering(1) After Offering(1)
----------------------------------------------------------------------------------------------------------------------------
Roland F. Bryan(2) 39,510,000 23,500,000 24.85% 14.78%
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
Christopher T. Kleveland (3) 23,500,000 23,500,000 14.78% 14.78%
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
Mark P. Harris(4) 23,500,000 23,500,000 14.78% 14.78%
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
Wings Fund, Inc.(5) 10,300,000 10,300,000 6.48% 6.48%
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, Califonria 93101
Gerry Nadler(6) 1,000,000 0 0.63% 0
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, Califonria 93101
Brian Altounian(7) 1,000,000 1,000,000 0.63% 0.63%
c/o MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
Julie O'Rear 14,250,000 0 8.96% 0
401 Church Road
Taigum, Queensland
Australia 4018
--------- --------- ---------- ---------
Totals 113,060,000 81,800,000 71.10% 51.44%
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(1) Does not include the exercise of 4,077,000 warrants to purchase 4,077,000 shares of Common Stock and 8,000,000 options to purchase 8,000,000 shares of Common Stock.
(2) Roland F. Bryan is the President, Chief Executive Officer, and Chairman of the Board of Directors of MTI. 23,500,000 of these shares are owned by the Bryan Family Trust. Mr. Bryan holds an option to purchase 13,500,000 shares from Mr. Harris at $0.10 per share and an option to purchase 13,500,000 shares from Mr. Kleveland at $0.10 per share. In addition, Mr. Harris and Mr. Kleveland have agreed that Mr. Bryan has the right to vote the shares held under these option agreements. Mr. Bryan holds a convertible note from
MTI in the principal amount of $436,000, interest payable at the rate of 6% per year, principal due on or before July 2009, and convertible into 17,440,000 shares of common stock at $0.025 per share.
(3) Christopher Kleveland is a director and the Vice President of Operations of MTI.
(4) Mark P. Harris is a former director of MTI.
(5) Wings Fund, Inc. provides consulting services to MTI.
(6) As a Chief Scientist, Gerry Nadler is a key employee of MTI. Does not include 7,000,000 incentive stock options to purchase 7,000,000 shares of Common Stock granted to Mr. Nadler pursuant to MIT's Option Plan. These Options vest as follows: 25% on September 19, 2003 and 1/36 every 30 days thereafter until the remaining Options have vested. These Options are exercisable for a period of ten years from the date of grant at an exercise price of $0.05 per share. As of July 31, 2005, 5,015,068 of these Options were vested.
(7) Mr. Brian Altounian is a director of MTI.
DESCRIPTION OF SECURITIES
GENERAL
As of July 31, 2005, our authorized capital stock consists of 500,000,000 shares of Common Stock, par value $0.001 per share, of which 159,017,050 shares are presently issued and outstanding and a maximum of 168,754,324 of which may be issued and outstanding upon the exercise of vested stock options and warrants.
COMMON STOCK
All outstanding shares of Common Stock are, and the shares to be issued as contemplated herein will be, fully paid and nonassessable. As a class, holders of the Common Stock are entitled to one vote per share in all matters to be voted upon by the stockholders. Holders of Common Stock are entitled to receive such dividends when and as declared by the Board of Directors out of the surplus or net profits of MTI legally available therefor, equally, on a share for share basis. We do not anticipate paying dividends in the near future. In the event of a liquidation, dissolution or winding-up of MTI, the holders of Common Stock are entitled to share equally, on a share for share basis, in all assets remaining after payment of liabilities, subject to the prior distribution rights of any other classes or series of capital stock then outstanding. The Common Stock has no preemptive rights and is neither redeemable nor convertible, and there are no sinking fund provisions. As of July 31, 2005, our 159,017,050 shares of Common Stock outstanding were held by approximately 156 stockholders of record.
WARRANTS
As of July 31, 2005, there were approximately 3,292,000 warrants outstanding exercisable until January 28, 2010 at a price of $0.025 per share, 525,000 warrants outstanding exercisable until March 23, 2010 at a price of $0.10 per share, 55,000 warrants outstanding exercisable until April 18, 2010 at a price of $0.10 per share, 5,000 warrants outstanding exercisable until April 28, 2010 at a price of $0.10 per share, and 200,000 warrants outstanding exercisable until June 16, 2010 at a price of $0.10 per share. Each warrant contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant under certain circumstances, including stock dividends, stock splits, reorganizations, reclassifications, and consolidations.
STOCK OPTIONS
As of July 31, 2005, there were a total of 8,000,000 incentive stock options granted to employees of MTI pursuant to MTI's Option Plan, all of which vest as follows: 25% one year after the Vesting Commencement Date, as defined in each stock option agreement, and 1/36 every 30 days thereafter until the remaining Options have vested. These Options are exercisable for a period of ten years from the date of grant and 7,000,000 are exercisable at an exercise price of $0.05 per share and 1,000,000 are exercisable at an exercise price of $0.025 per share.
DIVIDEND POLICY
We do not intend to pay cash dividends in the foreseeable future on the shares of Common Stock. Cash dividends, if any, that we may pay in the future to holders of Common Stock will be payable when, as, and if declared by the Board of Directors of MTI, based upon the Board's assessment of the financial condition of MTI, our earnings, our need for funds, and other factors including any applicable.
INTEREST OF NAMED EXPERTS AND COUNSEL
LEGAL COUNSEL
The validity of the issuance of the shares of Common Stock covered by this Prospectus will be passed upon for us by Richardson & Associates, counsel to the Company, 233 Wilshire Boulevard, Suite 820, Santa Monica, California, 90401. Mark J. Richardson Esq. of Richardson & Associates owns shares of MTI's Common Stock.
ACCOUNTANTS
Our financial statements for the twelve months ended December 31, 2004 and December 31, 2003, appearing in the prospectus have been audited by Rose, Snyder & Jacobs, a Corporation of Certified Public Accountants, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
TRANSFER AGENT AND REGISTRAR
U.S. Stock Transfer Corporation in Glendale, California is our Transfer Agent and Registrar.
MACHINETALKER, INC.
HISTORY
MachineTalker, Inc. ("MTI" or "we") is a Delaware corporation formed in January 2002 by Roland F. Bryan, Christopher T. Kleveland and Mark P. Harris to engage in the business of developing and marketing a wireless control technology. Our founders are also shareholders of SecureCoin, Inc. ("SecureCoin"). As part of our initial capitalization, our founders contributed certain intellectual property that was developed at and purchased from SecureCoin. SecureCoin assigned all rights to that intellectual property to Messrs. Bryan, Kleveland and Harris in January 2002, and those co-founders then contributed the intellectual property rights to us in connection with our formation. This intellectual property, including a provisional patent, forms the core of our proprietary smart security network technology that allow governments, businesses and individuals to rapidly deploy wireless security systems to protect and monitor things, places and people.
GENERAL
MTI has developed a new smart security network technology that allows governments, businesses, and individuals to deploy wireless security systems rapidly to protect and monitor things, places, and people. Current security systems are static and rely on centralized control over various types of "dumb" detectors or nodes. Without independent intelligence and a way to communicate with one another, individual security nodes are unable to carry out functions or overcome failure at the local level.
Our technology allows security systems to become dynamic by creating "smart" security networks at the local level. The remote and wireless devices developed by us ("MachineTalkers" or "Talkers") contain powerful microprocessors, on-board sensors, detectors, readers or actuators, and wireless radios. Talkers(R) automatically form an ad hoc wireless mesh network, creating intelligent nodes each capable of processing data in real-time and on a local basis. Once formed, a small community of Talkers(R) operate independently or collectively to assess local conditions or events and take action accordingly. These cooperating Talkers(R) form redundant and self-healing networks in case of failure; and, one or more individual units can be connected to modems for wireless communication outside of the local community by way of the Internet.
THE NEED FOR THE SIMPLE MACHINE MANAGEMENT PROTOCOL(R)(SMMP)
During the 1970s and early 1980s, a revolution of sorts came about which led to what we now know as the Internet. An important development that made this possible was the establishment of standards, rules, and shared languages, which allowed computers to "talk" to each other. Because of these "protocol" standards, computer interconnectivity exploded and the Internet was put to use in ways that were previously unimaginable.
MTI believes that today, the same environment for change exists in the world of non-computer entities. Many people can envision a future where almost everything communicates for a useful purpose. Already, our car keys deliver wireless commands to their car door locks and our airbags talk to the emergency desk of the car manufacturer's network.
Networking of such devices today is limited in the same way that computer networking was limited before universal connectivity made the Internet possible. As in the case of the Internet, we believe that all this will change once a simple, smart, flexible, and inexpensive communication platform is introduced that will enable most things able to talk to each other. Our management team believes the platform will be the MachineTalker(R) infused with a new standard language, the Simple Machine Management Protocol ("SMMP").
SMMP(R) provides MachineTalkers(R) with unique characteristics, including:
1 A MachineTalker(R)with SMMP(R)can be instructed to represent or be
proxy for any entity to which it is attached.
2 A MachineTalker(R)records and maintains a profile of that entity and
shares that profile with other MachineTalker(R)members of its local
community.
3 A MachineTalker(R)automatically forms an ad hoc mesh network with its
peers and they keep track of each other and share in processing
information.
4 The SMMP(R)operating system provides for peer-to-peer control, power
management to prolong battery life and a simplified API for ease in
programming new applications.
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PROPRIETARY TECHNOLOGY
GENERAL. Information passed to and from local or remote nodes and a centralized control facility is similar to the central computer/dumb terminal installations of the pre-Internet era. Like those early hard-wired systems that required every action to be processed centrally, today's security systems are severely handicapped to meet the increasing demands of information distribution and local control.
We believe that we have solved this problem by moving much of the processing now located at the central control site to inexpensive MachineTalkers(R) that serve as intelligent proxies for sensor, detectors, readers, or actuators. These Talkers(R) can make decisions based upon information provided by their local attachments or by their networked "peers." Each MachineTalker(R) can be set up to perform diagnostics and to transmit status reports on itself and on other members of its "community."
Like the Internet revolution, we believe that the MachineTalker(R) revolution will be driven by a change in networking technology. MachineTalkers(R) are managed by the SMMP(R) that forms the basis for the ad hoc wireless network and the peer-to-peer relationships.
AUTOMATIC NETWORK CONFIGURATION (ANC(TM)). The significant advantage of wireless networking is the ability to bring new nodes on-line without plugging in cables or physically reconfiguring a local network. This advantage dovetails with the MachineTalker(R) concept of Automatic Network Configuration ("ANC(TM)"), whereby the addition of a new "Talker(R)" to a community of Talkers(R) will happen simply by powering it up or coming into the sphere of the "community." This means that a number of sensing devices, made "intelligent" by attachment to MachineTalkers(R), can be moved, or supplemented in the field without having to connect them because they will automatically become absorbed as a member of a local community of sensors. In practical terms, service personnel can add new types of sensors or replace failed sensors without having to interrupt network operation. We believe that the foregoing benefits will justify the deployment of the MachineTalker(R) technology by our target customer base. Once adopted however, we believe that the real value of MachineTalker(R) technology lies in the vast potential that is unlocked as these networked entities or sensors acquire and share intelligence and knowledge amongst themselves in a decentralized and flexible model.
PATENT APPLICATION. An application for a United States patent in the names of Roland F. Bryan, Mark P. Harris, and Christopher T. Kleveland and assigned to MTI entitled "Self Coordinated Machine Network" was filed on April 23, 2002, by our former intellectual property counsel, Lyon & Lyon, LLP.
ABSTRACT OF THE PATENT DISCLOSURE. A self coordinated machine network is established by two or more machines in proximity with each other via a wired or wireless network infrastructure. The machines are configured to establish an ad hoc network between them for sharing information related to their common applications. New machines that come into proximity of the network infrastructure are automatically configured to join an existing ad hoc network. Machines that power down or are removed from proximity of the network infrastructure are eliminated from the ad hoc network. Communications between the constituent machines of the ad hoc network allow the machines to self coordinate the network and redundantly store information pertaining to the common and disparate applications of the various machines that comprise the self coordinated machine network. The same is the case for the internal components that make up the machine; in that self-contained subassemblies that take action in response to stimulus or change in status, like keyboards, card readers, bill changers and electronic devices, can be similarly self coordinated with the addition to each sub-assembly of the present invention; whereby cabling between such sub-assemblies is minimized or even eliminated by use of the wireless version of the present invention.
PRODUCTS
We currently offer several smart security network components for rapidly deploying wireless security systems, including:
MACHINETALKER(R). MachineTalker(R) is a high performance unit for applications requiring extensive local processing and/or gateway connections to higher level networks (such as Internet, Ethernet, 802.11 and WiFi).
MINITALKER(R). MiniTalker(R) is similar in functionality to the MachineTalker(R), but has lower performance levels, reduced size, and lower power consumption. As an option, this unit may include on-board sensors for a particular application.
TAGTALKER(TM). TagTalker(TM) is an ultra low power, very low cost unit for applications requiring limited local processing.
TOUGHTALKERS(TM). ToughTalker(TM) is a more rugged version of MiniTalker(R) and is designed for use in harsh, industrial environments where it must operate more reliably through shock and vibration, such as inside shipping containers.
CONTAINERTRACKER(TM). We recently completed development of a demonstration software program to support ToughTalkers(TM) which have been placed aboard a community of shipping containers. The demonstration software enables a user to monitor the containers and control interaction with on-board Talkers(R). The ContainerTracker(TM) software includes the ability to create, insert, and read-back a freight manifest that shows what has been loaded within a container, from where the container came, and to where the container is supposed to go. The manifest can also be accessed by a hand-held personal digital assistant when a container is encountered in the field.
ASSETTRACKER(TM). In June 2005, we released AssetTracker(TM), a small portable battery powered roving unit that integrates a ToughTalker(TM) with a Global Positioning System Modem. When an AssetTracker(TM) is plugged into an automobile's cigarette lighter, the devise will send location data over a cellular telephone connection which can then be monitored on the Internet and tracked on a map. Additionally, an AssestTracker(TM) can also feed the connection with information from other Talkers it encounters within its vicinity or community. We are currently testing this devise in Texas with a potential customer.
SPECIFICATIONS
SMMP(R) OPERATING SYSTEM. All of our MachineTalker(R) products use the SMMP(R) language developed by MTI. SMMP(R) is an operating system and protocol that facilitates the establishment of ad hoc wireless networks. MachineTalker(R) modules maintain profiles of all devices and interchange information to facilitate redundancy, establish network relationships and build autonomous communities of MachineTalkers(R).
RADIO TECHNOLOGIES. Our MachineTalker(R) products utilize a modular architecture to meet the requirement of disparate applications, meaning that different types of radios can be used. The MachineTalker(R) demonstration units utilize a single chip RF transceiver operating in the 902-928 MHz ISM band. We are a voting member of the IEEE 802.15.4 Committee, which has introduced a standard for a low power RF transceiver that utilizes direct sequence, spread spectrum. The 802.15.4 standard is intended to meet the requirements of low power networks in the future, such as MachineTalker(R). Several large semiconductor manufacturers have announced products to fulfill a wide variety of applications. Position Location and high performance can be obtained by our RF transceiver using pulsed spread spectrum techniques.
MICROPROCESSOR. The MachineTalker(R) is based on a low power extremely powerful 8-bit RISC processor (Atmel ATmega 128). Depending on the application, the MachineTalker(R) can make use of the on-board Analog-to-Digital Converter ("ADC") and various serial and parallel interfaces. The chip contains 128k of flash memory for program and data storage.
LOW POWER OPERATION. Depending on the duty cycle specified for a given application, the MachineTalker(TM)can have a battery life of 2+ years on AA batteries.
SENSORS. The MachineTalker(R)can be interfaced to a variety of sensors including micro electro-mechanical systems ("MEMS") and advanced nanotechnology, including:
o Temperature o Humidity
o Gas (all types)
o BioHazard
o Pressure
o Light Measurement
o Magnetometer (compass)
o Ultrasonic distance
o GPSo Displacement
o Gyroscope (MEMS)
o Hall Effect (magnetic proximity)
o Biometric (Fingerprint)
o Accelerometers (vibration, tilt)
o Sound Detection
o Corrosion Detection
o Proximity sensors (human)
INTERNET ACCESS. Remote and wireless MachineTalkers(R) with their detectors and sensors are now accessible via the Internet. Using the services of SensorLogic, Inc., a strategic partner which provides access services, all types of activities can be easily monitored in real-time from anywhere in the world. Such access can also be made by attachment of our products to standard personal computers, laptops, and PDAs; all acting as "network gateways."
APPLICATIONS FOR MACHINE TALKER SMART SECURITY NETWORK TECHNOLOGY
GENERAL. We intend to become a significant part of the electronic architecture of the worldwide security and sensor market. We believe that the United States homeland security market provides us with an attractive opportunity, as well as the market for mobile sensors. We believe that applications for our smart security network technology include the following:
o Transportation Security (land, sea and air)
o People Screening
o Cargo Security
o Container Security
o Mail and Mail Room Security
o Sensitive Sites and Public Spaces Security
o Weapons of Mass Destruction/Disruption
o Logistics and Critical Inventory Tracking
APPLICATION FOR KELLOGG, BROWN & Root. We recently entered into an agreement with Kellogg, Brown & Root ("KBR"), a division of Halliburton Company, to equip shipping containers used by KBR with MiniTalker(R) units to enable KBR to track its shipments on a global basis. We anticipate that each container shipped by KBR will contain a MiniTalker(R) unit which will be programmed with the shipping manifest, source, destination, and other information to identify the individual container when queried. The MachineTalker(R) will be programmed to report in the format required by KBR's inventory tracking system. Considering that shipping containers are not usually handled with care and that they generally pass through very harsh environments while in transit, we have designed a rugged version of our MiniTalker(R) unit for use in this application, referred to as a ToughTalker(TM). Once completed and demonstrated, ToughTalker(TM) units will be manufactured for installation in 250 KBR shipping containers.
NASA PROJECT. In July 2004, we entered into an agreement with NASA pursuant to which we have tested and evaluated a multi sensor circuit board from NASA to be an in-flight attachment to a MiniTalker(R). The board contains eight sensors, three are Gyros, one measures differential pressure, one measures absolute pressure, and three are accelerometers for X+Y+Z axes. The first MiniTalker(R) installation will be used to detect and record physical events in an unmanned aerial vehicle ("UAV"), to exchange information between UAVs, and then to transmit the information to a ground station. We believe that the NASA test will illustrate how wireless sensors can be placed anywhere inside an airframe, each with the intelligence to make decisions and gather data, without the need to rewire the aircraft. Information can be passed among sites containing the wireless sensors, to nearby aircraft containing wireless sensors, and to ground stations containing wireless sensors. We have also created programs for ground station computers attached to a MiniTalker(R) so that graphs of sensor data can be displayed as the data is collected.
BUSINESS AND REVENUE MODELS
Our business strategy is very straight-forward: (1) apply MachineTalker(R) smart security network technology to the $80 billion worldwide security and sensor products and systems market, (2) initially sell MachineTalker(R) devices through channel partners and distributors in this market, and (3) later on, further develop MachineTalker(R) proprietary technology and products for sale to manufacturers and operators of virtually all machines, appliances and devices.
Our management believes that most of our revenues will come from the sale of MachineTalker(R) devices. We also plan to earn revenues through licensing of our proprietary technology to equipment manufacturers.
MARKETING AND SALES PLAN
We compete in worldwide security products and systems market, as well as the market for sensors. The Freedonia Group forecasts that the world market for security products and systems will expand dramatically through 2006, approaching $80 billion, and perhaps double to $160 billion by 2011. Heightened fears of terrorism in the wake of the September 11, 2001 attacks on the United States, in tandem with rising conventional crime rates in many countries, is expected to be the major factor driving growth. Also important will be the robust pace of new product development, especially in the electronic security segment. MTI intends to become a significant part of the electronic architecture of the worldwide security products and systems market.
MARKETING STRATEGY. Our marketing strategy is to create a favorable environment in which to sell our MachineTalker(R) smart security network devices. We intend to enhance, promote, and support our supposition that the MachineTalker(R) proprietary smart security network technology is the most complete and comprehensive solution available in the marketplace to deploy wireless security and sensor systems rapidly.
PRODUCT AND SERVICE DIFFERENTIATION. We believe that the differentiating attributes of the MachineTalker(R)wireless control solution include:
o The only complete smart security system to easily create,
deploy and manage local wireless security systems
o Dynamic ("smart") networks
o Creates communities of wireless sensors via SMMP(TM)
o Low cost, easy-to-install wireless components
o Designed for diverse types of applications
o Highly scalable
o Highly reliable
VALUE PROPOSITION. Our value proposition is simple: we believe that MachineTalker(R)smart security networks allow governments, businesses and individuals to deploy wireless security systems rapidly to protect people, places and things at a reasonable cost.
POSITIONING. We believe that MachineTalker(R) can be positioned as the superior solution for creating, deploying, and managing local wireless security systems. We believe that MachineTalker(R) offers a complete solution that is inexpensive, efficient and scalable. We plan to reposition our competitors by demonstrating that their offerings are inadequate, too costly and not dynamic.
SALES STRATEGY. After creating a high level of perceived value and building significant demand for sales through our marketing campaign, we intend to sell our smart security network devices aggressively throughout the United States. If and when we achieve initial success in the domestic marketplace, we plan to expand our sales efforts into the international marketplace.
SALES MARGIN STRUCTURE. We believe that the majority of our sales will be derived from channel partners and certified integration partners. As a result, our sales margin structure must be appropriate for these independent organizations. Our proposed margin structure includes:
1. Direct Sales - Full suggested list price.
2. Channel Partners/Certified Integration Partners Sales - 40% off
suggested list price.
3. Manufacturer's Representatives - 10% commission.
FIELD SALES FORCE. Under our current business model we plan to hire approximately two salespeople who are also experienced engineers. The majority of our selling efforts to large accounts will be handled internally through our field sales force. MTI has chosen to use a direct sales force because our large accounts require considerable customer education and post-sales support -- directly from MTI. Our price points, pricing structure, and profits are such that our cost of sales warrants a "person-to-person" selling strategy.
MANUFACTURERS' REPRESENTATIVES. We can supplement our own field sales force by entering into agreements with manufacturers' representatives. Because manufacturers' representatives carry several product/service lines that are compatible with our products and services, we plan to select manufacturers' representatives carrying complementary and compatible products and services, as well as manufacturers' representatives that sell dissimilar products and services yet ones that are appropriate to their customers' customer.
DISTRIBUTION CHANNELS
We plan to sell our smart security network components through several channels of distribution, including the following:
DIRECT SALES TO END USERS. Under our current policy we only sell our products directly to end-users when other channels of distribution are unavailable. We anticipate that direct sales will occur most often with smaller customers.
CHANNEL PARTNERS AND/OR CERTIFIED INTEGRATION PARTNERS. We plan to
identify a number of independent organizations that may serve as channel
partners, certified integration partners, or both. These organizations are
likely to have well-established relationships with mid-size to large size
customers. Many may also provide specific vertical market applications. Our
requirements for channel partners and certified integration partners include:
established branding, established market segment, solid reputation, high volume
transactions and independent marketing and services organizations.
COMPETITION
The worldwide security products and systems industry in general and the market for security products in particular is highly competitive. Our principal competitors include large scale security companies that have provided container security in the past such as Savi Technology and wireless networking companies such as Ember Corporation that have OEMs that are trying to do what we are doing. Many of these competitors have longer operating histories, greater name recognition, larger installed customer bases, and substantially greater financial and marketing resources than MTI. Management believes that one of the features that will distinguish our security systems from the competition is our ad-hoc wireless network approach to do tracking and security. Our ability to compete successfully in the security products systems industry depends in large part upon our ability to market our wireless control smart security system and to respond effectively to changing technology. We cannot assure that we will be able to compete successfully in the security products and systems industry, or that future competition will not have a material adverse effect on our business, operating results, and financial condition.
GOVERNMENT REGULATION
We are subject to various federal, state and local laws affecting wireless communication and security businesses. The Federal Trade Commission and equivalent state agencies regulate advertising and representations made by businesses in the sale of their products, which apply to us. Our business is also subject to government laws and regulations governing health, safety, working conditions, employee relations, wrongful termination, wages, taxes and other matters applicable to businesses in general. Failure of MTI to comply with applicable government rules or regulations could have a material adverse effect on our financial condition and business operations.
EMPLOYEES
As of July 31, 2005, we employed seven people on a full-time basis. Of those seven full-time employees, two are employed in an administrative, marketing, and sales position, and the remaining five are technical employees employed in research, development, and production positions. We project that during the next 12 months, our workforce is likely to increase to 12, with two of the new positions being in administrative, marketing, and sales positions and the remaining three being research, development, and production positions.
To support our need for technical staffing, we have established relationships with technical staffing organizations that continuously offer highly qualified personnel to meet our needs, both locally and from out of the area.
PROPERTY
We currently lease approximately 1,100 square feet of office space at 513 De La Vina Street, Santa Barbara, California 93101 from a company owned by the majority shareholders at a base rental rate of approximately $1,188.64 per month pursuant to a three year lease. The lease term expires on August 20, 2006 with an option to extend the lease term for one year.
INTELLECTUAL PROPERTY
We currently own the following registered trademarks and service marks:
(i) United States Trademark Registration No. 2872244, issued by the United
States Patent and Trademark Office on August 10, 2004, covering the trademark
"SMMP," (ii) United States Trademark Registration No. 2872243, issued by the
United States Patent and Trademark Office on August 10, 2004, covering the
trademark "MACHINETALKER," (iii) United States Trademark Registration No.
2882375, issued by the United States Patent and Trademark Office on September 7,
2004, covering the trademark "MINITALKER," and (iv) United States Trademark
Registration No. 2897704, issued by the United States Patent and Trademark
Office on October 26, 2004, covering the trademark "SIMPLE MACHINE MANAGEMENT
PROTOCOL" with no claim made to the exclusive right to use "MACHINE MANAGEMENT
PROTOCOL" apart from the entire mark.
We have also applied for the following additional trademarks and services marks: (i) United States Serial No. 76400820, application filed with the United States Patent and Trademark Office on April 24, 2002, for the trademark "TALKER," (ii) United States Serial No. 78141481, application filed with the United States Patent and Trademark Office on July 5, 2002, for the trademark "TAGTALKER," (iii) United States Serial No. 78154576, application filed with the United States Patent and Trademark Office on August 15, 2002, for the trademark "TINYTALKER," (iv) United States Serial No. 78389393, application filed with the United States Patent and Trademark Office on March 23, 2004, for the trademark "RFIDNET," (v) United States Serial No. 78425975, application filed with the United States Patent and Trademark Office on May 27, 2004, for the trademark "SEALTALKER," (vi) United States Serial No. 78522694, application filed with the United States Patent and Trademark Office on November 24, 2004, for the trademark "TOUGHTALKER," and (vii) United States Serial No. 78535515, application filed with the United States Patent and Trademark Office on December 20, 2004, for the trademark "TINYTALKER." We cannot assure that we will be successful in obtaining theses marks, that these applications will not be challenged, that others will not attempt to infringe upon our marks, or that these marks will afford us any protection or competitive advantages. We have not yet been issued these trademarks and service marks. We may file additional trademark and tradename applications with the United States Office of Patents and Trademarks for additional tradenames and trademarks in the future.
In April 2002, a Patent Application to the United States Patent and Trademark Office ("USPTO") entitled "Self Coordinated Machine Network" application No. 20040114557 was filed, regarding a self coordinated machine network established by two or more machines in proximity with each other via a wired or wireless network infrastructure. The machines are configured to establish an ad hoc network between themselves for sharing information related to their common applications. New machines that come into proximity of the network infrastructure are configured to join an existing ad hoc network. Machines that power down or are removed from proximity of the network infrastructure are eliminated from the ad hoc network. Communications between the constituent machines of the ad hoc network allow the machines to self coordinate the network and redundantly store information pertaining to the common and disparate applications of the various machines that comprise the self coordinated machine network. An assignment of this application to us from the inventors, Bryan F. Roland, Mark P. Harris, and Christopher T. Kleveland was filed with the USPTO on April 23, 2002.
All of our employees have executed agreements that impose nondisclosure obligations on the employee and pursuant to which the employee has agreed to assign to us (to the extent permitted by California law) all copyrights and other inventions created by the employee during employment MTI. We have also implemented a trade secret protection policy that management believes to be adequate to protect our intellectual property and trade secrets.
SEASONALITY
Our operations are not expected to be affected by seasonal fluctuations, although our cash flow may be affected by fluctuations in the timing of cash receipts from our customers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following "management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements that involve risks and uncertainties. MTI's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" beginning on page 4 and elsewhere in this Prospectus.
OVERVIEW
Our institution of more vigorous sales efforts through year ended December 31, 2004 and during the first quarter ended March 31, 2005 are beginning to show results in increasing our revenue for our smart security network components and wireless security systems. Because we were able to obtain small amounts of external equity financing during fiscal year 2004 to date, we were able to hire additional personnel in our sales department. This action is beginning to show positive results as our new sales people enhance their competency with regard to our products and services and familiarize themselves with our operating procedures. In order to accelerate sales growth and product development and marketing, we require additional capital.
Our sales efforts through tradeshows and seminars generate leads of potential customers desiring to purchase our smart security network components and wireless security systems. We plan to continue this lead generation on a quarterly basis to add to the total number of leads to which our sales staff can potentially sell our products and services. We believe that the greater the number of leads generated, whether for immediate or long term purchases, the more likely our efforts will eventually create a consistent number of sales for us.
The fact that we were able to obtain $1,387,000 in equity financing during fiscal year 2004 through March 31, 2005 has enabled us to hire the additional engineering personnel. In order to accelerate sales growth, product development, and marketing, we will require additional capital through equity financing in the near future. We utilized approximately $571,814 of this capital for additional engineers. We utilized the remaining $815,186 raised by us as follows: $182,390 for marketing costs, $47,997 for legal and accounting fees, $332,914 for research and development, and $251,885 for administrative costs.
Depending on the amount of additional capital available to us, we plan to invest a significant portion of any additional available capital in sales and marketing, manufacturing inventory, and infrastructure. We constantly evaluate the alternative methods to obtaining additional capital on terms most favorable to us. We cannot assure that we will be able to locate sources of capital on terms favorable to us.
We currently have seven full time employees as compared to eight employees during 2003. Currently, we employ no part time employees. This change reflects expansion of our Engineering department and reduction of administration. We believe the evolution of our product line and technical Original Equipment Manufacturer ("OEM") sales help to increase adoption of our technology into new fields and applications.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
We have identified the policies below as critical to our business operations and the understanding of our results of operations.
REVENUE RECOGNITION. We recognize revenue in accordance with the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). We recognize revenue upon shipment, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer composition and historical experience. We accrue for warranty costs, sales returns, and other allowances based on our experience which tells us we have less than $25,000 per year in warranty returns and allowances. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluations of our customers and historic credit losses have been within our expectations. We do not ship a product until we have either a purchase agreement or rental agreement signed by the customer with a payment arrangement. This is a critical policy, because we want our accounting to show only sales which are "final" with a payment arrangement. We do not make consignment sales, nor inventory sales subject to a "buy back" or return arrangement from customers.
PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS. We maintain a provision for sales allowances, returns and bad debts. Sales returns and allowances result from equipment damaged in delivery or customer dissatisfaction, as provided by agreement. The provision is provided for by reducing gross revenue by a portion of the amount invoiced during the relevant period. The amount of the reduction is estimated based on historical experience.
RESERVE FOR OBSOLETE/EXCESS INVENTORY. Inventories are stated at the lower of cost or market. We regularly review our inventories and, when required, will record a provision for excess and obsolete inventory based on factors that may impact the realizable value of our inventory including, but not limited to, technological changes, market demand, regulatory requirements and significant changes in our cost structure. If ultimate usage varies significantly from expected usage, or other factors arise that are significantly different than those anticipated by management, inventory write-downs or increases in reserves may be required.
OTHER ACCOUNTING FACTORS
The effects of inflation have not had a material impact on our operation, nor are they expected to in the immediate future. Although we are unaware of any major seasonal aspect that would have a material effect on the financial condition or results of operation, the first quarter of each fiscal year is always a financial concern due to slow collections after the holidays. The deposits that are shown in the financials are for pending sales of existing products and not any new patented product. These are deposits received from our customers for sales of equipment and services and are only removed as deposits upon completion of the sale. If for whatever reason a customer order is cancelled, the deposit would be returned as stated in the terms of sale, minus a restocking fee. No depositor is a related party of any officer or employee of MachineTalker, Inc. Our terms of deposits typically are 50% down with the balance of the sale due upon delivery.
CURRENT OVERVIEW
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2004
We are a development stage company with limited revenue. Total revenue for the three month period ending March 31, 2005 increased by $16,000 to $16,000 from $0 in the prior year. Sequential annualized revenue in the first quarter of 2005 as compared to actual revenue in 2004 was lower because the Company received a large milestone payment in December 2004, and expects additional milestone payments in the second quarter of 2005. Operating and administrative expenses increased by $284,853 during the three months ended March 31, 2005 to $317,158 from $32,305 in the prior year. The substantial increase in operating expenses in 2005 as compared to 2004 primarily reflects added staffing. While currently operating costs exceed revenue because sales are not yet significant, revenue is expected to eventually exceed operating costs in the foreseeable future because (1) quantity sales to OEMs and (2) licensing of SMMP(R) to systems integrators is expected to occur. For the three months ended March 31, 2005, our consolidated net loss was $305,601 as compared to a consolidated net loss of $43,651 for the three months ended March 31, 2004.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 AS COMPARED TO THE FISCAL YEAR ENDED DECEMBER 31, 2003
We are a development stage company with limited revenue. Total revenue for the twelve month period ending December 31, 2004 increased by $204,833 to $204,833 from $0 in the prior year. Operating and administrative expenses increased by $385,095 during the twelve months ended December 31, 2004 to $741,769 from $356,674 in the prior year. The substantial increase in operating expenses in 2004 as compared to 2003 primarily reflects change in type of staffing. While currently operating costs exceed revenue because sales are not yet significant, revenue is expected to exceed operating costs in the foreseeable future because of the adoption of our product line by a significant customer. For the twelve months ended December 31, 2004, our consolidated net loss was $573,454 as compared to a consolidated net loss of $394,115 for the twelve months ended December 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
We had consolidated net cash of $407,467 at March 31, 2005 as compared to net cash of $0 as of March 31, 2004. We had a net working capital surplus (i.e. the difference between current assets and current liabilities) of $362,306 at March 31, 2005 as compared to a working capital deficit of $138,904 at March 31, 2004. Cash flow used for operating activities increased from ($26,505)
during the three months ended March 31, 2004 to ($96,511) during the three
months ended March 31, 2005. The increase in cash flow utilized for operating
activities in 2005 as compared to 2004 is due to product development. Cash used
for investing activities increased from $0 during the three months ended March
31, 2004 to ($1,480) during the three months ended March 31, 2005. Cash provided
by financing activities increased from $26,505 during the three months ended
March 31, 2004 to $373,000 during the three months ended March 31, 2005. Since
January 1, 2005 our capital needs have primarily been met from the proceeds of
(i) sales, and (ii) equity financing.
We had consolidated net cash of $132,459 at December 31, 2004 as compared to net cash of $0 as of December 31, 2003. We had a net working capital surplus (i.e. the difference between current assets and current liabilities) of $270,357 at December 31, 2004 as compared to a working capital deficit of ($116,825) at December 31, 2003. Cash flow used for operating activities increased from ($462,426) during the twelve months ended December 31, 2003 to ($464,252) during the twelve months ended December 31, 2004. The increase in cash flow utilized for operating activities in 2004 as compared to 2003 is due to product development. Cash used for investing activities increased from $0 during the twelve months ended December 31, 2003 to ($11,043) during the twelve months ended December 31, 2004. Cash provided by financing activities increased from $462,425 during the twelve months ended December 31, 2003 to $607,753 during the twelve months ended December 31, 2004. Since January 1, 2004, our capital needs have primarily been met from the proceeds of equity financing and, to a lesser extent, sales.
We will have additional capital requirements during 2005 and 2006 if we continue with our plan of securing new OEM relationships and developing requisite products. We cannot assure that we will have sufficient capital to finance our growth and business operations or that such capital will be available on terms that are favorable to us or at all. We are currently incurring operating deficits which are expected to continue until June 30, 2006.
DESCRIPTION OF PROPERTY
MTI does not own any real property. We currently lease approximately 1,100 square feet of office space at 513 De La Vina Street, Santa Barbara, California 93101 from a company owned by the majority shareholders at a base rental rate of approximately $1,188.64 per month pursuant to a three year lease. The lease term commenced on August 20, 2003 and we have the option to extend the lease term for one year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are certain transactions involving our officers, directors and shareholders owning more than 10% of our outstanding stock. We believe that the terms of these transactions are at least as favorable to us as we would expect to negotiate with unrelated third parties.
We lease approximately 1,100 square feet of office space at 513 De La Vina Street, Santa Barbara, California 93101 from a company in which our majority shareholders are minority shareholders at a base rental rate of approximately $1,188.64 pursuant to a three year lease which expires on August 20, 2006 with the option to extend the lease term for one year.
In June 2004, Mr. Roland F. Bryan, our President and Chief Executive Officer, converted $400,000 of a loan he made to us into 16,000,000 shares of common stock, as adjusted to reflect the ten for one forward split of our common stock which became effective in September 2004. The remaining balance of the loan of $436,000 is reflected by a convertible debenture issued by us to Mr.
Bryan in the principal amount of $436,000, interest payable at the rate of 6% per year, principal due July 2009 and convertible into 17,440,000 shares of common stock at $0.025 per share, as adjusted to reflect the ten for one forward split of our common stock which became effective in September 2004.
In 2002, a former director and current shareholder loaned us $6,000 to fund our expenses. The loan bears interest at 6% and is due on demand. We paid all principal and interest due and payable on the loan on July 15, 2005.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock does not trade on any exchange or the OTC market. There is no known public market for our securities. No dividends have been paid to date and our Board of directors does not anticipate paying dividends in the foreseeable future.
As of July 31, 2005 there were 159,017,050 shares of Common Stock of MTI, par value $0.001 per share, issued and outstanding and owned by approximately 156 shareholders of record.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned, or paid for services rendered in all capacities to us during fiscal 2003 and 2004 to our Chief Executive Officer, executive officers whose total annual salary and bonus in 2003 and 2004 exceeded $100,000, and each Director who received consulting fees from us during 2003 and 2004.
Summary Compensation Table
Long Term Compensation
Annual Compensation (1) (1)
----------------------- ---
Name and Principal Position Year Salary Bonus Securities Underlying All Other
Options Compensation
---------------------------------------------------------------------------------------------------------------------
Roland F. Bryan 2003 $6,000(2) - 0 - - 0 - - 0 -
Chief Executive Officer,
President, and Chairman 2004 $60,000(2) - 0 - - 0 - - 0 -
Christopher Kleveland 2003 $15,000(3) - 0 - - 0 - - 0 -
Vice President of
Operations 2004 $58,885(3) - 0 - - 0 - - 0 -
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(2) Mr. Roland Bryan forwent his annual salary of $120,000 per year in 2003, taking only $6,000. Mr. Bryan forwent his annual salary for the first and second quarters of 2004, receiving a pro rata portion of his $120,000 annual salary during the third and fourth quarters of 2004.
(3) Mr. Christopher Kleveland forwent his annual salary of $120,000 per year in 2003, taking only $15,000. Mr. Kleveland forwent his annual salary for the first and second quarters of 2004, receiving a pro rata portion of his $120,000 annual salary during the third and fourth quarters of 2004, less $1,115 for health insurance premiums which were deducted from his salary.
Our independent director receives no salary for his services to MTI as a director, but is reimbursed for expenses actually incurred in connection with attending meetings of the Board of Directors. Our Board of Directors may determine and modify the compensation of executive officers, consultants, directors and employees at any time in its discretion.
EMPLOYMENT AGREEMENTS
We have not entered into any employment agreements with our executive officers or other employees to date. We may enter into employment agreements with them in the future. We have established a stock incentive program for the directors, executive officers, employees and key consultants of MTI pursuant to which 20,000,000 authorized and unissued shares of Common Stock have been reserved for issuance to such persons pursuant to MTI's 2002 Stock Option Plan, as determined by the Board of Directors or a compensation committee of the Board.
BOARD OF DIRECTORS
Our Board of Directors presently consists of three members. Our Bylaws generally provide for majority approval of disinterested directors in order to adopt resolutions, including any borrowings by us or the issuance of any additional Common Stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
MTI has not changed accountants since its formation and there are no disagreements with the findings of its accountants.
GLOSSARY
ACC Associated Computer Consultants, Inc.
ADC Analog Digital Converter
ANC Automatic Network Configuration
Commission The Securities and Exchange Commission
Common Stock MTI's common stock
KBR Kellogg, Brown & Root
MachineTalkers(R) Remote and wireless devices developed by MTI
MEMS Micro electro-mechanical systems
MTI MachineTalker, Inc.
NASD The National Association of Securities Dealers
NASDAQ The National Automated Dealer Quotation System
operated by the NASDAQ Stock Market, Inc.
NASDAQ Small Cap An interdealer quotation system for smaller companies
operated by NASDAQ Market
OEM Original Equipment Manufacturer
Offering The offering of Shares by us under this Prospectus and
registered under our Registration Statement
Option Plan MTI's stock option plan for
Prospectus This document
Registration Our registration statement on the Form SB-2 filed with
Statement the SEC as of the date of this prospectus, which
includes exhibits and other information that is not
included in this prospectus
I-37
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SAB 104 Securities and Exchange Commission Staff Accounting
Bulletin 104
SEC The Securities and Exchange Commission
SecureCoin SecureCoin, Inc.
Securities Act The Securities Act of 1933, as amended
SMMP(R) Simple Machine Management Protocol
Talkers(R) Remote and wireless devices developed by MTI
Transfer Agent U.S. Stock Transfer Corporation
UAV Unmanned Ariel Vehicle
USPTO The United States Patent and Trademark Office
We MachineTalker, Inc.
|
ADDITIONAL INFORMATION
MTI has filed a registration statement on Form SB-2 (the "Registration Statement") with the Commission under the Securities Act in respect of the Common Stock offered hereby. This Prospectus omits certain information contained in the Registration Statement as permitted by the rules and regulations of the Commission. For further information with respect to MTI and the Common Stock offered hereby, reference is made to the Registration Statement, including the exhibits thereto, and Financial Statements and Notes thereto filed as a part thereof. All material provisions of all documents are summarized in this Prospectus. Copies of the Registration Statement, including all exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can be obtained from the Public Reference Section of the Commission upon payment of certain fees prescribed by the Commission. The Commission's Internet address is www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited financial statements certified by our independent accountants and quarterly reports for the first three quarters of each fiscal year containing unaudited financial information.
FINANCIAL STATEMENTS
MACHINETALKER, INC. (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Page
Balance Sheet at March 31, 2005 (unaudited) and
December 31, 2004 (audited) F-1
Statement of Operations for the three months ended
March 31, 2005 (unaudited) and March 31, 2004 (unaudited). F-2
Statement of Shareholders' Deficit for the three months
ended March 31, 2005 (unaudited) F-3
Statements of Cash Flows for the three months ended
March 31, 2005 (unaudited) and March 31, 2004 (unaudited) F-5
Notes to Financial Statements F-6
Report of Rose, Snyder & Jacobs, a Corporation of Certified
Public Accountants at December 31, 2004 F-11
Balance Sheet at December 31, 2003 (audited) and
December 31, 2004 (audited) F-12
Statement of Operations for fiscal years ended December 31, 2004
(audited) and December 31, 2003 (audited) F-13
Statement of Shareholders' Deficit for the fiscal years ended
December 31, 2004 (audited) and December 31, 2003 (audited) F-14
Statements of Cash Flows for the fiscal years ended December 31, 2004
(audited) and December 31, 2003 (audited) F-15
Notes to Financial Statements F-16
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MACHINETALKER, INC.
UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2005 AND 2004
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE
BALANCE SHEET F-1 STATEMENTS OF OPERATIONS F-2 STATEMENTS OF SHAREHOLDERS' DEFICIT F-3 STATEMENTS OF CASH FLOWS F-5 NOTES TO FINANCIAL STATEMENTS F-6 |
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
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ASSETS
March 31, December 31,
2005 2004
----------------- -----------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 407,467 $ 132,459
Accounts Recievable 16,000 180,000
Inventory 3,295 -
----------------- -----------------
TOTAL CURRENT ASSETS 426,762 312,459
----------------- -----------------
PROPERTY & EQUIPMENT, at cost
Machinery & Equipment 9,263 9,263
Computer equipment 19,308 17,828
Furniture & Fixture 4,595 4,595
----------------- -----------------
33,166 31,686
Less accumulated depreciation (13,313) (10,687)
----------------- -----------------
NET PROPERTY AND EQUIPMENT 19,853 20,999
----------------- -----------------
OTHER ASSETS
Security Deposit 475 475
----------------- -----------------
TOTAL ASSETS $ 447,090 $ 333,933
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 42,485 20,308
Accrued expenses 15,971 15,603
Note payable, shareholder (note 6) 6,000 6,000
Payroll taxes liabilities - 191
----------------- -----------------
TOTAL CURRENT LIABILITIES 64,456 42,102
----------------- -----------------
LONG TERM LIABILITIES
Notes Payable, shareholder (note 6) 436,000 436,000
----------------- -----------------
TOTAL LIABILITIES 500,456 478,102
----------------- -----------------
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value;
500,000,000 authorized shares;
155,950,000 shares issued and outstanding 155,950 141,930
Additional paid in capital 1,916,454 1,534,070
Accumulated deficit (2,125,770) (1,820,169)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (53,366) (144,169)
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 447,090 $ 333,933
================= =================
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MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
From Inception
Three Months Three Months January 30,2002
Ended Ended through
March 31, 2005 March 31, 2004 March 31, 2005
--------------------- -------------------- ----------------
REVENUE $ 16,000 $ - $ 220,833
--------------------- -------------------- ----------------
COST AND OPERATING EXPENSES
Salaries 70,813 1,500 589,683
Professional fees 56,562 10,996 411,472
Research and development 132,088 6,730 591,604
Rent 3,566 3,566 120,882
Insurance expenses 27 4,997 42,445
Depreciation and amortization 2,626 1,097 18,413
Payroll taxes 11,745 208 73,790
Office expense 9,569 2,092 68,575
Meals and entertainment 441 240 9,031
Travel 5,758 880 49,871
Advertising 559 - 3,755
Marketing Services 23,404 - 23,404
--------------------- -------------------- ----------------
TOTAL OPERATING EXPENSES 317,158 32,305 2,002,925
--------------------- -------------------- ----------------
LOSS FROM OPERATIONS (301,158) (32,305) (1,782,092)
OTHER INCOME/(EXPENSE)
Interest Expense (4,443) (11,346) (87,428)
--------------------- -------------------- ----------------
NET LOSS (305,601) (43,651) (1,869,520)
===================== ==================== ================
BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00)
===================== ====================
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 152,240,440 91,370,000
===================== ====================
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MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHERAHOLDERS' DEFICIT
(UNAUDITED)
Accumulated
Deficit During
Additional the
Common stock Paid-in Development
------------------------
Shares Amount Capital Stage Total
----------- ----------- ------------ ----------- -----------
Balance from original
Issuance at January 30, 2002
($0.0017 per share) ($7,650 in cash
and a patent at a fair value of $5,100) 7,500,000 $ 7,500 $ 5,250 $ - $ 12,750
Issuance of common stock
in February and March 2002
($0.50 per share in cash) 250,000 250 124,750 - 125,000
Issuance of common stock in April 2002
(20,000 shares at $0.50 per share in cash) 20,000 20 9,980 - 10,000
Issuance of common stock in April 2002
(20,000 shares as finders fees) 20,000 20 (20) - -
Issuance of common stock in May 2002
(140,000 shares at $0.50 per share in cash) 140,000 140 69,860 - 70,000
Issuance of common stock in May 2002
(20,000 shares as finders fees) 20,000 20 (20) - -
Issuance of common stock in June 2002
($1.00 per share in cash) 50,000 50 49,950 - 50,000
Net Loss - - - (852,600) (852,600)
----------- ----------- ------------ ----------- -----------
Balance at December 31, 2002 8,000,000 8,000 259,750 (852,600) (584,850)
Issuance of common stock in January 2003
($1.00 per share in cash) 128,000 128 127,872 - 128,000
Issuance of common stock in March 2003
($1.00 per share in cash) 10,000 10 9,990 - 10,000
Net Loss - - - (394,115) (394,115)
----------- ----------- ------------ ----------- -----------
Balance, December 31, 2003 8,138,000 8,138 397,612 (1,246,715) (840,965)
Issuance of common stock in January 2004
(25,000 shares valued at $6,250 for services 25,000 25 6,225 - 6,250
Net Loss - - - (43,651) (43,651)
----------- ----------- ------------ ----------- -----------
Balance, March 31, 2004 8,163,000 8,163 403,837 (1,290,366) (878,366)
Issuance of common stock in June 2004
(16,000,000 shares at $0.025 per share
in conversion of debt) 16,000,000 16,000 384,000 - 400,000
Issuance of common stock in June 2004
(10,000,000 shares at $0.025 per share
for services) 10,000,000 10,000 240,000 - 250,000
Stock Split 83,207,000 83,207 (83,207) - -
Issuance of common stock in July
through December 31, 2004 for cash 24,560,000 24,560 589,440 - 614,000
Net Loss (529,803) (529,803)
----------- ----------- ------------ ----------- -----------
Balance at December 31, 2004 141,930,000 141,930 1,534,070 (1,820,169) (144,169)
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MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHERAHOLDERS' DEFICIT
(UNAUDITED)
(continued)
Accumulated
Deficit During
Additional the
Common stock Paid-in Development
------------------------
Shares Amount Capital Stage Total
----------- ----------- ------------ ----------- -----------
Issuance of common stock in January 2005
(13,720,000 shares at $0.025 per share
for cash) 13,720,000 13,720 329,280 343,000
Issuance of common stock in March 2005
(300,000 shares at $0.10 per share
for cash) 300,000 300 29,700 30,000
Issuance of 3,817,000 warrants for services 23,404 23,404
Net Loss - - - (305,601) (305,601)
----------- ----------- ------------ ----------- -----------
Balance at March 31, 2005 155,950,000 $ 155,950 $ 1,916,454 $(2,125,770) $ (53,366)
=========== =========== ============ =========== ===========
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MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
From Inception
Three Months Three Months January 30, 2002
Ended Ended through
March 31, 2005 March 31, 2004 March 31, 2005
--------------------- -------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (305,601) $ (43,652) $ (2,125,770)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 2,626 1,097 18,414
Issuance of common shares for marketing services - - 256,250
(Increase) Decrease in:
Accounts receivable 164,000 - (16,000)
Inventory (3,295) (3,295)
Deposits - - (475)
Increase (Decrease) in:
Accounts payable 22,178 4,704 42,484
Accrued expenses 23,772 11,346 73,396
Tax liabilities (191) - -
--------------------- -------------------- ---------------------
NET CASH USED IN OPERATING ACTIVITIES (96,511) (26,505) (1,754,996)
--------------------- -------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,480) - (33,165)
--------------------- -------------------- ---------------------
NET CASH USED IN INVESTING ACTIVITIES (1,480) - (33,165)
--------------------- -------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - 505 -
Notes Payable-Officers - 26,000 807,978
Proceeds from issuance of common stock 373,000 - 1,380,000
--------------------- -------------------- ---------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 373,000 26,505 2,187,978
--------------------- -------------------- ---------------------
NET INCREASE IN CASH 275,009 - 399,817
CASH, BEGINNING OF PERIOD 132,458 - 7,650
--------------------- -------------------- ---------------------
CASH, END OF PERIOD $ 407,467 - $ 407,467
===================== ==================== =====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 4,443 $ 11,346 $ 87,428
===================== ==================== =====================
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
During the year ended December 31, 2004, the Company issued
25,000 common shares valued at $6,250 for marketing services;
16,000,000 common shares for conversion of $400,000 of debt;
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MACHINETALKER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
1. ORGANIZATION AND LINE OF BUSINESS
ORGANIZATION
MachineTalker, Inc. (the "Company") was incorporated in the state of Delaware on January 30, 2002. The Company, based in Goleta, California, began operations on January 30, 2002 to develop and market a wireless control technology. The Company's founders are also the principal owners of SecureCoin, Inc. ("SecureCoin"). As part of MachineTalker's initial capitalization, the Company's founders have contributed certain intellectual property that was developed at and acquired from SecureCoin. SecureCoin assigned all rights to that intellectual property to the co-founders in January 2002, and those co-founders then contributed the intellectual property rights to the Company in connection with its formation. This intellectual property, including a provisional patent, forms the core of MachineTalker's proprietary smart security network technology.
The accompanying interim unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the financial statements for the year ended December 31, 2004 and the notes thereto included in the Company's Annual Report.
The balance sheet at December 31, 2004 has been derived from the Company's year-end audited financial statements but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
LINE OF BUSINESS
The Company is currently in the stage of developing wireless networking products that combine microcomputers and wireless radio components in a single package that can be used to service a variety of attachments, including Sensors for measuring temperature, pressure, motion, vibration, location and many other parameters. These "MachineTalkers" can then be programmed to form local wireless networks with other MachineTalkers to process the Sensor data collectively in real time and on a local basis. This allows governments, businesses and individuals to rapidly deploy wireless security systems to protect and monitor things, places and people.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of MachineTalker, Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the
MACHINETALKER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from its shareholders since its' inception through March 2005. Management believes this funding will continue, and is also actively seeking new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company's obligations as they become due, and will allow the development of its core of business.
DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS
The Company has been in its initial stages of formation and for the three months ended March 31, 2005, had insignificant revenues. FASB #7 defines a development stage activity as one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.
STOCK-BASED COMPENSATION
The Company accounts for employee stock option grants in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations (APB 25), and has adopted the "disclosure only" alternative described in Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Entities electing to remain with the accounting method of APB 25 must make pro forma disclosures of net income and earnings per share, as if the fair value method of accounting defined in SFAS No. 123 had been applied.
If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under this plan consistent with the methodology prescribed by SFAS No. 123, the Company's net income and earnings per share would be reduced to the pro forma amounts indicated below for the three months ended March 31, 2005 and 2004:
2005 2004
---- ----
Net Loss
As reported $(305,601) $ (43,651)
Add: Stock Based Employee Compensation
expense included in reported net loss, net of
related tax effects
- -
Deduct: Total Stock Based Employee
Compensation expense determined under
fair value based method for all awards, net of
related tax effects (7,639) (45,742)
Pro Forma (313,240) (89,393)
Basic and Diluted Loss per Share
As reported $ (0.0) $ (0.0)
Pro Forma $ (0.0) $ (0.0)
|
MACHINETALKER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
3. CAPITAL STOCK
At March 31, 2005, the Company's authorized stock consists of 500,000,000 shares of common stock, par value $0.01 per share. During the three months ended March 31, 2005, the Company issued 13,720,000 shares of common stock at a purchase price of $0.025 per share and 300,000 shares of common stock at a purchase price of $0.10 per share. These issuances were made pursuant to Rule 506 of Regulation D promulgated under section 4(2) of the Securities Act of 1933, as amended. In September 2004, the Company effected a ten for one forward split of its commons stock. As adjusted to reflect the split, during the three months ended March 31, 2004, the Company issued 250,000 shares of common stock for services valued at $6,250.
4. STOCK OPTIONS
The Company adopted a Stock Option Plan for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of Options for Twenty Million (20,000,000) shares of Common Stock. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each option shall be exercisable in full or in installments and at such times as designated by the Board. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement, which date shall not be later than the tenth anniversary from the effective date of the option. During the three months ended March 31, 2005 and 2004, the Company granted 0 stock options and 7,000,000 stock options respectively, as adjusted for the ten for one forward split of the Company's common stock which occurred in September 2004. The 7,000,000 stock options were granted on or about February 15, 2004 and vest as follows: 25% one year after the date of grant and 1/36 every 30 days thereafter until the remaining stock options have vested. These stock options are exercisable for a period of ten years from the date of grant at an exercise price of $0.05 per share, as adjusted for the ten for one forward split of the Company's common stock. In August 2004, the Company granted 1,000,000 stock options, as adjusted to reflect the ten for one forward split of the Company's common stock, at an exercise price of $0.025 per share and exercisable for a period of ten years from the date of grant. These options vest as follows: 25% one year after the date of grant and 1/36 every 30 days thereafter until the remaining stock options have vested.
SFAS 123, Accounting for Stock-Based Compensation, requires pro forma information regarding net income (loss) using compensation that would have been incurred if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value of options granted was determined using the Black Schole method with the following assumptions:
Stock Options
2005 and 2004
--------------------
Risk free interest rate 4.08% to 4.28%
Stock volatility factor 1%
Weighted average expected option life 10 years
Expected dividend yield None
|
A summary of the Company's stock option activity and related information for the three months ended March 31, is as follows:
MACHINETALKER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
2005 2004
--------------------------- ----------------------------
Weighted Weighted
Number average Number average
of exercise of exercise
Options price Options price
--------------- ------------- ------------- ------------
Outstanding at the beginning of the period 8,000,000 $ 0.047 1,600,000 $ 0.050
Granted - - 7,000,000 0.050
Exercised - - - -
Expired - - - -
--------------- ------------- ------------- ------------
Outstanding a the end of the period 8,000,000 $ 0.047 8,600,000 $ 0.050
=============== ============= ============= ============
Exercisable at the end of period 4,991,781 $ 0.047 3,425,000 $ 0.050
=============== ============= ============= ============
Weighted average fair value of
options granted during the period $ - $ 0.050
============= ============
|
The Black Schole option valuation model was developed for use in estimating the fair value of traded options and warrants, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options and warrants have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options or warrants.
The weighted average remaining contractual life of options outstanding issued under the plan as of March 31, 2005 was as follows:
Weighted Weighted Weighted
Average Average Average
Stock Stock Remaining Exercise Price Exercise Price
Exercisable Options Options Contractual of Options of Options
Prices Outstanding Exercisable Life (years) Outstanding Exercisable
------------- --------------- --------------- --------------- --------------- ----------------
$ 0.025 1,000,000 561,644 9.4 years $ 0.025 $ 0.025
$ 0.050 7,000,000 4,430,137 8.1 years $ 0.050 $ 0.050
---------- ----------
8,000,000 4,991,781
========== =========
|
WARRANTS
During the three months ended March 31, 2005 the Company granted a total of 3,817,000 warrants to purchase a total of 3,817,000 shares of the Company's common stock to ten individuals for marketing services rendered to the Company, of which 3,292,000 are exercisable at $0.025 per share and expire in January 2010, and 525,000 are exercisable at $0.10 per share and expire in March 2010. The fair market value for the warrants were $23,404, and was determined using the Black Schole pricing model.
MACHINETALKER, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
5. RELATED PARTY
The Company leases its premises from a company in which our majority shareholders are minority shareholders pursuant to a three year lease, which expires on August 20, 2006 with the option to extend the lease term for one year. The rent expense for the three months ended March 31, 2005 and 2004 amounted to $3,566.
At March 31, 2004, loans from the Company's President and Chief Executive Officer, were converted to equity and to convertible debentures. Four hundred thousand dollars was converted into equity, and $436,000 was converted into debentures with interest payable at the rate of 6% per year, principal due July 2009, convertible into 17,440,000 shares of common stock at $0.025 per share.
During the year ended December 31, 2002, one of the Company's shareholders loaned the Company $6,000 to fund the Company's expenses. The loan bears interest at 6% and is due on demand.
6. SUBSEQUENT EVENTS
In June 2005, the Company completed a private placement of 3,100,000 shares of common stock (the "Common Stock") for a purchase price of $0.10 per share, raising total capital of $310,000 from approximately 52 investors, of which $280,000 was raised after March 31, 2005. The private placement was made pursuant to Regulation D of Rule 506 of the Securities Act of 1933, as amended (the "Securities Act").
On June 16, 2005, the Company issued warrants to purchase an aggregate of 200,000 shares of Common Stock at an exercise price of $0.10 per share to four investors for services rendered. The warrants expire on June 16, 2010.
On April 28, 2005, the Company issued warrants to purchase an aggregate of 5,000 shares of Common Stock at an exercise price of $0.10 per share to four investors for services rendered. The warrants expire on April 28, 2010.
On April 18, 2005, the Company issued warrants to purchase an aggregate of 55,000 shares of Common Stock at an exercise price of $0.10 per share to four investors for services rendered. The warrants expire on April 18, 2010.
MACHINETALKER, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2003
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
CONTENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-11 BALANCE SHEETS F-12 STATEMENTS OF OPERATIONS F-13 STATEMENTS OF SHAREHOLDERS' DEFICIT F-14 STATEMENTS OF CASH FLOWS F-15 NOTES TO FINANCIAL STATEMENTS F-16 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
MachineTalker, Inc.
We have audited the accompanying balance sheets of MachineTalker, Inc. (a Delaware corporation in the development stage) as of December 31, 2004 and 2003 and the related statements of operations, shareholders' deficit and cash flows for the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MachineTalker, Inc. as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered losses and has generated negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Rose, Snyder & Jacobs ------------------------ Rose, Snyder & Jacobs A Corporation of Certified Public Accountants Encino, California March 18, 2005 |
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
2004 2003
------------------ ----------------
ASSETS
CURRENT ASSETS
Cash $ 132,459 $ -
Accounts Recievable 180,000 -
------------------ ----------------
TOTAL CURRENT ASSETS 312,459 -
------------------ ----------------
PROPERTY & EQUIPMENT, at cost
Machinery & Equipment 9,263 -
Computer equipment 17,828 17,828
Furniture & Fixture 4,595 2,814
------------------ ----------------
31,686 20,642
Less accumulated depreciation (10,687) (6,299)
------------------ ----------------
NET PROPERTY AND EQUIPMENT 20,999 14,343
------------------ ----------------
OTHER ASSETS
Security Deposit 475 475
------------------ ----------------
TOTAL ASSETS $ 333,933 $ 14,818
================== ================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 20,308 $ 42,247
Accrued expenses 15,603 28,111
Note Payable, shareholders (note 6) 6,000 46,466
Payroll Tax Liabilities 191 -
------------------ ----------------
TOTAL CURRENT LIABILITIES 42,102 116,825
------------------ ----------------
LONG TERM LIABILITIES
Notes Payable, shareholders (note 6) 436,000 738,958
------------------ ----------------
TOTAL LIABILITIES 478,102 855,783
------------------ ----------------
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value;
20,000,000 authorized shares through June 16th, 2004;
500,000,000 shares from June 17th, 2004;
141,930,000 and 8,276,000 shares issued and outstanding 141,930 8,276
Additional paid in capital 1,534,070 397,474
Accumulated deficit during the development stage (1,820,169) (1,246,715)
------------------ ----------------
TOTAL SHAREHOLDERS' DEFICIT (144,169) (840,965)
------------------ ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 333,933 $ 14,818
================== ================
|
Report of Independent Registered Public Accounting Firm and Notes to Financial Statements
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
From Inception
January 30,2002
through
2004 2003 December 31, 2004
----------------------- ---------------------- ---------------------
REVENUE $ 204,833 $ - $ 204,833
----------------------- ---------------------- ---------------------
COSTS AND EXPENSES
Salaries 108,270 72,000 518,870
Professional fees 84,133 86,970 354,910
Research and development 210,776 109,228 459,516
Rent 14,264 27,429 117,316
Insurance expenses 8,137 17,543 42,418
Depreciation and amortization 4,388 3,968 15,787
Payroll taxes 17,821 10,127 62,045
Office expense 20,586 14,900 59,006
Meals and entertainment 1,764 1,426 8,590
Travel 15,291 10,328 44,113
Advertising 91 2,755 3,196
Marketing Services 256,250 - 256,250
----------------------- ---------------------- ---------------------
TOTAL COSTS AND EXPENSES 741,769 356,674 1,942,017
----------------------- ---------------------- ---------------------
LOSS FROM OPERATIONS (536,936) (356,674) (1,737,184)
----------------------- ---------------------- ---------------------
OTHER (EXPENSE)
Interest Expense (36,518) (37,441) (82,985)
----------------------- ---------------------- ---------------------
NET LOSS $ (573,454) $ (394,115) $ (1,820,169)
======================= ====================== =====================
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.00)
======================= ======================
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 112,436,932 90,290,630
======================= ======================
|
Report of Independent Registered Public Accounting Firm and Notes to Financial Statements
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Accumulated
Deficit During
Additional the
Common stock Paid-in Development
---------------------------
Shares Amount Capital Stage Total
------------ -------------- --------------- -------------- -------------
Balance from original
Issuance at January 30, 2002
($0.0017 per share) ($7,650 in cash
and a patent at a fair value of $5,100) 7,500,000 $ 7,500 $ 5,250 $ - $ 12,750
Issuance of common stock
in February and March 2002($0.50 per share in cash) 250,000 250 124,750 - 125,000
Issuance of common stock in April 2002
(20,000 shares at $0.50 per share in cash) 20,000 20 9,980 - 10,000
Issuance of common stock in April 2002
(20,000 shares as finders fees) 20,000 20 (20) - -
Issuance of common stock in May 2002
(140,000 shares at $0.50 per share in cash) 140,000 140 69,860 - 70,000
Issuance of common stock in May 2002
(20,000 shares as finders fees) 20,000 20 (20) - -
Issuance of common stock in June 2002
($1.00 per share in cash) 50,000 50 49,950 - 50,000
Net Loss - - - (852,600) (852,600)
------------ -------------- --------------- -------------- -------------
Balance at December 31, 2002 8,000,000 8,000 259,750 (852,600) (584,850)
Issuance of common stock in January 2003
($1.00 per share in cash) 128,000 128 127,872 - 128,000
Issuance of common stock in March 2003
($1.00 per share in cash) 10,000 10 9,990 - 10,000
Net Loss - - - (394,115) (394,115)
------------ -------------- --------------- -------------- -------------
Balance, December 31, 2003 8,138,000 8,138 397,612 (1,246,715) (840,965)
Issuance of common stock in January 2004
(25,000 shares valued at $6,250 for services) 25,000 25 6,225 - 6,250
Issuance of common stock in June 2004
(16,000,000 shares at $0.025 per share
in conversion of debt) 16,000,000 16,000 384,000 - 400,000
Issuance of common stock in June 2004
(10,000,000 shares at $0.025 per share
for services) 10,000,000 10,000 240,000 - 250,000
Stock Split 83,207,000 83,207 (83,207) - -
Issuance of common stock at $0.025 per share
in July through December 31, 2004 for cash 24,560,000 24,560 589,440 - 614,000
Net Loss - - - (573,454) (573,454)
------------ -------------- --------------- -------------- -------------
Balance at December 31, 2004 141,930,000 $ 141,930 $ 1,534,070 $ (1,820,169) $ (144,169)
============ ============== =============== ============== =============
|
Report of Independent Registered Public Accounting Firm and Notes to Financial Statements
MACHINETALKER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
From Inception
January 30, 2002
through
2004 2003 December 31,2004
-------------------- -------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (573,454) $ (394,115) $ (1,820,169)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 4,388 3,968 15,787
Issuance of common shares for marketing services 256,250 - 256,250
(Increase) Decrease in:
Accounts receivable (180,000) - (180,000)
Deposits (475) (475)
Increase (Decrease) in:
Accounts payable (7,804) (73,300) 20,308
Accrued expenses 36,178 1,496 49,624
Payroll tax liabilities 191 - 191
-------------------- -------------------- ------------------
NET CASH USED IN OPERATING ACTIVITIES (464,251) (462,426) (1,658,484)
-------------------- -------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,043) - (31,685)
-------------------- -------------------- ------------------
NET CASH USED IN INVESTING ACTIVITIES (11,043) - (31,685)
-------------------- -------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft (42,247) 25,405 0
Proceeds from Advances from Shareholders 36,000 299,020 807,978
Proceeds from issuance of common stock 614,000 138,000 1,007,000
-------------------- -------------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 607,753 462,425 1,814,978
-------------------- -------------------- ------------------
NET INCREASE IN CASH 132,459 - 124,809
CASH, BEGINNING OF YEAR - - 7,650
-------------------- -------------------- ------------------
CASH, END OF YEAR $ 132,459 $ - $ 132,459
==================== ==================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 36,518 $ 37,441 $ 82,985
==================== ==================== ==================
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
During the year ended December 31, 2004, the Company issued 25,000 common
shares valued at $6,250 for marketing services; 16,000,000 common shares
for conversion of $400,000 of debt; and 10,000,000 common shares valued at
$250,000 for marketing services.
|
Report of Independent Registered Public Accounting Firm and Notes to Financial Statements
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
1. ORGANIZATION AND LINE OF BUSINESS
ORGANIZATION
MachineTalker, Inc. (the "Company") was incorporated in the state of Delaware on January 30, 2002. The Company, based in Goleta, California, began operations on January 30, 2002 to develop and market a wireless control technology. The Company's founders are also the principal owners of SecureCoin, Inc. ("SecureCoin"). As part of MachineTalker's initial capitalization, the Company's founders have contributed certain intellectual property that was developed at and acquired from SecureCoin. SecureCoin assigned all rights to that intellectual property to the co-founders in January 2002, and those co-founders then contributed the intellectual property rights to the Company in connection with its formation. This intellectual property, including a provisional patent, forms the core of MachineTalker's proprietary smart security network technology.
LINE OF BUSINESS
The Company is currently in the stage of developing wireless networking products that combine microcomputers and wireless radio components in a single package that can be used to service a variety of attachments, including Sensors for measuring temperature, pressure, motion, vibration, location and many other parameters. These "MachineTalkers" can then be programmed to form local wireless networks with other MachineTalkers to process the Sensor data collectively in real time and on a local basis. This allows governments, businesses and individuals to rapidly deploy wireless security systems to protect and monitor things, places and people.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of MachineTalker, Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion. As discussed in note 6, the Company has obtained funds from its shareholders since its' inception through 2004. Management believes this funding will continue, and is also actively seeking new investors. Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company's obligations as they become due, and will allow the development of its core of business.
DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS
The Company has been in its initial stages of formation and for the year ended December 31, 2004, had insignificant revenues. FASB #7 defines a development stage activity as one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant.
Report of Independent Registered Public Accounting Firm
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
REVENUE RECOGNITION
The Company is in the process of developing and implementing accrual based revenue recognition polices. To date, the Company has had minimal revenues and is still in the development stage. Revenues are recognized when products are shipped and services are performed.
CASH AND CASH EQUIVALENT
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, and the fair value of stock options. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and are depreciated using the straight-line method over 5 years.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments", requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of December 31, 2004 and 2003, the amounts reported for cash, accounts receivable, accounts payable, accrued interest and other expenses, and notes payable approximate the fair value because of their short maturities.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2004 and 2003 were $91 and $2,755 respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. These cost consist primarily of salaries and direct payroll related costs. The costs for the years ended December 31, 2004 and 2003 were $207,326 and $109,228 respectively.
STOCK-BASED COMPENSATION
The Company accounts for employee stock option grants in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations (APB 25), and has adopted the "disclosure only" alternative described in Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Entities electing to remain with the accounting method of APB 25 must make pro forma disclosures of net income and earnings per share, as if the fair value method of accounting defined in SFAS No. 123 had been applied.
LOSS PER SHARE CALCULATIONS
The Company adopted Statement of Financial Standards ("SFAS") No. 128 for the calculation of "Loss per Share". SFAS No. 128 dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's diluted loss per share is the
Report of Independent Registered Public Accounting Firm
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
same as the basic loss per share for the years ended December 31, 2004, and 2003 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The weighted average number of shares used for the calculation of the loss per share considers the stock split as if it had occurred on January 1, 2003.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This Statement amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on the reported results. The disclosure requirements of this statement were effective for our years ended December 31, 2004 and 2003.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, Share-based Payment. SFAS 123R revises SFAS 123 and supersedes APB 25. SFAS 123R will be effective for the year ending December 31, 2006, and applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. Under SFAS 123R, we will be required to follow a fair value approach using an option-pricing model, such as the Black Schole option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. The adoption of SFAS 123R is expected to have a material impact on our results of operations.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN46) "Consolidation of Variable Interest Entities, and Interpretation of ARB 51." This interpretation addresses consolidation by business enterprises of certain variable interest entities (VIEs). The Interpretation as amended is effective immediately for all enterprises with interests in VIEs created after January 31, 2003. In December 2003, the FASB issued a revised version of FIN46 (FIN46R), which clarified the provisions of FIN46 by addressing implementation issues. FIN46R must be applied to all entities subject to the Interpretation as of the first interim quarter ending after March 15, 2004. The adoption of this interpretation did not impact the financial statements.
3. DEFERRED TAX BENEFIT
At December 31, 2004, the Company has federal and state cumulative net operating loss carryforwards of approximately $1,564,000 that expire through 2024. The Company also has tax credits, totaling approximately $625,000 to offset future Federal and State income taxes. For financial reporting purpose, a valuation allowance has been recognized in an amount equal to such deferred tax assets due to the uncertainty surrounding their ultimate realization.
Report of Independent Registered Public Accounting Firm
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
4. CAPITAL STOCK
At December 31, 2004, the Company's authorized stock consists of 500,000,000 shares of common stock, par value $0.001 per share. In September 2004, the Company effected a ten for one forward split of its common stock. As adjusted to reflect the split, during the year ended December 31, 2004, the Company issued 250,000 shares of common stock for services rendered valued at $6,250; 24,560,000 shares of common stock at a purchase price of $0.025 per share pursuant to a private placement made pursuant to Rule 506 of Regulation D promulgated under section 4(2) of the Securities Act of 1933, as amended (the "Private Placement"), 16,000,000 shares of common stock for conversion of debt of $400,000 as part of the Private Placement, and 10,000,000 shares of common stock for services rendered valued at $250,000. As adjusted to reflect the split and certain anti-dilution provisions applicable until the registration of such shares of common stock, during the year ended December 31, 2003, the Company issued 5,520,000 shares of common stock for cash of $138,000.
5. STOCK OPTIONS
The Company adopted a Stock Option Plan for the purposes of granting stock options to its employees and others providing services to the Company, which reserves and sets aside for the granting of Options for Twenty Million (20,000,000) shares of Common Stock. Options granted under the Plan may be either Incentive Options or Nonqualified Options and shall be administered by the Company's Board of Directors ("Board"). Each option shall be exercisable in full or in installments and at such times as designated by the Board. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement, which date shall not be later than the tenth anniversary from the effective date of this option. During the years ended December 31, 2004 and 2003, the Company granted 8,000,000 and 1,600,000 stock options, respectively, with effective dates of March 19, 2003 through August 1, 2004. The stock options vest as follows: 25% one year after the date of grant and 1/36 every 30 days thereafter until the remaining stock options have vested. The stock options are exercisable for a period of ten years from the date of grant at an exercise price of $0.025 or $0.05 per share, as adjusted for the ten for one forward split of the Company's common stock.
SFAS 123, Accounting for Stock-Based Compensation, requires pro forma information regarding net income (loss) using compensation that would have been incurred if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value of options granted was determined using the Black Schole method with the following assumptions:
2004 2003
-------------------- -------------------
Risk free interest rate 4.08% to 4.28% 3.81%
Stock volatility factor 1% 1%
Weighted average expected option life 10 years 10 years
Expected dividend yield None None
|
Report of Independent Registered Public Accounting Firm
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
5. STOCK OPTIONS (continued)
A summary of the Company's stock option activity and related information follows:
Weighted Weighted
Number average Number average
of exercise of exercise
Options price Options price
------------- --------------- -------------- ----------
Outstanding, beginning of year 1,600,000 $ 0.050 - $ -
Granted 8,000,000 $ 0.047 1,600,000 $ 0.050
Exercised - - - -
Expired (1,600,000) (0.05) - -
------------- --------------- -------------- ----------
Outstanding, end of year 8,000,000 $ 0.047 1,600,000 $ 0.050
============= =============== ============== ==========
Exercisable at the end of year 4,498,630 $ 0.047 714,520 $ 0.050
============= =============== ============== ==========
Weighted average fair value of
options granted during the year $ 0.047 $ 0.050
=============== ==========
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The Black Schole option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
The weighted average remaining contractual life of options outstanding issued under the plan as of December 31, 2004 was as follows:
Weighted Weighted Weighted
Average Average Average
Stock Stock Remaining Exercise Price Exercise Price
Exercisable Options Options Contractual of Options of Options
Prices Outstanding Exercisable Life (years) Outstanding Exercisable
------------- ----------------- ---------------- ------------- ----------------- ----------------
$ 0.025 1,000,000 500,000 9.7 years $ 0.025 $ 0.025
$ 0.050 7,000,000 3,998,630 9.1 years $ 0.050 $ 0.050
---------- ----------
8,000,000 4,498,630
========== =========
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The Company has adopted only the disclosure provisions of SFAS No. 123. It applies APB 25 and related interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation plans.
If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under this plan consistent with the methodology prescribed by SFAS No. 123, the Company's net income and earnings per share would be reduced to the pro forma amounts indicated below for the years ended December 31, 2004 and 2003:
Report of Independent Registered Public Accounting Firm
MACHINETALKER, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004 and 2003
2004 2003
---- ----
Net Loss
As reported $(573,454) $ (394,115)
Add: Stock Based Employee Compensation
expense included in reported net loss, net of
related tax effects - -
Deduct: Total Stock Based Employee
Compensation expense determined under
fair value based method for all awards, net of
related tax effects (74,623) (11,145)
Pro Forma (648,077) (405,260)
Basic and Diluted Loss per Share
As reported $ ( 0.01) $ ( 0.00)
Pro Forma $ ( 0.01) $ ( 0.00)
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6. RELATED PARTY
The Company leases its premises from a company in which our majority shareholders are minority shareholders pursuant to a three year lease which expires on August 20, 2006, with the option to extend the lease term for one year. The rent expense for the years ended December 31, 2004 and 2003 amounted to $14,264 and $27,429 respectively.
During the year ended December 31, 2004, loans from the Company's President and Chief Executive Officer, were converted to equity and to convertible debentures. Four hundred thousand dollars was converted into equity, and $436,000 was converted into debentures with interest payable at the rate of 6% per year, principal due July 2009, convertible into 17,440,000 shares of common stock at $0.025 per share. Also, during the year ended December 31, 2004, one of Company's shareholders loaned the Company $6,000 to fund the Company's expenses. The loan bears interest at 6% and is due on demand.
Report of Independent Registered Public Accounting Firm
UNTIL AUGUST 26, 2005 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
73,367,050 Shares of
Common Stock
PRELIMINARY PROSPECTUS
August 1, 2005
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware General Corporation Law and our Articles of Incorporation, our directors will have no personal liability to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his "duty of care." This provision does not apply to the directors' (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director's duty to the corporation of its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance of duties including gross negligence.
Insofar as an indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted for directors, officers or persons controlling MTI pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission each indemnification is against public policy as expressed in the Act and is therefore unenforceable.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of the Shares being registered hereby. All of the amounts shown are estimates except for the Securities and Exchange Commission (the "Commission") registration fee and the National Association of Securities Dealers ("NASD") filing fee.
Commission Registration Fee $ 929.56
Accounting Fees and Expenses $ 33,000.00
Legal Fees and Expenses $ 45,000.00
Printing and Engraving Expenses $ 5,000.00
Transfer Agent Fees $ 2,200.00
Miscellaneous Expenses $ 5,000.00
-----------
TOTAL $ 91,129.56
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Item 26. RECENT SALES OF UNREGISTERED SECURITIES
In June 2005, we completed a private placement of 3,100,000 shares of our common stock (the "Common Stock") for a purchase price of $0.10 per share, raising total capital of $310,000 from approximately 52 investors. The private placement was made pursuant to Regulation D of Rule 506 of the Securities Act of 1933, as amended (the "Securities Act").
On June 16, 2005, we issued warrants to purchase an aggregate of 200,000 shares of Common Stock at an exercise price of $0.10 per share to four investors for services rendered. The warrants expire on June 16, 2010.
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On April 28, 2005, we issued warrants to purchase an aggregate of 5,000 shares of Common Stock at an exercise price of $0.10 per share to one investor for services rendered. The warrants expire on April 28, 2010.
On April 18, 2005, we issued warrants to purchase an aggregate of 55,000 shares of Common Stock at an exercise price of $0.10 per share to three investors for services rendered. The warrants expire on April 18, 2010.
On March 23, 2005, we issued warrants to purchase an aggregate of 525,000 shares of Common Stock at an exercise price of $0.10 per share to four investors for services rendered. The warrants expire on March 23, 2010.
On January 28, 2005, we issued warrants to purchase an aggregate of 3,292,000 shares of Common Stock at an exercise price of $0.025 per share to eight investors for services rendered. The warrants expire on January 28, 2010.
In January 2005, we completed a private placement of 54,280,000 shares of our Common Stock for a purchase price of $0.025 per share, raising total capital of $1,357,000 from approximately 57 investors, of which 16,000,000 were acquired by Roland F. Bryan, the Chairman, Chief Executive Officer, and President of MTI through the conversion of $400,000 of a loan made by him to us. The private placement was made pursuant to Regulation D of Rule 506 of the Securities Act.
In June 2004, we issued 10,000,000 shares of common stock, as adjusted to reflect the ten for one forward split of our Common Stock which became effective in September 2004, to one investor for services rendered.
In January 2004, we issued 25,000 shares of Common Stock to one investor for services rendered. In light of the ten for one forward split of our Common Stock which occurred on September 7, 2004, this investor now owns 250,000 shares of Common Stock.
In March 2003, we completed a private placement of 188,000 shares of Common Stock for a purchase price of $1.00 per share, raising total capital of $188,000 from approximately 10 investors. The shares of Common Stock issued pursuant to this private placement contain certain anti-dilution provisions applicable until the registration of such shares of Common Stock. Accordingly, in light of the ten for one forward split of our Common Stock which occurred on September 7, 2004 and the subsequent private placement of our Common Stock for a purchase price of $0.025 per share which was completed in January 2005, these investors were each issued 39 additional shares of Common Stock for each share of Common Stock originally purchased by them. These investors now own 7,520,000 shares of Common Stock. The private placement was made pursuant to Regulation D of Rule 506 of the Securities Act.
In May 2002, we completed a private placement of 410,000 shares of Common Stock for a purchase price of $0.50 per share, raising total capital of $205,000 from approximately 57 investors. The shares of Common Stock issued pursuant to this private placement contain certain anti-dilution provisions applicable until the registration of such shares of Common Stock. Accordingly, in light of the ten for one forward split of our Common Stock which occurred on September 7, 2004 and the subsequent private placement of our Common Stock for a purchase price of $0.025 per share which was completed in January 2005, these investors were each issued 19 additional shares of Common Stock for each share of Common Stock originally purchased by them. These investors now own 8,200,000 shares of Common Stock. The private placement was made pursuant to Regulation D of Rule 506 of the Securities Act.
II-2
Item 27. EXHIBITS
3.1 Articles of Incorporation
3.2 Amendments to Articles of Incorporation
3.3 Bylaws
4.1 Specimen Certificate for Common Stock
4.2 2002 Stock Option Plan
4.3 Form of Incentive Stock Option Agreement
4.4 Form of Non Qualified Stock Option Agreement
5.1 Opinion of Richardson & Associates as to the legality of the
securities being registered
10.1 Lease Agreement by and between MachineTalker, Inc. and SecureCoin,
Inc., dated August 20, 2003
10.2 Agreement No. CA-00062 by and between MachineTalker, Inc. and
Kellogg, Brown & Root Services, Inc., dated December 20, 2004(1)
10.3 Agreement by and between MachineTalker, Inc. and Science
Applications International Corporation, dated July 1, 2004
23.1 Consent of Richardson & Associates (included as part of Exhibit
5.1).
23.2 Consent of Rose, Snyder & Jacobs, A Corporation of Certified
Public Accountants.
24.1 Power of Attorney (contained on page II-4 hereof).
|
(1) Certain portions of this exhibit have been redacted because they contain confidential material information and therefore may be excluded from the Company's public reports pursuant to Rule 406 of the Securities Act of 1933, as amended, and its equivalent rule under the Securities Exchange Act of 1934, as amended. The Company may file a request for confidential treatment for these portions of the exhibit with the Securities and Exchange Commission in the future.
Item 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-3
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference into this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the finial adjudication of such issue.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Roland F. Bryan, his true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that said attorney-in-fact and agent or the substitute or substitutes of him, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Barbara, State of California, on August 1,
2005
MACHINETALKER, INC.
By: /s/ Roland F. Bryan ------------------------------- Roland F. Bryan, President |
II-4
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ ROLAND F. BRYAN President, Chief Executive August 1, 2005
------------------- Officer, and Chairman
ROLAND F. BRYAN
/s/ CHRISTOPHER KLEVELAND Vice President of Operations, August 1, 2005
------------------------- Secretary, and Director
CHRISTOPHER KLEVELAND
/s/ BRIAN ALTOUNIAN Director August 1, 2005
-------------------
BRIAN ALTOUNIAN
|
II-5
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------------
3.1 Articles of Incorporation
3.2 Amendments to Articles of Incorporation
3.3 Bylaws
4.1 Specimen Certificate for Common Stock
4.2 2002 Stock Option Plan
4.3 Form of Incentive Stock Option Agreement
4.4 Form of Non Qualified Stock Option Agreement
5.1 Opinion of Richardson & Associates as to the legality of the
securities being registered
10.1 Lease Agreement by and between MachineTalker, Inc. and SecureCoin,
Inc., dated August 20, 2003
10.2 Agreement No. CA-00062 by and between MachineTalker, Inc. and
Kellogg, Brown & Root Services, Inc., dated December 20, 2004(1)
10.3 Agreement by and between MachineTalker, Inc. and Science
Applications International Corporation, dated July 1, 2004
23.1 Consent of Richardson & Associates (included as part of Exhibit
5.1).
23.2 Consent of Rose, Snyder & Jacobs, A Corporation of Certified
Public Accountants.
24.1 Power of Attorney (contained on page 7 hereof).
|
(1) Certain portions of this exhibit have been redacted because they contain confidential material information and therefore may be excluded from the Company's public reports pursuant to Rule 406 of the Securities Act of 1933, as amended, and its equivalent rule under the Securities Exchange Act of 1934, as amended. The Company may file a request for confidential treatment for these portions of the exhibit with the Securities and Exchange Commission in the future.
II-6
EXHIBIT 3.1
DELAWARE
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "MACHINETALKER, INC. ", FILED IN THIS OFFICE ON THE THIRTIETH DAY OF JANUARY, A.D. 2002, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
SEAL
/s/Harriet Smith Windsor
__________________________________________
Harriet Smith Windsor, Secretary of State
3484724 8100 AUTHENTICATION: 1586265
020060507 DATE: 01-30-02
|
State of Delaware
Secretary of State
Division of Corporations
FILED 09:00 AM 03/30/2002
020060507 - 3484724
CERTIFICATE OF INCORPORATION
OF
MACHINETALKER, INC.
I, the undersigned, for the purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware, do execute this Certificate of Incorporation and do hereby certify as follows:
FIRST: The name of this corporation is MACHINETALKER, INC.
SECOND: The address of this Corporation's registered office in the State of Delaware is 615 South DuPont Highway, City of Dover, County of Kent, State of Delaware 19901. National Corporate Research, Ltd., is the Corporation's registered agent at that address.
THIRD: The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which this Corporation is authorized to issue shall be Twenty Million (20,000,000), all of which shall be "Common Stock" with the par value of one-tenth of one cent ($0.001) per share.
FIFTH: The incorporator of this Corporation is Michael E. Pfau, whose mailing address is 1421 State Street, Santa Barbara, California 93101.
SIXTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. Election of Directors need not be by written ballot unless the Bylaws of the Corporation so provide.
SEVENTH: Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of Directors of the Corporation need not be by written ballot.
EIGHTH: A Director of the Corporation shall not liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended. Any amendment, modification, or repeal of the foregoing sentence shall not adversely affect any right or protection of a Director of the corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification, or appeal.
NINTH: The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized at any time by the laws of the State of Delaware may be added to this Certificate of Incorporation in the manner now or hereafter prescribed by law. All rights, preferences, and
privileges of whatsoever nature conferred upon stockholders, Directors, or other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article.
The undersigned incorporator hereby acknowledges that the foregoing Certificate of Incorporation is his act and deed on this 29th day of January, 2002.
/s/ Michael E. Pfau ----------------------------------- Michael E. Pfau, Incorporator |
EXHIBIT 3.2
DELAWARE
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "MACHINETALKER, INC. ", FILED IN THIS OFFICE ON THE SEVENTH DAY OF SEPTEMBER, A.D. 2004, AT 9:39 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
SEAL
/s/Harriet Smith Windsor
__________________________________________
Harriet Smith Windsor, Secretary of State
3484724 8100 AUTHENTICATION: 3336858
040646099 DATE: 09-08-04
|
State of Delaware
Secretary of State
Division of Corporations
Delivered 09:55 AM 09/07/2004
FILED 09:39 AM 09/07/2004
SW 040646099 - 3484724 FILE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MACHINETALKER, INC.
MACHINETALKLR, INC., a corporation organized and existing order and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that:
1. The amendment to the Corporation's Certificate of Incorporation set forth below was duly adopted in accordance with the provisions of Section 242 and has been consented to in writing by the stockholders, and written notice has been given, in accordance with Section 228 of the General Corporation Law of the State of Delaware.
II. The first paragraph of Article FOURTH of the Corporation's Certificate of Incorporation is amended to read in its entirety as follows:
"FOURTH: The total number of shares of stock which the Corporation is authorized to issue shall be Five Hundred Million (500,000,000), with a par value of One-tenth of One Cent ($0.001) per share (the "Common Stock"). Effective upon the filing of this Certificate of Amendment, each outstanding share of Common Stock be, and it hereby is, automatically split up, converted and divided into ten (10) shares of Common Stock."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by Roland Bryan, its authorized officer, on this 3rd day of September, 2004.
/s/Roland Bryan ------------------------------ Roland Bryan, President |
EXHIBIT 3.3
BYLAWS
OF
MACHINETALKER, INC.
TABLE OF CONTENTS
Section Page
1.1 Name of Corporation........................................1
1.2 Principal Office...........................................1
1.3 Additional or New Offices..................................1
2. DEFINITIONS...........................................................1
-----------
2.1 Certificate of Incorporation...............................1
2.2 Common Stock...............................................1
2.3 GCL........................................................1
2.4 Shares Entitled to Vote....................................1
2.5 Voting Power...............................................1
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3.1 Place of Meeting...........................................2 3.2 Annual Meetings............................................2 3.3 Special Meetings...........................................2 3.4 Notice of Meetings.........................................2 3.5 Quorum Requirements........................................3 3.6 Lack of Quorum; Adjournments...............................3 3.7 Voting Rights..............................................4 3.8 Voting by Proxy............................................4 3.9 Inspectors of Election.....................................4 3.10 Shareholder Action without a Meeting.......................4 |
4.1 Powers of Directors........................................5 4.2 Number and Qualification of Directors......................5 4.3 Election of Directors; Term................................5 4.4 Resignation of Directors...................................5 4.5 Removal of Directors.......................................6 4.6 Vacancies on Board of Directors............................6 4.7 Meetings of the Board of Directors.........................6 4.8 Director Action Without a Meeting..........................7 4.9 Committees of Directors....................................7 |
5.1 Principal Officers.........................................8 5.2 Election; Qualification and Tenure.........................8 5.3 Subordinate Officers.......................................8 5.4 Resignation and Removal of Officers........................8 5.5 Vacancies in Offices.......................................9 5.6 Responsibilities of Officers...............................9 |
TABLE OF CONTENTS
Section Page
7.1 Corporate Records.........................................11 7.2 Inspection of Books and Records...........................12 7.3 Annual Report to Shareholders.............................12 7.4 Financial Statements......................................12 7.5 Non-Disclosure Agreement..................................13 |
8.1 Certificates for Shares...................................13 8.2 Transfer of Shares on Books...............................13 8.3 Lost or Destroyed Certificates............................13 8.4 Transfer Agent and Registrars.............................14 |
9.1 Corporate Seal............................................14 9.2 Record Date...............................................14 9.3 Voting of Shares in Other Corporations....................14 9.4 Definitions and Interpretation............................14 |
10.1 Amendments By Shareholders................................14 10.2 Amendment By Directors....................................14 10.3 Record of Amendments......................................14 |
BYLAWS
OF
MACHINETALKER, INC.
1. NAME; EXECUTIVE OFFICES
1.1 Name of Corporation. The name of this Corporation is MachineTalker, Inc.
1.2 Principal Office. The Board of Directors shall designate the location of the principal executive office of the Corporation, which may be at any place within or without the State of Delaware. If the principal executive office is located outside of Delaware, and if the Corporation has one or more business office, then the Board of Directors shall designate a principal business office.
1.3 Additional or New Offices. The Board of Directors may establish such branch or subordinate offices, or may relocate the Corporation's principal office from time to time, at or to such locations as it determines to be appropriate.
2. DEFINITIONS
For purposes of these Bylaws, the terms set forth below shall be used as they are defined in this Section.
2.1 Certificate of Incorporation. The term "Certificate of Incorporation" means the Certificate of Incorporation of the Corporation as filed with the Secretary of State of the State of Delaware and as in effect at the time in question.
2.2 Common Stock. The term "Common Stock" means the Common Stock of the Corporation as constituted as of the date in question, including each Series of Common Stock.
2.3 GCL. The term "GCL" means the Delaware General Corporation Law as in effect at the time in question.
2.4 Shares Entitled to Vote. If the Certificate of Incorporation provide for more or less than one vote for any share of capital stock on any matter, every reference in these Bylaws to a majority or other percentage or amount of the "Shares Entitled to Vote" shall mean a majority or other applicable percentage or amount of the total number of votes entitled to be cast with respect to the shares of capital stock which have the right to vote or act by written consent on such matter.
2.5 Voting Power. If the Certificate of Incorporation provide for more or less than one vote for any share of capital stock on any matter, every reference in these Bylaws to a majority or other percentage of the "Voting Power" shall mean a majority or other applicable percentage of the total number of votes entitled to be cast with respect to the shares of capital stock which have the right to vote or act by written consent on such matter.
3. MEETINGS OF THE SHAREHOLDERS
3.1 Place of Meeting. All meetings of the shareholders of this Corporation shall be held at the principal office of the Corporation in the State of California, or at such other place within or without the State as may be designated from time to time by the Board of Directors or as may be consented to in writing by all of the persons entitled to vote who were not present at the meeting.
3.2 Annual Meetings. The annual meeting of the shareholders shall be held each year within one hundred and twenty (120) days of the end of the Corporation's fiscal year on the exact date and at a time within such 120-day period as shall be determined by the Board of Directors. At each annual meeting the shareholders shall elect a Board of Directors, consider reports of the affairs of the Corporation, and transact such other business as may properly be brought before the meeting.
3.3 Special Meetings. Special meetings of the shareholders may be called in accordance with the procedures set forth in this Section 3.3 for the purpose of taking any action permitted to be taken by the shareholders under the GCL and the Certificate of Incorporation.
3.3.1 Authorization to Call Special Meetings. The Chairman of the Board, the President, the Board of Directors, any two or more members of the Board, or one or more shareholders holding not less than ten percent (10%) of the Voting Power of the Corporation, may call special meetings of the shareholders at any time.
3.3.2 Procedure for Calling Special Meetings. If a special meeting is called by any person other than the Board of Directors, the request for the special meeting, specifying the general nature of the business proposed to be transacted, shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the President, the Chairman of the Board, any Vice-President or the Secretary of the Corporation. The officer receiving the request shall promptly cause notice of the meeting to be given in the manner provided by Section 3.4 of these Bylaws to the shareholders entitled to vote at the meeting. Any special meeting called for pursuant to this Section 3.3 shall be held not less than thirty-five (35) nor more than sixty (60) days following receipt of the request for the special meeting. If notice of the special meeting is not given to shareholders within twenty (20) days after the receipt of a request, the person(s) calling the meeting may give notice thereof in the manner provided by these Bylaws or apply to a court of competent jurisdiction as contemplated by the GCL.
3.4 Notice of Meetings. Notice of meetings, annual or special, shall be given in writing to each shareholder entitled to vote at such meeting by the Secretary or an Assistant Secretary, or if there be no such officers, by the Chairman of the Board or the President, or in the case of neglect or refusal, by any person entitled to call a meeting, not less than ten (10) days (or, if sent by third class mail, thirty (30) days) nor more than sixty (60) days before the date of the meeting.
3.4.1 Procedure for Giving Notice. Written notice of the meeting shall be given either personally or by first class mail (or third class mail if the Corporation has shares held of record by 500 or more persons as of the record date for the meeting) or telegraphic or other means of written communication, charges prepaid, addressed to the shareholder at the address of the shareholder appearing on the books of the Corporation or given by the shareholder to the Corporation for the purpose of notice. If no such address for notice appears on the Corporation's books or has not been given, notice shall be deemed to have been given if sent to the shareholder in care of the Corporation's principal executive office or if published at least once in a newspaper of general circulation in the county in which the principal executive office of the Corporation is located. The giving of notice as provided by these Bylaws may be omitted only to the extent and in the manner expressly permitted by the GCL.
3.4.2 Contents of Notice. Notice of any meeting of shareholders shall specify:
A. The place, the date and the hour of the meeting;
B. Those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholders;
C. If Directors are to be elected, the names of nominees whom, at the time of the notice, management intends to present for election;
D. The general nature of any business to be transacted at a special meeting and that no other business shall be transacted;
E. The general nature of business to be
transacted at any meeting, whether regular, annual or special, if such business
relates to any proposal to take action with respect to the approval of (1) a
contract or other transaction with an interested Director, governed by the GCL,
(2) an amendment of the Certificate of Incorporation, (3) the reorganization of
the Corporation within the meaning of the GCL, (4) the voluntary dissolution of
the Corporation, or (5) a plan of distribution in dissolution;
F. Such other matters, if any, as may be expressly required by the GCL.
3.4.3 Waiver of Notice of Meetings. The transactions of any meeting of shareholders, however called and noticed, shall be as valid as action taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, but who are not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. A waiver of notice or a consent to the holding of any meeting of shareholders need not specify the business transacted at or the purpose of any regular or special meeting, other than any proposal approved or to be approved at such meeting, the general nature of which was required by paragraph E. of Section 3.4.2 of these Bylaws to be stated in the notice thereof.
3.5 Quorum Requirements. The holders of a majority of the Shares Entitled to Vote, represented in person or by proxy, shall constitute a quorum at, all meetings of the shareholders for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
3.6 Lack of Quorum; Adjournments. If a quorum is not present or represented at any meeting of the shareholders, the meeting may be adjourned by a majority vote of the Shares Entitled to Vote who are present, either in person or by proxy, until such time as the requisite number of voting shares constituting a quorum is present.
3.6.1 Conduct of Adjourned Meeting. Except as provided in
Section 3.6.2 of these Bylaws, it shall not be necessary to give any notice of
the adjourned meeting, other than by announcement of the time and place thereof
at the meeting at which the adjournment is taken, and the Corporation may
transact at the adjourned meeting any business which might have been transacted
at the original meeting.
3.6.2 Notice of Adjourned Meeting. When a meeting is adjourned for more than forty-five (45) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with the provisions of Section 3.4 of these Bylaws.
3.7 Voting Rights. Subject to the provisions of the GCL, only persons in whose names Shares Entitled to Vote stand on the stock records of the Corporation on the record date shall be entitled to vote at meetings of the shareholders.
3.7.1 General Voting Rights. Except as otherwise provided in the Certificate of Incorporation or Section 3.8, below, every shareholder entitled to vote shall be entitled to one vote for each share of stock entitled to vote held of record. If the Certificate of Incorporation provide for more or less than one vote for any share of stock on any matter, every reference in these Bylaws to a majority or other proportionate vote of the stock of the Corporation shall refer to such majority or proportionate vote of the Shares Entitled to Vote based on the aggregate number of votes entitled to be cast by such shares on such matter.
3.7.2 Majority Vote. Except as otherwise provided in the Certificate of Incorporation or Section 4.3, below, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless the vote of a greater number of shares of stock or voting by classes is required by the GCL or by the Certificate of Incorporation.
3.7.3 Voice Voting; Written Ballots. Voting at meetings of the shareholders may be by voice vote or by ballot except that, in any election of Directors, voting must be by written ballot if voting by ballot is requested by any shareholder entitled to vote.
3.8 Voting by Proxy. Every shareholder entitled to vote, or to execute consents, may do so either in person, by telegram, or by written proxy in a form as provided in, and executed in accordance with the applicable provisions of the GCL. Proxies must be filed with the Secretary or an Assistant Secretary of the Corporation. The validity of a proxy tendered on behalf of a shareholder, and any revocation thereof, shall be determined in accordance with the provisions of the GCL.
3.9 Inspectors of Election. In advance of any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as Inspectors of Election at such meeting or any adjournment thereof. If no Inspectors of Election are appointed or if an appointment is vacated by an Inspector who fails to appear or fails or refuses to act, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment or fill such vacancy at the meeting. The number of Inspectors shall be as prescribed by and shall have the authority and duties set forth in the GCL.
3.10 Shareholder Action without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action which may be taken at any annual or special meeting of the shareholders, other than the election of Directors, may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote thereon were present and voted.
3.10.1 Notice of Written Consent. Unless the consents of all shareholders entitled to vote have been solicited in writing, prompt notice of any corporate action approved by shareholders without a meeting by less than unanimous written consent shall be given to those shareholders entitled to vote who have not consented in writing. Such notice must be given at least ten (10) days before the consummation of any action authorized by such approval if the action involves (i) a contract or other transaction with an interested Director, governed by the GCL, (ii) the indemnification of any present or former agent of the Corporation within the meaning of Section 317 of the GCL, (iii) any reorganization within the meaning of the GCL, or (iv) a plan of distribution in dissolution.
3.10.2 Election of Directors by Written Consent. A Director may be elected at any time to fill a vacancy (other than a vacancy resulting from the removal of a Director) not filled by the Board by the written consent of persons holding a majority of the outstanding Shares Entitled to Vote for the election of Directors, and any required notice of any such election shall promptly be given as provided in Section 3.4.2, above. Directors may not otherwise be elected without a meeting unless a consent in writing, setting forth the action so taken, is signed by all of the persons who would be entitled to vote for the election of Directors.
4. DIRECTORS OF THE CORPORATION
4.1 Powers of Directors. Subject to the limitations of the Certificate of Incorporation, the Bylaws, and the GCL as to action requiring the authorization or approval of the shareholders, the outstanding shares, or less than a majority vote of all shares, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by, the Board of Directors. The Board may delegate the management of the day-to-day operation of the business to a management company or other person, provided that the business and the affairs of the Corporation shall be managed, and all corporation powers shall be exercised under, the ultimate direction of the Board.
4.2 Number and Qualification of Directors. The authorized number of Directors shall be three (3). A change in the minimum or maximum number of Directors who may be authorized to serve on the Board of Directors, or a change from a variable to a fixed Board may be made only by amendment of the Certificate of Incorporation.
4.3 Election of Directors; Term. The Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. At any election of Directors, the Directors receiving the highest number of votes, up to the total number of Directors to be elected, shall be elected subject to the provisions of the Certificate of Incorporation. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. No reduction in the authorized number of Directors shall have the effect of removing any Director prior to the expiration of that Director's term of office.
4.4 Resignation of Directors. Any Director may resign by giving written notice of resignation to the Chairman of the Board, if any, or to the President, the Secretary or the Board of Directors. If any Director tenders a resignation in the manner provided by the GCL, the shareholders or the Board of Directors shall have the power to elect a successor to take office at such time as the resignation shall become effective subject to the provisions of the Certificate of Incorporation.
4.5 Removal of Directors. The entire Board of Directors, or any individual Director, may be removed from office in the manner provided by the GCL.
4.6 Vacancies on Board of Directors. A vacancy in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any Director, if a Director has been declared of unsound mind by order of Court or convicted of a felony, if the authorized number of Directors is increased, or if the shareholders shall fail, either at a meeting at which an increase in the number of Directors is authorized or at an adjournment thereof, or at any other time, to elect the full number of authorized Directors. Vacancies on the Board of Directors shall be filled as follows:
4.6.1 If Director not Removed. Any vacancy, other than a vacancy created by the removal of a Director, may be filled by a majority of the remaining Directors, whether or not less than a quorum, or by a sole remaining Director, and each Director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
4.6.2 If Director Removed. A vacancy created by the removal of a Director may be filled only by a vote of the majority of the Shares Entitled to Vote at a duly held meeting of the shareholders, or by the unanimous written consent of the holders of the outstanding Shares Entitled to Vote.
4.6.3 Action by Shareholders. The shareholders may at any time elect Directors to fill any other vacancies not filled by the Directors, and any such election made by written consent shall require the consent of a majority of the outstanding Shares Entitled to Vote.
4.7 Meetings of the Board of Directors. Meetings of the Board of Directors shall be held at the principal executive office of the Corporation, or at such other place as may be designated from time to time by resolution of the Board of Directors.
4.7.1 Annual Meetings. An annual meeting of the Board of Directors shall be held without notice at the place of the annual meeting of shareholders immediately following the adjournment of the annual shareholders meeting for the purpose of organizing the Board, electing any officers desired to be elected, and transacting such other business as may properly come before the meeting.
4.7.2 Other Regular Meetings. Other regular meetings of the Board of Directors shall be held without notice at such time as may be designated from time to time by resolution of the Board of Directors.
4.7.3 Special Meetings. Special meetings of the Board of Directors may be called for any purpose at any time by the Chairman of the Board, the President, any Vice-President, the Secretary, or by any two (2) Directors.
A. Notice of the time and place of special meetings shall be delivered or communicated personally to each Director by telephone, or by telegraph or mail, charges prepaid, addressed to each Director at the address of that Director as it is shown upon the records of the Corpora- tion, or if such address is not readily ascertainable, at the place in which the meetings of the Directors are regularly held.
B. Notice by mail shall be deposited in the United States mail at least four (4) days prior to the scheduled time of the meeting, and notice by telegraph shall be delivered to the telegraph company at least forty-eight (48) hours prior to the scheduled time of the meeting. Should
notice be delivered personally or by telephone, it shall be so delivered at least forty-eight (48) hours prior to the scheduled time of the meeting.
C. Notice given by mail, telegraph or by delivery in person within the time provided by this Section shall be due, legal and personal notice to the Director to whom it is directed. Any oral notice given within the time provided by this Section shall be due, legal and personal notice if communicated to a person at the office of the Director for whom intended in the reasonable belief that such person will promptly communicate such notice to that Director.
4.7.4 Conference Telephone Meetings. Any meeting, regular or special, may be held by conference telephone or similar communications equipment as long as all Directors participating in the meeting can hear one another, and any such participation shall constitute presence in person at the meeting.
4.7.5 Waiver of Notice. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as action taken at a meeting regularly called and noticed if all the Directors are present and sign a written waiver of notice and consent to holding such meeting, or if a majority of the Directors are present and all Directors either before or after the meeting, sign a written waiver of notice, or a consent to holding the meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to a Director who attends the meeting without protesting the lack of notice to such Director, either prior thereto or at the commencement of such meeting.
4.7.6 Quorum Requirements. A majority of the exact number of authorized Directors fixed in, or by the Board of Directors pursuant to Section 4.2, shall be necessary to constitute a quorum for the transaction of business (other than to adjourn) and the action of a majority of the Directors present at a meeting duly held at which a quorum is present shall be valid as the act of the Board of Directors unless a greater number is required by the Certificate of Incorporation, these Bylaws, or the GCL. A meeting at which a quorum initially is present may continue to transact business, notwithstanding the withdrawal of one or more Directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
4.7.7 Adjourned Meetings. A majority of the Directors present, whether or not a quorum, may adjourn from time to time by fixing a new time and place prior to taking adjournment, but if any meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given, prior to the reconvening of the adjourned meeting, to any Directors not present at the time the adjournment was taken.
4.8 Director Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to that action. Each such written consent shall be filed with the minutes of the proceedings of the Board, and shall have the same force and effect as a unanimous vote of the Directors.
4.9 Committees of Directors. The Board of Directors, by resolutions adopted by a majority of the authorized number of Directors, may establish one or more committees, including an Executive Committee, each consisting of two or more Directors, to serve at the pleasure of the Board, and may designate one or more alternate Directors to replace any absent committee members at any meeting of a committee.
4.9.1 Powers of Committees. The Board of Directors may delegate to any such committee any of the powers and authority of the Board of Directors in the business and affairs of the Corporation, except those powers specifically reserved to the Board of Directors by the provisions of the GCL.
4.9.2 Meetings and Actions of Committees. Meetings of committees shall be held and actions of committees shall be taken in the same manner as is provided by these Bylaws for meetings of Directors, except that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by the members of the committee. Alternate committee members shall be entitled to attend all committee meetings and to receive notice of special meetings of the committee. The Board of Directors may adopt rules for the governing of any committee not inconsistent with the provisions of these Bylaws.
5. OFFICERS OF THE CORPORATION
5.1 Principal Officers. The principal officers of the Corporation shall consist of a President, a Chief Financial Officer, and a Secretary. At the discretion of the Board of Directors, the Corporation may also appoint a Chairman of the Board, one or more Vice-Presidents, and such subordinate officers pursuant to Section 5.3 of these Bylaws as it determines to be appropriate.
5.2 Election; Qualification and Tenure. After their election, the Board of Directors shall meet and organize by electing a President, a Secretary and a Chief Financial Officer, who may be, but need not be, members of the Board of Directors, and such additional officers provided by these Bylaws as the Board of Directors shall determine to be appropriate. Any two or more offices may be held by the same person. Each officer of this Corporation shall serve at the pleasure of the Board of Directors, subject, however, to any rights of an officer under any contract of employment with the Corporation.
5.3 Subordinate Officers. Subordinate officers, including Assistant Secretaries, Treasurers and Assistant Treasurers, and such other officers or agents as the business of the Corporation may require, may from time to time be appointed by the Board of Directors, the President, or by any officer empowered to do so by the Board of Directors, and shall have such authority and shall perform such duties as are provided in the Bylaws or as the Board of Directors or the President may from time to time determine.
5.4 Resignation and Removal of Officers. Subject to the provisions of Section 5.4.3, below:
5.4.1 Removal. Any officer may be removed, either with or without cause, by a majority of the Directors at the time in office, at any regular or special meeting of the Board, or, except in the case of an officer appointed by the Board of Directors, by any officer upon whom the power of removal has been conferred by the Board of Directors.
5.4.2 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors or to the President, or to the Secretary or an Assistant Secretary of the Corporation. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein, and unless otherwise specified in the notice, the acceptance of such resignation shall not be necessary to make it effective.
5.4.3 Contractual Obligations. The resignation or removal of an officer shall not prejudice the rights of the Corporation or of the officer under any contract of employment between the officer and the Corporation.
5.5 Vacancies in Offices. Any vacancy in an office occurring because of death, resignation, removal, disqualification or any other cause may be filled by the Board of Directors at any regular or special meeting of the Board, or in such manner as may otherwise be prescribed in the Bylaws for regular appointment to the vacant office.
5.6 Responsibilities of Officers. The officers of the Corpora- tion shall have the following responsibilities:
5.6.1 Chairman of the Board. The Chairman of the Board, if there be one, shall, when present, preside at all meetings of the shareholders and of the Board of Directors, and shall have such other powers and duties as from time to time shall be prescribed by the Board of Directors. If there is no President, the Chairman of the Board, if any, shall be the Chief Executive Officer and general manager of the Corporation and shall have the powers and duties prescribed in Section 5.6.2, below.
5.6.2 President. The President shall work with the Chief Executive Officer on strategic and operational business issues. In the absence of the Chairman of the Board, or if there be none, the President shall preside at all meetings of the shareholders and of the Board of Directors, but shall have no vote at any such meetings unless the President is also a Director.
5.6.3 Vice-Presidents. In the absence or the disability of the President, and the Chairman of the Board, if any, the Vice-Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice-President designated by the President, shall perform the duties and exercise the powers of the President and when so acting shall have all of the powers of and shall be subject to all of the restrictions upon the President. The Vice-Presidents shall perform such other duties and have such other powers as the Board of Directors and the President shall prescribe.
5.6.4 Secretary. The Secretary shall have such powers and shall perform such duties as may be prescribed by the Board of Directors and the President and shall, in addition:
5.6.1 Keep, or cause to be kept, at the principal executive office or such other place as the Board of Directors may order, a book of all minutes of all of the proceedings of its shareholders and the Board of Directors and committees of the Board, with the time and place of holding of meetings, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors' meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof;
5.6.2 Keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent, a share register or a duplicate share register, showing classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation;
5.6.3 Give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given; and
5.6.4 Keep the seal of the Corporation if one be adopted, and affix the seal to all documents requiring a seal.
5.6.5 Assistant Secretary. The Assistant Secretary, if provided for and appointed, shall have all the rights, duties, powers and privileges of the Secretary and may act in the place and stead of the Secretary whenever necessary or desirable.
5.6.6 Chief Financial Officer. The Chief Financial Officer shall have such powers and perform such duties as may be prescribed by the Board of Directors and the President and shall, in addition:
A. Keep and maintain or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares;
B. Deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors; and
C. Disburse the funds of the Corporation as may be ordered by the Board of Directors, and render to the President and the Directors, whenever they so request, an account of all transactions as Chief Financial Officer and of the financial condition of the Corporation.
6. COMPENSATION; INDEMNIFICATION
6.1 Directors' Fees and Expenses. Directors and committee members may receive compensation for their services in that capacity, and may be reimbursed for expenses incurred by them on behalf of the Corporation, in the manner and only to the extent authorized in resolutions duly adopted by the Board of Directors. Nothing in this Section 6.1 shall preclude a Director from receiving compensation for services in the capacity of an officer, employee or agent of the Corporation. The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors or by the President, subject to any rights of the officer pursuant to any employment contract between that officer and the Corporation.
6.2 Indemnification. To the fullest extent to which this corporation is empowered by the General Corporation Law of the State of Delaware, or any other applicable laws, as in effect from time to time, the corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or other proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise, against all expenses (including attorneys' fees and out-of-pocket expenses), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding. Any director, officer or employee of the corporation who is or was serving as a director or officer of a subsidiary corporation or of any entity in which the corporation holds an equity interest shall be deemed to serve in such capacity at the requires of the corporation.
6.2.1 Expenses. Unless otherwise determined by the board of directors in any specific case, expenses incurred by any person described in the first sentence of this Section 6.2, above, in defending a civil or criminal action, suit, or proceeding described in such sentence shall be paid by the corporation in advance of the final disposition of such action, suit, or proceeding unless otherwise determined by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount in the event that it ultimately is determined that such person is not entitled to be indemnified by this corporation as authorized in this Section 6.2.
6.2.2 Contract Rights. The provisions of this Section 6.2 shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Section 6.2 and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable laws are in effect, and any repeal or modification of this Section 6.2 or any such law shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
6.2.3 Employees and Agents. Persons who are not covered by the foregoing provisions of this Section 6.2 and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust, or other enterprise may be indemnified to the extent authorized at any time or from time to time by the board of directors.
6.2.4 Provisions Not Exclusive. The indemnification provided in this Section 6.2 shall not be deemed to be exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to actions in a person's official capacity and as to actions in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person.
6.2.5 Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Section 6.2.
6.2.6 Merger or Consolidation. For purposes of this Section 6.2, references to "the Corporation" shall include, in addition to the resulting corporation or surviving corporation of any merger or consolidation with the Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger with the Corporation which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under the provisions of this Section 6.2 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
7. CORPORATE RECORDS AND REPORTS
7.1 Corporate Records. The Corporation shall keep and maintain all of the books and records required by this Section 7.1.
7.1.1 Record of Shareholders. A record of shareholders of the Corporation, giving the names and addresses of all shareholders and the number and class of shares held by each of them, shall be kept at the Corporation's principal executive office, or at the office of its transfer agent or registrar if one be appointed. The records of the Corporation's shareholders shall be open to the shareholders for inspection in the manner and to the extent provided by the GCL.
7.1.2 Corporate Bylaws. The original or a copy of these Bylaws, as amended to date, shall be kept at the principal executive office of the Corporation or, if such office is not in the State of Delaware, at its principal business office in Delaware, and shall be open to inspection by the shareholders at any reasonable time during regular business hours. If the Corporation has no principal executive or business office in Delaware, the Secretary shall furnish a copy of the Bylaws, as amended to date, to any shareholder who makes a written request to inspect the Bylaws.
7.1.3 Minutes and Accounting Records. Accounting books and records of the business and properties of the Corporation, and minutes of the proceedings of its shareholders, the Board of Directors and its committees shall be kept at the principal executive office of the Corporation or at such other location as may be fixed by the Board of Directors from time to time. All such minutes, accounting books and records shall be open to inspection upon the written request of a shareholder at any reasonable time during regular business hours for a purpose reasonably related to the interests of the requesting shareholder in accordance with the provisions of Section 220 of the GCL.
7.2 Inspection of Books and Records. Every Director shall have the absolute right to inspect all books, records and documents of the Corporation and each of its subsidiaries, and to inspect their respective properties, in the manner provided by the GCL. Shareholders and Directors may exercise their right of inspection either in person or by an agent or attorney acting on their behalf. The right to inspect any records or books of the Corporation shall include also the right to copy and to make extracts of such books and records.
7.3 Annual Report to Shareholders. So long as the Corporation has less than one hundred (100) holders of record of its shares (determined as provided in the GCL), no annual report to shareholders shall be required, and the requirement of such a report contained in the GCL is hereby expressly waived. Should the Corporation have more than one hundred (100) shareholders of record (determined as provided in the GCL), the Board of Directors of the Corporation shall cause an annual report to be prepared and delivered to shareholders in accordance with the provisions of the GCL, within the time frame required by that Section. If no annual report for a previous fiscal year was sent to shareholders, the Corporation shall, upon the written request of any shareholder made more than one hundred and twenty (120) days after the close of that fiscal year, deliver or mail to the person making the request within thirty (30) days thereafter the financial statements required by the GCL.
7.4 Financial Statements. Upon the written request of any one or more
shareholders holding at least five percent (5%) of the outstanding shares of any
class of its stock, the Corporation shall furnish an income statement for the
Corporation's most recent fiscal year ended more than one hundred and twenty
(120) days prior to the date of the request, and for the most recent interim
quarterly or semiannual period ended more than thirty (30) days prior to the
date of the request. The Chief Financial Officer shall cause the requested
income statements to be prepared, if not previously prepared, and delivered to
any requesting shareholder entitled to do so within thirty (30) days after
receipt of any such request.
7.4.1 Contents of Financial Statement. If an annual report for the last fiscal year has not been sent to shareholders, the income statement prepared by the Corporation at the request of shareholders entitled to do so shall be accompanied by a balance sheet as of the end of that period and a statement of changes in financial position for the fiscal year.
7.4.2 Audit Report. The quarterly income statements and balance sheets required by this Section 7.4 shall be accompanied by the report,
if any, of any independent accountants engaged by the Corporation or by a certificate of an authorized officer of the Corporation that the income statements and balance sheets were prepared without audit from the books and records of the Corporation.
7.5 Non-Disclosure Agreement. The Corporation may require as a condition to the delivery of any information under this Section 7 or to a shareholder's inspection of any books or records of the Corporation pursuant to the provisions of this Section 7 that the shareholder and any other person permitted to participate in such inspection execute an appropriate Confidentiality and Non-Disclosure Agreement and, as appropriate, that the shareholder agree to return all records and information provided by the Corporation after a reasonable period.
8. CERTIFICATES AND TRANSFER OF SHARES
8.1 Certificates for Shares. Subject to the provisions of Section 8.1.1, below, certificates for shares shall be in such form as the Board of Directors may prescribe.
8.1.1 Form of Certificate. Certificates for shares shall certify the number of shares and the classes or series of shares owned by the shareholder, and shall contain a statement setting forth the office or agency of the Corporation from which the shareholder may obtain, upon request and without charge, a copy of the statement of any rights, preferences, privileges, and restrictions granted to or imposed upon each class or series of shares authorized to be issued and upon the holders thereof, and any other legend or statement as may be required by the GCL and the Federal, Delaware, and California corporate securities laws. Notwithstanding the foregoing provisions of this Section 8.1.1, the Board of Directors may adopt a system of issuance, recordation and transfer of the Corporation's shares by electronic or other means not involving any issuance of certificates, provided such system complies with the GCL.
8.1.2 Officer Signatures. Every certificate for shares shall be signed in the name of the Corporation by the Chairman of the Board or by the President or Vice-President and the Chief Financial Officer or Assistant Chief Financial Officer or the Secretary or an Assistant Secretary. Any or all of the signatures on the certificate may be by facsimile.
8.2 Transfer of Shares on Books. Upon surrender to the Secretary or an Assistant Secretary or to the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
8.3 Lost or Destroyed Certificates. A new certificate may be issued without the surrender and cancellation of a prior certificate that is lost, apparently destroyed or wrongfully taken when: (a) the request for the issuance of a new certificate is made within a reasonable time after the owner of the prior certificate has notice of its loss, destruction or theft; and (b) such request is received by the Corporation prior to its receipt of notice that the prior certificate has been acquired by a bona fide purchaser; and (c) the owner of the prior certificate gives an indemnity bond or other adequate security sufficient in the judgment of the Board of Directors to indemnify the Corporation against any claim, expense or liability resulting from the issuance of a new certificate. Upon the issuance of a new certificate, the rights and liabilities of the Corporation, and of the holders of the old and new certificates, shall be governed by the provisions of the Delaware Commercial Code.
8.4 Transfer Agent and Registrars. The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be banks or trust companies, either domestic or foreign, at such times and places as the Board of Directors determines to be appropriate.
9. GENERAL CORPORATE MATTERS
9.1 Corporate Seal. The Board of Directors may, in its discretion, adopt a corporate seal, circular in form and having inscribed thereon the name of the Corporation and the date and state of its incorporation.
9.2 Record Date. The Board of Directors may fix, in advance, a record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders, to consent to corporate action in writing without a meeting, to receive any report, to receive any dividend or other distribution or allotment of any right, to exercise rights with respect to any change, conversion or exchange of shares, or to exercise any rights with respect to any other lawful action. The record date so fixed shall not be more than sixty (60) days prior to any event for the purpose for which it is fixed, and shall not be less than ten (10) days prior to the date of any meeting of the shareholders. If no such record date is fixed by the Board of Directors, then the record date shall be that date prescribed by the GCL.
9.3 Voting of Shares in Other Corporations. Shares standing in the name of this Corporation may be voted or represented and all rights incident thereto may be exercised on behalf of the Corporation by the President or, if he is unable or refuses to act, by a Vice-President or by such other person as the Board of Directors may designate.
9.4 Definitions and Interpretation. Unless the context requires otherwise, these Bylaws and the words and phrases included in them shall be construed and interpreted in accordance with the general provisions, rules of construction and definitions in the GCL. Unless expressly provided otherwise, every reference in these Bylaws to the provisions of the GCL shall refer to such provisions as they exist from time to time, or to any successor provision thereto.
10. AMENDMENT TO BYLAWS
10.1 Amendments By Shareholders. These Bylaws may be repealed or amended, or new Bylaws may be adopted, by the affirmative vote of a majority of the outstanding Shares Entitled to Vote or by the written consent of shareholders entitled to vote such shares, subject, however, to the restrictions on such amendments imposed by the GCL, the Certificate of Incorporation, or other provisions of these Bylaws.
10.2 Amendment By Directors. Subject to the right of shareholders as provided in Section 10.1 to adopt, amend or repeal Bylaws, and subject to the rights granted shareholders under the Certificate of Incorporation, the Board of Directors may adopt, amend or repeal Bylaws; provided, however, that no Bylaw or amendment changing the number of Directors of the Corporation, or changing the number of authorized Directors from a fixed to a variable number or vice versa, shall be adopted other than in the manner provided by Section 4.2 of these Bylaws.
10.3 Record of Amendments. Any amendment or new Bylaw adopted by the shareholders or the Board of Directors shall be copied in the appropriate place in the minute book with the original Bylaws, and the repeal of any Bylaw shall
be entered on the original Bylaws together with the date and manner of such repeal. The original or a copy of the Bylaws as amended to date shall be open to inspection by the shareholders at the Corporation's principal office in California at all reasonable times during office hours.
EXHIBIT 4.2
STOCK OPTION PLAN
THIS STOCK OPTION PLAN (the "Plan") is made and adopted by MACHINETALKER, INC., a Delaware corporation (the "Company"), for the purposes of enabling the Company to grant stock options to its employees and others providing services to the Company.
SECTION 1. DEFINITIONS. For purposes of this Plan, the term:
1.1 "BOARD" means the board of Directors of the Company.
1.2 "CODE" means the Internal Revenue Code of 1986, as amended from time to time.
1.3 "COMMITTEE" means such Committee of the Board of Directors as the Board may constitute and appoint from time to time to administer the Plan, pursuant to Section 2.2, below.
1.4 "COMMON STOCK" means shares of the common capital stock of the Company.
1.5 "COMPANY" means MACHINETALKER, INC., a Delaware corporation.
1.6 "EXERCISE PRICE" means the amount due pursuant to Section 6.1(c), below, for the purchase of shares of Common Stock upon the exercise of Options granted hereunder.
1.7 "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock determined as follows:
(a) If the Common Stock is listed on an established national stock exchange or the National Market System of the National Association of Securities Dealers, Inc., Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system (or the exchange with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board or Committee deems reliable;
(b) If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board or Committee deems reliable; and
(c) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Board or Committee.
1.8 "HOLDER" means each individual to whom an Incentive Option or a Nonqualified Option is granted, or to whom shares of Restricted Stock are issued, under this Plan.
1.9 "INCENTIVE OPTIONS" means "incentive stock options," as defined in Section 422 of the Code.
1.10 "NONQUALIFIED OPTIONS" means all options granted under this Plan to acquire stock of the Company, its Parent, or any of its Subsidiaries, other than Incentive Options.
1.11 "OPTION" shall mean each Incentive Option and Nonqualified Option permitted to be granted under this Plan.
1.12 "OPTION SHARES" shall mean the number of shares for which an Option is granted under this Plan.
1.13 "PARENT" means a corporation that owns directly or indirectly 50% or more of the total combined voting power of all classes of stock of the Company.
1.14 "PLAN" means this Stock Option Plan of the Company, as amended from time to time.
1.15 "RESTRICTED STOCK" means shares of Common Stock which (a) either (i) are
issued upon exercise of an Option prior to Holder's becoming fully vested
therein, or (ii) otherwise are issued by the Company pursuant to Section 7,
below, in lieu of granting an option for the purchase of such shares, and
(b) are subject to such vesting schedule and transfer restrictions as the
Board or the Committee deems appropriate.
1.16 "RESTRICTED STOCKHOLDER" means the employee of, consultant to, or director of the Company or other person to whom shares of Restricted Stock are issued pursuant to this Plan.
1.17 "RESTRICTED STOCK AGREEMENT" means an agreement executed by a Restricted Stockholder and the Company as contemplated by Section 7, below, which imposes on the shares of Restricted Stock held by the Restricted Stockholder such restrictions as the Board or Committee deem appropriate.
1.18 "SUBSIDIARY" means each corporation in which stock possessing 50% or more of the total combined voting power of all classes of stock of such corporation or corporations is owned directly or indirectly by the Company.
SECTION 2. PURPOSE. This Plan is intended to provide incentives to enable officers and employees of the Company, its Parent, and its Subsidiaries, and for certain other individuals providing services to or acting as directors of the Company, its Parent, or its Subsidiaries, to acquire or increase a proprietary interest in the Company, its Parent, or its Subsidiaries, and their success. The Company intends that this purpose shall be effected by the granting of Incentive Options and Nonqualified Options, and the issuance of shares of Restricted Stock, under the Plan.
SECTION 3. OPTIONS TO BE GRANTED AND ADMINISTRATION
3.1 OPTIONS TO BE GRANTED. Options granted under the Plan may be either Incentive Options or Nonqualified Options.
3.2 ADMINISTRATION BY THE BOARD. This Plan shall be administered by the Board of Directors of the Company.
(a) The Board shall have full and final authority to operate, manage and administer the Plan on behalf of the Company. This authority includes, but is not limited to: (i) the power to grant Options conditionally or unconditionally; (ii) the power to prescribe the form or forms of the instruments evidencing Options granted under this Plan; (iii) the power to interpret the Plan; (iv) the power to provide regulations for the operation of the incentive features of the Plan, and otherwise to prescribe
regulations for interpretation, management and administration of the Plan;
(v) the power to delegate responsibility for Plan operation, management and
administration on such terms, consistent with the Plan, as the Board may
establish; (vi) the power to delegate to other persons the responsibility
for performing ministerial acts in furtherance of the Plan's purpose; and
(vii) the power to engage the services of persons or organizations in
furtherance of the Plan's purpose, including but not limited to banks,
insurance companies, brokerage firms and consultants.
(b) In addition, as to each Option, the Board shall have full and
final authority in its discretion to determine: (i) the number of shares
subject to each Option; (ii) the time or times at which Options shall be
granted; (iii) the Option price for the shares subject to each Option,
which price shall be subject to the applicable requirements, if any, of
Section 6.1(c) hereof, and (iv) the time or times when each Option shall
become exercisable, the conditions under which exercise may be accelerated,
and the duration of the exercise period.
3.3 APPOINTMENT AND PROCEEDINGS OF COMMITTEE. The Board may appoint a Stock Option Committee which shall consist of at least two members of the Board. The Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed, and may fill vacancies, however caused, in the Committee. The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of its members shall constitute a quorum, and all actions of the Committee shall require the affirmative vote of a majority of its members. Any action may be taken by a written instrument signed by all of the members, and any action so taken shall be as fully effective as if it had been taken by a vote of a majority of the members at a meeting duly called and held.
3.4 POWERS OF COMMITTEE. Subject to the provisions of this Plan and the approval of the Board, the Committee shall have the power to make recommendations to the Board as to whom Options should be granted, the number of shares to be covered by each Option, the time or times of Option grants, and the terms and conditions of each Option. In addition, the Committee shall have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to exercise the administrative and ministerial powers of the Board with regard to aspects of the Plan other than the granting of Options. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted hereunder and the exercise of any power delegated to it hereunder shall be final, unless otherwise determined by the Board. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted hereunder.
SECTION 4. STOCK
4.1 SHARES SUBJECT TO PLAN. The Company hereby reserves and sets aside for the
granting of Options under the plan Two Million (2,000,000) shares of Common
Stock. Such number of shares is subject to adjustment as provided in
Section 9, below.
4.2 LAPSED OR UNEXERCISED OPTIONS. Whenever any outstanding Option under the Plan expires, is canceled or is otherwise terminated (other than by exercise), the shares of Common Stock allocable to the unexercised portion of such Option automatically shall be deemed to be restored to the Plan and again shall be available for the granting of other Options and issuance of shares of Restricted Stock under the Plan.
4.3 UNVESTED SHARES OF RESTRICTED STOCK REPURCHASED BY COMPANY. Whenever any unvested shares of Restricted Stock are repurchased by the Company pursuant
to Section 7, below, such repurchased shares automatically shall be deemed to be restored to the Plan and again shall be available for the granting of other Options or issuance of shares of Restricted Stock under the Plan.
SECTION 5. ELIGIBILITY
5.1 ELIGIBLE OPTIONEES. Incentive Options may be granted only to officers and other employees of the Company or its Parent or Subsidiaries, including members of the Board who are also employees of the Company or a Parent or Subsidiary. Nonqualified Options may be granted to officers or other employees of the Company or its Parent or Subsidiaries, to members of the Board or the board of directors of a Parent or any Subsidiary whether or not employees of the Company or such Parent or Subsidiary, and to certain other individuals providing services to the Company or its Parent or Subsidiaries.
5.2 LIMITATIONS ON 10% STOCKHOLDERS. No Incentive Option shall be granted to an
individual who, at the time the Incentive Option is granted, owns
(including ownership attributed pursuant to Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or a Parent or Subsidiary of the Company (a "greater-than-10%
stockholder"), unless such Incentive Option provides that (i) the purchase
price per share shall not be less than 110% of the Fair Market Value of the
Common Stock at the time such Incentive Option is granted, and (ii) such
Incentive Option shall not be exercisable to any extent after the
expiration of five (5) years from the date on which it is granted.
5.3 LIMITATION ON EXERCISABLE OPTIONS. The aggregate Fair Market Value
(determined at the time the Incentive Option is granted) of the Common
Stock with respect to which Incentive Options are exercisable for the first
time by any person during any calendar year under the Plan and under any
other Option plan of the Company (or a parent or subsidiary as defined in
Section 424 of the Code) shall not exceed $100,000. Any Option granted in
excess of the foregoing limitation shall be specifically designated as
being a Nonqualified Option. The first sentence of this Section 5.3 shall
be applied by reference to the Fair Market Value of Common Stock as of the
time the Option is granted.
SECTION 6. TERMS OF OPTION AGREEMENTS
6.1 MANDATORY TERMS. Each Option agreement shall contain such provisions as the Board or the Committee from time to time determines to be appropriate. Option agreements need not be identical, but each Option agreement by appropriate language shall include the substance of all of the following provisions:
(A) EXPIRATION. Notwithstanding any other provision of the Plan or of any Option agreement, each Option shall expire on the date specified in the Option agreement, which date shall not be later than the tenth anniversary of the date on which the Option was granted (fifth anniversary in the case of an Incentive Option granted to a greater-than-10% stockholder).
(B) EXERCISE; VESTING. Each Option shall be exercisable in full or in installments (which need not be equal) and at such times as designated by the Board or the Committee. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. Unless the Board or Committee determines otherwise with respect to any Option granted or any shares of Restricted Stock issued hereunder, the Holder of each Option shall become vested in such Option and each Restricted Stockholder shall become vested in shares of Restricted Stock as follows: (i) twenty-five percent (25%) of the shares after twelve (12)
consecutive months of employment with the Company, and (ii) thereafter, one-thirty-sixth (1/36th) of the remainder of the shares for each complete subsequent month of continuous employment with the Company.
(C) PURCHASE PRICE. The purchase price per share of the Common Stock under each Incentive Option shall be not less than the Fair Market Value of the Common Stock on the date the Option is granted (110% of the Fair Market Value in the case of a greater-than-10% stockholder). The price at which shares may be purchased pursuant to Nonqualified Options shall be specified by the Board or the Committee at the time the Option is granted, and may be less than, equal to or greater than the Fair Market Value of the shares of Common Stock on the date such Nonqualified Option is granted, but shall not be less than the par value of shares of Common Stock.
(D) TRANSFERABILITY OF OPTIONS. Options granted under the Plan and the rights and privileges conferred thereby may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process. Upon any attempt to so transfer, assign, pledge, hypothecate or otherwise dispose of any Option under the Plan (or any right or privilege conferred hereby), contrary to the provisions of the Plan, or upon any attempted levy or any attachment or similar process upon the rights and privileges conferred hereby, such Option shall thereupon terminate and become null and void.
(E) TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE. Except as
otherwise expressly provided in the terms and conditions of the Option
granted to an Optionee, Options granted hereunder shall terminate on the
earliest to occur of (i) the date of expiration thereof; (ii) if the Holder
is employed by the Company and such employment is terminated by the Company
for cause, as hereinafter defined, on the date of such termination; or
(iii) if the Holder is employed by the Company and such employment is
terminated for any reason other than death or for cause as aforesaid, on
the earlier of the date of expiration thereof or ninety (90) days following
the date of such termination.
(i) Until the date on which the Option so expires, the Holder may exercise that portion of his Option which is exercisable at the time of termination of such relationship. An employment relationship between the Company and the Holder shall be deemed to exist during any period during which the Holder is employed by the Company or by a Parent or any Subsidiary. Whether authorized leave of absence or absence on military government service shall constitute termination of the employment relationship between the Company and the Holder shall be determined by the Board or the Committee at the time thereof. For purposes of this Section 6.1(e), the term "cause" shall mean (a) any material breach by the Holder of any agreement to which the Holder and the Company are both parties, (b) any act (other than retirement) or omission to act by the Holder which may have a material and adverse effect on the Company's business or on the Optionee's ability to perform services for the Company, including, without limitation, the commission of any crime (other than minor traffic violations),(c) any material misconduct or material neglect of duties by the Holder in connection with the business or affairs of the Company or any Subsidiary or affiliate of the Company, or any other act or omission constituting "cause" for termination of Holder's employment by the Company under any employment agreement between such Holder and the Company.
(ii) In the event of the death of any Holder while in an employment or other relationship with the Company and before the date of expiration of such Option, such Option shall terminate on the earlier of such date of expiration or one hundred eighty (180) days following the date of such death. After the death of the Optionee, his executor, Board or Committee or any person or persons to whom his
Option may be transferred by will or by laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the Option to the extent the Holder was entitled to exercise such Option as of the date of his death.
(f) RIGHTS OF OPTIONEES. No Holder shall be deemed for any purpose to be the owner of any shares of Common Stock subject to any Option unless and until (i) the Option shall have been exercised with respect to such shares pursuant to the terms thereof, and (ii) the Company shall have issued and delivered a certificate representing such shares. Thereupon, the Holder shall have full voting, dividend and other ownership rights with respect to such shares of Common Stock, subject to any agreements entered into by the Holder in connection with the Optionees exercise of the Option and acquisition of the stock.
6.2 CERTAIN OPTIONAL TERMS. The Board or the Committee may in its discretion provide, upon the grant of any Option hereunder, that the stock shall be subject to the terms of a repurchase or shareholders' agreement including any and all commercially reasonable terms, such as, without limitation, that the Company shall have the right from time to time to repurchase all or any number of shares purchased upon exercise of such Option.
(a) The repurchase price per share payable by the Company shall be such amount or be determined in such a manner as is fixed or determined by the Board or the Committee at the time the Option for the shares subject to repurchase was granted. The Board or the Committee may also provide that the Company shall have a right of first refusal with respect to the transfer or proposed transfer of any shares purchased upon exercise of an Option granted hereunder. In the event the Board or the Committee shall grant Options subject to the Company's repurchase rights or rights of first refusal, the certificate or certificates representing the shares purchased pursuant to the exercise of such Option shall carry a legend satisfactory to counsel for the Company referring to such rights.
(b) Notwithstanding the foregoing, (i) the form of Stock Transfer Agreement attached to this Plan at EXHIBIT A is hereby approved for use with stockholders with respect to shares issued under this Plan. Such form may be used under this Plan by the Board, the Committee, and the officers of the Company, in their discretion, without any further approval from the stockholders, the Board or the Committee.
SECTION 7. AWARD OF RESTRICTED STOCK
7.1 AWARD OF RESTRICTED STOCK. The Board or Committee from time to time, in its absolute discretion, may (a) award Restricted Stock (in lieu of Options) to employees of, consultants to, and directors of the Company, and such other persons as the Board or Committee may select, and (b) permit Holders of Options to exercise such Options prior to full vesting therein and hold the Common Stock issued upon exercise of the Option as Restricted Stock. In either such event, the owner of such Restricted Stock shall hold such stock subject to such vesting schedule as the Board or Committee may impose or such vesting schedule to which the Option was subject, as determined in the discretion of the Board or Committee. Any unvested shares of Restricted Stock that are repurchased by the Company pursuant to this Section 7 shall be deemed to be restored to the Plan pursuant to Section 4.3, above.
7.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued only pursuant to a Restricted Stock Agreement, which shall be executed by the Restricted Stockholder and the Company and which shall contain such terms and conditions as the Board or Committee shall determine consistent with this Plan, including such restrictions on transfer as are imposed by the Stock Transfer Agreement.
7.3 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of Restricted Stock to the Restricted Stockholder or to the escrow holder pursuant to Section 7.8, below, the Restricted Stockholder shall have, unless otherwise provided by the Board or Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in the Restricted Stock Agreement, including the right to receive all dividends and other distributions (other than stock dividends, which shall be paid to the escrow holder for the benefit of the Restricted Stockholder) paid or made with respect to the Restricted Stock.
7.4 RESTRICTION ON TRANSFER: VESTING. Notwithstanding anything in this Plan or any Restricted Stock Agreement to the contrary, no Restricted Stockholders may sell or otherwise transfer, whether or not for value, any of the Restricted Stock prior to the date on which the Restricted Stockholder is vested therein.
7.5 ADDITIONAL RESTRICTIONS. All shares of Restricted Stock issued under this Plan (including any shares of Common Stock and other securities issued with respect to the shares of Restricted Stock as a result of stock dividends, stock splits or similar changes in the capital structure of the Company) shall be subject to such restrictions as the Board or Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights, transferability of the Restricted Stock and restrictions based on duration of employment with the Company, Company performance and individual performance; provided that the Board or Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of such restrictions. Restricted Stock may not be sold or encumbered until all applicable restrictions have terminated or expire. The restrictions, if any, imposed by the Board or Committee or the Board under this Section 7 need not be identical for all shares of Restricted Stock and the imposition of any restrictions with respect to any Restricted Stock shall not require the imposition of the same or any other restrictions with respect to any other Restricted Stock.
7.6 REPURCHASE OF UNVESTED RESTRICTED STOCK. Each Restricted Stock Agreement shall provide that the Company shall have the right to repurchase from the Restricted Stockholder the unvested Restricted Stock upon a termination of employment, termination of directorship or termination of a consulting arrangement, as applicable, at a cash price per share equal to the purchase price paid by the Restricted Stockholder for such Restricted Stock.
7.7 RIGHT OF FIRST REFUSAL. In the discretion of the Board or Committee, the Restricted Stock Agreement may provide that the Company shall have a right of first refusal with respect to the Restricted Stock and a right to repurchase the vested Restricted Stock upon a termination of the Restricted Stockholder's employment with the Company, the termination of the Restricted Stockholder's consulting arrangement with the Company, the termination of the Restricted Stockholder's service on the Company's Board, or such other events as the Board or Committee may deem appropriate.
7.8 ESCROW. The Secretary of the Company or such other escrow holder as the Board or Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed on the Restricted Stock expire or have been removed.
7.9 LEGEND. The Board or Committee shall cause a legend or legends to be placed on certificates representing shares of Restricted Stock that are subject to restrictions under Restricted Stock Agreements, which legend or legends shall make appropriate reference to the applicable restrictions.
SECTION 8. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
8.1 MEANS OF EXERCISE. Any Option granted under the Plan may be exercised by the Holder by delivering to the Company on any business day a written notice specifying the number of shares of Common Stock the Holder then desires to purchase and specifying the address to which the certificates for such shares are to be mailed (the "Notice"). The Notice shall be accompanied by payment for such shares, any required payment of withholding taxes, and such documents, including without limitation an investment letter and a repurchase or shareholder's agreement duly executed by the Holder relating, among other things, to restrictions on transfer rights of first refusal and Company buy-back rights (if applicable), as may reasonably be required or requested by the Company.
8.2 PAYMENT OF EXERCISE PRICE. The consideration for such shares shall be paid, with the approval of the Board or Committee, either:
(a) In cash, certified or bank check or postal money order payable to
the order of the Company for an amount equal to the sum of (x) the Exercise
Price of such shares, plus (y) the amount, if any, required to fund
withholding taxes due with respect to such exercise, as contemplated by
Section 11, below. If as of the date of Holder's exercise of the Option the
Company then is sponsoring a cashless exercise program through one or more
approved brokers, then upon notification by Holder the Company will tender
to a Company-approved broker any cash to be delivered under the foregoing
clause "(x)" may be provided with the proceeds of any Option Shares which
Holder elects to cause to be sold in connection with the exercise of the
Option, the date on which the Company receives the proceeds from the sale
of those shares shall be deemed to be the date on which the Option is
exercised, and any applicable income, withholding and other taxes shall be
calculated based upon the selling price of the Option Shares sold by the
Company-approved broker pursuant to such cashless exercise.
(b) With one or more share certificates for a number of shares of outstanding Company Common Stock having a Fair Market Value on the date of tender equal to the sum of (w) the Exercise Price of such shares, plus (x) the amount, if any, required to fund withholding taxes due with respect to such exercise, as contemplated by Section 11, below; provided that the Company shall not be obligated to accept the transfer of any shares of Common Stock in payment of the exercise price unless such transfer satisfies all of the provisions of Rule 16b-3 then applicable to the Company.
(c) If authorized by the applicable Option agreement, by (i) a "net exercise" under which Holder relinquishes the right to acquire a number of shares of Common Stock issuable upon exercise of the Option (but not in excess of the vested portion thereof) having a net Fair Market Value equal to the amount by which (x) the Fair Market Value of such relinquished shares, exceeds (y) the aggregate Exercise Price for such relinquished shares, and (ii) payment of cash in an amount equal to the remainder of the Exercise Price.
8.3 DELIVERY OF CERTIFICATE. Promptly after receipt of such written notification and payment, the Company shall deliver to the Holder or other appropriate person certificates for the number of shares with respect to which such Option has been so exercised, issued in the Optionee's name; provided, however, that such delivery shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Holder or other appropriate person, at the address specified pursuant to Section 8.1 or another appropriate address designated by the Holder.
SECTION 9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
9.1 NO EFFECT OF OPTIONS UPON CERTAIN CORPORATE TRANSACTIONS. The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
9.2 STOCK DIVIDENDS, RECAPITALIZATIONS, ETC. If the Company effects a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving compensation therefor in money, services or property, then: (a) the number, class and per share price of shares of stock subject to outstanding Options hereunder shall be appropriately adjusted in such a manner as to entitle a Holder to receive upon exercise of an Option, for the same aggregate cash consideration, the same total number and class of shares that the owner of an equal number of outstanding shares of Common Stock would own as a result of the event requiring the adjustment; and (b) the number and class of shares with respect to which Options may be granted under the Plan shall be adjusted by substituting for the total number of shares of Common Stock then reserved for issuance under the Plan that number and class of shares of stock that the owner of an equal number of outstanding shares of Common Stock would own as a result of the event requiring the adjustment.
9.3 DETERMINATION OF ADJUSTMENTS. Adjustments under this Section 9 shall be determined by the Board or the Committee and such determinations shall be conclusive. The Board or the Committee shall have the discretion and power in any such event to determine and to make effective provision for acceleration of the time or times at which any Option or portion thereof shall become exercisable. No fractional shares of Common Stock shall be issued under the Plan on account of any adjustment specified above.
9.4 NO ADJUSTMENT IN CERTAIN CASES. Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to outstanding Options.
SECTION 10. EFFECT OF CERTAIN TRANSACTIONS. If, while unexercised Options or unvested shares of Restricted Stock remain outstanding under the Plan, the Company is a party to a reorganization or merger with one or more other corporations, whether or not the Company is the surviving or resulting corporation, or if the Company consolidates with or into one or more other corporations, or if the Company is liquidated, or if there is a sale or other disposition of substantially all of the Company's capital stock or assets to a third party or parties (each hereinafter referred to as a "Transaction"), then:
10.1 OPTION OUTSTANDING. Subject to the provisions of Section 10.2, below, after the effective date of such Transaction unexercised Options shall remain outstanding and shall be exercisable in shares of Common Stock or, if applicable, shares of such stock or other securities, cash or property as the holders of shares of Common Stock received pursuant to the terms of such Transaction; or
10.2 PERMISSIVE ACCELERATION. The Board may accelerate the time for exercise of any or all unexercised and unexpired Options, effective as of a date prior to the effective date of such Transaction; provided that (a) notice of acceleration shall be given to each Holder of an Option to which such acceleration is to apply, (b) each Holder of an Option shall have the right to exercise such Option in part or in full prior to the effective date of such Transaction, and (c) to the extent not so exercised, all of such Options shall be canceled prior to or as of such effective date; and provided further, the Board may not accelerate unexercised and unexpired Options pursuant to this Section 10.2 if to do so would adversely affect pooling of interests treatment intended to be effected in connection with a Transaction.
SECTION 11. NON-EXCLUSIVITY OF THE PLAN; NON-UNIFORM DETERMINATIONS. Neither the adoption of the Plan by the Board nor the approval of the Plan by the stockholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation the granting of stock Options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. The Board's or Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive or are eligible to receive Options under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Board or the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Option agreements, as to (i) the persons to receive Options under the Plan, (ii) the terms and provisions of Options, (iii) the exercise by the Board or the Committee of its discretion in respect of the exercise of Options pursuant to the terms of the Plan, and (iv) the treatment of leaves of absence pursuant to Section 6.1(e), above.
SECTION 12. GOVERNMENT AND OTHER REGULATIONS AND WITHHOLDING
12.1 SECTION 260.141.46. Notwithstanding any other provision of this Plan to the contrary, to the extent required by Section 260.141.46 of Title 10 of the California Administrative Code, the Company shall deliver to each Holder annually within one hundred and twenty (120) days after the end of the Company's fiscal year a statement of income and expenses for the Company for the immediately preceding year and a balance sheet for the Company dated as of the last day of the immediately preceding fiscal year.
12.2 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to sell and deliver shares of Common Stock with respect to Options granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by government agencies as may be deemed necessary or appropriate by the Board or the Committee. All shares sold under the Plan shall bear appropriate legends. The Company may, but shall in no event be obligated to, register or qualify any shares covered by Options under applicable federal and state securities laws; and in the event that any shares are so registered or qualified the Company may remove any legend on certificates representing such shares. The Company shall not be obligated to take any other affirmative action in order to cause the exercise of an Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority.
12.3 WITHHOLDING. Whenever under the Plan shares are to be delivered upon exercise of an Option, the Company shall be entitled to require as a condition of delivery that the Holder remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto.
SECTION 13. "LOCKUP" AGREEMENT." The Board or the Committee in its discretion may specify upon granting an Option that the Holder shall agree, for a period of time (not to exceed 180 days) from the effective date of any registration of
securities of the Company, upon request of the Company or the underwriter or underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any Option for the purchase of, or otherwise dispose of any shares issued pursuant to the exercise of such Option, without the prior written consent of the Company or such underwriter or underwriters, as the case may be.
SECTION 14. MISCELLANEOUS
14.1 GOVERNING LAW. The Plan shall be governed by and construed in accordance with the laws of the State of California.
14.2 TERMINATION AND AMENDMENT OF PLAN. The Board may terminate the Plan at any
time, and may amend the Plan at any time and from time to time, subject to
the limitation that, except as provided in Sections 9 and 10 hereof, no
amendment shall be effective unless approved by the stockholders of the
Company in accordance with applicable law and regulations, at an annual or
special meeting held within twelve months before or after the date of
adoption of such amendment, in any instance in which such amendment would
(a) increase the number of shares of Common Stock as to which Options may
be granted under the Plan; or (b) change in substance the provisions of
Section 5 hereof relating to eligibility to participate in the Plan. Except
as provided in Sections 9 and 10 hereof, rights and obligations under any
Option granted before termination or amendment of the Plan shall not be
altered or impaired by such termination or amendment except with the
consent of the Optionee.
14.3 NO ASSURANCES OF EMPLOYMENT. Neither the adoption of this Plan, the granting of any Option hereunder, nor the execution of an Option agreement with any Holder is intended or shall be construed as either (a) conferring on any individual any right to remain employed by the Company for any specified term, or (b) limiting in any way the right, power and authority of the Company to terminate the employment or other service engagement of such person at any time either with or without cause.
14.4 EFFECTIVE DATE. The effective date of the Plan is February 15,2002. No Option may be granted under the Plan after the tenth (10th) anniversary of such effective date.
IN WITNESS WHEREOF, the undersigned has executed this Plan, effective as of the date set forth above.
MACHINETALKER, INC.
a Delaware corporation
By
------------------------------- -------------------------------
Date Roland F. Bryan, President
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EXHIBIT 4.3
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement") is made and entered into, effective on the "Effective Date" set forth on the signature page hereof (the "Effective Date"), by and between MACHINETALKER, INC., a Delaware corporation ("Company"), and the person executing this Agreement as the "Holder" hereunder ("Holder"), pursuant to the STOCK OPTION PLAN (the "Plan") sponsored by the Company.
FOR VALUABLE CONSIDERATION, receipt which is hereby acknowledged, Company hereby grants to Holder the following option (the "Option"):
SECTION 1. GRANT OF OPTION. Subject to the terms and conditions hereinafter set forth, Company hereby grants to Holder the right and option to purchase from the Company the number of shares of the Company's common stock ("Common Stock") designated on the signature page hereof as "Option Shares" (the "Option Shares"), at the exercise price per share set forth on the signature page hereof, and subject to such vesting schedule as are set forth in Section 2, below. Except as otherwise specified herein, this Option is exercisable at any time and from time to time during its term, in whole or in part. Unless earlier terminated pursuant to Section 7 or 9 hereof, this Option will terminate in all respects, and all rights and options to purchase shares hereunder will terminate, ten (10) years from the Effective Date of this Option.
SECTION 2. VESTING AND EXERCISE OF OPTION. This Option shall be exercisable from time to time only to the extent that Holder then has become vested in this Option. As of any date during the term of this Option, Holder shall be entitled to purchase such number of the Option Shares (to the extent not previously purchased hereunder) as is determined by multiplying the total number of Option Shares times Holder's then-current vesting percentage as determined under Sections 2(a), below.
(a) Subject to acceleration pursuant to Section 7, below, Holder shall become vested in this Option over the four-year period commencing on the "Vesting Commencement Date" set forth on the signature page hereof (the "Vesting Commencement Date") as follows: (i) Holder shall become vested in twenty-five percent (25%) of this Option following Holder's completing one year of continuous service as an employee of the Company from and after the Vesting Commencement Date, and (ii) thereafter, Holder shall become vested in one-thirty-sixth (1/36th) of the remainder of this Option for each complete period of thirty (30) consecutive days that Holder subsequently remains continuously employed with the Company from and after the first annual anniversary of the Vesting Commencement Date.
(b) Holder may exercise this Option at any time during the term hereof
with respect to Option Shares in which Holder has become vested by
delivering to the Company (i) a written notice of exercise, specifying the
number of Option Shares that Holder has elected to purchase hereunder and
the address to which the certificate representing such shares is to be
mailed, (ii) cash, certified or bank check or postal money order payable to
the order of the Company for an amount equal to the sum of (x) the Exercise
Price of such shares, plus (y) the amount, if any, required to fund
withholding taxes due with respect to such exercise, as contemplated by
Section 11, below, and (iii) such documentation as is necessary to satisfy
the conditions precedent to exercise set forth in Section 3, below.
(c) If Holder's employment with the Company is terminated for any reason prior to Holder's becoming one hundred percent (100%) vested in this Option, then Holder's rights with respect to the unvested portion of this Option shall expire forthwith on the effective date as of which Holder's employment is terminated.
SECTION 3. CONDITIONS PRECEDENT. As a condition precedent to any exercise of this Option, upon request of the Company, Holder (or if any other individual or individuals are exercising this Option, such individual or individuals) shall deliver to the Company pursuant to Section 2(a)(iii), above, each of the following:
(a) An investment letter in form and substance satisfactory to the Company and its counsel, containing among other things (including an acknowledgment of the rights of first refusal set forth in Section 11, hereof) a statement by Holder that (i) the Option is then being exercised for the account of Holder and only with a view to investment in, and not for, in connection with or with a view to the disposition of, the shares with respect to which the Option is then being exercised; (ii) Holder has been advised that Rule 144 of the Securities and Exchange Commission (the "Commission"), which permits the resale, subject to various terms and conditions, of small amounts of "restricted securities" (as therein defined) after they have been held for one (1) year, does not now apply to the Company because the Company is not now required to file, and does not file, current reports under the Securities Exchange Act of 1934 (the "Exchange Act"), nor is there publicly available information concerning the Company substantially equivalent to that which would be available if the Company were required to file such reports; (iii) Holder understands that there is no assurance that the Company will ever become a reporting company under the Exchange Act and that the Company has no obligation to Holder to do so; (iv) Holder and Holder's representatives have fully investigated the Company and the business and financial conditions concerning it and have knowledge of the Company's then current corporate activities and financial condition; and (v) Holder believes that the nature and amount of the shares being purchased are consistent with Holder's investment objectives, abilities and resources. The restrictions imposed by the foregoing investment representations will be inoperative upon the registration with the Commission of the stock subject to this Option or acquired through the exercise of this Option.
(b) An executed Stock Transfer Agreement (the "Stock Transfer
Agreement") in form reasonably satisfactory to the Company in which, inter
alia, Holder shall grant to the Company a right of first refusal prior to
any sale or attempted sale of any Option Shares to any other person. Such
first-refusal rights shall not apply to any Transaction (as defined in
Section 7, below), and in all events shall terminate and be of no further
force or effect from and after the first date as of which the Company has
filed with the United States Securities and Exchange Commission (the
"Commission") a registration statement for the sale of any shares of Common
Stock under the Securities Act of 1933, as amended (the "Securities Act"),
and such registration statement becomes effective. If there is any conflict
or inconsistency between the provisions of this Option and the provisions
of any Stock Transfer Agreement, then the provisions of the Stock Transfer
Agreement shall control.
SECTION 4. MARKET STAND-OFF. In addition to any restrictions stated in the Stock Transfer Agreement, the Holder also agrees for a period of up to one hundred eighty (180) days from the effective date of any registration of securities of the Company under the Securities Act of 1933, as amended (the "Securities Act"), upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares issued pursuant to the exercise of this Option, without the prior written consent of the Company and such underwriters.
SECTION 5. DELIVERY OF SHARES. Within a reasonable time following the receipt by the Company of the written notice and payment of the option price for the shares to be purchased thereunder and the fulfillment by Holder of the conditions precedent to exercise of this Option, the Company will deliver or cause to be delivered to the Holder (or if any other individual or individuals are exercising this Option, to such individual or individuals) at the address specified pursuant to Section 2 hereof a certificate or certificates for the number of shares with respect to which the Option is then being exercised, registered in the name of the Holder (or the name or names of the individual or individuals exercising the Option, either alone or jointly with another person
or persons with rights of survivorship, as the individual or individuals exercising the Option will prescribe in writing to the Company); provided, however, that:
(a) Such delivery will be deemed effected for all purposes when a stock transfer agent will have deposited such certificate or certificates in the United States mail, addressed to the Holder (or such individual or individuals) at the address so specified; and provided further that if any law, regulation or order of the Commission or other body having jurisdiction in the premises will require the Company or the Holder (or the individual or individuals exercising this Option) to take any action in connection with the sale of the shares then being purchased, then, subject to the other provisions of this paragraph, the date on which such sale will be deemed to have occurred and the date for the delivery of the certificates for such shares will be extended for the period necessary to take and complete such action, it being understood that the Company will have no obligation to take and complete any such action.
(b) Notwithstanding the foregoing, if this Option is exercised for shares subject to the first-refusal rights described in the Stock Transfer Agreement, then the certificate or certificates representing such shares will be delivered in accordance with the terms of, and as described in the Stock Transfer Agreement.
SECTION 6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The existence of this Option will not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company will effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving compensation therefor in money, services or property, then the number, class, and per share price of shares of stock subject to this Option will be appropriately adjusted in such a manner as to entitle the Holder to receive upon exercise of this Option, for the same aggregate cash consideration, the same total number and class of shares that the owner of an equal number of outstanding shares of Common Stock would own as a result of the event requiring the adjustment. Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares of obligations of the Company convertible into such shares or other securities, will not affect, and no adjustment by reason thereof will be made with respect to, the number or price of shares of Common Stock then subject to this Option.
SECTION 7. EFFECT OF CERTAIN TRANSACTIONS. If the Company is a party to a merger or reorganization with one or more other corporations, whether or not the Company is the surviving or resulting corporation, or if the Company consolidates with or into one or more other corporations, or if the Company is liquidated, or if there is a sale or other disposition of substantially all of the Company's capital stock or assets to a third party or parties (each hereinafter referred to as a "Transaction"), in any case while this Option remains outstanding: (a) subject to the provisions of clause (b) below, after the effective date of such Transaction this Option will remain outstanding and will be exercisable in shares of Common Stock or, if applicable, shares of such stock or other securities, cash or property as the holders of shares of Common Stock received pursuant to the terms of such Transaction; or (b) the time for exercise of this Option may be accelerated by the Company's Board of Directors so that this Option will be fully exercisable on or prior to the effective date of such Transaction; provided that (x) notice of such acceleration will be given to the Holder, and (y) the Holder will have the right to exercise this Option in part or in full prior to the effective date of such Transaction.
SECTION 8. RIGHTS OF HOLDER. No person will, by virtue of the granting of this Option to the Holder, be deemed to be a holder of any shares purchasable under this Option or to be entitled to the rights or privileges of a holder of such shares unless and until this Option has been exercised with respect to such shares and they have been issued pursuant to that exercise of this Option. The granting of this Option will not impose upon the Company any obligations to employ or to continue to employ the Holder or, if applicable, to continue the Holder as a director of the Company; and the right of the Company to terminate the employment of the Holder will not be diminished or affected by reason of the fact that this Option has been granted to the Holder. Nothing herein contained will impose any obligation upon the Holder to exercise this Option. Although this Option is intended to qualify as an incentive stock option under the Internal Revenue Code of 1986, the Company makes no representation as to the tax treatment to the Holder upon receipt or exercise of this Option or sale or other disposition of the shares covered by this Option.
SECTION 9. RESERVATION OF SHARES. At all times while any portion of this Option is outstanding, the Company will: reserve and keep available, out of shares of its authorized and unissued stock or reacquired shares, a sufficient number of shares of its Common Stock to satisfy the requirements of this Option; comply with the terms of this Option promptly upon exercise of the Option rights; and pay all fees or expenses necessarily incurred by the Company in connection with the issuance and delivery of shares pursuant to the exercise of this Option.
SECTION 10. TRANSFER AND TERMINATION. This Option is not transferable by the Holder otherwise than by will or the laws of descent and distribution. This Option is exercisable, during the Holder's lifetime, only by him, and by him only while he is an employee of the Company, except that in the event that such employment terminates for any reason other than for Cause as defined below, and other than by reason of death, the Holder will have the right to exercise this Option within ninety (90) days after the date he ceases to be an employee of the Company (but not later than the expiration date of this Option). As used in this paragraph, "Cause" means (a) any material breach by the Holder of any agreement to which the Holder and the Company are both parties, and such material breach is not cured within seven (7) days of written notice thereof, (b) any act (other than retirement) or omission to act by the Holder which may have a material and adverse effect on the Company's business or on the Holder's ability to perform duties or services for the Company, including, without limitation, the commission of any crime (other than ordinary traffic violations), fraud and acts of moral turpitude, or (c) any material misconduct or material neglect of duties by the Holder in connection with the business or affairs of the Company or any affiliate of the Company, other than an error in good faith exercise of business judgment. An employment relationship between the Company and the Holder will be deemed to exist, for purposes of this Option, during any period in which the Holder is employed in any capacity by the Company or by a parent or any subsidiary of the Company. In the event of the death of the Holder while he has the right to exercise this Option, his or her executors, administrators, heirs or legatees, as the case may be, will have the right to exercise this Option at any time within one hundred eighty (180) days after his death (but not after the termination date of this Option).
SECTION 11. TAX WITHHOLDING. To the extent that the exercise of the Option gives rise to an obligation on the part of the Company to withhold income tax from amounts otherwise to be paid to Holder, the Company shall do so on such terms and in accordance with such procedures as may be required under applicable law. If Holder's wages from the Company are insufficient to fund payment of Employee's share of such withholding taxes, Holder shall deposit such monies with the Company as a condition to exercising this Option.
SECTION 12. MISCELLANEOUS.
(A) NOTICES. All notices permitted or required by this Agreement shall be in writing and shall be deemed to be delivered and received (i) when
personally delivered, or (ii) on the day on which sent by facsimile, electronic mail, or other similar device generating a receipt evidencing a successful transmission, or (iii) on the third (3rd) business day after the day on which deposited in the United States mail, first-class-certified mail, return receipt requested, postage prepaid, transmitted or addressed to the person for whom intended, at the facsimile number, email address, or mailing address appearing at the end of this Agreement or such other facsimile number, email address, or mailing address, notice of which is given in the manner contemplated by this Section 12(a).
(B) LEGENDS. All share certificates evidencing Option Shares shall bear such legends as the Company, in its discretion, determines to be appropriate to reflect restrictions imposed upon such Shares by the Plan, this Agreement, and applicable federal and state securities laws.
(C) NO EMPLOYMENT RIGHTS. Neither the adoption of the Plan, the granting of the Option evidenced by this Agreement, or any other action taken by the Company in connection therewith are intended or shall be construed as giving to Holder any right to be retained in the employ of the Company for any period of time or to restrict in any manner the right and power of the Company to terminate Holder's employment with the Company.
(D) GOVERNING LAW. This Option shall be governed by the Internal Revenue Code of 1986, as amended, and by the internal laws of the State of California, without regard to conflict of law principles.
(E) GOVERNMENT REGULATIONS. The Option is subject to all laws, regulations and orders of any governmental authority which may be applicable thereto and, notwithstanding any of the provisions hereof, the Holder agrees that he will not exercise the Option granted hereby nor will the Company be obligated to issue any shares of stock hereunder if the exercise thereof or the issuance of such shares, as the case may be, would constitute a violation by the Holder or the Company of any such law, regulation or order or any provision thereof. The Company will not be obligated to take any affirmative action in order to cause the exercise of this Option or the issuance of shares pursuant hereto to comply with any such law, regulation, order or provision.
(F) OPTION SUBJECT TO PLAN. This Option is and will be subject in every respect to the provisions of the Company's 2001 Stock Option Plan, as amended from time to time, which is incorporated herein by reference and made a part hereof. The Holder hereby accepts this Option subject to all the terms and provisions of the Plan and agrees that (i) in the event of any conflict between the terms hereof and those of the Plan, the latter will prevail, and (ii) all decisions under and interpretations of the Plan by the Committee or the Board will be final, binding and conclusive upon the Holder and his or her heirs and legal representatives.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, the parties have executed this Option, or caused this Agreement to be executed, as of the Effective Date.
"COMPANY": "HOLDER:"
MACHINETALKER, INC.,
a Delaware corporation
By_____________________________ ______________________________
Roland F. Bryan, President Holder's Signature
Address and Facsimile No. for Notices: ______________________________
Holder's Printed Name
MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101 Address and Facsimile No.
for Notices:
-------------------------------
-------------------------------
-------------------------------
Facsimile No.: (805) 657-1740
Facsimile No.:( )_____________
No. of Option Shares:__________
Vesting Commencement Date:_____
Effective Date:_________________
Exercise Price Per Share:_______
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EXHIBIT 4.4
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement") is made and entered into, dated for reference purposes as of the "Effective Date" set forth on the signature page hereof (the "Effective Date"), by and between MACHINETALKER, INC., a Delaware corporation (the "Company"), and the person executing this Agreement as the "Holder" hereunder ("Holder"), pursuant to the STOCK OPTION PLAN (the "Plan") sponsored by the Company, with reference to the following facts:
RECITALS:
In recognition of past services by Holder and as an inducement to Holder to provide services for the Company, the Company has agreed to grant to Holder a nonqualified option to purchase certain shares of the common capital stock of the Company, and the parties have agreed to execute this Agreement in order to evidence the grant of such option.
AGREEMENTS:
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, receipt which is hereby acknowledged, Company hereby grants to Holder the following option (the "Option"):
Section 1. GRANT OF OPTION. Subject to the terms and conditions set forth below, the Company hereby grants to Holder the right and option (the "Option") to purchase from the Company the number of shares of the Company's common capital stock ("Common Stock") designated on the signature page hereof as "Option Shares" (the "Option Shares") at an exercise price per share set forth on the signature page hereof (the "Exercise Price"), subject to Holder's becoming vested in the Option as set forth in this Section 1.
(a) Subject to Sections 1(b) and 1(c), below, the Option shall be
exercisable only to the extent Holder has become vested therein. As of any date
during the term of this Option, Holder shall be entitled to purchase such number
of the Option Shares (to the extent not previously purchased hereunder) as is
determined by multiplying the total number of Option Shares times Holder's
then-current vesting percentage as determined under this Section 1(a) and
Section 7, below. In consideration for Holder's service to the Company from and
after the "Vesting Commencement Date" set forth on the signature page hereof
(the "Vesting Commencement Date"), Holder shall become vested in this Option as
follows:
(i) After one year of continuous service as a consultant of the Company following Holder's Vesting Commencement Date, Holder shall be twenty-five percent (25.0%) vested in this Option.
(ii) For each subsequent period of thirty (30) days that Holder thereafter remains continuously as a consultant of the Company, Holder shall become vested in one-thirty-sixth (1/36th) of the remainder of this Option.
(b) Notwithstanding any provision hereof to the contrary, Holder shall forfeit any portion of the Option in which Holder is not then vested as of the effective date as of which Holder's service engagement as a consultant to the Company is terminated.
(c) Subject to the foregoing provisions of this Section 1, the Option is exercisable at any time and from time to time during its term, in whole or in part, to the extent that Holder has become vested in such Option pursuant to this Section 1. This Option will terminate in all respects, and all rights and options to purchase shares hereunder will terminate ten (10) years from the Effective Date of this Option.
Section 2. MANNER OF EXERCISE OF OPTION. Holder may exercise the Option only by delivering to the Company (a) a written notice of exercise specifying the number of shares with respect to which the Option is to be exercised and the address to which the certificate representing such shares is to be mailed, (b) cash, certified or bank check or postal money order payable to the order of the Company for an amount equal to the sum of (x) the Exercise Price of such shares, and (y) such amount, if any, as may be due to fund withholding taxes due with respect to such exercise, as required by Section 11, below, and(c) such documentation establishing that the conditions precedent specified in Section 3, below, have been satisfied by the Holder.
Section 3. CONDITIONS PRECEDENT. As a condition precedent to any exercise of this Option, upon request of the Company, the Holder (or if any other individual or individuals are exercising this Option, such individual or individuals) shall deliver to the Company each of the following:
(a) Upon request of the Company, an investment letter in form and substance
satisfactory to the Company and its counsel which will contain among other
things a statement in writing that (i) the Option is then being exercised for
the account of the Holder and only with a view to investment in, and not for, in
connection with or with a view to the disposition of, the shares with respect to
which the Option is then being exercised; (ii) Holder has been advised that Rule
144 of the Securities and Exchange Commission (the "Commission"), which permits
the resale, subject to various terms and conditions, of small amounts of
"restricted securities" (as therein defined) after they have been held for one
(1) year, does not now apply to the Company because the Company is not now
required to file, and does not file, current reports under the Securities
Exchange Act of 1934 (the "Exchange Act"), nor is there publicly available
information concerning the Company substantially equivalent to that which would
be available if the Company were required to file such reports; (iii) Holder
understands that there is no assurance that the Company will ever become a
reporting company under the Exchange Act and that the Company has no obligation
to the Holder to do so; (iv) Holder and Holder's representatives have fully
investigated the Company and the business and financial conditions concerning it
and have knowledge of the Company's then current corporate activities and
financial condition; and (v) Holder believes that the nature and amount of the
shares being purchased are consistent with Holder's investment objectives,
abilities and resources. The foregoing investment representations no longer
shall be required after registration with the Commission of the stock subject to
this Option or acquired through the exercise of this Option.
(b) An executed Stock Transfer Agreement (the "Stock Transfer Agreement") in a form reasonably satisfactory to the Company and permitted by the terms of the Plan, in which, inter alia, Holder shall grant to the Company a right of first refusal prior to any sale or attempted sale of any Option Shares to any other person. Such first-refusal rights shall not apply to any Transaction (as defined in Section 7, below), and in all events shall terminate and be of no further force or effect from and after the first date as of which the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement for the sale of any shares of Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), and such registration statement becomes effective. If there is any conflict or inconsistency between the provisions of this Option and the provisions of any Stock Transfer Agreement, then the provisions of the Stock Transfer Agreement shall control.
Section 4. MARKET STAND-OFF. Holder agrees that in addition to the restrictions on transfer of the Option Shares set forth in the Stock Transfer Agreement, for a period of up to one hundred eighty (180) days from the effective date of any registration of securities of the Company under the Securities Act of 1933, as amended (the "Securities Act"), upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, Holder shall not sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of this Option or any shares issued pursuant to the exercise of this Option, without the prior written consent of the Company and such underwriters.
Section 5. DELIVERY OF SHARES. Within a reasonable time following the receipt by the Company of the written notice and payment of the option exercise price for the shares to be purchased hereunder and the fulfillment by Holder of the conditions precedent to exercise of this Option, the Company will deliver or cause to be delivered to Holder (or if any other individual or individuals are exercising this Option, to such individual or individuals) at the address specified pursuant to Section 2, above, a certificate or certificates for the number of shares with respect to which the Option is then being exercised, registered in the name of the Holder (or the name or names of the individual or individuals exercising the Option, either alone or jointly with another person or persons with rights of survivorship, as the individual or individuals exercising the Option will prescribe in writing to the Company); provided, however, that:
(a) Such delivery will be deemed effected for all purposes when a stock transfer agent will have deposited such certificate or certificates in the United States mail, addressed to the Holder (or such individual or individuals) at the address so specified; and provided further that if any law, regulation or order of the Commission or other body having jurisdiction in the premises will require the Company or the Holder (or the individual or individuals exercising this Option) to take any action in connection with the sale of the shares then being purchased, then, subject to the other provisions of this paragraph, the date on which such sale will be deemed to have occurred and the date for the delivery of the certificates for such shares will be extended for the period necessary to take and complete such action, it being understood that the Company will have no obligation to take and complete any such action.
(b) Notwithstanding the foregoing, if this Option is exercised for shares subject to the first-refusal rights set forth in the Stock Transfer Agreement, then the certificate or certificates representing such shares will be delivered in accordance with the terms of, and as described in the Stock Transfer Agreement.
Section 6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The existence of this Option will not affect in any way the right or power of the Company or its Shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company will effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving compensation therefor in money, services or property, then the number, class, and per share price of shares of stock subject to this Option will be appropriately adjusted in such a manner as to entitle the Holder to receive upon exercise of this Option, for the same aggregate cash consideration, the same total number and class of shares that the owner of an equal number of outstanding shares of Common Stock would own as a result of the event requiring the adjustment. Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares of obligations of the Company convertible into such shares or other securities, will not affect, and no adjustment by reason thereof will be made with respect to, the number or price of shares of Common Stock then subject to this Option.
Section 7. EFFECT OF CERTAIN TRANSACTIONS. If the Company is a party to a merger or reorganization with one or more other corporations, whether or not the Company is the surviving or resulting corporation, or if the Company
consolidates with or into one or more other corporations, or if the Company is liquidated, or if there is a sale or other disposition of substantially all of the Company's capital stock or assets to a third party or parties (each hereinafter referred to as a "Transaction"), in any case while this Option remains outstanding: (a) subject to the provisions of clause (b) below, after the effective date of such Transaction this Option will remain outstanding and will be exercisable in shares of Common Stock or, if applicable, shares of such stock or other securities, cash or property as the holders of shares of Common Stock received pursuant to the terms of such Transaction; or (b) the time for exercise of this Option may be accelerated by the Board so that this Option will be fully exercisable on or prior to the effective date of such Transaction; provided that (x) notice of such acceleration will be given to the Holder, (y) the Holder will have the right to exercise this Option in part or in full prior to the effective date of such Transaction, and (z) to the extent not so exercised, this Option will be canceled prior to or as of such effective date; and provided, further, that the Board may not accelerate unexercised and unexpired options pursuant to this clause (b) if to do so would adversely affect pooling of interests treatment intended to be effected in connection with a Transaction.
Section 8. RIGHTS OF HOLDER. No person will, by virtue of the granting of this Option to the Holder, be deemed to be a holder of any shares purchasable under this Option or to be entitled to the rights or privileges of a holder of such shares unless and until this Option has been exercised with respect to such shares and they have been issued pursuant to that exercise of this Option. The granting of this Option will not impose upon the Company or its shareholders any obligations to continue Holder's service engagement with the Company, and the right of the Company to terminate Holder's service engagement with the Company will not be diminished or affected by reason of the fact that this Option has been granted to the Holder. Nothing herein contained will impose any obligation upon the Holder to exercise this Option.
Section 9. RESERVATION OF SHARES. At all times while any portion of this Option is outstanding, the Company will reserve and keep available, out of shares of its authorized and unissued stock or reacquired shares, a sufficient number of shares of its Common Stock to satisfy the requirements of this Option; comply with the terms of this Option promptly upon exercise of the Option rights; and pay all fees or expenses necessarily incurred by the Company in connection with the issuance and delivery of shares pursuant to the exercise of this Option.
Section 10. TRANSFER AND TERMINATION. Holder may not sell, pledge, assign, hypothecate, transfer, or otherwise dispose of all or any portion of the Option other than by will or the laws of descent and distribution.
Section 11. TAX WITHHOLDING. To the extent that the exercise of the Option gives rise to an obligation on the part of the Company to withhold income tax from amounts otherwise to be paid to Holder, the Company shall do so on such terms and in accordance with such procedures as may be required under applicable law.
Section 12. MISCELLANEOUS.
(a) NOTICES. All notices permitted or required by this Agreement shall be in writing and shall be deemed to be delivered and received (i) when personally delivered, or (ii) on the day on which sent by facsimile, electronic mail, or other similar device generating a receipt evidencing a successful transmission, or (iii) on the third (3rd) business day after the day on which deposited in the United States mail, first-class-certified mail, postage prepaid, transmitted or addressed to the person for whom intended, at the facsimile number, email address, or mailing address appearing at the end of this Agreement, or such other facsimile number, email address, or mailing address, notice of which is given in the manner contemplated by this Section 12(a).
(b) NO EMPLOYMENT RIGHTS. Neither the granting of the Option evidenced by this Agreement, nor any other action taken by the Company in connection therewith, are intended or shall be construed as giving to Holder any right to be engaged to provide services for the Company for any period of time or to restrict in any manner the right and power of the Company to terminate Holders relationship with Company.
(c) GOVERNING LAW. This Option shall be governed by and construed in accordance with the internal laws of the State of California, without regard to conflict of law principles.
(d) GOVERNMENT REGULATIONS. The Option is subject to all laws, regulations and orders of any governmental authority which may be applicable thereto and, notwithstanding any of the provisions hereof, the Holder agrees that he will not exercise the Option granted hereby nor will the Company be obligated to issue any shares of stock hereunder if the exercise thereof or the issuance of such shares, as the case may be, would constitute a violation by the Holder or the Company of any such law, regulation or order or any provision thereof. The Company will not be obligated to take any affirmative action in order to cause the exercise of this Option or the issuance of shares pursuant hereto to comply with any such law, regulation, order or provision.
(e) OPTION SUBJECT TO PLAN. This Option is and will be subject in every respect to the provisions of the Company's Plan, as amended from time to time, which is incorporated herein by reference and made a part hereof. Holder hereby accepts this Option subject to all the terms and provisions of the Plan and agrees that (i) in the event of any conflict between the terms hereof and those of the Plan, the latter will prevail, and (ii) all decisions under and interpretations of the Plan by the Company's Board of Directors (or its designee) will be final, binding and conclusive upon the Holder and his or her heirs and legal representatives.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, the parties have executed this Option, or caused this Agreement to be executed as of the Effective Date.
"COMPANY": "HOLDER:"
MACHINETALKER, INC.,
a Delaware corporation
By_____________________________ ______________________________
Roland F. Bryan, President Holder's Signature
Address and Facsimile No. for Notices: ______________________________
Holder's Printed Name
MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101 Address and Facsimile No.
for Notices:
-------------------------------
-------------------------------
-------------------------------
Facsimile No.: (805) 657-1740
Facsimile No.:( )_____________
No. of Option Shares:__________
Vesting Commencement Date:_____
Effective Date:_________________
Exercise Price Per Share:_______
|
Exhibit 5.1
LEGAL OPINION
[RICHARDSON & ASSOCIATES LETTERHEAD]
August 1, 2005
MachineTalker, Inc.
RE: MACHINETALKER, INC. - VALIDITY OF ISSUANCE OF SHARES
Ladies and Gentlemen:
We have acted as special counsel to you in connection with the registration on Form SB-2 under the Securities Act of 1933, as amended ("Registration Statement"), of a total of 73,367,050 shares (the "Shares") of the Common Stock of MachineTalker, Inc., par value $0.001 per share. You have requested our opinion in connection with the registration of the Shares covered by the Prospectus, dated August 1, 2005 (the "Prospectus"). In connection with our acting as counsel, we have examined the laws of the State of California together with certain other documents and instruments prepared on behalf of MachineTalker, Inc. as we have deemed necessary and relevant in the preparation of our opinion as hereinafter set forth.
In our examination, we have assumed the genuineness of all signatures on original documents and the authenticity of all documents submitted to us as originals, the conformity to original documents to all documents submitted to us as certified, conformed or photostatic copies of originals, the authenticity of such latter documents, and the proper execution, delivery and filing of the documents referred to in this opinion.
Based upon the foregoing, we are of the opinion that the Shares sold by the Selling Securityholders pursuant to the terms of the Prospectus have been duly created and have been and will be validly issued shares of the Common Stock, par value $0.001 per share, of MachineTalker, Inc. Upon payment for the Shares and full compliance with all of the terms and conditions relating to the issuance of the Shares set forth in the Prospectus, the Shares will be fully paid and non-assessable.
For the purposes of this opinion, we are assuming that the appropriate certificates are duly filed and recorded in every jurisdiction in which such filing and recordation is required in accordance with the laws of such jurisdictions. We express no opinion as to the laws of any state or jurisdiction other than California.
We consent to the use of this opinion as an exhibit to the Registration Statement, and we further consent to the use of our name in the Registration Statement and the Prospectus, which is a part of said Registration Statement.
Respectfully submitted,
/s/Mark J. Richardson ---------------------- Mark J. Richardson for Richardson & Associates |
EXHIBIT 10.1
COMMERCIAL LEASE AGREEMENT
(C.A.R. Form CL, Revised 10/01)
CALIFORNIA
ASSOCIATION
OF REALTORS
1. PROPERTY: Landlord rents to Tenant and Tenant rents from Landlord, the real property and improvements described as:
|X| A. Lease: and shall terminate on (date) thirty six months from beginning at, 12:00 AM/PM. Any holding over after the term of this agreement expires, with Landlord's consent, shall create a month-to-month tenancy that either party may terminate as specified in paragraph 2B. Rent shall be at a rate equal to the rent for the immediately preceding month, payable in advance. All other terms and conditions of this agreement shall remain in full force and effect.
|_| B. Month-to-month: and continues as a month-to-month tenancy. Either party may terminate the tenancy by giving written notice to the other at least 30 days prior to the intended termination date, subject to any applicable laws. Such notice may be given on any date.
3. BASE RENT:
A. Tenant agrees to pay Base Rent at the rate of (CHECK ONE ONLY:)
|_| (1) $ per month, for the term of the agreement.
--------------------------
|_| (2) $ 2,377.29 per month, for the first 12 months of the agreement.
--------
|
|_| (3) $_____ per month for the period commencing _____ and ending _______ and
$_____ per month for the period commencing _____ and ending _______ and
$_____ per month for the period commencing _____ and ending _______.
|
|_| (4) In accordance with the attached rent schedule.
|_| (5) Other. CPI adjustments shall be a minimum of 2% per year and maximum of
----------------------------------------------------------------
5% per year
-----------
|
B. Base Rent is payable in advance on the 1st ( or ________) day of each calendar month, and is delinquent on the next day.
C. If the Commencement Date falls on any day other than the first day of the month, Base Rent for the first calendar month shall be prorated based on a 30-day period. If Tenant has paid one full month's Base Rent in advance of the Commencement Date, Base Rent for the second calendar month shall be prorated based on a 30-day period.
4. RENT:
A. Definition. ("Rent") shall mean all monetary obligations of Tenant to Landlord under the terns of this agreement. except security deposit.
C. Timing. Base Rent shall be paid as specified in paragraph 3. All other Rent shall be paid within 30 days after Tenant is billed by Landlord.
5. EARLY POSSESSION: Tenant is entitled to possession of the Premises on upon execution of the lease and payment of amounts due.
6. SECURITY DEPOSIT:
B. All or any portion of the security deposit may be used, as reasonably necessary, to: (i) cure Tenant's default in payment of Rent, late charges, non-sufficient funds ("NSF") fees, or other sums due; (ii) repair damage, excluding ordinary wear and tear, caused by Tenant or by a guest or licensee of Tenant; (III) broom clean the Premises, if necessary, upon termination of tenancy; and (IV) cover any other unfulfilled obligation of Tenant. SECURITY DEPOSIT SHALL NOT BE USED BY TENANT IN LIEU OF PAYMENT OF LAST MONTH'S RENT. If all or any portion of the security deposit is used during tenancy, Tenant agrees to reinstate the total security deposit within 5 days after written notice is delivered to Tenant Within 30 days after Landlord receives possession of the Premises, Landlord shall: (I) furnish Tenant an itemized statement indicating the amount of any security deposit received and the basis for its disposition, and (II) return any
remaining portion of security deposit to Tenant. However, if the Landlord's only claim upon the security deposit is for unpaid Rent, then the remaining portion of the security deposit, after deduction of unpaid Rent, shall be returned within 14 days after the Landlord receives possession
C. No interest will be paid on security deposit, unless required by local ordinance.
Landlord and Tenant acknowledge receipt of a copy of this page.
Landlord's Initials (________) (__________)
Tenant's Initials (________) (__________)
The copyright laws of the United States (Title 17 U.S. Code) forbid the unauthorized reproduction of this form, or any portion thereof, by photocopy machine or any other means, including facsimile or computerized formats. Copyright(C)1998-2001, CALIFORNIA ASSOCIATION OF REALTORS(R), INC. ALL. RIGHTS RESERVED. CL-11 REVISED 10/01 (PAGE 1 OF 6}
COMMERCIAL LEASE AGREEMENT (CL-11 PAGE 1 OF 6)
Kellogg Brown & Root Services, Inc.
Agreement No. CA-00062
This Agreement is entered into as of the 20 December 2004, by and between Kellogg Brown & Root Services, Inc. (hereinafter "KBR" or "Company"), whose offices are located at 1550 Wilson Boulevard, Suite 400, Arlington, Virginia 22209 and MachineTalker, Inc. (TIN: 01-0592299 ) whose address is 513 De La Vina Street, Santa Barbara, CA 93101 (hereinafter "MACHINETALKER" or "Consultant").
1. TERM AND SCOPE OF AGREEMENT:
1.1 Term
1.1.1 Effective Dates
The Agreement shall be valid and effective from the date of its execution by
both parties but in no event prior to 20 December 2004 or after 31July 2005.
1.1.2 Termination The Agreement may be terminated at any time by either party upon written notification. Such notification shall not relieve either party of its respective liabilities that may have accrued prior to termination.
1.1.3 Renewal This Agreement may be renewed for additional terms after the scheduled completion date upon mutual written agreement between the parties. If not renewed, the Agreement shall automatically expire at twelve midnight on 31 July 2005.
1.1.4 Licensed Product and Technology "LICENSED PRODUCT" means those certain devices that employ the use of the Licensed Technology and that are manufactured and sold by MACHINETALKER that are intended to enable users of those devices to track inventory, containers and other similar packages. "LICENSED TECHNOLOGY" means the Documentation and the Software that enables the Licensed Products to transmit and receive information via self-coordinated machine network by employing MACHINETALKER's Simple Machine Management Protocol (SMMP(R)) technology, as described in U.S. Patent Application 2004/0114557. The scope of the technology disclosed within U.S. Patent Application 2004/0114557, and licensed herein, shall be considered limited to such aspects of the technology as reasonably relates to applications, systems, or solutions that track inventory, containers and other similar packages.
1.1.5 Changes All changes, of any type, to this agreement affecting either the term or the value shall require the prior written agreement of both parties in the form of a modification to this agreement. Should MACHINETALKER elect to proceed with a change prior to finalization of written modification to this agreement, it shall be at the sole risk and liability of MACHINETALKER.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 1 of 14 -- MachineTalker, Inc.
1.2 Scope
1.2.1 Introduction MACHINETALKER will adapt their MachineTalker(R) product family of wireless mesh networking processors for placement on-board of shipping containers and materials, inventory, packages or other similar items in transit and storage to provide for tracking of those items. Specifically, the MiniTalker(R) and/or TagTalker(R) products will be tested in conjunction with KBR requirements to determine choice of radio, battery and methods for mounting within the Shipping containers and materials.
1.2.2 Background The tracking or finding of items will bring significant economic savings while minimizing the problem of loss of valuable contents due to theft or spoilage.
1.2.3 KBR Project The Project will involve the coordinated effort of systems personnel from both MACHINETALKER and KBR. The MACHINETALKER staffing will include systems engineering personnel to formulate how MachineTalker's(R) will be adapted physically and what new Applications Software is to be created to meet KBR requirements. KBR staffing will include those who will specify aspects of shipping processes, what is to be detected, what actions will be taken, what is to be reported, and how it is to be reported.
Subsequently, the MACHINETALKER team will test variations of the basic MachineTalker(R) product to optimize performance in KBR specified environment. MACHINETALKER will implement Applications Software to service sensors, accept cargo information and to report in the manner specified for use by KBR tracking system software.
The end result is to equip the items with the means for tracking and security and to do so in concert with KBR tracking system. The Project tasks to accomplish this goal are tied to "milestones" as expressed below and in the Project Schedule and Payment Deliverable Chart. Each deliverable shall also include submission of a written report addressing the goal of the deliverable, the status of each goal and an assessment of the progress of the project.
1.2.4 Project Specifics Task #1 - All hands meeting(s) among Project team members to discuss and determine all operational issues to be resolved by the use of on-board means for security and tracking. The result of these meetings will be to publish a task-oriented schedule and guidelines for testing, evaluation and specification for the requisite Applications Software to fulfill the stated goals of the Project. MACHINETALKER shall prepare and submit a written report which shall summarize the findings of the all hands meeting, including but not necessarily limited to, the specification for the end product and its interfaces.
Task #2 - Test and evaluation of the insertion of wireless products into the shipping container environment. These tests will be conducted using off-the-shelf MiniTalkers(R) to evaluate operation at different radio frequencies and in different container locations and configurations. The result of these tests will be to find the optimum radio frequencies and the optimum mounting locations within the Shipping containers and materials. Radio frequencies which are prohibited for use by the U.S. Government will not be considered. MACHINETALKER shall prepare a written report upon completion of this Task #2 and, in conjunction with the report, submit a manufacturing specification for the production hardware configuration for KBRMiniTalker(R) unit.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 2 of 14 -- MachineTalker, Inc.
Task #3 - Codification of KBR freight tracking and inventory software I/O language (protocol) desired by KBR Project team. This codification is anticipated to be the foundation of the data content being sent by a MACHINETALKER network or by individual shipping containers and materials, to KBR tracking and controlcenter. MACHINETALKER shall prepare a written report summarizing this progress and accomplishments made under this deliverable including the specification of the required format.
Task #4 - Selection of sensors and detectors that will be used on-board of the shipping containers and materials and that will be serviced by KBR - MiniTalker version. MACHINETALKER engineers will experiment with and test the proposed sensing devices to ensure that their output parameters can be serviced by the wireless node. Consideration shall be given to the type of sensor, sensor output, power requirements and packaging. MACHINETALKER shall prepare and submit a report which will include a specification on implementing the sensor hardware and the Applications Software to support each sensor type and provide for the range of sensor types and their relative physical attributes along with draft information about their use.
Task #5 - Finalization of the design of the end-product including hardware and software documentation to build units to meet KBR requirement, field testing of the first production units with the Applications Software and, incorporation of changes that will improve the end product. MACHINETALKER shall prepare and submit an initial report that, at minimum, includes a Bill of Materials for the manufacture of units in quantity, a summary of Applications Software changes to improve operation in the field and incorporates detailed results of testing in the field. MACHINETALKER shall prepare a final report that summarizes the issues of operating wireless sensors on-board Shipping containers and materials, descriptions of the form-fit-and function, details on installation, use and maintenance, methodology for determining placement of sensors and wireless nodes on or within containers and guidelines for use of different types of sensors of interest to shipping and maintenance personnel.
1.2.5 Go-No-Go Decision
As expressed in Section 1.2.6 below, KBR, on or about Week 14, at its sole
discretion, shall determine if the project will proceed. Election to continue
the project must be made by the affirmative action of KBR to purchase the
Software License as set forth in Exhibit 6 of this Agreement. In the event KBR
elects to end the project, or fails to purchase the Software License, 1) KBR
shall waive any and all rights to the licenses technology and products, 2) KBR
and MACHINETALKER shall cease to have any right and/or obligation to each other,
3) MACHINETALKER shall be free of all encumbrances and limitations on the
intellectual property rights as it applies to the licensed technology and
products, and 4) KBR shall pay MACHINETALKER the remainder of any amounts not
yet paid toward the Firm Fixed Price of this Consulting Agreement.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 3 of 14 -- MachineTalker, Inc.
1.2.6 [Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
Agreement No. CA-00062 12/29/2004 6:18 PM Page 4 of 14 -- MachineTalker, Inc.
2. KBR Contact Performance of the work under this Agreement is subject to the written technical direction of the Technical Representative. "Technical direction" means a directive to MACHINETALKER that approves approaches, solutions, designs or refinements; fills in details or other wise completes the general description of work or documentation items; shifts emphasis among work areas or tasks; or furnishes similar instruction to MACHINETALKER. Technical direction includes requiring studies and pursuit of certain lines of inquiry regarding matters within the general tasks and requirements of this Agreement.
The Technical Representative does not have the authority to, and shall not, issue any instruction purporting to be technical direction that:
(1) constitutes an additional assignment outside of the statement of work;
(2) constitutes a change to the Agreement or work required under the Agreement;
(3) constitutes a basis for an increase in the total price or the period of
performance under the Agreement;
(4) changes any of the expressed terms, conditions or specifications of the
Agreement;
(5) interferes with MACHINETALKER's right to perform the terms and conditions
of the Agreement.
The Technical Manager for KBR is Andrew Bush or his assigns and is the point of contact for all technical matters under this Agreement subject to the limitations above.
Technical direction shall be issued in writing by the Technical Representative. If, in MACHINETALKER's opinion, any instruction or direction by the Technical Representative falls within items (1) through (5) above, MACHINETALKER shall provide written notification to the Subcontract Administrator and shall not proceed with the work required prior to negotiation and issuance of the appropriate modification to the Agreement, or withdrawal of the instruction/direction.
Name: Andy Bush
The Technical Representative : Telephone: 703-526-2358
for this Agreement shall be e-mail: andy.bush@halliburton.com
The Subcontract Administrator Primary Contact
for the Agreement shall be: Name: Kevin B. Shriner
Telephone #: 703-526-7966
e-mail: kevin.shriner@halliburton.com
|
Agreement No. CA-00062 12/29/2004 6:18 PM Page 5 of 14 -- MachineTalker, Inc.
3 Compensation
For performing the Services, MACHINETALKER will be compensated as follows:
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
3.1 Reimbursement for Certain Approved Expenses
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
3.2 Agreement Value and Change Requirement
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
Agreement No. CA-00062 12/29/2004 6:18 PM Page 6 of 14 -- MachineTalker, Inc.
4. Payments and Invoicing.
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
Invoices shall be submitted to:
Kellogg Brown & Root Services, Inc.
P.O. Box 12366Arlington, Virginia 22219-2366
Attention: Procurement - Mr. Kevin B. Shriner
MACHINETALKER shall execute and submit one (1) copy of the "Affidavit for Subcontractor" incorporated as Exhibit 2 with the final invoice.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 7 of 14 -- MachineTalker, Inc.
5. MACHINETALKER as Independent Contractor. As an independent contractor under this Agreement, and not an employee or agent of KBR, MACHINETALKER is not authorized to and will not commit KBR to any obligation, and MACHINETALKER will receive no vacation accrual, holiday pay, paid sick leave, insurance, or any other benefits afforded employees of KBR. All taxes, Social Security payments, and other such related charges relative to MACHI NETALKER's Services shall be solely MACH IN ETALKER's responsibility.
6. Performance of the Services.
6.1 MACHINETALKER's Services will be performed at MACHINETALKER's office location, KBR Arlington, Virginia and/or other locations to be mutually agreed-upon in writing between KBR and MACHINETALKER. KBR is interested in the results obtained through the use of MACHINETALKER's Services, rather than the manner in which MACHINETALKER's Services are performed. While MACHINETALKER is expected to devote the amount of effort reasonably required to complete the assignments given to MACHINETALKER within the financial and time constraints attendant to each assignment, the number of hours worked during any given day and the particular days that MACHINETALKER works will be solely at MACHINETALKER's discretion except where interface with KBR or client representatives is required. MACHINETALKER understands and agrees that, for any Services performed on KBR's premises or that of a customer or supplier of KBR, that it will comply with any and all rules and regulations pertaining to health, safety, environmental, or security, specifically, KBR's policies regarding substance testing for any persons performing work under contract to KBR on KBR premises.
6.2 EXCEPT FOR EXISTING BUSINESS RELATIONSHIPS AS NOTED IN EXHIBIT 4 MACHINETALKER agrees not to accept any other representation appointment, not to enter into a relationship with any person, firm or corporation with respect to projects which may be competitive with or conflict with the interests of KBR. KBR, however, acknowledges that MACHINETALKER provides MachineTalker(R) products, consulting, and development services to other clients, and agrees that nothing hereunder shall be deemed or construed to prevent MACHINETALKER from carrying on such business or developing for itself or others materials that are not competitive with those produced as a result of the Services provided hereunder, irrespective of their similarity to the deliverables provided hereunder.
6.3 License to Use. In addition to the SMMP(R) license agreement executed by the parties incorporated as Exhibit 6 to this Agreement and to the extent that any MACHINETALKER Information, as defined below, is incorporated into the Applications Software, MACHINETALKER will grant an exclusive, non-royalty bearing, worldwide and perpetual license to use such MACHINETALKER Information under this Agreement in the area of container and inventory security and tracking. Nothing in this Section 6.3 shall be deemed to permit KBR to disclose, provide access to, sublicense, disassemble, decompile, reverse engineer, modify, create derivative works of, or transfer any MACHINETALKER Information to any third party, except to a subsidiary or affiliate, with a need to know without the prior, written consent of MACHINETALKER.
7. No Subcontracting. It is understood that this Agreement is for Services to be rendered by MACHINETALKER personally. In no event shall Services requested of MACHINETALKER hereunder be rendered by any other person without KBR's prior written approval.
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8. Confidentiality and Proprietary Information.
8.1 Confidentiality MACHINETALKER agrees to keep confidential and not disclose to any third party nor use except in connection with MACHINETALKER's Services for KBR all information concerning KBR, including but not limited to the existence and content of this Agreement, KBR's Services, the business affairs or technical data or processes of KBR, or its customers, made available to MACHINETALKER by KBR in the course of MACHINETALKER's Services to KBR, except to the extent KBR authorizes disclosures in writing. All memoranda, notes, and documents made available to MACHINETALKER by KBR will remain the property of KBR and shall be returned to KBR upon completion of the Services or termination of the Agreement.
KBR agrees that in conjunction with the Project described in the Agreement KBR may receive or be privy to information that is confidential and proprietary to Consultant. Such Confidential Information can include, but is not limited to, the business plans, business associations or proprietary technical information of the Consultant. Except as developed for KBR during the Project, all memoranda, notes, and documents made available to KBR by the Consultant will remain the property of the Consultant and shall be returned to theConsultant upon completion of the Services or termination of the Agreement.
If either MACHINETALKER or KBR receives from the other party written information which is marked "Confidential" or "Proprietary", the receiving party agrees not to use such information except in the performance of this Agreement, and to treat such information in the same manner as it treats its own confidential information for a period of Five (5) years from the date of disclosure. Without limiting the foregoing, it is agreed that all communications between MACHINETALKER and KBR relating to bidding, testing, or sales activities are to be confidential. However, MACHINETALKER's and KBR's obligations above shall not apply with respect to any Confidential Information which:
A.) (i) is already rightfully in the possession of the Party; (ii) is or
becomes publicly available through no wrongful act of either Party; (iii) is
rightfully received by the Party from a third party without an obligation of
confidentiality to the other Party; (iv) is disclosed to a third party by either
Party without restriction; or (v) is approved for release by written
authorization of the disclosing Party.
B.) Is or becomes generally available to the public other than by reason of
a breach by either of the PARTIES of its obligations under this Agreement; or
C.) Is compelled by court order to disclose, provided that disclosing Party
(i) provides to the other Party a reasonable period prior to disclosure written
notice of all circumstances pertaining to the proposed disclosure, and (ii)
cooperates reasonably with any attempt by other Party to obtain or file
pleadings with respect to any protective judicial order limiting or prohibiting
the disclosure of such Confidential Information except to the extent necessary
for the purposes of the proceeding in which the disclosure order arose; or Other
Party agrees that the confidential information can be disclosed to a third party
under a non-disclosure agreement with that party, for the sole purpose of
preparing proposals, marketing, sales, and other activities reasonably related
to disclosing Party's overall business strategy in the area of applications,
systems, or solutions that track inventory, containers and other similar
packages, where such final purpose is the sale of, and implementation of, the
Licensed Products.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 9 of 14 -- MachineTalker, Inc.
8.2 Ownership of Proprietary Information and Work Product
MACHINETALKER's original works in developing the Applications Software, including but not limited to MACHINETALKER's work products submitted to KBR, are agreed to be works made for hire, and all right, title and interest will be owned by KBR. MACHINETALKER will promptly disclose to KBR any invention or original work conceived or prepared by MACHINETALKER in the course of MACHINETALKER's Services hereunder in developing such Applications Software, or based on information made available to MACHINETALKER by KBR in the course of MACHINETALKER's Services. Hereunder, all right, title, and interest in such inventions and original works, including any derivative works, or improvements, modifications, or enhancements thereof ("Works") are owned by KBR. MACHINETALKER will assist KBR with all reasonably necessary efforts to execute all papers necessary to enable KBR or its nominee to apply for Letters Patent based on such inventions and copyrights on such Works in the United States and any foreign countries which KBR may select, and to assign to KBR or its nominee the entire right, title, and interest in and to any such Works. Such services by MACHINETALKER are recognized to be outside of the scope of this agreement and MACHINETALKER will be compensated for such efforts at MACHINETALKER's published hourly fee contained in Attachment B.
MACHINETALKER's and KBR's obligations in this Article 8 shall survive any termination or expiration of this Agreement for a period of 5 years from the termination of the Agreement.
9. MACHINETALKER's Reports. MACHINETALKER will furnish monthly reports reflecting the times worked and a summary of the efforts and the results of MACHINETALKER's Services corresponding to those times. Such reports shall be submitted to the Technical Representative upon request.
10. Compliance with Laws. MACHINETALKER agrees to conduct its activities and perform all Services in accordance with all applicable laws, regulations, codes or ordinances, including but not limited to possessing all valid and current professional licenses or certifications required to perform the Services in the applicable jurisdiction(s). In the provision of Services pursuant to this Agreement, MACHINETALKER shall comply with KBR/Halliburton Code of Business Conduct incorporated into this Agreement as Exhibit 1. In addition, MACHINETALKER shall comply with all requirements and standards of conduct applicable to it under the Personnel Employment Services Act, Tex. Civ. Stat. Ann. art. 5221a-7.
11. Future Purchases of Licensed Product. Exhibit 7, Purchase Order Terms and Conditions will be made a part of any future purchases of Licensed Products.
12. Dispute Resolution. This Agreement and any disputes between the parties shall be governed by the laws of the Commonwealth of Virginia, excluding any provisions thereof dealing with conflict of laws which might make the laws of other jurisdictions applicable. The parties agree that all disputes and claims will be amicably resolved through good faith direct negotiation between the parties as an exclusive substitute for litigation. Should any dispute or claim not be resolved within a reasonable period, the parties agree, as a sole and exclusive remedy, to submit the dispute or claim to mediation or binding arbitration, to be administered by the American Arbitration Association in Arlington, Virginia, in accordance with its then-current rules and procedures.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 10 of 14 -- MachineTalker, Inc.
13. Indemnification for Services
(A) MACHINETALKER AGREES TO INDEMNIFY AND HOLD KBR HARMLESS FROM ANY LOSS, ACTION, OR CLAIM ARISING OUT OF ANY SERVICES RENDERED, PROVIDED THAT KBR GIVES MACHINETALKER NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT KBR IS MADE AWARE OF THE CLAIM. KBR AGREES TO USE BEST EFFORTS TO ASSIST MACHINETALKER IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
(B) KBR AGREES TO INDEMNIFY AND HOLD MACHINETALKER HARMLESS FROM ANY LOSS OR CLAIM RELATED TO THE NEGLIGENCE OF KBR, ITS AGENTS OR EMPLOYEES DURING THE TESTING PERIOD DESCRIBE IN ATTACHMENT A, OR ARISING OUT OF ANY REPRESENTATION OR WARRANTY MADE BY KBR, ITS AGENTS, OR EMPLOYEES WHERE SUCH REPRESENTATION EXCEEDS MACHINETALKER'S LIMITED WARRANTY IF SUCH LOSS OR CLAIM IS EXCLUSIVE OF MACHINETALKER NEGLIGENCE, PROVIDED THAT MACHINETALKER GIVES KBR NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT MACHINETALKER IS MADE AWARE OF THE CLAIM. MACHINETALKER AGREES TO USE BEST EFFORTS TO ASSIST KBR IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
In the event that either Party is entitled to claim damages from the other Party subsequent to an action arising under article 17, above, such liability shall be limited to:
1) Damages for bodily injury (including death) and damage to real
property and tangible personal property; and
2) The amount of any other actual direct damages, up to the charges (if
recurring, 12 month's charges apply) for the Product that is the
subject of the claim.
In no event shall either party be liable to the other for:
A) loss of, or damage to, records or data; or
B) special, incidental, or indirect damages or any consequential economic
damages; or
C) lost profits, business, revenue, or anticipated savings.
All indemnities are subject to the limitations and exclusions elsewhere in this Agreement.
NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY, KBR'S MAXIMUM LIABILITY TO MACHINETALKER SHALL NOT EXCEED THE AMOUNT OF $600,000 UNDER ANY CIRCUMSTANCES, INCLUSIVE OF ATTORNEYS' FEES, COSTS, AND EXPENSES, FOR ANY CLAIM ARISING FROM OR RELATED TO THE AGREEMENT OR TO THE SUBJECT MATTER OF THE AGREEMENT. SUCH CLAIMS MIGHT INCLUDE BUT ARE NOT LIMITED TO CLAIMS FOR BREACH OF CONTRACT.
13.3 In the event, travel outside of the continental United States is authorized under this Agreement, MACHINETALKER acknowledges, understands and accepts that conditions in the world including locations throughout Middle East, Kuwait and/or Iraq can be considered dangerous. Although reasonable efforts are made to ensure the safety of all personnel, KBR makes no representations or warranties regarding the safety of individuals and accepts no liability or responsibility for the safety of independent contractors, subcontractors, MACHINETALKER's, vendors or suppliers including, but not limited to, health and welfare costs that may be incurred in the event of injury.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 11 of 14 -- MachineTalker, Inc.
14. CREATION OF SECURITY INTEREST. MACHINETALKER hereby grants to KBR a security interest in any products or items purchased for the purpose of creating, repairing, or modifying Licensed Product to secure the performance of MACHINETALKER's obligations as stated in the Agreement. MACHINETALKER agrees to maintain a Job Cost System that at all time will uniquely identify the said products or items to which KBR holds a security interest. MACHINETALKER agrees to segregate the said products or items at all times so that they are readily identifiable and separate from any other similar materials not belonging to KBR and not subject to KBR's security interest. MACHINETALKER agrees to provide free and open access to its facility during normal business hours for inspection by KBR, and to MACHINETALKER's Job Cost System for the purpose of allowing KBR to audit the accuracy of the system and compliance with this Article. MACHINETALKER further agrees to execute any and all UCC-1 forms and such other forms that KBR may request in order to perfect KBR's security interest or to accomplish the purposes of this Article.
15. AUDIT RIGHTS. For the purpose of evaluating MACHINETALKER's incurred costs with respect to MACHINETALKER's invoices for cost reimbursement, progress payments, MACHINETALKER's claim(s) arising out of a termination or partial termination of this contract, and MACHINETALKER's proposals for incentive price revisions or elements of MACHINETALKER's change proposals which involve unique claims (e.g., obsolescence costs) which must be verified by audit, MACHINETALKER agrees that KBR or any of its duly authorized representatives shall have access to and the right to audit any directly pertinent books, documents, papers, and records which support direct and indirect costs.
16. EXAMINATION OF PROPOSED COSTS. For the purpose of evaluating MACHINETALKER's proposed costs with respect to proposals, change proposals, and proposals for follow-on procurement, MACHINETALKER agrees that KBR or any of its duly authorized representatives may subject such proposals or reports and related financial data to analysis type examination at MACHINETALKER's facility. For such purposes, MACHINETALKER shall make available all data supporting direct and indirect costs.
17. PERFORMANCE OF WORK ON GOVERNMENT PREMISES Any work under this contract which is performed by MACHINETALKER or any of its subcon-tractors on premises under Government control is subject to all provisions of this contract governing such work and to the following: A.) All MACHINETALKER personnel shall at all times conspicuously display a distinctive badge provided by MACHINETALKER, identifying such personnel as employees of MACHINETALKER and shall observe and otherwise be subject to such security regulations as are in effect for the particular premises involved. B.) Except as may be otherwise specified in this contract, MACHINETALKER shall furnish all supplies, material and equipment required for the work to be performed. C.) MACHINETALKER shall provide direct supervision of its own employees but shall not supervise or accept supervision from any Government personnel. D.) MACHINETALKER shall designate to KBR in writing an on-the-premises representative to serve as point of contact for MACHINETALKER with the Contracting Officer or his duly authorized representative. E.) Performance of work on Government premises shall be confined to the area(s) specified by the Contracting Officer or his duly authorized representative.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 12 of 14 -- MachineTalker, Inc.
18. PROCUREMENT INTEGRITY As an express condition of the award of this subcontract, (or subcontract modification) MACHINETALKER represents and warrants to KBR that in relation to the award of the prime contract (or prime contract modification) under which this subcontract is issued, MACHINETALKER has complied, and will continue to comply, in all respects with the Procurement Integrity provisions of the Office of Federal Procurement Policy Act Amendments of 1988 (the Act), 41 U.S.C. 423, and its implementing Federal Acquisition Regulations (see FAR 3.104), as amended. MACHINETALKER further agrees that it shall comply with the Act and implementing regulations, as amended, in relation to any and all modifications or extensions of the prime contract under which this subcontract is issued. For violations of the Act by the MACH INETALKER or MACHINETALKER's subcontractors, as determined by notice from the U.S. Government.
19. NOTICE Any correspondence of notice given by either Party to the other hereunder shall be served, if delivered in person to the office of the authorized representative and designated in writing to act for the respective party, or if deposited in the mail, properly stamped with the required postage and addressed to the office of the authorized representative. Either Party hereto shall have the right to change any representative or address it may have given to the other Party by giving such other party due notice in writing of such change. Notices shall be delivered as addressed as follows:
FOR KBR: Kevin Shriner Telephone: 703-526-7966
Kellogg Brown & Root Services, Inc.
1550 Wilson Blvd, Suite 200
Arlington VA 22209
FOR MACHINETALKER Roland F. Bryan Telephone: 805-957-1680
MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, CA 93101 Notices of all
changes to the Agreement, except as
otherwise stated herein, shall be delivered
thirty (30) days prior to the effective date
of the change.
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20. Purchase of the Software License.
MACHINETALKER offers the purchase of the Software License under the condition
that acceptance by KBR must be in the form of a Lump Sum payment in the amount
of $200,000 and received by MACHINETALKER prior to 11:59pm on 01 April 2005. In
the event KBR elects to purchase the Software License, said License terms and
conditions shall be as set forth in Exhibit 6 of this Agreement. In the event
KBR elects to end the project, or fails to purchase the Software License, such
action or inaction on behalf of KBR shall result in the following: 1) KBR shall
waive any and all rights to the licenses technology and products, 2) KBR and
MACHINETALKER shall cease to have any right and/or obligation to each other and
3) MACHINETALKER shall be free of all encumbrances and limitations on the
intellectual property rights as it applies to the licensed technology and
products.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 13 of 14 -- MachineTalker, Inc.
21. Agreement Documents
Attachment A -Relative Activity Periods vs. Task Attachment B -MACHINETALKER Hourly Rates Exhibit 1 - Halliburton Code of Business Conduct Exhibit 2 - Affidavit for MACHINETALKER (Final Release) Exhibit 3 - Small Business Program Representations Exhibit 4 - Organizational Conflict of Interest Exhibit 5 - Secrecy Agreement (Mutual Non-Disclosure Agreement) Exhibit 6 - Software License (9 Pages) Exhibit 7 - Purchase Order Terms and Conditions (11 Pages) Exhibit 8 - Notice of KBR Invoice Procedures
22. Entire Agreement.
The foregoing constitutes the entire Agreement between KBR and MACHINETALKER and supercedes any representations or Agreements heretofore made with respect to the same subject matter. This Agreement may be renewed, modified, or amended only by a document in writing signed by both parties hereto.
Please signify Agreement to the foregoing by dating and signing both originals of this Agreement and returning one original to KBR's attention.
Agreement No. CA-00062 12/29/2004 6:18 PM Page 14 of 14 -- MachineTalker, Inc.
"MACHINETALKER"
MACHINETALKER, INC., a Delaware corporation
Name & title: Date:
Roland F. Bryan, President
Address and Facsimile Number for Notice:
MachineTalker, Inc.
513 De La Vina Street
Santa Barbara, California 93101
Facsimile No.: (805) 957-1740
"KBR"
KELLOGG, BROWN & ROOT SERVICES, INC.
Name & title: Date:
Address and Facsimile Number for Notice:
Kellogg, Brown & Root Services, Inc.
Attn: Procurement
1550 Wilson Boulevard, Suite 400
Arlington, Virginia 22209
Facsimile No.: (____)
Consulting Agreement
MachineTalker, Inc.
ATTACHMENT A
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
ATTACHMENT B
[Redacted pursuant to Rule 406 of Regulation C of the Securities Act]
Consulting Agreement
MachineTalker, Inc.
EXHIBIT 1
Code of Business Conduct
Halliburton Company
Code of
Business
Conduct
TABLE OF CONTENTS
Letter To All Employees ......................................1
General Policy Regarding Laws and Business Conduct ...........2
Ethical Business Practices ...................................3
Sensitive Transactions ...................................3
Commercial Bribery .......................................4
Accounting Controls, Procedures and Records ..............5
Use and Disclosure of Inside Information .................6
Confidential or Proprietary information ..................6
Conflicts of Interest ....................................7
Fraud and Similar Irregularities .........................8
Export Matters and International
Business Relationships ......................................9
Export Administration and International
Economic Sanctions .......................................9
Boycotts .................................................9
International Business Relationships .....................10
Antitrust and Competition ...................................11
Employment and the Workplace ................................12
Equal Employment Opportunity .............................12
Harassment ...............................................12
Health, Safety and Environment ..............................13
Political Activities .......................................14
United States Federal Government Contracting ...............15
Confidential Reporting of Alleged Code Violations ..........1E
Useful Telephone Numbers ...................................1E
Training ...................................................1E
Distribution ...............................................1E
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General Policy Regarding Laws and Business Conduct
The Code of Business Conduct of Halliburton Company (the "Company") consists of the policies relating to the ethical and legal standards of conduct to be followed by Directors, employees and agents of the Company in the conduct of its business. The Code of Business Conduct applies to all Company Directors, employees and agents and all Company activities throughout the world, except where specifically indicated.
It is the policy of the Company to comply with applicable law. Some Company policies are based on the requirements of applicable law and others are just good ethics and business sense. The Company is organized under United States law and its securities are publicly traded. This means that the Company is primarily governed by United States law, and that United States law applies to some of the Company's business outside the United States.
The Company does business in many countries around the world and, as a good business citizen, we must observe the applicable laws of the countries in which the Company does business. Sometimes there is a conflict between the United States law and the law of one of the other countries in which the Company operates. In these situations the Company will resolve the conflict with the advice and counsel of the Law Department.
It is the personal responsibility of each Company Director, employee and agent to observe the standards of conduct and other requirements of the Code of Business Conduct whether or not these standards and requirements are also imposed by law. Any Director, employee or agent who does not comply with these standards and requirements is acting outside the scope of his or her employment, responsibilities or agency.
The underlying formal policies themselves have more detail than is contained in this booklet. It is the responsibility of each Director, employee or agent to familiarize himself or herself with the details of the policies of the Company that apply to his or her assigned duties. If an employee wishes to refer to the complete policies summarized in this booklet, they are available in electronic and written form. If a Director, employee or agent has any questions about the policies summarized in this booklet, he or she should contact the Law Department.
Reference: Corporate Policy 3-0001
Ethical Business Practices
Company policy requires Directors, employees and agents to observe high standards of business and personal ethics in the conduct of their duties and responsibilities. Directors and employees must practice fair dealing, honesty and integrity in every aspect of dealing with other Company employees, the public, the business community, shareholders, customers, suppliers, competitors and government authorities. When acting on behalf of the Company, Directors and employees shall not take unfair advantage through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or other unfair-dealing practices.
Company policy prohibits unlawful discrimination against employees, shareholders, Directors, officers, customers or suppliers on account of race, color, age, sex, religion or national origin. All persons shall be treated with dignity and respect and they shall not be unreasonably interfered with in the conduct of their duties and responsibilities.
No Director or employee should be misguided by any sense of loyalty to the Company or a desire for profitability that might cause him or her to disobey any applicable law or Company policy. Violation of Company policy will constitute grounds for disciplinary action, including, when appropriate, termination of employment.
Reference: Corporate Policy 3-0001
Sensitive Transactions
Company policy prohibits its Directors, employees and agents from entering into sensitive transactions. If such a transaction occurs, the Company and its officers, Directors and employees directly involved may be subject to fines, imprisonment and civil litigation.
The term "sensitive transactions" is commonly used to describe a broad range of business dealings generally considered to be either illegal, unethical, immoral or to reflect adversely on the integrity of the Company. These transactions are usually in the nature of kickbacks, gifts of significant value, bribes or payoffs made to favorably influence some decision affecting a company's business or for the personal gain of an individual. These transactions may result in violation of various laws, including the United States Foreign Corrupt Practices Act (the "FCPA") and similar laws of other countries.
Company policy and the FCPA prohibits the Company and its officers, Directors, employees and agents from corruptly offering or giving anything of value to:
o An official, including any person acting in an official
capacity for a government outside the United States or an
official of a public international organization;
o A political party official or political party outside the
United States; or
o A candidate for political office outside the United States;
directly or indirectly, for the purpose of influencing any act or decision of these officials in their official capacity or in violation of their lawful duties or to secure any improper advantage in order to help the Company obtain or retain business or direct business to any person.
Employees of government owned companies such as national oil companies are considered to be government officials.
Company policy prohibits any Director, employee or agent from making any payment or engaging in any transaction that is prohibited by the FCPA.
This policy does not prohibit properly made and recorded facilitating payments. Sometimes the Company may be required to make facilitating or expediting payments to a low level government official or employee in some countries other than the United States to expedite or secure the performance of routine governmental action by the government official or employee. Such facilitating payments may not be illegal under the FCPA and similar laws of other countries. Nevertheless, it may be difficult to distinguish a legal facilitating payment from an illegal bribe, kickback or payoff. Accordingly, facilitating payments must be strictly controlled and every effort must be made to eliminate or minimize such payments. Facilitating payments, if required, will be made only in accordance with the advance guidance of the Law Department. All facilitating payments must be recorded accurately as facilitating payments in the accounting records of the Company.
Reference: Corporate Policy 3-0005
Commercial Bribery
Company policy prohibits commercial bribes, kickbacks and other similar payoffs and benefits paid to any suppliers or customers.
Directors, employees and agents are also prohibited from receiving, directly or indirectly, anything of a significant value (other than salary, wages or other ordinary compensation from the Company) in connection with a transaction entered into by the Company.
Bribery of suppliers or customers includes any payment for the benefit of any representative of the supplier or customer. It includes:
o Gifts of other than nominal value;
o Cash payments by Directors, employees or third per-sons, such
as agents or consultants, who are reimbursed by the Company;
o The uncompensated use of Company services, facilities or
property, except as may be authorized by the Company; and
o Loans, loan guarantees or other extensions of credit.
This policy does not prohibit expenditures of reasonable amounts for meals and entertainment of suppliers and customers which are an ordinary and customary business expense, if they are otherwise lawful. Expenditures of this type should be included on expense reports and approved under standard Company procedures.
Reference: Corporate Policy 3-0006
Accounting Controls, Procedures and Records
Applicable laws and Company policy require the Company to keep books and records that accurately and fairly reflect its transactions and the dispositions of its assets. In addition, the Company must maintain a system of internal accounting controls that will ensure the reliability and adequacy of its books and records. Failure to meet such requirements may constitute a violation of law.
To satisfy these requirements, the Company has adopted policies to ensure that only proper transactions are entered into by the Company, that such transactions have proper management approval, that such transactions are properly accounted for in the books and records of the Company and that the reports and financial statements of the Company are timely prepared, understandable and fully, fairly and accurately reflect such transactions. All Directors and employees having any responsibility for such functions must be familiar with the Company's policies, accounting controls, procedures and records and must comply with their requirements.
Reference: Corporate Policy 3-0004
Use and Disclosure of Inside information
The laws of the United States and many other countries regulate the use and disclosure of inside information concerning the Company. Information is "inside information" if it has not been publicly disclosed. The Company has policies (based in part on such laws) concerning the use and disclosure of inside information.
Company policy prohibits disclosure of material inside information to anyone other than persons within the Company whose positions require them to know such information.
Company policy also prohibits trading in the securities of the Company by any employee while in the possession of material inside information. If an employee or agent has inside information he or she must wait until the end of business on the second business day after the information has been properly disclosed to the public before trading in the securities of the Company. Company policy also prohibits providing inside information to other persons or recommending that they buy or sell the Company's securities on the basis of inside information. More restrictive rules apply to certain key employees, officers and Directors.
A Director, employee or agent shall not trade in the securities of another company if, in the course of his or her employment or position with the Company, he or she learns confidential information about such other company that is likely to affect the price of such securities.
Company Directors, employees and agents are discouraged from short term speculation in the securities of the Company.
It is Company policy that no preferential treatment be given with respect to disclosure of inside information. The Company has adopted procedures to avoid improper preferential disclosures.
Reference: Corporate Policy 3-0008
Confidential or Proprietary Information
Company Directors, employees and agents often learn confidential or proprietary information about the Company or its customers. Company policy prohibits Directors, employees and agents from disclosing or using confidential or proprietary information outside the Company or for personal gain, either during or after employment, without proper written Company authorization to do so. An unauthorized disclosure could be harmful to the Company or a customer or helpful to a competitor.
The Company also works with proprietary data of customers, suppliers and joint venture partners. This is an important trust and must be discharged with the greatest care for the Company to merit the continued confidence of its customers, suppliers and joint venture partners. No Director, employee or agent shall disclose or use confidential or proprietary information outside the Company without Company authorization, nor shall any Director, employee or agent disclose such information to other employees except on a need-to-know basis.
Reference: Corporate Policy 3-0009
Conflicts of Interest
Company policy prohibits conflicts between the interests of its Directors or employees and the Company. A complete definition of what constitutes a conflict of interest is difficult. There are some situations, however, that will always be considered a prohibited conflict of interest. These situations occur when a Director or employee or any person having a close personal relationship with the Director or employee:
o Obtains a significant financial or other beneficial interest in one of the
Company's suppliers, customers or competitors without first notifying the
Company and obtaining written approval from the Chief. Executive Officer
or his or her designee;
o Engages in a significant personal business transaction involving the
Company for profit or gain, unless such transaction has first been
approved in writing by the Chief Executive Officer or his or her designee;
o Accepts money, gifts of other than nominal value, excessive hospitality,
loans, guarantees of obligations or other special treatment from any
supplier, customer or competitor of the Company (loans from lending
institutions at prevailing interest rates are excluded);
o Participates in any sale, loan or gift of Company property without
obtaining written approval from the Chief Executive Officer or his or her
designee;
o Learns of a business opportunity through association with the Company and
discloses it to a third party or invests in or takes the opportunity
personally without first offering it to the Company;
o Uses corporate property, information, or position for personal gain; or
o Competes with the Company.
A conflict of interest may arise because of outside directorships, personal use of Company property or obtaining Company services for personal benefit.
"Person having a close personal relationship with the Director or employee" refers to the Director's or employee's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, any person living in the same house with the Director or employee or any business associate of the Director or employee.
Periodically the Company requires certain employees to certify to the Company that they have complied with all requirements of the Code of Business Conduct. Disclosure of a particular situation that may be a conflict of interest does not mean that the Company will consider it to be substantial enough to be prohibited. Each situation will be considered on an individual basis.
Reference: Corporate Policy 3-0003
Fraud and Similar Irregularities
Company policy prohibits fraud and establishes procedures to be followed concerning the recognition, reporting and investigation of suspected fraud. Fraud includes, but is not limited to:
o Dishonest or fraudulent act;
o Embezzlement;
o Forgery or alteration of negotiable instruments such as
Company checks and drafts;
o Misappropriation of Company, employee, customer, partner or
supplier assets;
o Conversion to personal use of cash, securities, supplies or
any other Company asset;
o Unauthorized handling or reporting of Company transactions;
and
o Falsification of Company records or financial statements for
personal or other reasons.
Directors and employees are obligated to protect the Company's assets and ensure their efficient use. Theft, carelessness and waste of Company assets by Directors and employees are prohibited since such actions and conduct have a direct and negative impact on the Company's profitability. All Company assets shall only be used for the legitimate business purposes of the Company.
Any Director, employee or agent who suspects that any fraudulent activity may have occurred is required to report such concern to the Law Department, Audit Services, Security Department, or the Company's Chief Financial Officer. All fraud investigations will be conducted under the direction of the Law Department.
Reference: Corporate Policy 3-0015
Export Matters and International Business Relationships
Export Administration and International Economic Sanctions
Although the Company operates in many countries throughout the world, as a United States company it must comply with the export administration and international economic sanctions laws of the United States. Company policy requires that the Company conduct all of its business and export its services, products and technology in compliance with such laws. There are no exceptions to this policy.
The Company has established a comprehensive internal monitoring program to ensure compliance with such laws. The requirements of these laws are complex and sometimes difficult to understand. Any questions concerning the requirements of this policy or the applicable law should be addressed to the export control manager or the Law Department. All Company Directors, employees and agents must observe all requirements of the internal controls program and act in compliance with these laws.
Reference: Corporate Policy 3-0010
Boycotts
Applicable laws and Company policy prohibits cooperation with certain boycotts imposed by the laws of other countries. Applicable United States laws also require that the Company not provide certain information concerning the identity and nationality of its employees, Directors, shareholders, subcontractors and suppliers or information about where the Company does business when such information is requested to support a prohibited boycott.The Company is also required to report requests it receives to support such boycotts even though it does not comply with such requests.
Sometimes requests to support a prohibited boycott are hard to detect. All employees and agents who are likely to come in contact with such requests must be fully aware of the details of this policy.
Reference: Corporate Policy 3-0011
International Business Relationships
The Company often enters into business relationships with other persons and companies outside the United States. These "International Business Relationships" take the form of agency agreements, joint ventures and other forms of business combinations. Company policy governs the manner in which it will enter into and manage these business relationships.
The term "International Business Relationships" includes the following:
o Employment of an agent, consultant, sponsor or any other party to assist
the Company in obtaining work or projects, personnel visas, import
licenses, facilities or other matters necessary for operation within a
country or region;
o Entering into a joint venture, consortium or shareholder agreement, or any
other arrangement where another party obtains an equity interest in the
business of an entity in which the Company also owns an interest or a
share of the profits from any work performed by the Company;
o Entering into a distribution, marketing, sales representation or licensing
agreement where another party distributes, markets, sells or licenses
others or obtains a license relating to the services, products or
technology of the Company; or
o Entering into a contract or subcontract where another party will perform
the majority of the work to be performed under the Company's contract.
"International Business Relationships" do not include subcontracts or purchase orders for goods or routine services in the regular course of business.
While International Business Relationships are useful in the conduct of the Company's business, they must be adequately subject to the Company's systems of control to protect the Company's assets against unauthorized use. Also, the Company may be held accountable for actions taken by agents and others on its behalf. Thus, Company policy requires that selection of other parties with whom the Company will join in International Business Relationships must be subject to appropriate management control and investigation.
All proposed agreements establishing or amending such relationships must be carefully reviewed by legal, financial and management personnel prior to signing the agreement.
Further, these agreements must require that the other parties agree to comply with the Company's Code of Business Conduct for International Business Relationships. This separate code of conduct applies to International Business Relationships. It includes many of the same requirements as the Company's Code of Business Conduct. Any employee who has responsibilities with respect to International Business Relationships must be familiar with the more detailed applicable Company policies.
Reference: Corporate Policy 3-0007
Antitrust and Competition
The antitrust laws of the United States and other countries prohibit agreements or actions that might eliminate or discourage competition, bring about a monopoly, abuse a dominant market position, artificially maintain prices or otherwise illegally hamper or distort commerce.
In addition to criminal fines and jail terms, United States antitrust violations often allow a private party to recover three times actual money damages. Antitrust lawsuits have frequently resulted in judgments against companies amounting to tens of millions and on occasions hundreds of millions of dollars.
The Company does not tolerate any business activity that violates antitrust laws that apply to the Company's business. Company policy requires that no Director, employee or agent of the Company shall enter into any understanding, agreement, plan or scheme, express or implied, formal or informal, with any competitor in regard to prices, terms or conditions of sale or service, production, distribution, territories or customers; nor exchange or discuss with a competitor prices, terms or conditions of sale or service, or any other competitive information; nor engage in any other conduct which violates any of the antitrust laws. However, subcontracting arrangements or joint proposals with competitors which are not in violation of applicable antitrust laws and which have been approved by the Law Department are not prohibited. Any discussion with competitors in connection with a project in which the competitor is an alliance partner, joint venturer, or subcontractor must be precleared and coordinated with the Law Department.
Antitrust laws are complex and sometimes difficult to understand. Any Director, employee or agent of the Company who has responsibility for business conduct that might be subject to antitrust laws must be guided by the advice of the Law Department. Any questions concerning
antitrust implications must be referred to the Law Department before taking any action. There are no exceptions to this policy and no one is authorized to approve any action in violation of this policy.
Reference: Corporate Policy 3-0013
Employment and the Workplace
Equal Employment Opportunity
Company policy prohibits all unlawful discrimination against any employee or applicant for employment. The Company is committed to providing equal opportunity to all qualified individuals in its hiring and promotion policies. The Company will endeavor to create a workforce that is a reflection of the diverse population of the communities in which it operates.
With respect to operations governed by United States law, this policy relates to all phases of employment, including recruitment, hiring, placement, promotion, transfer, compensation, benefits, training, educational, social and recreational programs and the use of Company facilities. It covers all other personnel actions in all job categories and at all levels, including employment of qualified disabled individuals, disabled veterans and veterans of the Vietnam era. It is intended to provide employees with a working environment free of discrimination, harassment, intimidation or coercion relating directly or indirectly to race, color, religion, sex, age, disability or national origin.
All Directors, members of management and other employees shall actively support this policy.
Reference: Corporate Policy 3-0002
Harassment
The Company believes that all employees should be treated with dignity and respect. It is the policy of the Company to provide a work environment which is free from harassment.
As used in this policy, harassment includes sexual, racial, ethnic, and other forms of harassment, including harassment based upon disability. Some examples, depending on the facts and circumstances, include:
o Verbal or Written Harassment - unwelcome or derogatory comments
regarding a person's race, color, sex, religion, ancestry, ethnic
heritage, mental or physical disability, age or appearance; threats of
physical harm; or the distribution of material having such effects,
including by electronic mail or display in any Company work area.
o Physical Harassment - hitting, pushing or other aggressive physical
contact or threats to take such action, or inappropriate gestures.
o Sexual Harassment - unwelcome sexual conduct, whether verbal or
physical, including sexual advances, demands for sexual favors, or
other verbal or physical conduct of a sexual nature, whether or not it
was designed or intended to promote an intimate relationship.
It is not considered harassment for supervisors and other members of management to enforce job performance and standards of conduct in a fair and consistent manner.
Any employee who believes she or he is being harassed should consider telling the offending party that she or he objects to that conduct. This often solves the problem. However, if an employee is not comfortable confronting the offending party (or if the offending party's unwelcome conduct continues), the employee should advise his or her immediate supervisor of the offending conduct. If the employee is more comfortable discussing the issue with someone other than his or her immediate supervisor, or if the immediate supervisor has not taken what the employee regards as appropriate action to solve the problem, the employee should contact a Human Resources or Law Department representative.
Reports of harassment will be investigated promptly and discreetly.
Any employee who reports any act of harassment in good faith, including sexual harassment, will not be retaliated against because of such report.
Reference: Corporate Policy 3-0016
Health, Safety and Environment
Protection of health, safety and the prevention of pollution to the environment are primary goals of the Company. The Company will strive to develop and provide products and services that have no undue environmental impact and are safe in their intended use, efficient in their consumption of energy and natural resources and can be recycled, reused or disposed of safely.
All employees must conduct their duties and responsibilities in compliance with applicable law and industry standards relating to health and safety in the workplace and prevention of pollution to the environment.
The Chief Health, Safety and Environment Officer of the Company shall oversee the administration of this policy. Implementation shall be subject to the oversight of the Health, Safety and Environment Committee of the Company's Board of Directors.
Reference: Corporate Policy 3-0014
Political Activities
The Company believes strongly in the democratic process. Its Directors and employees should take an active interest in fostering principles of good government in the countries and communities in which they live. Directors and employees may spend their own time and funds supporting political candidates and issues, but they will not be reimbursed by the Company. Directors and employees should ensure that their personal political contributions and activities are in compliance with applicable law.
Further, some political conduct which is permitted and encouraged for individuals is unlawful for corporations.
Company policy requires Directors, employees and agents who represent the Company in political and governmental matters to comply with all laws regulating corporate participation in public affairs. To assure that these requirements are met and as guidance to them, the following policies have been adopted:
No Director, employee or agent shall apply any pressure on any other employee that infringes that individual's right to decide whether, to whom and in what amount a personal political contribution is to be made;
No contributions of Company funds, property or services shall be made in support of political candidates for federal office in the United States or in certain states or other countries where such contributions are prohibited. Indirect expenditures on behalf of a candidate, such as travel on a Company aircraft, may be considered as contributions in this regard;
No political contribution of Company funds, property or services can be made by the Company, except in accordance with a plan approved by the Chief Executive Officer;
o When permitted by law and authorized by the Chief Executive Officer, Company funds and facilities may be used to provide administrative support for the operation of political action committees or programs, the purposes of which include the disbursement of financial contributions made by certain employees, shareholders and/or others to political parties or candidates. No Company funds, facilities or other property will be used for other than administrative support of such a committee;
o When permitted by law and authorized by the Chief Executive Officer, expenditures of Company funds may be made to inform or influence the voting public on an issue of importance to the business of the Company and its shareholders.
If an employee or Director is requested to make a political contribution or to provide assistance on behalf of the Company, whether personal or corporate, and such employee or Director has any questions regarding this Company policy or applicable law, the employee or Director should contact the Company's Vice President - Government Relations or the Law Department.
Reference: Corporate Policy 3-0012
United States(degree)federal Government Contracting
To ensure that the Company complies with federal regulations on United States governmental contracts, all employees involved in the performance of work under governmental contracts are to be adequately informed and sufficiently trained in the policies and practices contained in the Code of Business Conduct and other Company policies specifically relating to government contracting. Each business unit manager with contracts with the United States government is responsible for ensuring that training sessions regarding these policies are conducted and that the training sessions are properly documented.
The Company takes appropriate, timely action to correct violations of United States governmental standards. If any employee has a question on the propriety of a transaction, the employee must report the transaction to the immediate supervisor. If the supervisor finds the question to have substance, the supervisor must report the transaction to the General Counsel or his or her designee. The supervisor must advise the employee of the action the supervisor has taken. If the employee disagrees with the supervisor or if the employee is not comfortable reporting the transaction to the supervisor, the employee may contact the General Counsel or his or her designee directly.
When cost and pricing data are required to respond to a government solicitation, the cost and pricing data must be current, accurate, and complete at the time of submission. All costs are to be properly recorded, documented, and retained in compliance with United States federal procurement regulations. Each business unit doing business with the United States government must invoice the government in strict compliance with United States governmental cost principles and other United States federal regulations.
Many United States governmental projects in which the Company participates may involve classified or proprietary materials or information. In these cases, the Company complies with all United States government security regulations to prevent unauthorized access, distribution, or use of any classified information.
The Company complies with applicable United States federal statutes and regulations governing the employment of former United States military, Department of Defense, or other federal employees. When the Company contemplates hiring a former United States governmental employee or engaging the employee as a consultant, the responsible business unit manager shall consult with the Law Department for guidance.
Reference: Corporate Policy 3-0017
Confidential Reporting of Alleged Code Violations
If you need advice or assistance or know of a violation of the Code of Business Conduct, you should contact management or the Law Department in person or by telephone. You may also send an e-mail to FHOUCODE or a letter to the special Mailbox noted below, or you may call the Company's Ethics Helpline.
If you use the Ethics Helpline, Mailbox or Code e-mail address:
1. You may refrain from identifying yourself (although, in the absence of
such identification, the Company may have insufficient information to
investigate the allegations).
2. No retribution shall be imposed on you for making the report in good
faith unless you are one of the violators.
3. Your confidentiality shall be maintained unless disclosure is:
o Required or advisable in connection with any governmental investigation
or report;
o In the interests of the Company, consistent with the goals of the Code;
or
o Required or advisable in the Company's legal defense of the matter.
The Ethics Helpline, Mailbox and Code e-mail address are not intended to be used for personal grievances. All matters that do not appear to constitute violations of the Code of Business Conduct will be referred to the appropriate department; for example, reports concerning personnel grievances will be sent to the Human Resources Department.
The Ethics Helpline is answered by an independent company and is available every day, 24 hours a day. Translators are available on request. If you are calling from the United States or Canada, you may access the Ethics Helpline toll free by dialing:
1-888-414-8112
If you are in the United Kingdom, you may dial toll free: 0800-169-3116 If you are in Indonesia, you may dial toll free:
001-803-1-009-1244
If you are calling from any other country, you may call collect at:
770-613-6714
The address of the Mailbox for making Code reports is:
Director of Business Conduct Halliburton Company P.O. Box 2625 Houston, Texas 77252-2625 U.S.A.
Useful Telephone Numbers
Executive Vice President 713.759.2620
and General Counsel
Law Department - Houston, TX 281.575.4434
(Energy Services Group)
Law Department - Houston, TX 713.753.2241
(Kellogg Brown & Root)
Law Department - Houston, TX 713.753.2344
(KBR Government Operations)
General Counsel and Secretary -
Landmark 713.839.2422
Law Department - Leatherhead
44.1372.86.6583
Law Department - Aberdeen 44.1224.776071
Law Department - Cairo 20.2.522.8737
Law Department - Dubai 971.4.3036629
Law Department - Moscow 7.095.755.8300
Law Department - Perth 61.8.9278.4280
Law Department - Singapore 65.6329.7779
Chief Financial Officer 713.759.2636
Vice President - Human Resources 281.575.3734
Director of Audit Services 713.839.4747
Security Department 713.839.4704
Director of Business Conduct 713.759.2673
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Training
Code of Business Conduct training is available on the Company's intranet. Additionally, various departments offer a significant number of training courses in a wide number of Code of Business Conduct subjects that include, among many others, environmental compliance, safety, compliance with laws and equal opportunity. To arrange training on the Code of Business Conduct or other subjects, contact the Director of Business Conduct.
Distribution
The Company's Code of Business Conduct is a very important part of the governance of the Company. A summary of the Code is published in a number of languages and is distributed to employees in hard copy and on the Company's intranet. The Code of Business Conduct is also published on the Company's internet home page at http://www.halliburton.com. To obtain a full copy of the Company's Code of Business Conduct, contact the Director of Business Conduct.
Consulting Agreement
MachineTalker, Inc.
EXHIBIT 2
Affidavit for Consultant - Final Release
(submit with final invoice)
CONSULTANT Prime Contractor
Kellogg Brown & Root Services, Inc.
1550 Wilson Boulevard, Suite 200
Arlington, Virginia 22209
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"AFFIDAVIT FOR CONSULTANT"
RE: AGREEMENT/WORK RELEASE NO.
WHEREAS, the above-named Consultant entered into the above-referenced Agreement with Kellogg Brown & Root Services, Inc. for performance by Consultant of the Services described in the Agreement; and
WHEREAS, under the Agreement certain monies are not due and payable unto Consultant until all bills for labor, material, and other changes arising in the performance of the Services have been fully paid by the Consultant;
NOW, THEREFORE, for the purpose of inducing Kellogg Brown & Root Services, Inc. to pay over such monies unto the Consultant, the Consultant does hereby:
Warrant and represent to Kellogg Brown & Root Services, Inc.
that all bills for labor, material, re-sublet work, equipment rental,
taxes, insurance and all other charges arising in connection with the
performance of the Services have been fully paid by or for the
Consultant, except as listed below;
Agree to indemnify and hold harmless Kellogg Brown & Root
Services, Inc. from all liens, claims, demands, penalties, losses,
costs, damages, and liability in any manner arising out of or in
connection with any claim by any person, entity or agency for payment
for work or labor performed or material furnished pursuant to or in
connection with the Agreement;
Release, relieve and discharge Kellogg Brown & Root Services,
Inc. from all claims for payment (other than unpaid retainage, if any)
for work performed under or in connection with the Agreement or any
change order or other modification thereto, except as listed below.
EXCEPTIONS:
Signed:_____________________________________________
Printed Name and Title_____________________________________________
FOR CONSULTANT
SUBSCRIBED AND SWORN TO before me this the_______day of__________2003
NOTARY PUBLIC
County of___________________
State of__________________________
Consulting Agreement
MachineTalker, Inc.
EXHIBIT 3
Small Business Program Representations
52.21 9-1 SMALL BUSINESS PROGRAM REPRESENTATIONS (APR 2002) - ALTERNATE I (APR
2002)
(a)(1) The North American Industry Classification System (NAICS) code for this acquisition is 561210.
(2) The small business size standard is $6,000,000.00.
(3) The small business size standard for a concern which submits an offer in its own name, other than on a construction or service contract, but which proposes to furnish a product which it did not itself manufacture, is 500 employees.
(b) Representations. (1) The offeror represents as part of its offer that it [ ] is, [ ] is not a small business concern.
(2) (Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents, for general statistical purposes, that it [ ] is, [ ] is not a small disadvantaged business concern as defined in 13 CFR 124.1002.
(3) (Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents as part of its offer that it [ ] is, [ ] is not a women-owned small business concern.
(4) (Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents as part of its offer that it [ ] is, [ ] is not a veteran-owned small business concern.
(5) (Complete only if the offeror represented itself as a veteran-owned small business concern in paragraph (b)(4) of this provision.) The offeror represents as part of its offer that it [ ] is, [ ] is not a service-disabled veteran-owned small business concern.
(6) [Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.] The offeror represents, as part of its offer, that--
(i) It [ ] is, [ ] is not a HUBZone small business concern listed, on the date of this representation, on the List of Qualified HUBZone Small Business Concerns maintained by the Small Business Administration, and no material change in ownership and control, principal office, or HUBZone employee percentage has occurred since it was certified by the Small Business Administration in accordance with 13 CFR part 126; and
(ii) It [ ] is, [ ] is not a joint venture that complies with the requirements of 13 CFR part 126, and the representation in paragraph (b)(6)(i) of this provision is accurate for the HUBZone small business concern or concerns that are participating in the joint venture. (The offeror shall enter the name or names of the HUBZone small business concern or concerns that are participating in the joint venture:
) Each HUBZone small business concern participating in the joint venture shall submit a separate signed copy of the HUBZone representation.
(7) (Complete if offeror represented itself as disadvantaged in paragraph (b)(2) of this provision.) The offeror shall check the category in which its ownership falls:
____ Black American.
____ Hispanic American.
____ Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians).
____ Asian-Pacific American (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China, Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru).
Subcontinent Asian (Asian-Indian) American (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands, or Nepal).
Individual/concern, other than one of the preceding.
(c) Definitions. As used in this provision--
Service-disabled veteran-owned small business concern--
(1) Means a small business concern--
(i) Not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service-disabled veterans; and
(ii) The management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran.
(2) Service-disabled veteran means a veteran, as defined in 38 U.S.C. 101(2), with a disability that is service-connected, as defined in 38 U.S.C. 101(16).
"Small business concern," means a concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on Government contracts, and qualified as a small business under the criteria in 13 CFR Part 121 and the size standard in paragraph (a) of this provision.
Veteran-owned small business concern means a small business concern--
(1) Not less than 51 percent of which is owned by one or more veterans (as defined at 38 U.S.C. 101(2)) or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans; and
(2) The management and daily business operations of which are controlled by one or more veterans.
"Women-owned small business concern," means a small business concern --
(1) That is at least 51 percent owned by one or more women or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more women; or
(2) Whose management and daily business operations are controlled by one or more women.
(d) Notice.
(1) If this solicitation is for supplies and has been set aside, in whole or in part, for small business concerns, then the clause in this solicitation providing notice of the set-aside contains restrictions on the source of the end items to be furnished.
(2) Under 15 U.S.C. 645(d), any person who misrepresents a firm's status as a small, HUBZone small, small disadvantaged, or women-owned small business concern in order to obtain a contract to be awarded under the preference programs established pursuant to section 8(a), 8(d), 9, or 15 of the Small Business Act or any other provision of Federal law that specifically references section 8(d) for a definition of program eligibility, shall--
(i) Be punished by imposition of fine, imprisonment, or both;
(ii) Be subject to administrative remedies, including suspension and debarment; and
(iii) Be ineligible for participation in programs conducted under the authority of the Act.
(End of provision)
52.21 9-19 SMALL BUSINESS CONCERN REPRESENTATION FOR THE SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM (OCT 2000)
(a) Definition.
"Emerging small business" as used in this solicitation, means a small business concern whose size is no greater than 50 percent of the numerical size standard applicable to the North American Industry Classification System (NAICS) code assigned to a contracting opportunity.
(b) [Complete only if the Offeror has represented itself under the provision at 52.219-1 as a small business concern under the size standards of this solicitation.] The Offeror [ ] is, [ ] is not an emerging small business.
(c) (Complete only if the Offeror is a small business or an emerging small business, indicating its size range.)
Offeror's number of employees for the past 12 months (check this column if size standard stated in solicitation is expressed in terms of number of employees) or Offeror's average annual gross revenue for the last 3 fiscal years (check this column if size standard stated in solicitation is expressed in terms of annual receipts). (Check one of the following.) No. of Employees Avg. Annual Gross Revenues
50 or fewer $1 million or less
-------- -------
101 - 250 $2,000,001 - $3.5 million
-------- -------
251 - 500 $3,500,001 - $5 million
-------- -------
501 - 750 $5,000,001 - $10 million
-------- -------
751 - 1,000 $10,000,001 - $17 million
-------- -------
Over 1,000 Over $17 million
-------- -------
(End of provision)
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52.21 9-21 SMALL BUSINESS SIZE REPRESENTATION FOR TARGETED INDUSTRY CATEGORIES UNDER THE SMALL BUSINESS COMPETITIVENESS DEMONSTRATION PROGRAM (MAY 1999)
(Complete only if the Offeror has represented itself under the provision at 52.219-1 as a small business concern under the size standards of this solicitation.)
Offeror's number of employees for the past 12 months (check this column if size standard stated in solicitation is expressed in terms of number of employees) or Offeror's average annual gross revenue for the last 3 fiscal years (check this column if size standard stated in solicitation is expressed in terms of annual receipts). (Check one of the following.)
No. of Employees Avg. Annual Gross Revenues
50 or fewer $1 million or less
-------- -------
101 - 250 $2,000,001 - $3.5 million
-------- -------
251 - 500 $3,500,001 - $5 million
-------- -------
501 - 750 $5,000,001 - $10 million
-------- -------
751 - 1,000 $10,000,001 - $17 million
-------- -------
Over 1,000 Over $17 million
-------- -------
(End of provision)
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52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS (FEB 1999) The offeror
represents that --
(a) [ ] It has, [ ] has not participated in a previous contract or subcontract subject to the Equal Opportunity clause of this solicitation;
(b) [ ] It has, [ ] has not, filed all required compliance reports; and
(c) Representations indicating submission of required compliance reports, signed by proposed subcontractors, will be obtained before subcontract awards.
(End of provision)
52.222-25 AFFIRMATIVE ACTION COMPLIANCE (APR 1984)
The offeror represents that (a) [ ] it has developed and has on file, [ ] has not developed and does not have on file, at each establishment, affirmative action programs required by the rules and regulations of the Secretary of Labor (41 CFR 60-1 and 60-2), or
(b) [ ] has not previously had contracts subject to the written affirmative action programs requirement of the rules and regulations of the Secretary of Labor.
(End of provision)
52.222-38 COMPLIANCE WITH VETERANS' EMPLOYMENT REPORTING REQUIREMENTS (DEC 2001)
By submission of its offer, the offeror represents that, if it is subject to the reporting requirements of 38 U.S.C. 4212(d) (i.e., if it has any contract containing Federal Acquisition Regulation clause 52.222-37, Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans), it has submitted the most recent VETS-100 Report required by that clause.
(End of provision)
52.223-13 CERTIFICATION OF TOXIC CHEMICAL RELEASE REPORTING (OCT 2000)
(a) Submission of this certification is a prerequisite for making or entering into this contract imposed by Executive Order 12969, August 8, 1995.
(b) By signing this offer, the offeror certifies that--
(1) As the owner or operator of facilities that will be used in the performance of this contract that are subject to the filing and reporting requirements described in section 313 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) (42 U.S.C. 11023) and section 6607 of the Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13106), the offeror will file and continue to file for such facilities for the life of the contract the Toxic Chemical Release Inventory Form (Form R) as described in sections 313(a) and (g) of EPCRA and section 6607 of PPA; or
(2) None of its owned or operated facilities to be used in the performance of this contract is subject to the Form R filing and reporting requirements because each such facility is exempt for at least one of the following reasons: (Check each block that is applicable.)
[ ] (i) The facility does not manufacture, process or otherwise use any toxic chemicals listed under section 313(c) of EPCRA, 42 U.S.C. 11023(c);
[ ] (ii) The facility does not have 10 or more full-time employees as specified in section 313.(b)(1)(A) of EPCRA 42 U.S.C. 11023(b)(1)(A);
[ ] (iii) The facility does not meet the reporting thresholds of toxic chemicals established under section 313(f) of EPCRA, 42 U.S.C. 11023(f) (including the alternate thresholds at 40 CFR 372.27, provided an appropriate certification form has been filed with EPA);
[ ] (iv) The facility does not fall within Standard Industrial Classification Code (SIC) major groups 20 through 39 or their corresponding North American Industry Classification System (NAICS) sectors 31 through 33; or
[ ] (v) The facility is not located within any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Northern Mariana Islands, or any other territory or possession over which the United States has jurisdiction.
(End of provision)
52.230-1 COST ACCOUNTING STANDARDS NOTICES AND CERTIFICATION (JUN 2000)
Note: This notice does not apply to small businesses or foreign governments. This notice is in three parts, identified by Roman numerals I through III.
Offerors shall examine each part and provide the requested information in order to determine Cost Accounting Standards (CAS) requirements applicable to any resultant contract.
If the offeror is an educational institution, Part II does not apply unless the contemplated contract will be subject to full or modified CAS coverage pursuant to 48 CFR 9903.201-2(c)(5) or 9903.201-2(c)(6), respectively.
I. DISCLOSURE STATEMENT--COST ACCOUNTING PRACTICES AND CERTIFICATION
(a) Any contract in excess of $500,000 resulting from this solicitation will be subject to the requirements of the Cost Accounting Standards Board (48 CFR Chapter 99), except for those contracts which are exempt as specified in 48 CFR 9903.201-1.
(b) Any offeror submitting a proposal which, if accepted, will result in a contract subject to the requirements of 48 CFR Chapter 99 must, as a condition of contracting, submit a Disclosure Statement as required by 48 CFR 9903.202. When required, the Disclosure Statement must be submitted as a part of the offeror's proposal under this solicitation unless the offeror has already submitted a Disclosure Statement disclosing the practices used in connection with the pricing of this proposal. If an applicable Disclosure Statement has already been submitted, the offeror may satisfy the requirement for submission by providing the information requested in paragraph (c) of Part I of this provision.
CAUTION: In the absence of specific regulations or agreement, a practice disclosed in a Disclosure Statement shall not, by virtue of such disclosure, be deemed to be a proper, approved, or agreed-to practice for pricing proposals or accumulating and reporting contract performance cost data.
(c) Check the appropriate box below:
(1) Certificate of Concurrent Submission of Disclosure Statement.
The offeror hereby certifies that, as a part of the offer, copies of the Disclosure Statement have been submitted as follows: (i) original and one copy to the cognizant Administrative Contracting Officer (ACO) or cognizant Federal agency official authorized to act in that capacity (Federal official), as applicable, and (ii) one copy to the cognizant Federal auditor.
(Disclosure must be on Form No. CASB DS-1 or CASB DS-2, as applicable. Forms may be obtained from the cognizant ACO or Federal official and/or from the loose-leaf version of the Federal Acquisition Regulation.)
Date of Disclosure Statement:_________________Name and Address of Cognizant ACO or Federal Official Where Filed:____________________
The offeror further certifies that the practices used in estimating costs in pricing this proposal are consistent with the cost accounting practices disclosed in the Disclosure Statement.
(2)Certificate of Previously Submitted Disclosure Statement. The offeror hereby certifies that the required Disclosure Statement was filed as follows:
Date of Disclosure Statement:___________Name and Address of Cognizant ACO or Federal Official Where Filed:__________________________________
The offeror further certifies that the practices used in estimating costs in pricing this proposal are consistent with the cost accounting practices disclosed in the applicable Disclosure Statement.
(3)Certificate of Monetary Exemption.
The offeror hereby certifies that the offeror, together with all divisions, subsidiaries, and affiliates under common control, did not receive net awards of negotiated prime contracts and subcontracts subject to CAS totaling more than $50 million (of which at least one award exceeded $1 million) in the cost accounting period immediately preceding the period in which this proposal was submitted. The offeror further certifies that if such status changes before an award resulting from this proposal, the offeror will advise the Contracting Officer immediately.
(4) Certificate of Interim Exemption.
The offeror hereby certifies that (i) the offeror first exceeded the monetary
exemption for disclosure, as defined in (3) of this subsection, in the cost
accounting period immediately preceding the period in which this offer was
submitted and (ii) in accordance with 48 CFR 9903.202-1, the offeror is not yet
required to submit a Disclosure Statement. The offeror further certifies that if
an award resulting from this proposal has not been made within 90 days after the
end of that period, the offeror will immediately submit a revised certificate to
the Contracting Officer, in the form specified under subparagraph (c)(1) or
(c)(2) of Part I of this provision, as appropriate, to verify submission of a
completed Disclosure Statement.
CAUTION: Offerors currently required to disclose because they were awarded a CAS-covered prime contract or subcontract of $50 million or more in the current cost accounting period may not claim this exemption (4). Further, the exemption applies only in connection with proposals submitted before expiration of the 90-day period following the cost accounting period in which the monetary exemption was exceeded.
II. COST ACCOUNTING STANDARDS--ELIGIBILITY FOR MODIFIED CONTRACT COVERAGE
If the offeror is eligible to use the modified provisions of 48 CFR 9903.201-2(b) and elects to do so, the offeror shall indicate by checking the box below. Checking the box below shall mean that the resultant contract is subject to the Disclosure and Consistency of Cost Accounting Practices clause in lieu of the Cost Accounting Standards clause.
[ ] The offeror hereby claims an exemption from the Cost Accounting Standards clause under the provisions of 48 CFR 9903.201-2(b) and certifies that the offeror is eligible for use of the Disclosure and Consistency of Cost Accounting Practices clause because during the cost accounting period immediately preceding the period in which this proposal was submitted, the offeror received less than $50 million in awards of CAS-covered prime contracts and subcontracts. The offeror further certifies that if such status changes before an award resulting from this proposal, the offeror will advise the Contracting Officer immediately.
CAUTION: An offeror may not claim the above eligibility for modified contract coverage if this proposal is expected to result in the award of a CAS-covered contract of $50 million or more or if, during its current cost accounting period, the offeror has been awarded a single CAS-covered prime contract or subcontract of $25 million or more.
III. ADDITIONAL COST ACCOUNTING STANDARDS APPLICABLE TO EXISTING CONTRACTS
The offeror shall indicate below whether award of the contemplated contract would, in accordance with subparagraph (a)(3) of the Cost Accounting Standards clause, require a change in established cost accounting practices affecting existing contracts and subcontracts.
[ ] YES [ ] NO
(End of provision)
252.209-7001 DISCLOSURE OF OWNERSHIP OR CONTROL BY THE GOVERNMENT OF A TERRORIST
COUNTRY (MAR 1998)
(a) "Definitions."
As used in this provision --
(a) "Government of a terrorist country" includes the state and the government of a terrorist country, as well as any political subdivision, agency, or instrumentality thereof.
(2) "Terrorist country" means a country determined by the Secretary of State, under section 6(j)(1)(A) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)(i)(A)), to be a country the government of which has repeatedly provided support for such acts of international terrorism. As of the date of this provision, terrorist countries include: Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria.
(3) "Significant interest" means --
(i) Ownership of or beneficial interest in 5 percent or more of the firm's or subsidiary's securities. Beneficial interest includes holding 5 percent or more of any class of the firm's securities in "nominee shares," "street names," or some other method of holding securities that does not disclose the beneficial owner;
(ii) Holding a management position in the firm, such as a director or officer;
(iii) Ability to control or influence the election, appointment, or tenure of directors or officers in the firm;
(iv) Ownership of 10 percent or more of the assets of a firm such as equipment, buildings, real estate, or other tangible assets of the firm; or
(v) Holding 50 percent or more of the indebtness of a firm.
(b) "Prohibition on award."
In accordance with 10 U.S.C. 2327, no contract may be awarded to a firm or a subsidiary of a firm if the government of a terrorist country has a significant interest in the firm or subsidiary or, in the case of a subsidiary, the firm that owns the subsidiary, unless a waiver is granted by the Secretary of Defense.
(c) "Disclosure."
(1) Identification of each government holding a significant interest; and
(2) A description of the significant interest held by each government.
(End of provision)
252.225-7020 TRADE AGREEMENTS CERTIFICATE (APR 2003)
(a) Definitions. Caribbean Basin country end product, designated country end product, NAFTA country end product, non-designated country end product, qualifying country end product, and U.S. -made end product have the meanings given in the Trade Agreements clause of this solicitation.
(b) Evaluation. The Government--
(1) Will evaluate offers in accordance with the policies and procedures of Part 225 of the Defense Federal Acquisition Regulation Supplement; and
(2) Will consider only offers of end products that are U.S.-made, qualifying country, designated country, Caribbean Basin country, or NAFTA country end products, unless the Government determines that--
(i) There are no offers of such end products;
(ii) The offers of such end products are insufficient to fulfill the Government's requirements; or
(iii) A national interest exception to the Trade Agreements Act applies.
(c) Certification and identification of country of origin.
(1) For all line items subject to the Trade Agreements clause of this solicitation, the offeror certifies that each end product to be delivered under this contract, except those listed in paragraph (c)(2) of this provision, is a U.S.-made, qualifying country, designated country, Caribbean Basin country, or NAFTA country end product.
(2) The following supplies are other non-designated country end products:
(Line Item Number)
(Country of Origin)
(End of provision)
252.247-7022 REPRESENTATION OF EXTENT OF TRANSPORTATION BY SEA (AUG 1992)
(a) The Offeror shall indicate by checking the appropriate blank in paragraph
(b) of this provision whether transportation of supplies by sea is anticipated
under the resultant contract. The term supplies is defined in the Transportation
of Supplies by Sea clause of this solicitation.
(b) Representation. The Offeror represents that it:
(1) Does anticipate that supplies will be transported by sea in the performance of any contract or subcontract resulting from this solicitation.
(2) Does not anticipate that supplies will be transported by sea in the performance of any contract or subcontract resulting from this solicitation.
(c) Any contract resulting from this solicitation will include the Transportation of Supplies by Sea clause. If the Offeror represents that it will not use ocean transportation, the resulting contract will also include the Defense FAR Supplement clause at 252.247-7024, Notification of Transportation of Supplies by Sea.
(End of provision)
52.000-4117 CONTRACTOR'S CERTIFICATION
Bidders are cautioned to note the "Contractor's Certification," included in this solicitation, and to furnish the information required by paragraph b., Partnerships, and paragraph c., Corporations, as appropriate.
Name of Company:
Signed by:
Typed/Printed Name:
Date Signed:
Consulting Agreement MachineTalker, Inc.
EXHIBIT 4
Organizational Conflict of Interest
ORGANIZATIONAL CONFLICT OF INTEREST
CERTIFICATION
MachineTalker, Inc.
Consultant
Consultant certifies that, to the best of its knowledge and belief, and excepting those organizations listed below, no facts exist concerning any past, present, or currently planned activities (financial, contractual, organizational or otherwise) which relate to the work contemplated to be provided to the Kellogg Brown & Root Services, Inc. and which are relevant to possible organizational conflicts of interest.
KBRSI acknowledges that Consultant provides its MachineTalker(R) products, its consulting and its development services to other clients; and that Consultant has developed the means and promoted the use of its products in shipping container tracking and security to many organizations including KBRSI. In this regard Consultant has published original material, given seminars and has entered into prior negotiations with those clients listed below:
Continental Airlines, Universal Guardian Holdings, Mitsubishi, Sovereign Tracking Systems, Nera Satellite Systems (Norwegian shipping).
Consultant certifies that these referenced clients may specify the use of MachineTalker(R) products in the tracking of shipping containers or inventory. Consultant acknowledges that the goal of the KBRSI Agreement is to develop the means to track shipping containers and inventory on a global basis and to provide that service for the shipping industry. Therefore, in keeping with the Agreement, should any of these existing clients wish to develop a similar service using MachineTalker(R) products, Consultant will introduce them to KBRSI to offer its capability to them.
Signature:
Name:
Title:
Date:
Company:
Address:
Phone No.:
Consulting Agreement MachineTalker, Inc.
EXHIBIT 5
Secrecy Agreement
SECRECY AGREEMENT
MachineTalker, Inc. hereinafter called Consultant, agrees to cooperate fully with Kellogg Brown & Root Services, Inc, hereinafter called Company in its patents, proprietary information, and nondisclosure policies, copies of which have been provided to Consultant. Consultant further agrees as follows:
1. Consultant will not use or disclose to anyone, at any time or in any manner, any trade secrets or confidential information which Consultant learns as a result of/or during the performance of Consultant's services.
2. Such "trade secrets confidential information" shall include everything told to Consultant in confidence as a trade secret and also all photographs, maps, drawings, reports, specifications, operating data, procurement or marketing information, cost data and other information related to the details of the work. Consultant is involved in and the operations and installations affected. No such information shall be released to anyone other, than authorized representatives of Company for whom the work is being performed, who have a need to know, either before or after completion of the work, except with the written consent by Company's representative.
3. These obligations shall continue during the term of the Agreement and for three (3) years thereafter.
4. Consultant understands and agrees that these obligations may be enforced by legal action for damages, injunction or otherwise, brought by Company for whom the work is performed, or their assigns.
I have read this Agreement and agree to its provisions. MachineTalker, Inc.
SIGNED:
NAME:
DATE:
EXHIBIT 6
Software License
EXHIBIT 6
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT (the "Agreement") is made and entered into, effective as of December __, 2004 (the "Effective Date"), by and between MACHINETALKER, INC., (MACHINETALKER) a Delaware corporation ("Licensor"), and KELLOGG, BROWN & ROOT SERVICES, INC., (KBR) a Delaware corporation ("LICENSEE"), with reference to the following facts:
RECITALS:
MACHINETALKER owns the "Software" and manufactures and sells the "Licensed Product" described below, and the parties have agreed to execute this Agreement in order to memorialize the terms and conditions on which MACHINETALKER shall grant to KBR certain license rights to use the "Software" in connection with its use of the Licensed Product.
AGREEMENTS:
NOW, THEREFORE, the parties hereto, intending to be legally bound, do hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1 "CONFIDENTIAL INFORMATION" means and includes (a) all Trade Secrets, knowledge, data and other information of a confidential or proprietary nature which is owned, held, or known by MACHINETALKER and relating to the Licensed Technology, including but not limited to the Source Code for the Software, and all customer lists, business plans, marketing plans and strategies, pricing strategies and other subject matter pertaining to the Licensed Technology, and (b) all other information which either (i) is conspicuously identified as "confidential" at the time it is disclosed to KBR, or (ii) is verbally disclosed, and/or identified as "confidential" at the time of such disclosure, within Five (5) days after the latter of the execution of this Agreement or the disclosure of such information.
1.2 "DOCUMENTATION" means those User Guides that MACHINETALKER provides to KBR upon KBR's purchase of the Licensed Product.
1.3 "EFFECTIVE DATE" has the meaning ascribed thereto in the first paragraph of this Agreement.
1.4 "LICENSE" means the license granted by MACHINETALKER to KBR pursuant to Section 2, below.
1.5 "LICENSE FEES" means the sum of [Redacted pursuant to Rule 406 of Regulation C of the Securities Act], which KBR shall pay to MACHINETALKER concurrently herewith pursuant to Section 3, below.
1.6 "LICENSED PRODUCT" means those certain devices that employ the use of the Licensed Technology and that are manufactured and sold by MACHINETALKER that are intended to enable users of those devices to track inventory, containers and other similar packages.
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1.7 "LICENSED TECHNOLOGY" means the Documentation and the Software that enables the Licensed Products to transmit and receive information via self-coordinated machine network by employing MACHINETALKER's Simple Machine Management Protocol (SMMP) technology, as described in U.S. Patent Application 2004/0114557. The scope of the technology disclosed within U.S. Patent Application 2004/0114557, and licensed herein, shall be considered limited to such aspects of the technology as reasonably relates to applications, systems, or solutions that track inventory, containers and other similar packages.
1.8 "MATERIAL ERRORS" means reproducible or otherwise verifiable errors in the Licensed Product and Technology that causes abnormal termination of the Software program, loss of user data, or otherwise prevents the use of the Licensed Product and Technology for its intended purpose.
1.9 "OBJECT CODE" means the version of a computer program that is not in a programming language and is in a specific, machine-readable format only.
1.10 "SOFTWARE" means the Licensed Technology in Object Code form, including the Documentation, that enables the Licensed Products to transmit and receive information in a self-coordinated machine network manner by employing MACHINETALKER's Simple Machine Management Protocol (SMMP) technology, as described in U.S. Patent Application 2004/0114557.
1.11 "SOFTWARE UPDATES or UPGRADES" means such improvements and enhancements to the Licensed Product and Technology as MACHINETALKER from time to time shall produce, market, and give freely to KBR after the Effective Date, or that KBR shall from time to time request and have provided by MACHINETALKER.
1.12 "SOURCE CODE" means the version of a computer program that is in a programming language that is understandable by humans and shall include any programmers' notes and similar documentation available prior to the date of this agreement.
1.13 "TRADE SECRETS" means information that has independent economic value, is not generally known in the industry, and is the subject of reasonable efforts by either party to maintain secret.
2. GRANT OF LICENSE & RIGHT OF FIRST REFUSAL
2.1 EXCLUSIVE LICENSE. Subject to the limitations on "Use" set forth in
Section 2.3, below, MACHINETALKER hereby grants to KBR an exclusive license to
use the Software in connection with the use and operation of Licensed Products
to track inventory, containers and other similar packages. KBR acknowledges that
the foregoing License is a nonexclusive license as regards applications outside
the reasonable scope of the Licensed Products. Both Parties acknowledge that
this exclusive license is intended as an absolute limit on MACHINETALKER's right
and power to grant to any other person, juridical or otherwise, a license to use
the Licensed Technology and Licensed Products as described herein including the
right to use the same in connection with the sale of goods or services that may
be competitive with any goods or services sold now or within Five years of the
effective date of this License date by MACHINETALKER.
2.2 RESTRICTIONS ON USE. The exclusive license granted by MACHINETALKER to KBR to use
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the Licensed Product and Technology is subject to the restriction that the use of the Licensed Products and Technology is limited to a KBR solution to provide a method of tracking inventory, containers and other similar packages, and such use as the end users or intended clients might reasonably be required to utilize said KBR solution.
This License is also limited by the following understanding of the PARTIES that KBR will market and sell the Licensed Products and Technology and shall in all cases have a Right of First Refusal on business opportunities that may arise that involve the licensed area of tracking of inventory, containers, and similar packages, but that opportunities that arise that KBR, within a reasonable period of time, elects not to pursue may be taken up by MACHINETALKER under the same terms and conditions as offered to KBR at the time of KBR's written rejection, such rejection of the opportunity by KBR and acceptance of the opportunity by MACHINETALKER shall waive the exclusivity of this License as it applies to said singularly defined instance or opportunity at the KBR offered terms and conditions.
2.3 LIMITATIONS ON USE. Notwithstanding any provision of this Agreement to the contrary, KBR shall use the Licensed Technology only in connection with KBR's use of Licensed Products to track inventory, containers and other similar packages, and only with those Licensed Products that are supplied to KBR by MACHINETALKER for re-sale as part of a KBR solution to provide a method of tracking inventory, containers and other similar packages.
2.4 RESALE OF, or SUBLICENSING OF THIS LICENSE. MACHINETALKER grants to KBR the right to resell this license in entirety to a 3rd party subject to the rights and responsibilities established and conveyed herein, and subject to the condition that such 3rd party be, or be wholly owned by, a company which is registered, or incorporated in the United States. Any resale to a U.S. 3rd party must transfer all rights and obligations of KBR to said U.S. 3rd party in entirety. MACHINETALKER grants to KBR the right to sublicense this License in whole or in part to any U.S. 3rd party, however, this grant of right to sublicense is restricted to commercial sales reasonably relating to a KBR solution for tracking inventory, containers and other similar packages.
2.5 DELIVERIES BY MACHINETALKER. Concurrent with the sale and delivery of Licensed Products to KBR, MACHINETALKER shall deliver to KBR a copy of all Documentation necessary for proper use of the Licensed Product in the field of tracking inventory, containers and other similar packages.
3. KBR FEES. Concurrent with the execution of this Agreement, and in consideration of all rights and licenses granted herein, KBR shall pay to MACHINETALKER [Redacted pursuant to Rule 406 of Regulation C of the Securities Act] as a full and final License Fee. Upon payment of said License Fee, all License rights granted herein are mutually acknowledged by the parties to have been paid for in full and to be royalty-free for the duration of this License.
4. REPRESENTATIONS AND WARRANTIES OF MACHINETALKER
4.1 REPRESENTATIONS AND WARRANTIES. MACHINETALKER represents and warrants to KBR:
4.1.1 SOFTWARE AND DOCUMENTATION. That the Licensed Product and Technology
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shall perform in accordance with the specifications as set forth in the Consulting Agreement, of which this License is an inseparable part. MACHINETALKER agrees to apply best efforts over the period of this License to modify the specifications such that they are fit for the intended use of the Licensed Products and Technology as described herein.
4.1.2 INTELLECTUAL PROPERTY RIGHTS. That to the knowledge of MACHINETALKER, as of the Effective Date of this Agreement, the Licensed Technology does not infringe any patent, copyright, trade secret or other intellectual property right of any third party and that they have the right to sell the information, rights, patents and products conveyed by this licensing agreement. MACHINETALKER agrees that they will fully indemnify and defend KBR against any legal action alleging breach or infringement of intellectual property rights related to use of the Licensed Technology. Furthermore, MACHINETALKER agrees that they will pay all costs and damages associated with and/or finally awarded in any such action, provided that MACHINETALKER is notified promptly in writing of the action and, upon their request and agreement to pay associated expenses, that they are given control of such action and all reasonably requested information and assistance necessary to settle or defend the same. Should use of the Licensed Technology be enjoined as a result of such action, then MACHINETALKER shall in a reasonable time either: (a) At their own cost obtain for KBR the right to continue to use the Licensed Technology; or (b) modify or replace the Licensed Technology with non-infringing Technology.
4.1.3 INDEMNIFICATION. (A) MACHINETALKER AGREES TO INDEMNIFY AND HOLD KBR HARMLESS FROM ANY LOSS, ACTION, OR CLAIM ARISING OUT OF ANY DEFECTS OF THE LICENSED TECHNOLOGY, PROVIDED THAT KBR GIVES MACHINETALKER NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT KBR IS MADE AWARE OF THE CLAIM. KBR AGREES TO USE BEST EFFORTS TO ASSIST MACHINETALKER IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
(B) KBR AGREES TO INDEMNIFY AND HOLD MACHINETALKER HARMLESS FROM ANY LOSS OR CLAIM RELATED TO THE NEGLIGENCE OF KBR, ITS AGENTS OR EMPLOYEES REGARDING THE INSTALLATION, USE, SALE OR SERVICING OF LICENSED TECHNOLOGY OR ARISING OUT OF ANY REPRESENTATION OR WARRANTY MADE BY KBR, ITS AGENTS, OR EMPLOYEES WHERE SUCH REPRESENTATION EXCEEDS MACHINETALKER'S LIMITED WARRANTY IF SUCH LOSS OR CLAIM IS EXCLUSIVE OF MACHINETALKER NEGLIGENCE, PROVIDED THAT MACHINETALKER GIVES KBR NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT MACHINETALKER IS MADE AWARE OF THE CLAIM. MACHINETALKER AGREES TO USE BEST EFFORTS TO ASSIST KBR IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
In the event that either Party is entitled to claim damages from the other Party subsequent to an action arising under article 17, above, such liability shall be limited to:
1) Damages for bodily injury (including death) and damage to real property and tangible personal property; and
2) The amount of any other actual direct damages, up to the charges (if recurring, 12 month's charges apply) for the Product that is the subject of the claim.
In no event shall either party be liable to the other for:
A) loss of, or damage to, records or data; or
B) special, incidental, or indirect damages or any consequential economic damages; or
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C) lost profits, business, revenue, or anticipated savings.
All indemnities are subject to the limitations and exclusions elsewhere in this Agreement.
NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY, KBR'S MAXIMUM LIABILITY TO MACHINETALKER SHALL NOT EXCEED THE AMOUNT OF $600,000 UNDER ANY CIRCUMSTANCES, INCLUSIVE OF ATTORNEYS' FEES, COSTS, AND EXPENSES, FOR ANY CLAIM ARISING FROM OR RELATED TO THE AGREEMENT OR TO THE SUBJECT MATTER OF THE AGREEMENT. SUCH CLAIMS MIGHT INCLUDE BUT ARE NOT LIMITED TO CLAIMS FOR BREACH OF CONTRACT.
5. ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 COVENANTS OF KBR. KBR covenants and agrees:
5.1.1 APPOINT CONTACT. To appoint as MACHINETALKER's primary contact in connection with the delivery and operation of the Licensed Technology a limited number of personnel who possesses reasonable skills sufficient to allow that person to assist competently in the installation and operation of the Licensed Technology. MACHINETALKER agrees to provide all necessary training and instruction to KBR designated personnel at KBR's Premises pursuant to this Agreement.
5.1.2 ACCEPTANCE AND USE OF SOFTWARE. KBR agrees to accept and use the Licensed Technology solely as part of an application, system, or solution that enables end users of the Licensed Products to track inventory, containers and other similar packages.
5.1.3 CONFIDENTIALITY. PARTIES agree to keep confidential the terms and conditions of this Agreement, except for any disclosures (a) made in connection with any dispute arising under this Agreement, to the extent appropriate to enforce or defend KBR's rights under this Agreement, (b) to the extent required by law, (c) made after the terms of this Agreement that become available to the public other than by reason of KBR's breach of its obligations under this Agreement, or (d) made in response to a legal and proper request of any governmental authority.
5.1.4 NO MODIFICATIONS. KBR agrees not to modify, reverse engineer, decompile, or change or copy the Licensed Technology in any manner for other than the purposes of integration with a monitoring system without the express written consent of MACHINETALKER, which shall not be unreasonable withheld.
5.2 COVENANTS OF MACHINETALKER. MACHINETALKER covenants and agrees:
5.2.1 DELIVERY OF SOFTWARE. To deliver the Licensed Product and the Documentation concurrently with the sale and delivery of Licensed Products.
5.2.2 CORRECTION OF MATERIAL ERRORS IN LICENSED PRODUCT AND TECHNOLOGY. If a Material Error occurs in the Licensed Product and Technology, then MACHINETALKER shall exercise commercially reasonable best efforts to correct such error as promptly as reasonably practicable.
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5.2.3 UPDATES AND UPGRADES. To deliver to KBR all Updates and Upgrades to the Licensed Technology that are developed and published by MACHINETALKER during the term of this Agreement that improve or correct the performance of the Licensed Products.
5.3 OWNERSHIP. KBR acknowledges and agrees that except for the License expressly granted herein, KBR shall not acquire any right, title, license, or other interest in or claim to all or any portion of the Licensed Technology (including any portion thereof constituting Confidential Information) by reason of (a) the execution and delivery of this Agreement, or (b) the disclosure of any information with respect to the Licensed Technology by MACHINETALKER to KBR either pursuant to this Agreement or prior to execution hereof in connection with discussions pertaining to the Licensed Product and Technology, or (c) KBR's discovery of the Confidential Information in the course of the commercial relationship contemplated by this Agreement.
6. CONFIDENTIAL INFORMATION
6.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. If either PARTY hereto receives from the other party written information which is marked "Confidential" or "Proprietary", the receiving party agrees not to use such information except in the performance of this Agreement, and to treat such information in the same manner as it treats its own confidential information for a period of Five (5) years from the date of disclosure. Without limiting the foregoing, it is agreed that all communications between MACHINETALKER and KBR relating to bidding, testing, or sales activities are to be confidential.
6.2 PERMITTED DISCLOSURE. PARTY's obligations under Section 6.1, above, shall not apply with respect to any Confidential Information which:
A.) (i) is already rightfully in the possession of KBR; (ii) is or becomes publicly available through no wrongful act of KBR; (iii) is rightfully received by KBR from a third party without an obligation of confidentiality to MACHINETALKER; (iv) is disclosed to a third party by MACHINETALKER without restriction; or (v) is approved for release by written authorization of MACHINETALKER.
B.) Is or becomes generally available to the public other than by reason of a breach by either of the PARTIES of its obligations under this Agreement; or
C.) Is compelled by court order to disclose, provided that KBR (i) provides to MACHINETALKER a reasonable period prior to disclosure written notice of all circumstances pertaining to the proposed disclosure, and (ii) cooperates reasonably with any attempt by MACHINETALKER to obtain or file pleadings with respect to any protective judicial order limiting or prohibiting the disclosure of such Confidential Information except to the extent necessary for the purposes of the proceeding in which the disclosure order arose; or
D.) MACHINETALKER agrees that the confidential information can be disclosed to a third party under a non-disclosure agreement with that party, for the sole purpose of preparing proposals, marketing, sales, and other activities reasonably related to KBR's overall business strategy in the area of applications, systems, or solutions that track inventory, containers and other similar packages, where such final purpose is the sale of, and implementation of, the Licensed Products.
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6.2.2 ACTION BETWEEN PARTIES. Disclosure of Confidential Information in any action between the parties pursuant to or in connection with this Agreement is permitted, provided that the disclosing party first (a) provides the non-disclosing party at least twenty-one (21) days advance written notice of such disclosure, (b) takes all reasonable actions, at its sole cost and expense, to obtain a protective order protecting such Confidential Information from disclosure except to the extent directly required to construe or enforce this Agreement or the rights and duties of the parties hereunder, and (c) cooperates reasonably in efforts by non-disclosing party to obtain or file pleadings with respect to any such protective order.
6.3 EQUITABLE RELIEF. PARTIES (a) acknowledge that any violation of the
provisions of this Section 6 may cause immediate and irreparable damage for
which non-disclosing party cannot be adequately compensated by monetary damages,
(b) agree that in the event of any such breach that the non-disclosing party
shall be entitled to such preliminary or other injunctive relief, an order for
specific performance, and any other equitable relief that a court may determine
to be appropriate, (c) hereby waive any requirement that non-disclosing party
post, as a condition or other requirement of obtaining any such equitable
relief, a bond or other collateral, and (d) further agree that such equitable
relief shall be in addition to any damages or other remedies provided by law and
otherwise available to non-disclosing party as a result of disclosing party's
breach of confidentiality. Notwithstanding the above, the parties shall not be
liable to each other regarding obligations and remedies relating to the use of
and disclosure of Proprietary Information provided that the Receiving Party
affords the Proprietary Information the same degree of protection that it
affords to its own Proprietary Information of similar importance, but not less
than a reasonable degree of care.
7. TERM AND TERMINATION
7.1 TERM. Subject to the restrictions of Section 7.2, below, the term of the License shall commence on the Effective Date and shall continue for a period of Five (5) years.
7.2 TERMINATION. This Agreement may be terminated:
7.2.1 BY MACHINETALKER. By MACHINETALKER if KBR breaches any material obligation imposed upon KBR under this Agreement or the Purchase Order (including but not limited to the obligation to pay License Fees when due) and fails to cure such breach within thirty (30) days following the date on which MACHINETALKER delivers to KBR written notice of default.
7.2.2 BY KBR. By KBR at any time upon thirty (30) days' advance written notice to MACHINETALKER.
7.2.3 BY EITHER PARTY. Should the other party (a) become insolvent; (b) make an assignment for the benefit of creditors; (c) have a receiver appointed; (d) institute any proceedings for liquidation or winding up.
7.3 EFFECT OF TERMINATION. Upon any termination of this Agreement for any reason legally justified under the terms and conditions of this agreement:
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7.3.1 USE AND RETURN OF SOFTWARE. KBR shall cease using the Licensed Technology and, at the election of MACHINETALKER, either (a) shall return to MACHINETALKER all copies of the Licensed Technology provided pursuant to this Agreement, or (b) shall destroy all copies of the Licensed Technology provided pursuant to this Agreement.
7.3.2 SURVIVAL OF CLAIMS. Each party shall retain all claims for breach of this Agreement with respect to periods prior to the effective date of termination of this Agreement.
7.3.3 SURVIVAL OF OBLIGATIONS. The rights and obligations of each party under Sections 5.1.4, 6, and 8 of this Agreement shall survive the expiration or termination of this Agreement. In the event of termination by KBR, MACHINE TALKER's obligation to continue to sell Licensed Products to KBR shall be limited to those Licensed Products and Technology that KBR is contractually obligated to furnish to a customer.
8. MISCELLANEOUS
8.1 TRADEMARKS. The name of either PARTY, and any trademarks, trade names and logos associated with the PARTY may only be used as authorized in writing by the owning PARTY.
8.2 NO IMPLIED LICENSE. No license is granted herein, either directly or by implication, estoppel or otherwise, except as expressly provided for in this Agreement.
8.3 SEVERABILITY. If any provision of this License is for any reason found to be ineffective, unenforceable, or illegal by any court having jurisdiction over both parties, such condition shall not affect the validity or enforceability of any of the remaining portions hereof, unless it deprives any party hereto of any material right or license held by such party under this Agreement. The parties shall negotiate in good faith to replace any such ineffective, unenforceable, or illegal provisions as soon as practicable, and the substituted provision shall, as closely as possible, have the same economic and legal effect as the eliminated provision.
8.4 INDEPENDENT CONTRACTORS. Performance by the parties under this Agreement shall be as independent contractors. This Agreement is not intended and shall not be construed as creating a joint venture or partnership, or as causing either party to be treated as the agent of the other party for any purpose or in any sense whatsoever, or to create any fiduciary or any other obligations other than those expressly imposed by this Agreement.
8.5 ASSIGNMENT. Subject to the express limitations imposed by this Agreement on KBR's right to assign its rights hereunder or to grant sublicenses, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and permitted assignees.
8.6 GOVERNING LAW, JURISDICTION AND VENUE. This License shall be governed by and subject to and construed according to the laws of the Commonwealth of Virginia. Each party hereby consents to the jurisdiction of the courts of the Commonwealth of Virginia for any action construing or enforcing the rights and duties created hereunder. The parties agree that the exclusive venue for all disputes arising under or in connection with this License shall be a court of proper venue and jurisdiction in Virginia, and hereby waive any right to object that such venue is inconvenient or otherwise inappropriate.
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8.7 ATTORNEYS' FEES. If any action or proceeding is commenced to construe this License or the rights and remedies created herein, then the party prevailing in that action shall be entitled to recover its costs and fees in such action or proceeding, as well as all costs and fees of enforcing any judgment entered therein.
8.8 FORCE MAJEUR. Neither party shall be liable for any default or delay in performance of any of its obligations under this Agreement if such default or delay is caused, directly or indirectly, by fire, flood, earthquake or other acts of God; labor disputes, strikes or lockouts; acts of terrorism, wars, rebellions or revolutions; riots or civil disorder; accidents or unavoidable casualties; interruptions in transportation or communications facilities or delays in transit or communication; supply shortages that could not reasonably be avoided, or remedied; or the failure of any Person to perform any commitment to such party related to this Agreement; or any other cause beyond such party's reasonable control and remedy.
8.9 ENTIRE AGREEMENT; AMENDMENTS. This License may not be modified or amended except by a written instrument mutually executed by the parties subsequent to the effective date of this Agreement.
8.10 INTERPRETATION. Each party to this Agreement has been represented by (or had adequate time to obtain the advice and input of) independent legal counsel with respect to this Agreement. All pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter and to the singular or plural as the identity of the person or persons may require for proper interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date set forth above.
[GRAPHIC OMITTED]
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EXHIBIT 7
Purchase Order Terms and Conditions
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EXHIBIT 7
KELLOGG BROWN & ROOT, SERVICES INC. (KBR)
PURCHASE ORDER TERMS AND CONDITIONS
(To be made a part of any future purchase of Licensed Products)
1. DEFINITIONS. These Terms and Conditions, together with the Agreement and any special terms and conditions, and all attachments, exhibits and documents expressly referenced in the Purchase Order, shall collectively constitute the "Purchase Order". "Buyer", "Seller", and "Owner" (if any) are identified and defined as set forth within this Purchase Order. This Purchase Order is entered into between Buyer and Seller, who may be referred to individually herein as a "party" or collectively as the "parties". Seller agrees to sell, and Buyer agrees to buy, the goods, work and/or services described in and furnished under this Purchase Order (the "Goods"), under the terms and conditions set forth herein. The "Buyer Indemnitees" as referred to herein shall mean Buyer, any Owner, any assignee, their parents, subsidiaries, affiliates, partners, co-participants, investors, and lenders, and the respective officers, directors, employees, consultants, contractors, invitees, agents, representatives, successors, heirs, and insurers of each such entity at all tiers. Seller is acting in all respects as an independent contractor under this Purchase Order.
2. EFFECTIVE DATE. This Purchase Order becomes effective when (a) executed by both the Buyer and Seller; or (b) when Seller commences performance; or (c) when Seller tenders the Goods to Buyer, whichever event occurs earliest.
3. INTEGRATION AND CONTROLLING TERMS. This Purchase Order constitutes the entire agreement between Buyer and Seller with respect to the Goods, superseding all quotations, proposals, communications, negotiations and counter-proposals. This Purchase Order expressly excludes any quotations or proposal of Seller unless such proposal is specifically referenced and incorporated herein. Any different or additional terms and conditions by Seller in Seller's acceptance or during Seller's performance of this Purchase Order, including any terms and conditions contained on any of Seller's quotations, proposals, or forms, shall be null and void and of no effect on the parties. Electronic commerce transactions between Buyer and Seller pertaining to this Purchase Order will be solely governed by these terms and conditions. Any terms and conditions on Seller's internet site to which agreement by Buyer in any manner, whether through a online electronic agreement, deemed implied by site use, or otherwise, is required in any manner during performance of this Purchase Order, will be null and void and of no legal effect on Buyer. If this Purchase Order has been issued by Buyer in response to a proposal or offer by Seller, it is Buyer's intention that its counteroffer to Seller will be governed solely by these terms and conditions and not by any of Seller's terms or conditions which may be contained in its proposal or offer. If Seller includes or attaches any different and/or additional terms or conditions in Seller's executed acceptance of a Purchase Order issued by Buyer and proceeds to commence performance or tender all or any part of the Goods without Buyer's express acceptance of such different or additional terms or conditions, Seller agrees that a binding contract will be formed solely upon Buyer's terms and conditions, which contract will not include any of Seller's different and/or additional terms or conditions. Seller's proposal or quotation is not included as part of the Purchase Order unless expressly referenced herein as part of the agreement.
4. ERRONEOUS OR CONFLICTING REQUIREMENTS. Upon Seller's discovery that any provision of this Purchase Order may contain any error, omission or conflict with any other provision contained herein, it is Seller's responsibility to give Buyer immediate written notice of such for resolution by Buyer. If
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Seller proceeds with performance after discovery without notification to and resolution by Buyer, then Seller assumes the risk of all resulting expenses, costs and consequences incurred.
5. INSPECTION, EXPEDITING, AND DOCUMENTATION. Seller is fully responsible for the timely, proper and accurate performance of this Purchase Order, including, to the extent applicable, for the design, fabrication, manufacture, production, construction, and shipment of the Goods, and for compliance with all terms, conditions, specifications, drawings, and other written requirements of Buyer. Buyer has the right to inspect and expedite the Goods at any stage of design, fabrication, manufacture, storage, transit, and upon delivery to assure compliance herewith. Seller will provide Buyer with all data, drawings, specifications, test results, quality documentation, schedules and other documents and information relating to the Goods. Notwithstanding any specifications, data, requirements or other information provided by Buyer, it is Seller's responsibility to request any additional documentation or information from Buyer which Seller determines it may need for performance of this Purchase Order, and Buyer will respond to the extent possible in a timely manner. Seller will comply with Buyer's inspection and testing requirements, plans or procedures set forth in this Purchase Order, and with other such instructions and directions as may be provided by the authorized Buyer representative. No inspection, waiving of inspection, review, approval, acceptance or provision of any instructions, direction, information, drawings or data hereunder by or from Buyer, or lack of such from Buyer, will constitute a waiver of, or relieve or discharge Seller from, either expressly or by implication, Seller's responsibilities and obligations under this Purchase Order.
6. TIME OF PERFORMANCE. SELLER ACKNOWLEDGES THAT THE TIME REQUIRED FOR PERFORMANCE AND THE DELIVERY SCHEDULE SPECIFIED HEREIN ARE CRITICAL, MATERIAL AND OF THE ESSENCE TO PERFORMANCE OF THIS PURCHASE ORDER FOR THE AVOIDANCE OF SUBSTANTIAL LOSS TO BUYER, VARIOUS CONTRACTORS AND ANY OWNER . SELLER'S UNEXCUSED FAILURE TO MEET THE DELIVERY SCHEDULE WITHOUT BUYER'S WRITTEN CONSENT MAY CONSTITUTE A BREACH OF CONTRACT OR DEFAULT HEREUNDER. Any such consent by Buyer, however, will not constitute a waiver of any provision herein but will serve only to delay the delivery schedule. In the event of delay, or anticipated delay, from any cause, including force majeure, Seller will immediately notify Buyer in writing of the delay or anticipated delay, and its approximate duration, and Seller will undertake to mitigate, shorten or make up the delay by all reasonable and expeditious means. An event of "Force Majeure" under this paragraph shall be an excused delay, provided Seller has provided timely written notice of the occurrence of such event to Buyer. If possible, Seller agrees to take all reasonable commercial efforts to reduce or mitigate the effects of such delay. "Force Majeure" is defined as any act of God, flooding, fire, severe storm, lightning, act of war, act of terrorism, or unforeseeable governmental action, beyond the control of and not caused in any part by any fault of Seller, but shall not include any power, supply, transportation or labor problems. Buyer, at its option, may require or approve in writing a change in the delivery schedule or progress requirements as established in this Purchase Order in response to Seller's notice. If Seller fails to obtain the approval of Buyer for any such change, and Seller fails for any reason to meet the delivery schedule, progress requirements, or it becomes apparent that Seller will not for any reason meet the schedule or progress milestones, Buyer may in such case, without penalty, cancellation fee, restocking or other fee or charges, and without prejudice to any other rights which it may have, cancel all or any part of the Purchase Order and take any other action as Buyer may consider necessary or desirable under the circumstances to avoid or minimize losses. Buyer may backcharge Seller for all direct costs and expenses of any nature resulting from Seller's unexcused nonperformance, delays or failure to meet the required delivery schedule.
7. TITLE, SHIPMENT, AND RISK OF LOSS. Unless otherwise specified herein, title to the Goods (and in the event that the Goods are made to order, then title to all material, inventory and work in progress,
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design data, other documentation, and all contractual rights thereto) will vest in Buyer (or Owner if Buyer is acting as Owner's agent) immediately upon acceptance of the Goods by Buyer, payment by Buyer, or identification to this Purchase Order, whichever first occurs. If Goods are made to order or the Purchase Order otherwise specifies that title will vest in the Goods upon identification to this Purchase Order, Seller will take action to segregate the Goods and clearly label them as property of Buyer. In the event of cancellation or termination of this Purchase Order, Buyer has the right to enter Seller's (or Seller's agent's, contractor's or supplier's) premises during regular business hours and take possession of any Goods, including any related drawings, records, materials to be incorporated into the Goods, and equipment, for which Buyer has paid Seller, provided to Seller by Buyer, or which have been identified to this Purchase Order or created by Seller hereunder, and Buyer shall be obligated to pay Seller for any unpaid portion of the Goods or equipment of which Buyer takes possession. Seller warrants free and clear title to the Goods, free and clear from any and all liens, claims, restrictions, reservations, security interests and encumbrances. If applicable, Seller is responsible for properly and carefully preparing, labeling, packing and shipping the Goods, at its expense unless otherwise specified herein, and providing all required shipping documentation. In the shipping process, Seller will comply with all laws and regulations applicable to the Goods in addition to any requirements or instructions of Buyer as may be specified in this Purchase Order or otherwise in writing pertaining thereto. Irrespective of vesting of title and any other provision herein to the contrary, Seller will bear the risk of loss and damage, and will insure or self-insure for the benefit of Seller, Buyer, and any Owner, the Goods in its care, custody and control, including free issue material supplied to Seller for incorporation into, or work in conjunction with, the Goods accordance with the provisions of this Purchase Order. Should any loss or damage occur to the Goods prior to acceptance by Buyer, Buyer at its option may cancel this Purchase Order without any cancellation fee, charge, penalty, or liability, and any amounts paid by Buyer for such Goods shall be refunded in full to Buyer. Should any loss or damage occur to any free-issue materials provided to Seller, in addition to Buyer's right to cancel this Purchase Order, Seller shall either, at Buyer's option, immediately replace such materials with identical materials in order to meet its performance obligations hereunder, or reimburse Buyer for the loss, including any necessary additional expenses and costs which may be incurred resulting from such loss. Upon request, Seller shall provide adequate insurance coverage, naming Buyer (and if applicable at Buyer's request, any Owner or other person) as additional insured, for its obligations under this Paragraph.
8. CONFORMING GOODS AND ACCEPTANCE. The Goods will conform to the description, data, drawings, plans, specifications, performance or operation criteria (if applicable), any sample, and other requirements of Buyer provided to Seller. The Goods will meet the standards set forth in Paragraph 9 below. Seller will not make any modification, change, or substitution, in whole or in part, without the prior written approval of Buyer. If required by Buyer, Seller will supply satisfactory evidence of the origin, composition, manufacture, kind and quality of the Goods. Prior to shipment, Seller will carefully inspect, and if applicable test, the Goods for conformance to the requirements of this Purchase Order. If the words "or equal" are used in this Purchase Order, proposed equals must be approved in writing in advance by Buyer. Seller will not ship more or less than the quantity specified without the prior written approval of Buyer. Upon delivery of the Goods or in any other location or time as may be specified herein, Buyer may conduct a visual inspection of the Goods in accordance with its standard procedures and may accept or reject the Goods, in whole or in part, provided that Buyer reserves all rights provided for herein to reject any Goods, in whole or in part, at a later time upon discovery of a latent defect or non-compliance not apparent by such normal visual inspection. If Goods received do not conform to those ordered, or if a different quantity is shipped, Buyer may reject such shipment in whole or in part by giving notice thereof to Seller, and may cancel this Purchase Order. Seller will remove any rejected Goods at Seller's expense within ten (10) working days after notice. If any Goods are rejected by Buyer, Seller will not ship any replacement Goods without the prior written approval of and in accordance with the instructions provided by Buyer. For any incorrect quantity, damaged, defective, non-conforming, or rejected
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Goods, Buyer may cancel this Purchase Order in whole or in part without any obligation to pay a cancellation fee or other fee, charge or penalty, and return the Goods at Seller's expense for full refund or credit to Buyer's account, at Buyer's option.
9. WARRANTY. Seller warrants to Buyer that the Goods furnished under this Purchase Order, whether manufactured, fabricated, or otherwise produced or provided by Seller or others, will be (a) new, (b) of the latest design or model conforming to Buyer requirements, (c) conform to the descriptions, data, drawings, plans, specifications, any performance criteria, sample if any, and other requirements specified herein or provided by Buyer to Seller; (d) be of merchantable quality, (e) if specified in this Purchase Order, fit for the purpose(s) intended; (f) conform with all applicable laws, ordinances, codes and regulations, (g) be of the highest quality; and (h) free from defects in materials, performance, operation, and workmanship. The Goods will be warranted hereunder, as may be applicable, for a period of one (1) year after the date of acceptance of the facility or the project by Owner, or twenty-four (24) months from date of delivery to and acceptance by Buyer, whichever period expires earlier. All work on the Goods or otherwise in the performance of this Purchase Order will be done in a skilled manner and of the highest quality of workmanship. Seller further warrants that the Goods will be of sufficient size and capacity, and of correct materials, to properly perform any functions or purpose specified in this Purchase Order.
10. WARRANTY REMEDIES. If, within the warranty period specified in Paragraph 9 above, Buyer discovers any defect, error, noncompliance, omission, operational or performance deficiency, or breach of warranty set forth in Paragraph 9 above as to the Goods, upon notice from Buyer, Seller will promptly repair, reperform, or replace, without cost, the Goods in question (including bearing any necessary removal, reinstallation, access, shipping, labor and other direct costs resulting therefrom) in accordance with Buyer instructions. If Seller fails to proceed promptly with and complete the repair, reperformance, or replacement of the defective Goods, Buyer may repair, reperform, or replace the Goods and charge all related direct costs (including labor and access costs) to Seller without voiding the warranties herein, and without Buyer waiving any other rights or remedies it may have under this Purchase Order. Such repair, reperformance, or replacement will be rewarranted for a period of twelve (12) months from the date of its acceptance by Buyer or Owner. If Buyer determines, for any reason, that the remedies provided for herein are not adequate or feasible, Buyer may elect to have such Goods removed at Seller's expense and any portion of the purchase price paid refunded in full. Any Owner or assignee of this Purchase Order as well as Buyer will have the benefit of the foregoing warranty and warranty remedies in Paragraphs 9 and 10 herein, and such rights and remedies are in addition to any other rights or remedies provided in law, equity, or under this Purchase Order.
11. GOVERNING LAW AND COMPLIANCE WITH LAW. Unless otherwise specified in this Purchase Order, this contract will be governed by the laws of the State of Texas, U.S.A., exclusive of conflict of laws principles, in effect on the date the Purchase Order becomes effective. In its performance under this Purchase Order, Seller agrees to comply with all applicable laws, treaties, ordinances, directives, orders, codes and regulations, and specifically with, but not limited to, any import, export, health, safety, security and environmental laws, treaties, ordinances, codes and regulations of any jurisdiction (whether international, country, region, state, province, city, or local) where this Purchase Order may be performed. NOTHING CONTAINED IN THIS PARAGRAPH WILL OBLIGATE BUYER, OWNER, SELLER, OR ANY PERSON ACTING ON THEIR BEHALF, TO ENGAGE IN ANY ACTION OR OMISSION TO ACT WHICH WOULD BE PROHIBITED BY OR PENALIZED UNDER THE LAWS OR REGULATIONS OF THE UNITED STATES OF AMERICA OR ANY OF ITS STATES. If applicable to this Purchase Order, Seller will specifically comply with the U.S. Occupational Safety and Health Act (OSHA), and any State Plan approved thereunder, and any regulation thereunder, including without limitation, OSHA Hazard Communication Standard 29 CFR 1910.1200
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and 1926.59 regarding container labeling, warning notices, and Material Safety Data Sheets. Upon Buyer written request, Seller will provide any certification of compliance required by any federal, state, or local law, ordinance, code, or regulation. SELLER AGREES TO RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS THE BUYER INDEMNITEES FROM AND AGAINST ANY LOSS, COST (INCLUDING ATTORNEY FEES AND COURT COSTS), CIVIL OR OTHER FINES AND PENALTIES, DAMAGE OR LIABILITY, ARISING FROM OR ALLEGED TO ARISE FROM ANY VIOLATION, ALLEGED VIOLATION, OR FAILURE TO COMPLY WITH, THE TERMS OF THIS PARAGRAPH BY SELLER OR ANY PERSON FOR WHOM SELLER MAY BE RESPONSIBLE.
12. HAZARDOUS AND DANGEROUS GOODS. Seller is solely responsible for examining, inspecting, identifying, and determining whether or not any Goods provided hereunder (in whole or in part) constitute hazardous or dangerous goods, and to notify Buyer of such prior to shipment of the Goods. Unless expressly exempted by Buyer in writing in the Purchase Order, Seller is responsible to determine if a Material Safety Data Sheet (MSDS) is required for the Goods, and if so, to supply with the Goods all such required MSDS documentation and information. In the event any Goods or any portion thereof are so identified by Seller, Seller shall ensure that such Goods are properly handled, labeled, documented, packaged, transported, and shipped in full compliance with any applicable legal requirements, to the point of delivery to Buyer. It is the sole responsibility of the Seller to ensure the compliance by all suppliers, manufacturers, and subcontractors of all tiers with the provisions of this paragraph, including but not limited to timely, complete and proper submittal of all required documents and information. Seller shall inform Buyer in writing prior to shipment of any precautionary measures that need to be taken with the Goods. SELLER AGREES TO RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS THE BUYER INDEMNITEES FROM AND AGAINST ANY LOSS, COST (INCLUDING ATTORNEY FEES AND COURT COSTS), CIVIL OR OTHER FINES AND PENALTIES, DAMAGE OR LIABILITY, ARISING FROM OR ALLEGED TO ARISE FROM ANY VIOLATION, ALLEGED VIOLATION, OR FAILURE TO COMPLY WITH, THE TERMS OF THIS PARAGRAPH BY SELLER, ANY OF ITS LOWER TIER SUPPLIERS OR SUBCONTRACTORS, OR ANY OTHER PERSON FOR WHOM SELLER MAY BE RESPONSIBLE HEREUNDER.
13. IMPORT AND EXPORT COMPLIANCE. SELLER AGREES THAT IT IS SOLELY RESPONSIBLE IN ITS PERFORMANCE UNDER THIS PURCHASE ORDER FOR REQUIRED COMPLIANCE WITH THE IMPORT AND EXPORT LAWS AND REGULATIONS OF THE UNITED STATES OF AMERICA, AND TO THE EXTENT APPLICABLE TO THE PURCHASE ORDER, THE IMPORT AND EXPORT LAWS AND REGULATIONS OF ANY OTHER JURISDICTION OR COUNTRY. If any import or export control or compliance form is attached to this Purchase Order, including Buyer's Request for Export Control Information, Seller will thoroughly and accurately complete such form and return it within ten (10) days to Buyer. Seller understands and acknowledges that (a) Buyer and Owner (if any), and their contractors and agents, will rely on the information provided by Seller, including making a determination whether any U.S. or foreign export or import license is required for the export of the supplied materials to the country of destination; (b) Seller is responsible for compliance with local import and export control laws of any jurisdiction, and is responsible for compliance with applicable U.S. re-export laws; and (c) Seller will be fully responsible for the accuracy and completeness of import and export documentation prepared or executed by Seller as part of Seller's performance of this Purchase Order, including that required for the import of any materials used in the production or manufacture of the Goods and of any documents prepared by Seller's employees, contractors, agents and brokers. SELLER AGREES TO RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS THE BUYER INDEMNITEES FROM AND AGAINST ANY LOSS, COST (INCLUDING ATTORNEY FEES AND COURT COSTS), CIVIL OR OTHER FINES AND PENALTIES, DAMAGE OR LIABILITY, ARISING FROM OR ALLEGED TO ARISE FROM ANY VIOLATION, ALLEGED VIOLATION, OR FAILURE TO COMPLY WITH,
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THE TERMS OF THIS PARAGRAPH BY SELLER OR ANY PERSON FOR WHOM SELLER MAY BE RESPONSIBLE.
14. ASSIGNMENT AND NOTICE OF SELLER CHANGES. Seller will not sell, assign, or transfer this Purchase Order, or any part hereof, or any performance or money due hereunder, without the prior written consent of Buyer. If consent is granted, any such assignment by Seller will not (a) increase or alter Buyer's obligations, (b) diminish the rights of Buyer, or (c) relieve Seller of any of its obligations under this Purchase Order. Buyer reserves the right to assign this Purchase Order, in whole or in part. Seller will give Buyer or any Owner prompt written notice of any adverse material change in its financial standing (including any prospective bankruptcy, reorganization, insolvency, liquidation, dissolution or assignment for the benefit of any creditor), ownership or organization or any other operational change which may affect its performance under the Purchase Order, including in the manufacture or production of the Goods. In the event of any adverse material change, Buyer reserves the right to cancel or terminate this Purchase Order without penalty or further obligation other than to pay Seller for any completed and satisfactory performance to the date of such cancellation or termination.
15. CANCELLATION. Buyer has the right at any time to cancel all or any separable part of this Purchase Order by written notice. No cancellation, fee, charge or payment will be owed by Buyer to Seller, and Seller will be owed only for the direct costs of any completed and satisfactory performance to the date of cancellation, and, if any portion of the Goods will be delivered to Buyer, Seller shall also be reimbursed any direct and necessary costs incurred to preserve, protect, store, and ship such Goods to the point of delivery to Buyer. At the time of any cancellation by Buyer, Seller will immediately discontinue all work pertaining to the Purchase Order, including not placing additional purchase orders or making any other commitment, and canceling forthwith any existing purchase orders and commitments on the best possible terms. Seller will preserve and protect the Goods on hand, work in progress, supplier data, and completed work, both in its own and in its suppliers' facilities, in accordance with Buyer's instructions. Buyer has the right to enter Seller's (or Seller's agent's, contractor's or supplier's) premises during regular business hours and take possession of any Goods, including any related drawings, records, materials to be incorporated into the Goods, and equipment, for which Buyer has paid Seller, provided to Seller, or which have been identified to this Purchase Order or created by Seller hereunder, and Buyer shall be only obligated to pay Seller for any unpaid portion of the Goods of which Buyer takes possession.
16. CHANGES IN THE GOODS. Seller will make no modification, change, substitution, or revision without Buyer's prior written consent.
(a) Buyer has the right to make changes in the character or quantity of the Goods, in the manner or time of performance of this Purchase Order, or otherwise, by written notice to Seller. Changes will be in writing and signed by a duly authorized representative of Buyer. Seller will respond to Buyer in writing within five (5) business days of receipt either accepting the change, with any proposed adjustment in price or schedule, or rejecting the change if Seller is unable to comply. If Seller fails to respond within such period, such change will be deemed accepted and an equitable adjustment in the price and time of performance will be made by Buyer if any change results in a reasonably documented decrease or increase in Seller's cost or time of performance. If Seller rejects the change, Buyer may cancel this Purchase Order as set forth in Paragraph 15 above.
(b) Should Seller request any change from Buyer, Seller shall place such request in writing, with all reasonable supporting documentation, and submit to Buyer. If Seller's request is complete, Buyer will respond
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in writing as soon as possible concerning acceptance or rejection of such change. Seller will not discontinue performance pending Buyer's decision without the prior written consent of Buyer. No claim by Seller for any change will be considered unless submitted to Buyer in writing within ten (10) days after the occurrence of the event upon which such change is based.
17. INDEMNIFICATION; CONSEQUENTIAL DAMAGES.
(A) MACHINETALKER AGREES TO INDEMNIFY AND HOLD KBR HARMLESS FROM ANY LOSS, ACTION, OR CLAIM ARISING OUT OF ANY PRODUCT DEFECTS, PROVIDED THAT KBR GIVES MACHINETALKER NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT KBR IS MADE AWARE OF THE CLAIM. KBR AGREES TO USE BEST EFFORTS TO ASSIST MACHINETALKER IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
(B) KBR AGREES TO INDEMNIFY AND HOLD MACHINETALKER HARMLESS FROM ANY LOSS OR CLAIM RELATED TO THE NEGLIGENCE OF KBR, ITS AGENTS OR EMPLOYEES REGARDING THE INSTALLATION, USE, SALE OR SERVICING OF PRODUCTS OR ARISING OUT OF ANY REPRESENTATION OR WARRANTY MADE BY KBR, ITS AGENTS, OR EMPLOYEES WHERE SUCH REPRESENTATION EXCEEDS MACHINETALKER'S LIMITED WARRANTY IF SUCH LOSS OR CLAIM IS EXCLUSIVE OF MACHINETALKER NEGLIGENCE, PROVIDED THAT MACHINETALKER GIVES KBR NOTICE OF ANY SUCH LOSS OR CLAIM WITHIN 30 DAYS OF THE DATE THAT MACHINETALKER IS MADE AWARE OF THE CLAIM. MACHINETALKER AGREES TO USE BEST EFFORTS TO ASSIST KBR IN ANY SUCH DEFENSE TO THE EXTENT REASONABLE AND PRACTICABLE.
In the event that either Party is entitled to claim damages from the other Party subsequent to an action arising under article 17, above, such liability shall be limited to:
1) Damages for bodily injury (including death) and damage to real property and tangible personal property; and
2) The amount of any other actual direct damages, up to the charges (if recurring, 12 month's charges apply) for the Product that is the subject of the claim.
In no event shall either party be liable to the other for:
A) loss of, or damage to, records or data; or
B) special, incidental, or indirect damages or any consequential
economic damages; or
C) lost profits, business, revenue, or anticipated savings.
All indemnities are subject to the limitations and exclusions elsewhere in this Agreement.
NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY, KBR'S MAXIMUM LIABILITY TO MACHINETALKER SHALL NOT EXCEED THE AMOUNT OF $600,000 UNDER ANY CIRCUMSTANCES, INCLUSIVE OF ATTORNEYS' FEES, COSTS, AND EXPENSES, FOR ANY CLAIM ARISING FROM OR RELATED TO THE AGREEMENT OR TO THE SUBJECT MATTER OF THE AGREEMENT. SUCH CLAIMS MIGHT INCLUDE BUT ARE NOT LIMITED TO CLAIMS FOR BREACH OF CONTRACT.
18. TAXES. Unless otherwise provided for in this Purchase Order, Seller is responsible for payment of, and the compensation set forth herein includes, all sales, use, excise, value-added, goods and services, business (franchise or privilege), and other such taxes, any taxes imposed on Seller which are based on revenue, income, net income, net assets, net worth, or capital and any taxes imposed in lieu thereof, and all duties, fees, levies, charges or other assessments of whatever nature imposed by governing authorities or any
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duties, fees, levies, charges or other assessments of whatever nature imposed by governing authorities or any jurisdiction applicable in connection with performance under this Purchase Order. Seller accepts sole responsibility and liability for the payment of any and all contributions or taxes for unemployment insurance, social security payments, or other assessments for those persons performing work for Seller hereunder. If it is ever determined that any tax included in the price paid by Buyer was not required to be paid, Seller agrees to refund promptly such amount to Buyer. Seller will release, defend, indemnify, and hold the Buyer Indemnitees harmless from and against any fines, penalties, interest, costs (including attorneys fees and court costs), charges, fees, losses, damages or liabilities, arising from, alleged to arise from, or in any way associated with Seller's failure to comply with the terms of this Paragraph.
19. CONFIDENTIALITY. All data, designs, documents, drawings, specifications, communications and other information, revealed or disclosed in any form or manner to Seller by Buyer (whether written, oral, electronic, visual, graphic, photographic, observational, or otherwise), including any documents or other tangible items supplied, or produced or created by Seller for Buyer hereunder, or any information or item provided by any Owner (collectively defined as "Buyer Information") are proprietary and confidential to Buyer and will be used solely by Seller for purposes of performing this Purchase Order. All such Information will be treated and protected by Seller as confidential, and will not be disclosed to any third party without the prior written consent of Buyer and may be disclosed within Seller's organization only on a need-to-know basis. Buyer may require Seller's employees, contractors, suppliers and other Seller personnel involved in the performance of this Purchase Order to execute an individual confidentiality agreement prior to any disclosure. The provisions protecting Buyer Information in any separate confidentiality, secrecy, or nondisclosure agreement heretofore executed by Seller in connection with Buyer's or Owner's business, this Purchase Order, or any other contract pertaining to the Goods, are hereby expressly incorporated within this Purchase Order, and these provisions are in addition to such agreement. Upon request of Buyer, Seller will immediately return to Buyer any Buyer Information provided, either upon demand, or upon completion of the warranty period hereunder, including all copies made by Seller.
20. PUBLICITY. Seller will not publicize, disclose, or discuss the existence, content, or scope (whether generalities or details) of this Purchase Order, make any reference to Buyer or Owner (if any), the business of either, or the project for which this Purchase Order is intended, to any third party by any means, and through any medium (including but not limited to marketing materials, advertising, internet or web site references, photographs, articles, press releases or interviews, speeches or programs) without obtaining the prior written consent of Buyer. Seller shall not use Buyer's, any Owner's, or the project name as a reference in any manner without Buyer's express prior consent.
21. PAYMENTS, LIENS, RIGHT TO SET OFF AND BACKCHARGES. Seller agrees to keep the project, premises and other property of Buyer, any Owner, and any other person, free and clear from any and all claims, liens, restrictions, reservations, security interests and encumbrances arising from this Purchase Order, Seller's performance or non-performance, or related to the Goods. To the maximum extent allowed by law, Seller agrees to release, defend, indemnify, and hold harmless the Buyer Indemnitees from and against any and all laborers', materialmen's, mechanic's, subcontractors, or any other liens, claims, restrictions, reservations, security interests and encumbrances arising from, alleged to arise from, or in any way arising from this Purchase Order, Seller's performance or nonperformance, or related to the Goods. Seller agrees that any payment made by Buyer constitutes trust funds intended for the benefit of any contractors, suppliers and laborers. At any time, if Seller fails to make any payment to any of its contractors, suppliers and laborers, Buyer may elect to pay such beneficiaries directly or by issuance of joint checks, or take any other action required to prevent imposition of a lien. Regardless of the payment terms in this Purchase Order, Buyer's
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- Purchase Order Terms & Conditions
obligation to pay the purchase price is conditioned upon (a) receipt of completed, non-defective conforming Goods; (b) receipt and acceptance by Buyer of Seller's accurate and properly completed invoice accompanied by satisfactory supporting documentation; and (c) compliance by Seller with all terms and conditions of this Purchase Order. Seller agrees to pay promptly when due all bills for labor, material, equipment or services in connection with the Goods. If such bills are not promptly paid by Seller when due, Buyer may pay them and Seller will immediately reimburse Buyer therefore. Buyer may at its discretion set off any funds owed by Seller against any other amounts due to Seller under any other contract with Buyer, Owner, or any affiliate of either. Seller waives all rights of lien against the premises, facilities, equipment and other property of Buyer and any Owner. Any sums due Seller hereunder may be applied by Buyer as a set off against any sums owed by Seller to Buyer or any of its affiliates or against any claims of third parties against Buyer arising from Seller's performance, breach or default, hereunder, whether under this or any other purchase order or other contract. At its sole discretion, Buyer may withhold from payments to be made to Seller amounts legally required to be withheld from such payments and remitted to the taxing authority of any jurisdiction relevant to the transaction. Upon prior notice to Seller and Seller's failure to cure within the period of time contained therein, Buyer reserves the right to backcharge Seller for any losses, damages, claims, costs and expenses incurred resulting from Seller's breach of any provision of this Purchase Order. Buyer may withhold or set-off any payment due under this or any other contract with Seller or any of its affiliates in order to recover such backcharged amounts.
22. SUBCONTRACTORS, SUBVENDORS AND SUBSUPPLIERS. Buyer reserves the right to approve or disapprove any subcontractors, subvendors, or subsuppliers proposed by Seller to be involved in Seller's implementation of or performance under this Purchase Order. Prior to entering into this Purchase Order, Seller will submit a listing of all such proposed subcontractors, subsuppliers, or subvendors for review and approval by Buyer. Seller agrees that Buyer has the right to contact or visit any of Seller's subcontractors, subvendors, or subsuppliers directly to confirm delivery commitments or the origin, composition, manufacture, kind, quantity, or quality of any Goods provided thereunder. Any approval by Buyer will not constitute a waiver of any term or condition hereunder, at law, or in equity, nor relieve Seller of any obligation herein. Seller will ensure that terms and conditions substantially similar to those in this Purchase Order are contained in any contract issued to any subcontractor, subsupplier or subvendor for any goods, materials, equipment, services, work or other items to be provided under this Purchase Order. Upon request, Seller agrees to submit to Buyer copies of any contract with any subcontractor, subvendor, or subsupplier (with pricing deleted) for any item procured pertaining to this Purchase Order.
23. INTELLECTUAL PROPERTY. If applicable to this Purchase Order, any customized or made-to-order Goods which are first conceived, designed, created, developed, fabricated, or manufactured by Seller under this Purchase Order (whether detailed or conceptual), and in whatever form, including but not limited to designs, manufactured items, or developed software and any and all related data, drawings, documents and specifications ("Custom Goods"), are the sole property of Buyer, or any Owner or other assignee (if so designated in the Purchase Order or upon request of the Buyer), with title to such vesting upon identification to this Purchase Order. Such Custom Goods and any and all related data, drawings, documents, and specifications will be considered and protected by Seller as "Buyer Information" as set forth in Paragraph 19 hereunder. Seller will turn over all such Custom Goods and any related data, drawings, documents and specifications to Buyer or any Owner, including copies thereof, at no additional charge, at the expiration date of the warranty period, or earlier as may be requested in writing by Buyer . Any proprietary designs, know-how, software, development tools, processes, source code, programs, or systems owned or controlled by Seller prior to the date of this Purchase Order which are incorporated or embedded into the Custom Goods ("Seller Intellectual Property") shall remain the intellectual property of Seller, and Seller agrees to grant and does herein grant to Buyer and any Owner or their assignees a non-exclusive, worldwide, transferable, fully-paid and
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- Purchase Order Terms & Conditions
perpetual license to use the Seller Intellectual Property in connection with use of the Custom Goods. Except for any Seller Intellectual Property, Seller shall not retain any rights to the Custom Goods, in whole or in part. Seller warrants, represents and covenants that the design, fabrication, manufacture, production, sale, distribution and intended use of the Custom Work and the Goods do not infringe directly or indirectly, in whole or in part, any patent, copyright, trade secret, trademark, trade name, or other intellectual property right of any third party. Seller agrees to release, defend, protect, indemnify and hold the Buyer Indemnitees harmless from and against any and all costs (including attorney fees and court costs), expenses, fines, penalties, losses, damages, and liabilities arising out of any alleged or actual patent, copyright, trade secret, trademark, trade name, or other intellectual property right infringement or other claim, demand or action made by any third party arising from or related to the design, fabrication, manufacture, production, sale, distribution or use of the Goods or any Custom Goods , however Seller will not be responsible to the extent of any negligence or fault on the part of any Buyer Indemnitee as may be finally determined by a court or arbitrator. At Buyer's request, Seller agrees to execute such additional documents as may be required by Buyer to confirm the provisions of this Paragraph including legal title in and to the Custom Goods. The provisions of this Paragraph 23 shall survive the expiration, cancellation or termination of this Purchase Order.
24. DOCUMENTATION AND RIGHT OF AUDIT. Where Seller's invoice includes compensation for work performed at a lump sum, unit rate or for changes in the work, Seller will submit Seller's determination of units of work performed, substantiated by documents satisfactory in form and content to Buyer. Upon verification by Buyer of such documents, Buyer will advise Seller in writing of either Buyer's acceptance of Seller's determination, or of Buyer's alternative determination of such units. Where Seller's invoices include compensation for work performed for a reimbursable price, all costs, expenses and other amounts so invoiced will be substantiated and supported by documents satisfactory to and verified by Buyer. Seller will maintain for a minimum period of five (5) years after final payment has been made to Seller under this Purchase Order all records and accounts pertaining to work performed hereunder. Seller agrees that Buyer will have the right to audit, copy and inspect, or cause to have audited, copied and inspected, Seller's records and accounts pertaining to performance under this Purchase Order at all reasonable times during the course of performance hereunder and for a minimum period of five (5) years after final payment has been made to Seller, however, Buyer's rights will not extend to any components of any lump sum amounts or unit rates.
25. DEFAULT AND TERMINATION FOR CAUSE. In the event of Seller's (a) actual or
anticipated breach of or default under any provision of this Purchase Order,
which has not been cured within a reasonable time after written notice of such
has been provided to Seller by Buyer; or (b) any organizational or operational
change as stated in Paragraph 14 adversely affecting, or which may adversely
affect, in Buyer's sole judgment and opinion, Seller's performance hereunder; or
(c) any actual or threatened bankruptcy, reorganization, receivership,
insolvency, making an assignment for the benefit of creditors, liquidation,
dissolution, or other financial or organizational instability, Buyer has the
right, in addition to any rights or remedies it may have in law, in equity, or
under this Purchase Order, to require that Seller provide acceptable documentary
or other appropriate assurances of performance, including a performance bond,
letter of credit, or other type of guarantee. Should Seller be unable or
unwilling to do so, Buyer has the right to immediately terminate this Purchase
Order for cause by written notice to Seller and Seller will not be entitled to
any cancellation or termination charge or other fee or penalty hereunder, nor
will Buyer be liable to pay any costs of cancellation. In such event, Buyer may
immediately take possession of all or any portion of the Goods, subject only to
an obligation to equitably compensate Seller for same, including for any
payments made by Seller for materials or other work incorporated into such
Goods. Upon termination by Buyer as a result of Seller's default hereunder,
Seller will be liable to and will immediately pay or reimburse Buyer for all
reasonable costs of any nature which may be incurred by Buyer to cover any
losses or expenses related to such default and to effect completion of
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- Purchase Order Terms & Conditions
performance of this Purchase Order, and if Buyer does not elect to take possession of any portion of the Goods, Seller shall also refund to Buyer any payments made to Seller for design or other work and materials to be incorporated into the Goods. 26. SITEWORK. If Seller performs any work or services on site related to this Purchase Order or the Goods provided hereunder, Buyer's On-Site Services Terms and Conditions will apply in addition to the provisions of this Purchase Order, and are attached to and fully incorporated herein.
27. CLAIMS AND DISPUTE RESOLUTION. Seller will submit any claims or disputes arising under this Purchase Order to Buyer in writing prior to Buyer making final payment. Buyer's obligation to make final payment is conditioned upon Seller's settlement and release of all claims or disputes. Seller agrees that its failure to submit any claims or disputes in writing by such time will constitute an express waiver by Seller of any legal or equitable rights with respect to the subject matter of the claim or dispute. For any claims or disputes arising under this Purchase Order, the parties agree to exert their best efforts in good faith to try to resolve such issues through direct negotiation between management. Seller agrees that any such issues that cannot be resolved through direct negotiation within a reasonable time will be submitted to binding arbitration. Arbitration proceedings will be conducted by the American Arbitration Association ("AAA") in Houston, Texas, before a single arbitrator, in accordance with the AAA Commercial Rules and Procedures. Each party will bear its own expenses in any dispute resolution process or proceeding. Notwithstanding the existence, filing, or pendency of any claim or dispute under this Purchase Order or with Buyer or any Owner, Seller will continue to fully perform its obligations hereunder and will not cease or delay performance, fabrication or fail to make any shipment pending resolution of any claim or dispute. Any award of the arbitrator may be enforced in any jurisdiction.
EXHIBIT 8
Notice of KBR Invoice Procedures
Agreement No. CA-00062 12/29/2004 6:49 PM Page 1 of 1 EXHIBIT 8 - Notice of KBR Invoice Procedures
EXHIBIT 8
NOTICE OF KBR INVOICE PROCEDURES
ALL INVOICES MUST BE ADDRESSED & DELIVERED TO:
TO RECEIVE YOUR INVOICE MONIES YOU MUST INCLUDE THE FOLLOWING ON ALL INVOICES:
__ COMPANY NAME: MachineTalker, Inc.
__ VENDOR No.: (Applied for, Contact your SCA prior to first invoice)
__ FULL CONTRACT No. :CA-00062
*Invoices shall also reference as appropriate: Invoice number, percentage of work complete, identify invoice as a "progress payment", quantities shipped, descriptions, tag numbers, and pricing.
IMPORTANT NOTES:
You must send invoices to the above address in the above format. All invoices sent to the Project Manager or work site, or to the address below, will be returned! Invoices that do not include the above listed information will be returned!
KBR will not consider an invoice as properly delivered for payment processing unless submitted to the above address. Invoices shall not delivered to any other address or location, or given to another KBR representative, except as understood by the subcontractor/vendor that they do so at their own risk of loss to the invoice.
KBR will not consider an invoice as properly delivered for payment processing unless it includes on its face: The Company Name, The Company's Vendor No.:, The Work Release No.:, and as applicable, Invoice number, percentage of work complete, identify invoice as a "progress payment", quantities shipped, descriptions, tag numbers, and pricing.
KBR will consider the date the invoice is physically received at the above address as the official date of receipt to compute the payment due date.
Please contact the below immediately if your current invoicing system will not support the above requirements. Questions concerning these invoice processing procedures may be directed to:
[DO NOT SEND IN VOICES TO THIS ADDRESS]
Kellogg Brown & Root Services, Inc. ATTN:
Procurement - Kevin Shriner 1550 Wilson
Boulevard, Suite 400 Arlington, Virginia 22209
E-mail: Kevin.Shriner@Halliburton.com
EXHIBIT 10.3
SB-2
MACHINETALKER, INC.
June 22, 2004
Machine Talker, Inc.
513 De La Vina Street
Santa Barbara, CA 93101
Attention: Mr. Roland Bryan
Subject: Request for Proposal (RFP) No. 140-05RFP062204-99
Science Applications International Corporation (SAIC) hereby solicits your proposal for five (5) controllers and wireless network interfaces for a UAV as described in Attachment I Statement of Work, in support of their Prime Contract, NAS1-02058, with the NASA Langley Research Center, located in Hampton, VA.
Proposal Instructions and Information
1. Type of Subcontract: Firm Fixed-Price.
1a. Period of Performance: July 1, 2004 through November 30, 2004
1b. Terms and Conditions: Any subcontract resulting from this solicitation shall resemble the sample agreement enclosed including all clauses required by SAIC's prime contract and all clauses required by law on the date of execution of the subcontract. The terms and conditions set forth or referenced herein by SAIC shall apply and SAIC objects to and shall not be bound by any additional or different terms and conditions proposed by the offeror. Your proposal shall be inclusive of all costs associated with performing the work in accordance with the attached terms and conditions
2. Cost/Price Submittal Requirements:
2a. Please submit an itemized firm fixed price quotation to provide all materials and services required by Attachment I Statement of Work.
2b. The following cost detail is necessary to properly evaluate your proposal. Please provide the following information as applicable:
1) Labor Hours and Rates: Please provide a detailed breakdown of all proposed labor hours, categories and corresponding labor rates.
2) Other Direct Costs: Travel - Itemized travel costs such as mileage, hotel, and per diem shall be based on the current Federal Travel Regulations. Air Fare shall be based on the most economical commercial rates. In addition, please provide
SAIC
140-05RFP062204-99
departure/destination, number of people and number of days per trip. Materials - All proposed material costs shall be itemized and supported by vendor quotes, price lists or other substantiation acceptable to SAIC.
3) A copy of your current price list showing the applicable rates/prices associated with the requested items and services if you have one. If the proposed costs are different than those included in the price list, please include an explanation of the difference (i.e. x% volume discount).
3. Proposal Contents: Please include the following with your proposal:
3a. Price/Cost Information: See section 2 above
3b. Forms/Certifications:
1. Annual Master Certifications & Representations
2. Government Property Questionnaire
3. Vendor Master Template
4. Certificate of Insurance in accordance with the
requirements of Attachment 3, Schedule A, Paragraph 6.
3c. Points of Contact: Please provide technical and contractual points of contact including: phone, fax, e-mail and Fed-X address.
4. Proposal Submission:
4a. You are requested to submit an proposal no later than close of business, June 28, 2004 via e-mail or facsimile to the following:
Science Applications International Corporation Attention: Leah K. Brummett Tel: 757/827-4851 FAX: 757/825-4968 e-mail: leah.k.brummett@saic.com
Any exceptions to the requirements stated herein, including terms and conditions, must be addressed and submitted in writing with alternate language or justification for deletion with your proposal.
5. Proposal Validity: To be considered valid, your proposal must be addressed to the undersigned, reference SAIC RFP No. 140-05RFP062204-485 and remain firm through July 28, 2004.
6. Questions regarding this solicitation: Questions should be addressed to the following individuals:
Technical: Contractual:
Walter Miller Leah K. Brummett
(757) 827-4886 (757) 827-4851
FAX (757) 825-4968
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SAIC
140-05RFP062204-99
Please be advised that this RFP does not commit SAIC to pay any cost associated with preparation and submission of a proposal and that the SAIC CONTRACTUAL REPRESENTATIVE IS THE ONLY INDIVIDUAL AUTHORIZED TO LEGALLY COMMIT SAIC TO THE EXPENDITURE OF FUNDS RELATED TO THIS SOLICITATION. This is not an authorization to proceed with work.
BY ACKNOWLEDGMENT OF RESPONSE TO THIS RFP, THE OFFEROR HEREBY CERTIFIES THAT NO GRATUITIES WERE OFFERED BY THE SUPPLIER OR SOLICITED BY ANY SAIC EMPLOYEE EITHER DIRECTLY OR INDIRECTLY. ANY SITUATION WHERE A GRATUITY IS SOLICITED SHOULD BE REPORTED IMMEDIATELY TO THE VICE PRESIDENT AND DEPUTY DIRECTOR OF PROCUREMENT MR. ROBERT G. BERG, JR. AT (619) 535-7451.
Sincerely,
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Leah K. Brummett
Sr. Subcontract Administrator
RFP 140-05RFP062204-99 ATTACHMENTS
1. Attachment I Statement of Work
2. RFQ/P General Provisions
3. Sample Subcontract Agreement - Schedule A.
4. Schedule B Contract Clauses Parts I and II.
COMPLETE AND RETURN THE FOLLOWING WITH YOUR PROPOSAL:
5. Annual Master Certifications and Representations
7. Government Property Questionnaire.
8. Vendor Master Template
SAIC
140-05RFP062204-99
SAIC Science Applications
International Corporation
An Employee-Owned Company
SUBCONTRACT AGREEMENT (SAMPLE)
Firm Fixed Price
---------------------------------- ---------------------------------------------
SUBCONTRACTOR: SUBCONTRACT #:
---------------------------------- ---------------------------------------------
MachineTalker, Inc. MODIFICATION #:
---------------------------------- ---------------------------------------------
ADDRESS: SUBPROJECT #:
---------------------------------- ---------------------------------------------
513 De La Vina Street DPAS RATING:
---------------------------------- ---------------------------------------------
Santa Barbara, CA 93103 TYPE: Firm Fixed Price
---------------------------------- ---------------------------------------------
VALUE: $55,000
---------------------------------- ---------------------------------------------
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INTRODUCTION
This Subcontract Agreement, effective July 1, 2004 is made between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (hereinafter known as "Buyer"), a Delaware corporation with principal offices in San Diego, California, and MachineTalker, Inc. (hereinafter known as "Seller"), a Delaware corporation, with principal offices in Santa Barbara, California. The effort to be performed by Seller under this Subcontract will be part of Buyer's Prime Contract #(number) which has been issued by (insert name). The work, defined in Attachment I (Statement of Work and Schedule) will be performed on a Firm Fixed-Price basis, in accordance with Schedule A (Specific Terms and Conditions), and any referenced documents listed in 16.0 Order of Precedence section of this agreement.
SCHEDULE A
SPECIFIC TERMS AND CONDITIONS
1.0 PRICE
The total firm fixed price for the work to be performed under this Subcontract is $55,000 This Subcontract is fully funded in the amount of $55,000ncluding profit, through November 30, 2004
1.1 DELIVERY
The goods and services required by this subcontract shall be delivered in accordance with the delivery schedule contained in this agreement. The time of delivery stated is of the essence of this Subcontract. The date specified for delivery is the required delivery date at Buyer's plant, unless otherwise specifically noted herein. All items furnished under this subcontract shall be delivered FOB Destination, unless specified otherwise in writing by the Buyer's contractual representative. Delivery shall not be deemed complete until the goods have been actually received and accepted by Buyer, notwithstanding delivery to any carrier, or until orders for services have been performed, received, and accepted by Buyer.
1.2 INSPECTION
All goods supplied and services performed pursuant hereto shall be subject to inspection and test by buyer and its agents and by its customers at all times and places, whether during or after manufacture as to goods, or performance as to services, and notwithstanding the terms of delivery or payment or, as to goods, that title has not yet passed to Buyer or to its customers. In the event that goods supplied are not performed in accordance with the specifications and instructions of Buyer, Buyer may require prompt correction thereof, or as to services, require that the services be rendered again at Seller's expense. Buyer may terminate the subcontract for default If such defects exist and if Seller is unable or refuses to replace the goods or render the services again promptly.
1.3 INVOICES
SAIC Science Applications
International Corporation
An Employee-Owned Company
Science Applications International Corporation
Attention: (Subcontract Administrator name)
Street Address
---------------------------------------------------------
City, State, Zip Code
-----------------------------------------
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Invoices shall clearly reference a unique invoice number on each invoice, and the date of the invoice. Invoices shall include the "Amount Previously Billed," the "Amount of this Invoice," and the "Total Amount Billed to Date."
1.4 PAYMENT
Payment terms will be NET 30 (or 60) Days and paid within Thirty 30 (or 60) Days after receipt of a proper invoice or acceptance of delivered items or services rendered by the Buyer, which ever occurs later, unless otherwise specified in this subcontract. Buyer may make any adjustments in Seller's invoices due to shortages, late delivery, rejections, or other failure to comply with the requirements of this subcontract before payment. Cash Discounts will be taken from date of acceptance of delivered items, or date of acceptable invoice, whichever is later. Payment shall not constitute final acceptance. Buyer may offset against any payment hereunder any amount owed to Buyer by Seller.
1.5 WARRANTY
Seller represents and warrants (1) that the price charged for the goods and/or
services purchased pursuant hereto shall be no higher than Seller's current
price to any other customer for the same quality and quantity of such goods or
services; (2) that all goods and services delivered pursuant hereto will be new,
unless otherwise specified, and free from defects in material and workmanship;
(3) that all goods and services will conform to applicable specifications,
drawings, and standards of quality and performance, and that all items will be
free from defects in design and suitable for their intended purpose; (4) that
the goods covered by this order are fit and safe for consumer use, if so
intended. All representations and warranties of Seller together with its service
warranties and guarantees, if any, shall run to Buyer and Buyer's customers. The
foregoing warranties shall survive any delivery, inspection, acceptance, or
payment by Buyer.
2.0 TECHNICAL AND CONTRACTUAL REPRESENTATIVES
The following authorized representatives are hereby designated for this Subcontract:
SELLER: BUYER:
TECHNICAL: Gerald A. Nadler TECHNICAL:
------------------------- ----------------
CONTRACTUAL: Roland F. Bryan CONTRACTUAL:
------------------------- ----------------
2.1 CONTACTS
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Contacts with Buyer that affect the subcontract prices, schedule, statement of work, and subcontract terms and conditions shall be made with the authorized contractual representative. No changes to this Subcontract shall be binding upon Buyer unless incorporated in a written modification to the Subcontract and signed by Buyer's contractual representative.
2.2 CHANGES
SAIC Science Applications
International Corporation
An Employee-Owned Company
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work as changed without interruption and without awaiting settlement of any such claim.
3.0 DISCLOSURE
Seller shall not disclose information concerning work under this Subcontract to any third party, unless such disclosure is necessary for the performance of the subcontract effort. No news releases, public announcement, denial or confirmation of any part of the subject matter of this Subcontract or any phase of any program hereunder shall be made without prior written consent of Buyer. The restrictions of this paragraph shall continue in effect upon completion or termination of this Subcontract for such period of time as may be mutually agreed upon in writing by the parties. In the absence of a written established period, no disclosure is authorized. Failure to comply with the provisions of this Clause may be cause for termination of this subcontract.
4.0 KEY PERSONNEL
(a) For purposes of this clause, Buyer and Seller define "Key Personnel" as those individuals who are mutually recognized as essential to the successful completion and execution of this Subcontract.
(b) Personnel designated as "Key Personnel" shall be assigned to the extent necessary for the timely completion of the task to which assigned. Any substitution or reassignment involving Seller's "Key Personnel" assigned to this work shall be made only with persons of equal abilities and qualifications and is subject to prior approval of Buyer, in writing.
(c) Buyer reserves the right to direct the removal of any individual assigned to this Subcontract.
(d) Seller's Key Personnel are: Gerald A. Nadler, Principal Scientist; Peter Wolf, Senior Software Engineer
5.0 ASSIGNMENTS AND SUBCONTRACTS
This Subcontract is not assignable and shall not be assigned by Seller without the prior written consent of Buyer. Further, Seller agrees to obtain Buyer's approval before subcontracting this order or any substantial portion thereof; provided, however, that this limitation shall not apply to the purchase of standard commercial supplies or raw materials.
6.0 INSURANCE
Without prejudice to Seller's liability to indemnify Buyer as stated in the INDEMNIFICATION provision of this Agreement, Seller shall procure, at its expense, and maintain for the duration of the Agreement, the insurance policies described below with financially responsible insurance companies, reasonably acceptable to Buyer, with policy limits not less than those indicated below. Notwithstanding any provision contained herein, the Seller, and its employees, agents, representatives, consultants and lower-tier subcontractors and suppliers, are not insured by Buyer, and are not covered under any policy of insurance that Buyer has obtained or has in place.
Special Provisions Applicable to Seller's Insurance coverage:
1. ADDITIONAL INSURED - Seller shall have all policies, except Workers' Compensation and Employer's Liability, endorsed to name Buyer as an Additional Insured with respect to the work to be performed by the Seller.
2. WAIVER OF SUBROGATION - Seller shall have all policies endorsed to waive the insurer's rights of subrogation in favor of Buyer.
3. DEDUCTIBLES - Subject to the reasonable review and approval of Buyer, the Seller may arrange deductibles or self-insured retention's as part of the required insurance coverage's. However, it is expressly agreed that all deductibles or self-insured retention's are the sole responsibility of the Seller.
SAIC Science Applications
International Corporation
An Employee-Owned Company
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4. ADEQUACY OF INSURANCE LIMITS - The insurance coverage limits stated below are minimum coverage requirements, not limits of liability, and shall not be construed in any way as Buyer's acceptance of responsibility of the Seller.
5. CERTIFICATES OF INSURANCE - Prior to commencement of any work under this Agreement, the Seller shall furnish Buyer with Certificates of Insurance, in a format acceptable to Buyer, evidencing the insurance coverage required in this Agreement and containing the following information:
a. Identify Buyer as an "Additional Insured" with respect to all
policies except Workers' Compensation and employers'
liability.
b. State that all policies have been endorsed to waive
subrogation in favor of Buyer.
c. State that the underwriters agree to provide Buyer with at
least 30 days prior written notice of any cancellation or
material change in the coverage.
6. WORK WITHIN 50' OF A RAILROAD - Exclusion deleted. (If applicable due to performance of work within 50 feet of a railway)
6.1 COVERAGE
A. WORKERS' COMPENSATION - Insurance for statutory obligations imposed by law including, where applicable, coverage under United States Longshoremen's and Harbor Workers' Act and Jones Act. (if applicable, Defense Base Act for those employees working on a U.S. Military installation outside of the United States).
B. EMPLOYERS LIABILITY - Insurance with limits of $1,000,000 for bodily injury by accident and $1,000,000 for bodily injury by disease, including, if applicable, maritime coverage endorsement.
C. COMMERCIAL GENERAL LIABILITY - (Standard ISO occurrence form) - including products and completed operations coverage, full fire legal liability and contractual liability, with a per occurrence limit of $1,000,000.
D. BUSINESS AUTO LIABILITY - Coverage for bodily injury and property damage liability for all owned, hired or non-owned vehicles, with an each accident limit of $1,000,000.
The following clauses are applicable to this Agreement if checked:
___E. PROFESSIONAL LIABILITY - $1,000,000 per occurrence and aggregate providing coverage for claims arising out of the performance of professional services, resulting from any error, omission or negligent act of the Seller.
___F. AIRCRAFT LIABILITY - Covering liability arising out of the use, operation or maintenance of any aircraft, including passenger liability, with a per occurrence limit of not less than $10,000,000.
___G. VESSEL LIABILITY - Covering liability arising out of the use, operation, or charter of a vessel. Protection and Indemnity (including Jones Act) with limits of liability not less than $5,000,000.
VESSEL HULL & Machinery - Covering damage or destruction to the vessel hull or machinery. Hull and Machinery insurance for the replacement value of the vessel. Waiver of subrogation in favor of Buyer provided.
___H. SHIP REPAIRERS LEGAL LIABILITY - Covering legal liability arising out of ship repair or ship maintenance operations, with a per occurrence limit of liability of not less than $1,000,000.
___I. CONTRACTOR POLLUTION LIABILITY - Covering sudden and non-sudden release of pollutants resulting in damage to the environment or in bodily injury arising out of the operations or services of Seller. Minimum per occurrence limits of liability of $1,000,000.
___J. CONSTRUCTION CONTRACTS - All-Risk Builders risk insurance covering Seller and Buyer as their interests may appear, on the work, to the full value thereof, and for loss to Seller's equipment.
SAIC Science Applications
International Corporation
An Employee-Owned Company
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___L. AIRCRAFT PRODUCTS LIABILITY - Covering liability arising out of the manufacture, sale, servicing, repair, distribution, instruction and operation of aircraft related products or services with a per occurrence limit of $1,000,000.
___M. NUCLEAR S&T LIABILITY - Covering legal liability due to bodily injury or property damage caused by the nuclear energy hazard, excluding work performed at or for a nuclear facility, with a per occurrence limit of $1,000,000.
7.0 INDEMNIFICATION
(a) Seller shall indemnify, defend and hold SAIC and SAIC's customers harmless
from and against any and all damages, losses, liabilities and expenses
(including reasonable attorneys' fees) arising out of or relating to any
claims, causes of action, lawsuits or other proceedings, regardless of
legal theory, that result, in whole or in part, from Seller's (or any of
Seller's subcontractors, suppliers, employees, agents or representatives):
(i) intentional misconduct, negligence, or fraud, (ii) breach of any
representation, warranty or covenant made herein, or (iii) products or
services including, without limitation, any claims that such products or
services infringe any United States patent, copyright, trademark, trade
secret or any other proprietary right of any third party. Notwithstanding
the foregoing, Seller's obligations under this Section shall not apply to
any claims which are finally determined by a court of competent
jurisdiction to be occasioned by the negligence or willful misconduct of
SAIC.
(b) Buyer shall promptly notify Seller of any claim against Buyer that is covered by this indemnification provision and shall authorize representatives of Seller to settle or defend any such claim or suit and to represent Buyer in, or to take charge of, any litigation in connection therewith.
8.0 INFRINGEMENT INDEMNITY
(a) In lieu of any warranty by Buyer or Seller against infringement, statutory or otherwise, it is agreed that Seller shall defend, at its expense, any suit against Buyer or its customers based on a claim that any item furnished under this order or the normal use or sale thereof infringes any U.S. Letters patent or copyright, and shall pay costs and damages finally awarded in any such suit, provided that Seller is notified in writing of the suit and given authority, information, and assistance at Seller's expense for the defense of same. If the use or sale of said item is enjoined as a result of such suit, Seller, at no expense to Buyer, shall obtain for Buyer and its customers the right to use and sell said item or shall substitute an equivalent item acceptable to Buyer and extend this patent indemnity thereto.
(b) Notwithstanding the foregoing paragraph, when this order is performed under the Authorization and Consent of the U.S. Government to infringe U.S. Patents, Seller's liability for infringement of such Patents in such performance shall be limited to the extent of the obligation of Buyer to indemnify the U.S. Government.
9.0 PROPRIETARY INFORMATION, TOOLS, MATERIALS, ETC.
(a) Seller agrees it will keep confidential and not use any material, jigs, dies, fixtures, molds, patterns, taps, gauges, other equipment, designs, sketches, specifications, drawings, computer programs and software, or other data or information furnished by Buyer for any purpose whatsoever other than as herein specified, including but not limited to the manufacture of large quantities, without prior written consent of Buyer. All materials, jigs, dies, fixtures, molds, patterns, taps, gauges, other equipment, designs, sketches, specifications, drawings, computer programs and software, or other data or information furnished by Buyer, whether loaned to Seller or fabricated, manufactured, purchased, or otherwise acquired by Seller for the performance of this Subcontract and specifically charged to Buyer are the property of Buyer. They are to be marked for identification as Buyer may designate, and upon completion or termination of this Subcontract shall be returned to Buyer in good condition, reasonable wear only excepted, together with all spoiled and surplus material, unless otherwise directed in writing by Buyer. Seller agrees to replace, at its expense, all such items not so returned. Seller shall make no charge for any storage, maintenance or retention of such property of Buyer. Seller shall bear all risk of loss for all of Buyer's property in Seller's possession.
SAIC Science Applications
International Corporation
An Employee-Owned Company
parts: "All materials furnished by Buyer on this order (except that which
becomes normal industrial waste or was replaced at Seller's expense) has
been returned in the form of parts or held as unused material for Buyer's
disposition."
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10.0 DISPUTES
Any dispute not disposed of in accordance with the "Disputes Clause" of Schedule B, if any, shall be determined in the following manner.
(a) Buyer and Seller agree to enter into Negotiation to resolve any dispute. Both parties agree to negotiate in good faith to reach a mutually agreeable settlement within a reasonable amount of time.
(b) If negotiations are unsuccessful, Buyer and Seller agree to enter into binding Arbitration. The American Arbitration Association (AAA) Commercial Arbitration Rules (most recent edition) are to govern this Arbitration. The Arbitration shall take place in the County of San Diego, State of California. The Arbitrator shall be bound to follow the applicable subcontract provisions and California law in adjudicating the dispute. It is agreed by both parties that the Arbitrator's decision is final, and that no party may take any action, judicial or administrative, to overturn this decision. The judgment rendered by the Arbitrator may be entered in any court having jurisdiction thereof.
Pending any decision, appeal or judgment referred to in this provision or the settlement of any dispute arising under this Subcontract, Seller shall proceed diligently with the performance of this Subcontract.
11.0 DEFAULT
(a) The Buyer may, by written notice of default to the Seller, terminate the whole or any part of this Subcontract in any one of the following circumstances: (i) if Seller fails to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or (ii) if Seller fails to perform any of the other provisions of this Subcontract in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as Buyer may authorize in writing) after receipt of notice from the Buyer specifying such failure; or (iii) Seller becomes insolvent or the subject of proceedings under any law relating to bankruptcy or the relief of debtors or admits in writing its inability to pay its debts as they become due.
(b) If this Subcontract is so terminated, Buyer may procure or otherwise obtain, upon such terms and in such manner as Buyer may deem appropriate, supplies or services similar to those terminated, Seller, subject to the exceptions set forth below, shall be liable to Buyer for any excess costs of such similar supplies or services.
(c) Seller shall transfer title and deliver to Buyer, in the manner and to the extent requested in writing by Buyer at or after termination such complete articles, partially completed articles and materials, parts, tools, dies, patterns, jigs, fixtures, plans, drawings, information and contract rights as Seller has produced or acquired for the performance of the terminated part of this Subcontract, and Buyer will pay Seller the contract price for complete articles delivered to and accepted by Buyer and the fair value of the other property of Seller so requested and delivered.
(d) Seller shall continue performance of this Subcontract to the extent not terminated. Buyer shall have no obligations to Seller with respect to the terminated part of this Subcontract except as herein provided. In case of Seller's default, Buyer's rights as set forth herein shall be in addition to Buyer's other rights although not set forth in this Subcontract.
SAIC Science Applications
International Corporation
An Employee-Owned Company
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12.0 GENERAL RELATIONSHIP
The Subcontractor is not an employee of SAIC for any purpose whatsoever. Seller agrees that in all matters relating to this Subcontract it shall be acting as an independent contractor and shall assume and pay all liabilities and perform all obligations imposed with respect to the performance of this Subcontract. Seller shall have no right, power or authority to create any obligation, expressed or implied, on behalf of Buyer and/or the Government and shall have no authority to represent Buyer as an agent.
13.0 NON-WAIVER OF RIGHTS
The failure of Buyer to insist upon strict performance of any of the terms and conditions in the Subcontract, or to exercise any rights or remedies, shall not be construed as a waiver of its rights to assert any of the same or to rely on any such terms or conditions at any time thereafter. The invalidity in whole or in part of any term or condition of this subcontract shall not affect the validity of other parts hereof.
14.0 APPLICABLE STATE LAW AND COMPLIANCE
This Subcontract shall be governed by and construed in accordance with the laws of the State of California. Seller agrees to comply with the applicable provisions of any federal, state or local law or ordinance and all orders, rules and regulations issued there under.
15.0 EXPORT CONTROL COMPLIANCE FOR FOREIGN PERSONS
The subject technology of this Subcontract (together including data, services, and hardware provided hereunder) may be controlled for export purposes under the International Traffic in Arms Regulations (ITAR) controlled by the U.S. Department of State or the Export Administration Regulations ("EAR") controlled by the U.S. Department of Commerce. ITAR controlled technology may not be exported without prior written authorization and certain EAR technology requires a prior license depending upon its categorization, destination, end-user and end-use. Exports or re-exports of any U.S. technology to [any destination under U.S. sanction or embargo are forbidden.
Access to certain technology ("Controlled Technology") by Foreign Persons (working legally in the U.S.), as defined below, may require an export license if the Controlled Technology would require a license prior to delivery to the Foreign Person's country of origin. SELLER is bound by U.S. export statutes and regulations and shall comply with all U.S. export laws. SELLER shall have full responsibility for obtaining any export licenses or authorization required to fulfill its obligations under this Subcontract.
SELLER hereby certifies that all SELLER employees who have access to the Controlled Technology are U.S. citizens, have permanent U.S. residency or have been granted political asylum or refugee status in accordance with 8 U.S.C. 1324b(a)(3). Any non-citizens who do not meet one of these criteria are "Foreign Persons" within the meaning of this clause but have been authorized under export licenses to perform their work hereunder.
16.0 ORDER OF PRECEDENCE
The documents listed below are hereby incorporated by reference. In the event of an inconsistency or conflict between or among the provisions of this Subcontract, the inconsistency shall be resolved by giving precedence in the following order:
SAIC Science Applications
International Corporation
An Employee-Owned Company
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17.0 ENTIRE AGREEMENT
The parties hereby agree that this Subcontract, including all documents incorporated herein by reference, shall constitute the entire agreement and understanding between the parties hereto and shall supersede and replace any and all prior or contemporaneous representations, agreements or understandings of any kind, whether written or oral, relating to the subject matter hereof.
In witness whereof, the duly authorized representatives of Buyer and the Seller have executed this Subcontract on the Dates shown.
SELLER: Science Applications International Corporation
MACHINETALKER, INC.
------------------------------
(Company Name)
x /s/Roland F. Bryan x
------------------------------ ----------------------------------------------
(Signature) (Signature)
NAME: ROLAND F. BRYAN NAME:
------------------------------ ----------------------------------------------
(Type or Print) (Type or Print)
TITLE: PRESIDENT TITLE:
------------------------------ ----------------------------------------------
DATE: 23 JUNE 2004 DATE:
------------------------------ ----------------------------------------------
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SAIC
An Employee-Owned Company
ANNUAL MASTER CERTIFICATION
52.203-11 -- Certification and Disclosure Regarding Payments to Influence Certain Federal Transactions
(Apr 1991)
(a) The definitions and prohibitions contained in the clause, at FAR 52.203-12, Limitation on Payments to Influence Certain Federal Transactions, included in this solicitation, are hereby incorporated by reference in paragraph (b) of this certification.
(b) The offeror, by signing its offer, hereby certifies to the best of his or her knowledge and belief that on or after December 23, 1989 -
(1) No Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress on his or her behalf in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment or modification of any Federal contract, grant, loan, or cooperative agreement;
(2) If any funds other than Federal appropriated funds (including profit or fee received under a covered Federal transaction) have been paid, or will be paid, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress on his or her behalf in connection with this solicitation, the offeror shall complete and submit, with its offer, OMB standard form LLL, Disclosure of Lobbying Activities, to the Contracting Officer; and
(3) He or she will include the language of this certification in all subcontract awards at any tier and require that all recipients of subcontract awards in excess of $100,000 shall certify and disclose accordingly.
(c) Submission of this certification and disclosure is a prerequisite for making or entering into this contract imposed by section 1352, title 31, United States Code. Any person who makes an expenditure prohibited under this provision or who fails to file or amend the disclosure form to be filed or amended by this provision, shall be subject to a civil penalty of not less than $10,000, and not more than $100,000, for each such failure.
52.204-3 -- Taxpayer Identification (Oct 1998)
(a) Definitions.
"COMMON PARENT," as used in this solicitation provision, means that corporate entity that owns or controls an affiliated group of corporations that files its Federal income tax returns on a consolidated basis, and of which the offeror is a member.
"TAXPAYER IDENTIFICATION NUMBER (TIN)," as used in this provision, means the number required by the Internal Revenue Service (IRS) to be used by the offeror in reporting income tax and other returns. The TIN may be either a Social Security Number or an Employer Identification Number.
(b) All offerors must submit the information required in paragraphs (d) through
(f) of this provision to comply with debt collection requirements of 31 U.S.C.
7701(c) and 3325(d), reporting requirements of 26 U.S.C. 6041, 6041A, and 6050M
and implementing regulations issued by the IRS. If the resulting contract is
subject to the reporting requirements described in Federal Acquisition
Regulation (FAR) 4.904, the failure or refusal by the offeror to furnish the
information may result in a 31 percent reduction of payments otherwise due under
the contract.
(c) The TIN may be used by the Government to collect and report on any delinquent amounts arising out of the offeror's relationship with the government (31 U.S.C. 7701(c)(3)). If the resulting contract is subject to the payment reporting requirements described in FAR 4.904, the TIN provided hereunder may be matched with IRS records to verify the accuracy of the offeror's TIN.
SAIC
An Employee-Owned Company
(d) TAXPAYER IDENTIFICATION NUMBER (TIN) X TIN: 01-0592299 ;__ TIN has been applied for; ___ TIN is not required because; Offeror is a nonresident alien, foreign corporation, or foreign partnership that does not have income effectively connected with the conduct of a trade or business in the United States and does not have an office or place of business or a fiscal paying agent in the United States; __ Offeror is an agency or instrumentality of a foreign government; __ Offeror is an agency or instrumentality of the Federal Government.
(e) TYPE OF ORGANIZATION. __ Sole proprietorship; __ Partnership; X Corporate entity (not tax-exempt); __ Corporate entity (tax-exempt); __ Government entity (Federal, State, or local); Foreign government; __ International organization per 26 CFR 1.6049-4; __ Nonprofit Organization; __ Javits-Wagner-O'Day (JWOD) per 41 U.S.C. 46-48c; Other ___.
(f) COMMON PARENT. X Offeror is not owned or controlled by a common parent as
defined in paragraph (a) of this provision; ___ Name and TIN of common parent:
Name_____, TIN ____ .
52.204-5 -- Women-Owned Business Other Than Small Business (May 1999)
(a) Definition. "WOMEN-OWNED BUSINESS CONCERN," as used in this provision, means a concern that is at least 51 percent owned by one or more women; or in the case of any publicly owned business, at least 51 percent of its stock is owned by one or more women; and whose management and daily business operations are controlled by one or more women.
(b) Representation. [Complete only if the offeror is a women-owned business
concern and has not represented itself as a small business concern in paragraph
(b)(1) of FAR 52.219-1, Small Business Program Representation, of this
solicitation.] The offeror represents that it ___ is a women-owned business
concern.
52.204-6 -- Data Universal Numbering System (DUNS) Number (Jun 1999)
(a) The offeror shall enter, in the block with its name and address on the cover
page of its offer, the annotation "DUNS" followed by the DUNS number that
identifies the offeror's name and address exactly as stated in the offer. The
DUNS number is a nine-digit number assigned by Dun and Bradstreet Information
Services.
(b) If the offeror does not have a DUNS number, it should contact Dun and
Bradstreet directly to obtain one. A DUNS number will be provided immediately by
telephone at no charge to the offeror. For information on obtaining a DUNS
number, the offeror, if located within the United States, should call Dun and
Bradstreet at 1-800-333-0505. The offeror should be prepared to provide the
following information:
(1) Company name.
(2) Company address.
(3) Company telephone number.
(4) Line of business.
(5) Chief executive officer/key manager.
(6) Date the company was started.
(7) Number of people employed by the company.
(8) Company affiliation.
(b) Offerors located outside the United States may obtain the location and
phone number of the local Dun and Bradstreet Information Services office
from the Internet home page at http://www.customerservices@dnb.com. If an
offeror is unable to locate a local service center, it may send an e-mail
to Dun and Bradstreet at globalinfo@mail.dnb.com.
52.209-5 -- Certification Regarding Debarment, Suspension, Proposed Debarment, and Other Responsibility Matters (Dec 2001)
i. __ are, X are not presently debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any Federal agency;
ii. __ have, X have not within a three-year period preceding the signature date of this document, been convicted of or had a civil judgment rendered against them for: commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, State, or local) contract or subcontract; violation of Federal or state antitrust statutes relating to the submission of offers; or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property; and
iii. __ are, X are not presently indicted for, or otherwise criminally or civilly charged by a governmental entity with commission of any of the offenses enumerated in subdivision (b) of this provision.
iv. __ has, X has not within a three-year period preceding the signature date of this document, had one or more contracts terminated for default by any Federal agency.
(2) "PRINCIPALS," for the purposes of this certification, means officers; directors; owners; partners; and, persons having primary management or supervisory responsibilities within a business entity (e.g., general manager; plant manager; head of a subsidiary, division, or business segment, and similar positions).
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY OF THE UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT CERTIFICATION MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER SECTION 1001, TITLE 18, UNITED STATES CODE.
(b) The offeror shall provide immediate written notice to the Contracting
Officer if, at any time prior to contract award, the offeror learns that its
certification was erroneous when submitted or has become erroneous by reason of
changed circumstances.
(c) A certification that any of the items in paragraph (a) of this provision
exists will not necessarily result in withholding of an award under this
solicitation. However, the certification will be considered in connection with a
determination of the offeror's responsibility. Failure of the offeror to furnish
a certification or provide such additional information as requested by the
Contracting Officer may render the offeror nonresponsible.
(d) Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render, in good faith, the
certification required by paragraph (a) of this provision. The knowledge and
information of an offeror is not required to exceed that which is normally
possessed by a prudent person in the ordinary course of business dealings.
(e) The certification in paragraph (a) of this provision is a material
representation of fact upon which reliance was placed when making award. If it
is later determined that the offeror knowingly rendered an erroneous
certification, in addition to other remedies available to the Government, the
Contracting Officer may terminate the contract resulting from this solicitation
for default.
52.215-6 -- Place of Performance (Oct 1997)
(a) The offeror or respondent, in the performance of any contract resulting from
this solicitation, __ intends, X does not intend to use one or more plants or
facilities located at a different address from the address of the offeror or
respondent as indicated in this proposal or response to request for information.
(b) If the offeror or respondent checks "intends" in paragraph (a) of this
provision, it shall insert in the following spaces the required information:
Place of Name and Address of Owner
Performance and Operator of the Plant or
(Street Address, City, State, County, Zip Facility if Other Than Offeror
Code) Respondent
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SAIC
An Employee-Owned Company
52.219-1 -- Small Business Program Representations (Apr 2002)
(a) (1) The North American Industry Classification System (NAICS) code(s) applicable to this document is/are 334513 [insert NAICS code(s)].
(2) The small business size standard is 500
(3) The small business size standard for a concern which submits an offer in its own name, other than on a construction or service contract, but which proposes to furnish a product which it did not itself manufacture, is 500 employees.
(b) Representation-
(1) The offeror represents as part of its offer that it X is, __ is not a small business concern.
(2)(Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents, for general statistical purposes, that it __ is, X is not a small disadvantaged business concern as defined in 13 CFR 124.1002. (Must be SBA certified)
(3)(Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents as part of its offer that it __ is, X is not a women-owned small business concern.
(4)(Complete only if the offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents as part of its offer that it __ is, X is not a veteran-owned small business concern.
(5)(Complete only if the offer represented itself as a veteran-owned small business concern in paragraph (b)(4) of this provision.) The offeror represents as part of its offer that it __ is, X is not a service-disabled veteran-owned small business concern.
(6)(Complete only if offeror represented itself as a small business concern in paragraph (b)(1) of this provision.) The offeror represents, as part of its offer, that it __ is, X is not a HUBZone small business concern listed, on the date of this representation, on the List of Qualified HUBZone Small Business Concerns maintained by the Small Business Administration, and no material change in ownership and control, principal office, or HUBZone employee percentage has occurred since it was certified by the Small Business Administration in accordance with 13 CFR part 126; (Must be SBA certified)
The offeror represents, as part of its offer, that it __ is, X is not a joint venture that complies with the requirements of 13 CFR part 126, and the representation in paragraph (b)(6)(i) of this provision is accurate for the HUBZone small business concern or concerns that are participating in the joint venture. [The offeror shall enter the name or names of the HUBZone small business concern or concerns that are participating in the joint venture:___.] Each HUBZone small business concern participating in the joint venture shall submit a separate signed copy of the HUBZone representation.
(c) Definitions. As used in this provision--
(i) Not less than 51 percent of which is owned by one or more
service-disabled veterans or, in the case of any publicly owned business,
not less than 51 percent of the stock of which is owned by one or more
service-disabled veterans; and
(ii) The management and daily business operations of which are controlled
by one or more service-disabled veterans or, in the case of a veteran with
permanent and severe disability, the spouse or permanent caregiver of such
veteran.
(2) Service-disabled veteran means a veteran, as defined in 38 U.S.C. 101(2), with a disability that is service-connected, as defined in 38 U.S.C. 101(16).
SAIC
An Employee-Owned Company
(d) Notice.
(1)If this solicitation is for supplies and has been set aside, in whole or in
part, for small business concerns, then the clause in this solicitation
providing notice of the set-aside contains restrictions on the source of the end
items to be furnished.
(2)Under 15 U.S.C. 645(d), any person who misrepresents a firm's status as a
small, HUBZone small, small disadvantaged, or women-owned small business concern
in order to obtain a contract to be awarded under the preference programs
established pursuant to section 8(a), 8(d), 9, or 15 of the Small Business Act
or any other provision of Federal law that specifically references section 8(d)
for a definition of program eligibility, shall --
(i) Be punished by imposition of fine, imprisonment, or both;
(ii) Be subject to administrative remedies, including suspension and
debarment; and
(iii) Be ineligible for participation in programs conducted under the
authority of the Act.
Alternate I (Apr 2002). As prescribed in 19.307(a)(2), add the following paragraph (b)(7) to the basic provision:
(7) [Complete if offeror represented itself as disadvantaged in paragraph (b)(2) of this provision.] The offeror shall check the category in which its ownership falls:
__ Black American.
__ Hispanic American.
__ Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians).
__ Asian-Pacific American (persons with origins from Burma, Thailand, Malaysia,
Indonesia, Singapore, Brunei, Japan, China, Taiwan, Laos, Cambodia (Kampuchea),
Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands
Republic of Palau), Republic of the Marshall Islands, Federated States of
Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa,
Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru).
__ Subcontinent Asian (Asian-Indian) American (persons with origins from India,
Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands, or Nepal).
__Individual/concern, other than one of the preceding
52.222-21 - Prohibition of Segregated Facilities (Feb 1999)
(a) "SEGREGATED FACILITIES," as used in this clause, means any waiting rooms, work areas, rest rooms and wash rooms, restaurants and other eating areas, time clocks, locker rooms and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation, and housing facilities provided for employees, that are segregated by explicit directive or are in fact segregated on the basis of race, color, religion, sex or national origin because of written or oral policies or employee custom. The term does not include separate or single-user rest rooms or necessary dressing or sleeping areas provided to assure privacy between sexes.
(b) The contractor agrees that it does not and will not maintain or provide for its employees any segregated facilities at any of its establishments, and that it does not and will not permit its employees to perform their services at any location under its control where segregated facilities are maintained. The Contractor agrees that a breach of this clause is a violation of the Equal Opportunity clause in the contract.
(c) The Contractor shall include this clause in every subcontract and purchase order that is subject to the Equal Opportunity clause of this contract.
52.222-22 -- Previous Contracts and Compliance Reports (Feb 1999)
SAIC
An Employee- Owned Company
The offeror represents that
(a) It __has, X has not participated in a previous contract or subcontract
subject to the Equal Opportunity clause of this document;
(b) It __has, X has not filed all required compliance reports; and
(c) Representations indicating submission of required compliance reports, signed
by proposed subcontractors, will be obtained before subcontract awards.
52.222-25 -- Affirmative Action Compliance (Apr 1984)
The offeror represents that
(a) It X has developed and has on file, __has not developed and does not have on
file, at each establishment, affirmative action programs required by the rules
and regulations of the Secretary of Labor (41 CFR 60-1 and 60-2); or
(b) It X has not previously had contracts subject to the written affirmative
action programs requirement of the rules and regulations of the Secretary of
Labor.
52.223-13 -- Certification of Toxic Chemical Release Reporting (Oct 2000)
(a) Submission of this certification is a prerequisite for making or entering into this contract imposed by Executive Order 12969, August 8, 1995.
(b) By signing this offer, the offeror certifies that --
(1) As the owner or operator of facilities that will be used in the performance of this contract that are subject to the filing and reporting requirements described in section 313 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA) (42 U.S.C. 11023) and section 6607 of the Pollution Prevention Act of 1990 (PPA) (42 U.S.C. 13106), the offeror will file and continue to file for such facilities for the life of the contract the Toxic Chemical Release Inventory Form (Form R) as described in sections 313(a) and (g) of EPCRA and section 6607 of PPA; or
(2) None of its owned or operated facilities to be used in the performance of this contract is subject to the Form R filing and reporting requirements because each such facility is exempt for at least one of the following reasons: [Check each block that is applicable.]
X (i) The facility does not manufacture, process, or otherwise use any
toxic chemicals listed under section 313(c) of EPCRA, 42 U.S.C. 11023(c);
X (ii) The facility does not have 10 or more full-time employees as
specified in section 313(b)(1)(A) of EPCRA, 42 U.S.C. 11023(b)(1)(A);
__(iii) The facility does not meet the reporting thresholds of toxic
chemicals established under section 313(f) of EPCRA, 42 U.S.C. 11023(f)
(including the alternate thresholds at 40 CFR 372.27, provided an
appropriate certification form has been filed with EPA);
__(iv) The facility does not fall within Standard Industrial
Classification Code (SIC) major groups 20 through 39 or their corresponding
North American Industry Classification System (NAICS) sectors 31 through
33; or
__(v) The facility is not located within any State of the United
States, the District of Columbia, the Commonwealth of Puerto Rico, Guam,
American Samoa, the United States Virgin Islands, the Northern Mariana
Islands, or any other territory or possession over which the United States
has jurisdiction.
52.226-2 --Historically Black College or University and Minority Institution Representation (May 2001)
(a) Definitions. As used in this provision --
"HISTORICALLY BLACK COLLEGE OR UNIVERSITY" means an institution determined by the Secretary of Education to meet the requirements of 34 CFR 608.2. For the Department of Defense, the National Aeronautics and Space Administration, and the Coast Guard, the term also includes any nonprofit research institution that was an integral part of such a college or university before November 14, 1986.
SAIC
An Employee-Owned Company
"MINORITY INSTITUTION" means an institution of higher education meeting the requirements of Section 1046(3) of the Higher Education Act of 1965 (20 U.S.C. 1067k, including a Hispanic-serving institution of higher education, as defined in Section 316(b)(1) of the Act (20 U.S.C. 1101a)).
(b)Representation. The offeror represents that it -- __is, X is not a historically black college or university; __is, X is not a minority institution.
52.227-6 -- Royalty Information (Apr 1984)
(a) Cost or charges for royalties. When the response to this solicitation
contains costs or charges for royalties totaling more than $250, the following
information shall be included in the response relating to each separate item of
royalty or license fee:
(1) Name and address of licensor.
(2) Date of license agreement.
(3) Patent numbers, patent application serial numbers, or other basis on
which the royalty is payable.
(4) Brief description, including any part or model numbers of each contract
item or component on which the royalty is payable.
(5) Percentage or dollar rate of royalty per unit.
(6) Unit price of contract item.
(7) Number of units.
(8) Total dollar amount of royalties.
(b) Copies of current licenses. In addition, if specifically requested by the
Contracting Officer before execution of the contract, the offeror shall furnish
a copy of the current license agreement and an identification of applicable
claims of specific patents.
Alternate I (Apr 1984). Substitute the following for the introductory portion of paragraph (a) of the basic clause: When the response to this solicitation covers charges for special construction or special assembly that contain costs or charges for royalties totaling more than $250, the following information shall be included in the response relating to each separate item of royalty or license fee:
252.209-7001 Disclosure of Ownership or Control by the Government of a Terrorist Country (Mar 1998)
(a) Definitions. As used in this provision-
(1) "GOVERNMENT OF A TERRORIST COUNTRY" includes the state and the government of a terrorist country, as well as any political subdivision, agency, or instrumentality thereof.
(2) "TERRORIST COUNTRY" means a country determined by the Secretary of State, under section 6(j)(1)(A) of the Export Administration Act of 1979 (50 U.S.C. App. 2405(j)(i)(A)), to be a country the government of which has repeatedly provided support for acts of international terrorism. As of the date of this provision, terrorist countries include: Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria.
(3)"SIGNIFICANT INTEREST" means-
(i) Ownership of or beneficial interest in 5 percent or more of the firm's or
subsidiary's securities. Beneficial interest includes holding 5 percent or more
of any class of the firm's securities in "nominee shares," "street names," or
some other method of holding securities that does not disclose the beneficial
owner;
(ii) Holding a management position in the firm, such as a director or officer;
(iii) Ability to control or influence the election, appointment, or tenure of
directors or officers in the firm;
(iv) Ownership of 10 percent or more of the assets of a firm such as equipment,
buildings, real estate, or other tangible assets of the firm; or
(v) Holding 50 percent or more of the indebtedness of a firm.
(b) Prohibition on award. In accordance with 10 U.S.C. 2327, no contract may be awarded to a firm or a subsidiary of a firm if the government of a terrorist country has a significant interest in the firm or subsidiary or, in the case of a subsidiary, the firm that owns the subsidiary, unless a waiver is granted by the Secretary of Defense.
SAIC
An Employee-Owned Company
(c) Disclosure. If the government of a terrorist country has a significant interest in the Offeror or a subsidiary of the Offeror, the Offeror shall disclose such interest in an attachment to its offer. If the Offeror is a subsidiary, it shall also disclose any significant interest the government of a terrorist country has in any firm that owns or controls the subsidiary. The disclosure shall include-
(1) Identification of each government holding a significant interest; and
(2) A description of the significant interest held by each government.
252.209-7002 Disclosure of Ownership or Control by a Foreign Government (Sep 1994)
(a)Definitions. As used in this provision-
(1)"EFFECTIVELY OWNED OR CONTROLLED" means that a foreign government or any entity controlled by a foreign government has the power, either directly or indirectly, whether exercised or exercisable, to control the election, appointment, or tenure of the Offeror's officers or a majority of the Offeror's board of directors by any means, e.g., ownership, contract, or operation of law (or equivalent power for unincorporated organizations).
(2) "ENTITY CONTROLLED BY A FOREIGN GOVERNMENT"- (A) Any domestic or foreign
organization or corporation that is effectively owned or controlled by a foreign
government; or (B) Any individual acting on behalf of a foreign government.
(ii) Does not include an organization or corporation that is owned, but is not
controlled, either directly or indirectly, by a foreign government if the
ownership of that organization or corporation by that foreign government was
effective before October 23, 1992.
(3)"FOREIGN GOVERNMENt" includes the state and the government of any country (other than the United States and its possessions and trust territories) as well as any political subdivision, agency, or instrumentality thereof.
(4)"PROSCRIBED INFORMATION" means-
(i) Top Secret information;
(ii) Communications Security (COMSEC) information, except classified keys used
to operate secure telephone units (STU IIIs);
(iii) Restricted Data as defined in the U.S. Atomic Energy Act of 1954, as
amended;
(iv) Special Access Program (SAP) information; or
(v) Sensitive Compartmented Information (SCI).
(b) Prohibition on award. No contract under a national security program may be awarded to an entity controlled by a foreign government if that entity requires access to proscribed information to perform the contract, unless the Secretary of Defense or a designee has waived application of 10 U.S.C. 2536(a).
(c) Disclosure. The offeror shall disclose any interest a foreign government has in the offeror when that interest constitutes control by a foreign government as defined in this provision. If the offeror is a subsidiary, it shall also disclose any reportable interest a foreign government has in any entity that owns or controls the subsidiary, including reportable interest concerning the offeror's immediate parent, intermediate parents, and the ultimate parent. Use separate paper as needed, and provide the information in the following format:
Offeror's Point of Contact for Questions about Disclosure:
(a)Name and Phone Number with Country Code, City Code and Area Code, as
applicable)
(b)Name and Address of Offeror
(c)Name and Address of Entity Controlled Description of Interest, Ownership by a
Foreign Government Percentage, and Identification of Foreign Government
SAIC
An Employee-Owned Company
252.225-7017 Prohibition on Award to Companies Owned by the People's Republic of China (Feb 2000)
(a)Definition. "PEOPLE'S REPUBLIC OF CHINA," as used in this provision, means the government of the People's Republic of China, including its political subdivisions, agencies, and instrumentalities.
(b) Prohibition on award. Section 8120 of the Department of Defense Appropriations Act for fiscal year 1999 (Pub. L. 105-262), as amended by Section 144 of Title I, Division C, of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (Pub. L. 105-277), prohibits the award of a contract under this solicitation to any company in which the Director of Defense Procurement (Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics)) has determined that the People's Republic of China or the People's Liberation Army of the People's Republic of China owns more than 50 percent interest.
(c) Representation. By submission of an offer, the offeror represents that the People's Republic of China or the People's Liberation Army of the People's Republic of China does not own more than 50 percent interest in the offeror.
REPRESENTATION AND CERTIFICATION
MachineTalker, Inc. 513 De La Vina Street,
Santa Barbara, CA 93101
------------------------------------------------------------------- ----------------------------------------------
COMPANY NAME (TYPE OR PRINT) COMPANY ADDRESS
(Street, City, State and Zip)
www.machinetalker.com rfb@machinetalker.com
------------------------------------------------------------------- ---------------------------------------------
COMPANY'S WEB SITE (URL) ADDRESS CONTACT'S EMAIL ADDRESS
Roland F. Bryan 805-957-1680
------------------------------------------------------------------- ---------------------------------------------
NAME AND TITLE OF PERSON AUTHORIZED TO BIND OFFEROR TELEPHONE NUMBER
6/ 23 /2004
---------------------------------------------------------------------- ---------------------------------------
SIGNATURE OF PERSON AUTHORIZED TO BIND OFFEROR DATE
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The Offeror shall provide immediate written notice to Science Applications International Corporation if, at any time prior to contract award, the Offeror learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances.
SAIC Science Applications
International Corporation
An Employee-Owned Company
SCHEDULE B - CONTRACT CLAUSES
(NASA)
PART II, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
ACQUISITION REGULATION (NASA FAR) CLAUSES
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1. REFERENCES TO NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) FAR SUPPLEMENT All references herein to "National Aeronautics and Space Administration FAR Supplement" or "NASA FAR" shall mean the National Aeronautics and Space Administration Acquisition Regulation which implements and supplements the Federal Acquisition Regulation.
2. NASA FAR CLAUSES APPLICABLE TO THIS ORDER The clauses in NASA FAR Subpart 18-52.2 referenced in subparagraph (a) and those clauses referenced and checked in subparagraph (b), below, in effect on the date of this Order, are incorporated herein and made a part of this Order. To the extent that an earlier version of any such clause is included in the Prime Contract or Subcontract under which this Order is issued, the date of the clause is it appears in such Prime Contract or Subcontract shall be controlling and said version shall be incorporated therein. In all such clauses, unless the context of a clause requires otherwise, the term "Contractor" shall mean Seller, the term "Contract" shall mean this Order, and the terms "Government," "Contracting Officer" and equivalent phrases shall mean Buyer and Buyer's Purchasing Representative, respectively. It is intended that the referenced clause shall apply to Seller in such manner as is necessary to reflect the position of Seller as a subcontractor to Buyer, to insure Seller's obligations to Buyer and to the United States Government, and to enable Buyer to meet its obligations under its Prime Contract or Subcontract.
(a) The following clauses are applicable to this Order: NASA Reference Title of Clause -------------- --------------- 18-52.204-70 Report on NASA Subcontracts (If subcontract exceeds $500,000) 18-52.204-76 Security Requirements for Unclassified Automated Information Resources 18-52.204-77 Submission of Security Plan for Unclassified Automated Information Resources 18-52.208-81 Printing and Duplicating 18-52.219-74 Use of Rural Area Small Business 18-52.219-76 NASA Small Disadvantaged Business Goal 18-52.244-70 Geographic Participation in the Aerospace Program (if SubK exceeds $100,000) |
(b) DIAR clauses applicable to this Order if checked: NASA Reference Title of Clause -------------- --------------- __18-52.204-71 NASA Contractor Financial Management Reporting __18-52.204-72 NASA Contractor Financial Management Reporting (Performance Analysis Report) X 18-52.204-75 Security Classification Requirements __18-52.208-70 Rates __18-52.208-73 Contractor's Facilities __18-52.208-74 Technical Provisions __18-52.208-75 Renewal of Contract __18-52.208-76 Change in Rates __18-52.209-70 Product Removal from Qualified Products List __18-52.209-71 Limitation of Future Contracting __18-52.210-70 Brand Name or Equal __18-52.210-75 Packaging and Marking __18-52.212-70 Notice of Delay __18-52.216-80 Task Ordering Procedure |
NASA Reference Title of Clause
-------------- ---------------
X 18-52.223-70 Safety and Health
__18-52.223-71 Frequency Authorization
__18-52.223-72 Potentially Hazardous Items
X 18-52.227-11 Patent Rights
X 18-52.227-70 New Technology
__18-52.227-71 Request for Waiver of Rights of Inventions
X 18-52.227-72 Designation of New Technology Representative and Patent Representative
__18-52.227-85 Invention Reporting and Rights - Foreign
__18-52.227-87 Transfer of Technical Data Under Space Station International Agreement
__18-52.227-72 Inter-party Waiver of Liability during STS Operations
__18-52.228-76 Cross-Waiver of Liability for Space Station Activities
X 18-52.242-72 Observance of Legal Holidays - Alternate I
__18-52.245-73 Financial Reporting of Government Owned/Contractor Held Property
(The date "July 31" in paragraph (c) is changed to "July 15")
__18-52.247-71 Protection of the Florida Manatee
__18-52.250-70 Indemnification Under P.L. 85-804 - NASA Contracts
X 1852.203-70 Display of Inspector General Hotline Posters (June 2001)
X 1852.215-84 Ombudsman (Jun 2000)
X 1852.228-75 Minimum Insurance Coverage (Oct 1988)
X 1852.223.75 Major Breach of Safety or Security
X 1852.225-70 Export Licenses
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SAIC Science Applications
International Corporation
An Employee-Owned Company
SCHEDULE B - U.S. GOVERNMENT TERMS AND CONDITIONS
Applicable to all U.S. Government subcontracts
PART I - FAR CLAUSES
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1. DEFINITIONS In all such clauses, unless the context of the clause requires otherwise, the term "Contractor" shall mean Seller, the term "Contract" shall mean this Order, and the terms "Government," "Contracting Officer" and equivalent phrases shall mean Buyer and Buyer's Purchasing Representative, respectively. It is intended that the referenced clauses shall apply to Seller in such manner as is necessary to reflect the position of Seller as a subcontractor to Buyer, to insure Seller's obligations to Buyer and to the United States Government, and to enable Buyer to meet its obligations under its Prime Contract or Subcontract. The following definitions apply unless otherwise specifically stated:
"Buyer" - the legal entity issuing this Order.
"Purchasing Representative" - Buyer's authorized representative.
"Seller" - the legal entity which contracts with the Buyer.
"This Order" - this contractual instrument, including changes.
"Prime Contract" - the Government contract under which this Order is issued.
"FAR" - the Federal Acquisition Regulation.
2. IDENTIFICATION OF CONTRACT NUMBERS Government contract numbers shown on this Order shall be included in subcontracts and purchase orders issued by Seller hereunder.
3. DISPUTES
(a) Notwithstanding any provisions herein to the contrary:
(1) If a decision relating to the Prime Contract is made by the Contracting Officer and such decision is also related to this Order, said decision, if binding upon Buyer under the Prime Contract shall in turn be binding upon Buyer and Seller with respect to such matter; provided, however, that if Seller disagrees with any such decision made by the Contracting Officer and Buyer elects not to appeal such decision, Seller shall have the right reserved to Buyer under the Prime Contract with the Government to prosecute a timely appeal in the name of Buyer, as permitted by the contract or by law, Seller to bear its own legal and other costs. If Buyer elects not to appeal any such decision, Buyer agrees to notify Seller in a timely fashion after receipt of such decision and to assist Seller in its prosecution of any such appeal in every reasonable manner. If Buyer elects to appeal any such decision of the Contracting Officer, Buyer agrees to furnish Seller promptly with a copy of such appeal. Any decision upon appeal, if binding upon Buyer, shall in turn be binding upon Seller. Pending the making of any decision, either by the Contracting Officer or on appeal, Seller shall proceed diligently with performance of this Order.
(2) If, as a result of any decision or judgment which is binding upon Seller and Buyer, as provided above, Buyer is unable to obtain payment or reimbursement from the Government under the Prime Contract for, or is required to refund or credit to the Government, any amount with respect to any item or matter for which Buyer has reimbursed or paid Seller, Seller shall, on demand, promptly repay such amount to Buyer. Additionally, pending the final conclusion of any appeal hereunder, Seller shall, on demand, promptly repay any such amount to Buyer. Buyer's maximum liability for any matter connected with or related to this Order which was properly the subject of a claim against the Government under the Prime Contract shall not exceed the amount of Buyer's recovery from the Government.
(3) If this Order is issued by Buyer under a Government Subcontract rather than a Prime Contract, and if Buyer has the right under such Subcontract to appeal a decision made by the Contracting Officer under the Prime Contract in the name of the Prime Contractor (or if Buyer is subject to any arbitrator's decision under the terms of its subcontract), and said decision is also related to this Order, this Disputes Clause shall also apply to Seller in a manner consistent with its intent and similar to its application had this Order been issued by Buyer under a Prime Contract with the Government.
SAIC Science Applications
International Corporation
An Employee-Owned Company
(4) Seller agrees to provide certification that data supporting any claim
made by Seller hereunder is made in good faith and that the supporting
data is accurate and complete to the best of Seller's knowledge or
belief, all in accordance with the requirements of the Contract
Disputes Act of 1978 (41USC601-613) and implementing regulations. If
any claim of Seller is determined to be based upon fraud or
misrepresentation, Seller agrees to defend, indemnify and hold Buyer
harmless for any and all liability, loss, cost or expense resulting
therefrom.
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(b) Any dispute not addressed in paragraph (a) above, will be subject to the disputes clause of Schedule A of this subcontract agreement.
4. OTHER GOVERNMENT PROCUREMENT Nothing contained herein shall be construed as precluding the Seller from producing items for direct sale to the Government, utilizing therefore all hardware and/or software, including designs, drawings, engineering data or other technical or proprietary information furnished Seller by Buyer, provided the Government has the unrestricted right to permit the use thereof for such purpose.
5. INDEMNIFICATION - COST OR PRICING DATA - COST ACCOUNTING STANDARDS Seller agrees to indemnify and hold Buyer harmless to the full extent of any cost or price reduction effected by Buyer's customer, which may result from (i) certified cost or pricing data submitted by Seller or its lower-tier subcontractors which is not accurate, current or complete as certified by Seller; (ii) the failure by Seller or its lower-tier subcontractors to disclose and consistently follow applicable cost accounting practices and standards or otherwise comply with pertinent parts of the FAR, applicable agency supplements thereto, and regulations promulgated by the Cost Accounting Standards Board.
6. TERMINATION FOR CONVENIENCE The Buyer may terminate performance of work under this subcontract in whole, or in part if the Purchasing Representative determines that a termination is in the Buyer's interest. The Buyer shall terminate by delivering to the Seller a Notice of Termination specifying the extent of termination and the effective date. If this is a Fixed Price subcontract, the termination will be in accordance with FAR 52.249-2 and FAR 52.249-4. If this is a Cost Reimbursable subcontract, the termination will be in accordance with FAR 52.249-6. If this is a Cost Reimbursement subcontract for Educational or Other Nonprofit Institutions, then termination will be in accordance with FAR 52.249-5.
7. GOVERNMENT PROPERTY Seller shall comply with the Government Property requirements contained in FAR clause 52.245-2 if this is a fixed priced contract and FAR clause 52.245-5 (substituting 52.245-2 subparagraph (g) for 52.245-5 subparagraphs (g) (1), (2), and (3) if this is a cost reimbursement contract.
8. CONTRACT COST PRINCIPLES AND PROCEDURES Seller agrees that to the extent applicable, costs allocated to this contract shall be in full compliance with Subpart 31.2 of FAR (Subpart 31.3 for Educational Institutions) and the applicable agency supplements thereto, if any, set forth in Part II hereof. In the event such compliance is not maintained, Seller agrees to compensate Buyer to the full extent of any prices or costs, including any penalties or interest, which are determined by Buyer's customer to be unallowable or unreasonable or not allocable, under Buyer's contract with its customer.
9. FAR CLAUSES APPLICABLE TO THIS ORDER The clauses in FAR Subpart 52.2 referenced in subparagraph (a), the clauses applicable at the dollar thresholds in subparagraph (b), and those clauses referenced and checked in subparagraph (c) below, in effect on the date of this Order, are incorporated herein and made a part of this Order. To the extent that an earlier version of any such clause is included in the Prime Contract or Subcontract under which this Order is issued, the date of the clause as it appears in such Prime Contract or Subcontract shall be controlling and said version shall be incorporated herein.
SAIC Science Applications
International Corporation
An Employee-Owned Company
|
(a) The following clauses are applicable to this Order: Clause # & FAR Ref. Title of Clause ------------------ --------------- 52.203-3 Gratuities 52.211-5 Material Requirements 52.211-15 Defense Priority and Allocation Requirements 52.222-1 Notice to the Government of Labor Disputes 52.222-26 Equal Opportunity (Only Paragraphs (b)(1) through (b)(11) 52.223-3 Hazardous Material Identification and Material Safety Data 52.225-13 Restrictions on Certain Foreign Purchases 52.229-3 Federal, State, and Local Taxes |
(b) The following clauses are applicable to this Order at the indicated dollar
values:
Clause # & FAR Ref. Title of Clause
------------------ ---------------
52.203-5 Covenant Against Contingent Fees* (*if order exceeds $50,000)
52.203-6 Restrictions on Subcontractor Sales to the Government*
(*if order exceeds $100,000)
52.203-7 Anti-Kickback Procedures* (*if order exceeds $100,000)
52.203-8 Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity
52.203-10 Price or Fee Adjustment for Illegal or Improper Activity * (*If order exceeds
$50,000)
52.203-11 Certification and Disclosure Regarding Payments to
Influence Certain Federal Transactions* (*if order
exceeds or is expected to exceed $100,000)
52.203-12 Limitation on Payments to Influence Certain Federal Transactions*
(*if order exceeds or is expected to exceed $100,000)
52.209-6 Protecting the Governments Interest when Subcontracting with Contractors Debarred,
Suspended, or Proposed for Debarment*
(*if Order exceeds $25,000)
52.215-2 Audit and Records-Negotiation* (*if Order exceeds $50,000)
52.219-8 Utilization of Small Business Concerns* (*if Order exceeds $100,000)
52.219-9 Small Business Subcontracting Plan*
(*if Subcontract exceeds or is expected to exceed $500,000)
52.222-4 Contract Work Hours & Safety Standards Act - Overtime Compensation*
(*if Order exceeds $100,000)
52.222-35 Affirmative Action for Disabled Veterans & Veterans of the Vietnam Era*
(*if Order exceeds $10,000)
52.222-36 Affirmative Action for Workers with Disabilities*
(*if Order exceeds $2,500)
52.222-37 Employment Reports on Special Disabled Veterans and Veterans of the Vietnam Era* (*if
Order exceeds $10,000)
52.227-2 Notice and Assistance Regarding Patent and Copyright Infringement*
(*if Order exceeds $50,000)
52.246-16 Responsibility for Supplies* (*if order exceeds $50,000)
52.247-63 Preference for U.S. Flag Air Carriers* (*if order exceeds $50,000)
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SAIC Science Applications
International Corporation
An Employee-Owned Company
|
(c) The following clauses are applicable to this Order if checked:
Clause # & FAR Ref. Title of Clause
------------------ ---------------
__52.203-10 Price or Fee Adjustment for Illegal or Improper Activity*
(*If Order exceeds $50,000)
__52.204-2 Security Requirements
X 52.204-4 Printing/Copying Double Sided on Recycled Paper
__52.207-3 Right of First Refusal of Employment Openings
__52.214-26 Audit and Records-Sealed Bidding
__52.214-27 Price Reduction for Defective Cost or Pricing Data Modifications - Sealed Bidding
__52.214-28 Subcontractor Cost or Pricing Data - Modifications - Sealed Bidding
__52.215-10 Price Reduction for Defective Cost or Pricing Data
__52.215-11 Price Reduction for Defective Cost or Pricing Data -Modifications
__52.215-12 Subcontractor Cost or Pricing Data
__52.215-13 Subcontractor Cost or Pricing Data - Modifications
X 52.215-15 Pension Adjustments and Asset Reversions
__52.215-16 Facilities Capital Cost of Money
X 52.215-18 Reversion or Adjustment of Plans for Post-Retirement Benefits Other Than Pensions
__52.215-19 Notification of Ownership Changes
__52.215-20 Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data
X 52.215-21 Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data - Modifications
X 52.216-7 Allowable Cost and Payment
X 52.216-8 Fixed Fee
__52.216-18 Ordering
__52.216-22 Indefinite Quantity
X 52.217-8 Option to Extend Services
X 52.217-9 Option to Extend the Term of the Contract
(a) within the current contract year
(b) not to exceed 60 months or 5 years
X 52.219-16 Liquidated Damages - Subcontracting Plan
X 52.222-2 Payment for Overtime Premiums -Subparagraph (a) Add "0"
X 52.222-3 Convict Labor
__52.222-6 Davis-Bacon Act (if order is for construction exceeding $2,000)
__52.222-11 Subcontracts (Labor Standards)
__52.222-20 Walsh-Healy Public Contracts Act (if Order exceeds $10,000)
X 52.222-21 Prohibition of Segregated Facilities
X 52.222-29 Notification of Visa Denial
X 52-222-41 Service Contract Act of 1965, as Amended* (*if Order exceeds $2,500)
__52.222-42 Statement of Equivalent Rates by Federal Hires
X 52.222-43 Fair Labor Standards Act and Service Contract Act - Price Adjustment*
(*Multiple Year and Option Contracts)
__52.222-46 Evaluation of Compensation for Professional Employees
__52.223-5 Pollution Prevention and Right-to-Know Information
X 52.223-6 Drug-Free Workplace
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Enclosure 6
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9-932-031 Schedule B, Part I (Rev. 7/01/2002)
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SAIC Science Applications
International Corporation
An Employee-Owned Company
__52.223-7 Notice of Radioactive Materials
X 52.223-14 Toxic Chemical Release Reporting
__52.224-2 Privacy Act
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Clause # & FAR Ref. Title of Clause
------------------ ----------------
__52.225-1 Buy American Act -Balance of Payments Program - Supplies
__52.225-5 Trade Agreements
__52.225-8 Duty-Free Entry
__52.226-1 Utilization of Indian Organizations and Indian -Owned Economic Enterprises
X 52.227-1 Authorization and Consent (if order exceeds $50,000)
X 52.227-1 Authorization and Consent -Alternate I
__52.227-3 Patent Indemnity (if order exceeds $50,000)
__52.227-9 Refund of Royalties
__52.227-10 Filing of Patent Applications - Classified Subject Matter
__52.227-11 Patent Rights - Retention by the Contractor (Short Form)
__52.227-12 Patent Rights - Retention by the Contractor (Long Form)
__52.227-13 Patent Rights - Acquisition by the Government
X 52.227-14 Rights in Data - General (Alternate I, II, III, IV, or V)
__52.227-16 Additional Data Requirements
__52.227-17 Rights in Data - Special Works
__52.227-18 Rights in Data - Existing Works
__52.227-19 Commercial Computer Software - Restricted Rights
__52.227-20 Rights in Data SBIR Program
__52.227-21 Technical Data, Certification, Revision and Withholding of Payment - Major Systems
__52.227-22 Major System - Minimum Rights
__52.227-23 Rights to Proposal Data (Technical)
__52.228-3 Worker's Compensation Insurance (Defense Base Act)
__52.228-4 Worker's Compensation and War-Hazard Insurance Overseas
__52.228-5 Insurance - Work on a Government Installation
X 52.228-7 Insurance - Liability to Third Persons
__52.229-6 Taxes - Foreign Fixed-Price Contracts
__52.229-7 Taxes - Fixed-Price Contracts with Foreign Governments
__52.229-8 Taxes - Foreign Cost-Reimbursement Contracts
__52.229-9 Taxes - Cost-Reimbursement Contracts with Foreign Governments
__52.229-10 State of New Mexico Gross Receipts and Compensating Tax
__52.230-2 Cost Accounting Standards
__52.230-3 Disclosure and Consistency of Cost Accounting Practices
__52.230-5 Cost Accounting Standards -Educational Institution
__52.230-6 Administration of Cost Accounting Standards
__52.232-7 Payments Under Time-and-Materials and Labor-Hour Contracts
__52.232-16 Progress Payments (Notwithstanding paragraph 8 above,
in paragraph (d),"Government" means the "U.S. Government" except in subdivision (d)(2)(iv).
X 52.232-17 Interest
__52.232-18 Availability of Funds
__52.232-19 Availability of Funds for the Next Fiscal Year
X 52.232-20 Limitation of Cost
__52.232-22 Limitation of Funds
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Enclosure 6
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9-932-031 Schedule B, Part I (Rev. 7/01/2002)
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SAIC Science Applications
International Corporation
An Employee-Owned Company
X 52.232-23 Assignment of Claims
X 52.232-23 Assignment of Claims Alternate 1
__52.232-32 Performance-Based Payments
__52.236-2 Differing Site Conditions
__52.236-13 Accident Prevention
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Clause # & FAR Ref. Title of Clause
------------------ ---------------
X 52.237-2 Protection of Government Buildings, Equipment & Vegetation
X 52.237-3 Continuity of Services
__52.237-7 Indemnification and Medical Liability Insurance
__52.237-10 Identification of Uncompensated Overtime
__52.239-1 Privacy or Security Safeguards
X 52.242-1 Notice of Intent to Disallow Costs
X 52.242-3 Penalties for Unallowable Costs
X 52.242-4 Certification of Final Indirect Costs
__52.242-12 Report of Shipment
X 52.242-13 Bankruptcy
__52.242-15 Stop-Work Order
X 52.242-15 Stop-Work Order Alternate 1
__52.243-1 Changes - Fixed-Price
__52.243-1 Changes - Fixed- Price - Alternate I
__52.243-2 Changes - Cost-Reimbursement
__52.243-2 Changes - Cost-Reimbursement - Alternate I
__52.243-2 Changes - Cost-Reimbursement - Alternate II
__52.243-2 Changes - Cost-Reimbursement - Alternate V
__52.243-3 Changes - Changes - Time-and-Materials or Labor-Hours
__52.243-6 Change Order Accounting
X 52.244-2 Subcontracts
X 52.244-5 Competition in Subcontracting
X 52.244-6 Subcontracts for Commercial Items and Commercial Components
__52.245-4 Government-Furnished Property (Short Form)
__52.245-8 Liability for the Facilities
__52.245-16 Facilities Equipment Modernization
__52.245-17 Special Tooling
__52.245-18 Special Test Equipment
X 52.245-19 Government Property Furnished "As Is"
__52.246-1 Contractor Inspection Requirements
__52.246-2 Inspection of Supplies - Fixed Price
__52.246-3 Inspection of Supplies - Cost-Reimbursement
__52.246-4 Inspection of Services - Fixed-Price
X 52.246-5 Inspection of Services - Cost-Reimbursement
__52.246-6 Inspection of Time-and- Material and Labor-Hour
__52.246-8 Inspection of Research and Development - Cost-Reimbursement
__52.246-20 Warranty of Services
__52.246-23 Limitation of Liability
__52.246-24 Limitation of Liability - High-Value Items
X 52.246-25 Limitation of Liability - Services
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SAIC Federal Procurement Procedures Page 6 of 7
Section II, Part A, F-05 Terms and Conditions (V-3.2)
Downloaded from http://issaic.saic.com/forms/
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Enclosure 6
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9-932-031 Schedule B, Part I (Rev. 7/01/2002)
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SAIC Science Applications
International Corporation
An Employee-Owned Company
X 52.247-1 Commercial Bill of Lading Notation
__52.247-55 F.O.B. Point for Delivery of Government-Furnished Property
X 52.247-64 Preference for Privately Owned U.S. Flag Commercial Vessels
__52.248-1 Value Engineering
__52.249-8 Default -(Fixed-Price Supply and Services)
X 52.249-14 Excusable Delays
__52.253-1 Computer Generated Forms
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Other Flow Down Clauses:
__52.215-8 Order of Precedence - Uniform Contract Format __52.215-9 Price Reduction for Defective cost or Pricing Data __52.223-10 Waste Reduction Program __52.232-1 Payments __52.232-8 Discounts for Prompt Payment __52.232-9 Limitation on Withholding of Payments __52.232-10 Extras __52.232-25 Prompt Payment __52.242-14 Suspension of Work __52.249-2 Termination for Convenience of the Government __52.252-6 Authorized Deviations in Clauses |
Exhibit 23.2
CONSENT OF ROSE, SNYDER & Jacobs,
A Corporation of Certified Public Accountants
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The undersigned independent certified public accounting firm hereby consents to the inclusion of its report on the financial statements of MachineTalker, Inc. for the fiscal years ending December 31, 2004 and December 31, 2003, and to the reference to it as experts in accounting and auditing relating to said financial statements, in the Registration Statement on Form SB-2 for MachineTalker, Inc. dated August 1, 2005.
/s/ Rose, Snyder & Jacobs ROSE, SNYDER & JACOBS, A CORPORTION OF CERTIFIED PUBLIC ACCOUNTANTS Encino, California July 28, 2005 |